2011-2012 Budget FAQ's

Q: I thought the budget was final in June. Why are we hearing that there may be more cuts in December?

A: The final budget was adopted by the state with the assumption of optimistic projected revenues would be used to balance the 2011-2012 budget. Early revenue projections from the state are indicating that the optimistic revenues are not occurring requiring the state to make mid-year budget reductions. The state will announce the projected revenues for the year on December 15th, 2011 and announce if there will be mid-year reductions. At that time, we will re-visit the budget adopted by the Board of Trustees in September and make any necessary adjustments.

Q: I heard the district’s reserves are higher than most other districts? Why is that so?

A: It’s important to maintain a healthy reserve for several reasons:

1. Since 2004-2005, the amount the state has deferred state apportionment funding to us has risen from a low of $5.4 million to approximately $27.7 million for 2011-12. If we do not maintain robust reserves, we are then left without funds to pay our employees, our vendors and our other financial obligations. It is not uncommon for the state to defer payments for the last six months of the fiscal year. We cannot rely solely on the state to meet our financial commitments. And, unlike other districts, we are not forced to borrow money and pay back interest which in the long term reduces resources available to students.
2. Healthy reserves allow us to have funds available for capital and deferred maintenance projects that may not fall within any of the operational budgets. For example, as you walk through your campus or center, you will see numerous maintenance issues that need to be addressed…roofs, air conditioning units, and general classroom repair. Reserve funds allow us to use monies to address such projects. Another example would be technology infrastructure and instructional and non-instructional technology upgrades. Much like your home, these repairs and upgrades are costly but must be addressed. Our reserves can be used for these special projects.
3. The financial health of an institution speaks volumes to many agencies and organizations including our accrediting body, bond rating organizations, potential donors and of course, the community we serve, including students. The district is a stable, strong, dynamic organization in an economy that is often times the opposite. Other districts and organizations, including the private sector, have not fared well during these recent financial storms. Our Board of Trustees has taken great care in preserving the financial integrity of our district.

Q: Since AB1X 32 does not defer any of the planned mid-year "trigger" cuts to Community College funding from the state, how will the district make up the difference?

A: The district is in the process of reviewing the potential mid-year adjustments and will be working closely with the Board to come up with some recommendations. The difficult part of this is we only know from a broad stroke what the impact may be, we won’t know the actual financial impact until mid-December based on revenues received by the State.

Q: Recently the Governor signed AB1X 32 which delays the increase of student fees from $36 a unit to $46 dollars a unit until the end of the 2011-12 fiscal year. How does this impact the district’s finances?

A: From a student and operational perspective moving the fees from the spring 2012 semester to the summer 2012 term is beneficial. It allows the students who have already registered for their spring classes in November and December to not be billed an extra $10/unit if the mid-year triggers hit in mid- December. Students will be able to register for classes and know how much they will be charged for classes when they sign up and can plan accordingly. Additionally, staff will not have to rebill students for classes they signed up for and paid for at the old rate. From a financial perspective, it is estimated the impact of this change will cost the district approximately $750,000. We will need to revise our budget for this new shortfall.

Q: Why doesn’t district use its reserves to balance the budget?

A: The adopted budget for the district for 2011-12 utilizes $4.9m in reserves to balance our $9 million shortfall. The balance of the shortfall is handled by implementing cost savings plans (from ideas submitted through Dollars and Sense), utilizing a retirement incentive program to reduce personnel costs and reducing course offerings in line with the $7.7 million we were reduced in state funding.