Budget Information

Budget Information

April 6, 2009
Recent Changes to the Structural Deficit Forecast as per Andy Dunn
  • Revenue:  $185,049,909 - A likely deficit factor for property taxes was recommended by the League, resulting in lowered revenue forecasts by about $1.5 million
  • Expense:  $191,731,770 - Refined expense projections, particularly on filled positions, will increase expense by about $1.0 million

These two factors will cause the operating deficit to increase from $6.7 million to $9.2 million for the 09-10 budget.

Proposed solution to this increase is to use $2.5 million in one time funds to balance the 09-10 budget

Please click here for the details on this update.


February 25, 2009
FHDA Budget Plan to Reduce $11 Million Structural Deficit as per Martha Kanter

State Budget Summary
The 2008-09 California state budget was signed into law on Sept. 24, 2008, nearly three months into the new fiscal year. As it was based on a set of revenue and expense estimates that were already several months old, the budget was almost immediately out of balance. A special session of the Legislature was called last fall, but a solution to the state’s $42 billion shortfall, involving a combination of tax increases, spending cuts and borrowing, did not materialize until just the past few days. The governor signed this budget package into law on February 20, revising the 2008-09 budget and laying out the budget blueprint for 2009-10.

Despite an 18-month solution having been signed into law, there remain numerous uncertainties surrounding this budget package. The continued volatility of the economy is a key concern as is the outcome of a special election currently scheduled for May 2009. This election is necessary to validate certain borrowing components of the budget plan and the duration of some of the tax increases. The California Community Colleges actually fared quite well in this process in the context of a shortfall of this magnitude and in contrast to previous budget proposals and to other branches of state and local government. Nonetheless, we are faced with a very challenging period through the 2010-11 fiscal year (FY) if not beyond.

Business Services will continue to track and analyze these issues going forward to better understand the impact to our district. We will provide a periodic update to all faculty and staff over the next 18 months.


Steps to Correct Foothill-De Anza’s Structural Deficit
Apart from the challenges facing the state of California, the Foothill-De Anza Community College District (FHDA) began the 2008-09 FY with an internal structural operating deficit of nearly $8 million that is projected to grow to $11 million next year. Several major factors created the district’s budget shortfall this year. These include the rising cost of healthcare ($2.8 million), the 2007-08 compensation adjustment to salaries that exceeded the state cost-of-living adjustment ($2.4 million), and the increasing cost of basic operations ($1 million-$2 million). For the 2008-09 FY and 2009-10 FY combined, significant cost increases in medical benefits alone now constitute approximately $6 million, or more than half the district’s $11 million estimated operating deficit over the next 18 months.

FHDA has identified the following goals, consistent with its Educational Master Plan, to guide our efforts in bringing the budget into structural balance by June 30, 2010.
  • Preserve instructional programs and student services to meet students’ educational needs.
  • Meet annual growth and productivity goals.
  • Preserve staffing levels to the extent possible.
  • Achieve the necessary budget reductions to achieve structural balance by June 30, 2010.

Because of the diligent work by all members of the Foothill-De Anza family, the district has made significant strides toward the goal of a structurally balanced budget by June 30, 2010. We have been able to bring the $11 million shortfall down to $5.12 million as a result of revised growth and productivity estimates, curtailed spending, vacant positions and other savings that we have made.

The outline below reflects our planning to date on how to close our structural budget gap. It projects a reduction in positions and estimates of potential savings in districtwide and other operating expenses. Over the next 18 months we will make adjustments to our budget plan as a result of any changes in the state’s fiscal condition, student enrollment and/or workforce changes.

($11,000,000) 
FHDA Internal Operating Deficit (estimated January 2009)
Changes to Revenue Estimates:
($1,500,000) Reduced apportionment revenue estimate
($500,000) Reduced interest income estimate
Changes to Expense Estimates:
$1,640,000
Adjusted contract salaries estimate
$850,000 Adjusted PDL/SDL estimate
$160,000 Adjusted Utilities estimate
$400,000 Adjusted Other Operating Expense estimate
Implemented Changes/Solutions:
$2,500,000 Job Corps program reduction for FY 09/10
$750,000 Negotiated Benefit Changes
($6,700,000)  
Adjusted FHDA Internal Operating Deficit (estimated February 2009)
Currently Identified Solutions ($1,580,000)
$300,000  
Eliminate/suspend 10 faculty positions
$1,280,000 Eliminate/suspend 16 non-teaching positions
($5,120,000) Remaining FHDA Internal Operating Deficit
Additional Solutions to be Identified ($5,120,000)
$4,000,000 Eliminate/suspend 50 non-teaching positions
$1,120,000 Reduce B Budget
$0  
FHDA Internal Operating Deficit Corrected (estimated June 2010)



While Foothill, De Anza and Central Services will be able to use a mix of position reductions and/or “B” Budget reductions to meet their respective targets, for now, it is necessary to plan to address the remaining structural deficit by eliminating or suspending 50 non-teaching positions beyond the 26 positions currently identified for 2008-09 (see Ongoing Solutions below). Implementation of the budget plan would be completed by June 30, 2010.


Other Possible Solutions that May Affect Final Implementation
$ TBD (other changes to employee pay and benefits as a result of negotiations)

Consistent with the guiding principles noted above, we will take every care to minimize impacts to personnel but absent negotiated cost constraints in areas such as health benefits, we have few other options. We will look for every opportunity to preserve faculty, staff and administrators.



Ongoing Solutions

Full-time Faculty Positions – Fund 14 (Unrestricted General Fund)
Vacancies -The district currently has 11 vacant full-time Fund 14 positions above the FTFO
requirement (see Full-time Faculty Obligation information below). Ten positions will be
suspended at $90,000 per position savings minus the part-time backfill of $60,000 per position,
leaving a $30,000 ongoing savings per position. Pending continued discussion of the FTFO,
these numbers may require adjustment. The district would still be 1 position over the FTFO to
provide a cushion and avoid paying a penalty to the state.

Filled Positions -One filled faculty Fund 14 position will be suspended at Foothill College effective June 30, 2010.


Full-Time Faculty Obligation (FTFO)

We are over our minimum faculty obligation of 516 by 11 faculty positions district-wide. To
date, we have approximately 23 vacant faculty positions. This means that the district will need to
refill a minimum of 12 faculty positions in order to meet our FTFO of 516 and avoid penalties.
Our FTFO for 2009-10 FY will remain at 516 according to the State Chancellor’s decision issued
in November 2008.

In order to avoid penalties for not meeting our FTFO numbers, the district plans to recruit for
more than the 12 positions required. We want to ensure we successfully complete a sufficient
number by the end of this academic year, but no more than that required to meet our FTFO, plus
one for a cushion, so as to avoid possible penalties.

Administrative Positions – Fund 14 (Unrestricted General Fund)
Vacancies -To date we have identified one Fund 14 vacancy to be eliminated/suspended.

Filled Positions -One filled administrator position will be suspended from Fund 14.

Classified Positions – Fund 14 (Unrestricted General Fund)
Vacancies -To date we have identified 12 Fund 14 vacancies to be eliminated/suspended.

Filled Positions -Two filled classified Fund 14 positions will be suspended.

Summary

The district has identified a total of 26 positions – 10 faculty, 2 administrative and 14 classified positions. Of these 26 positions, 22 are vacant and 4 are filled positions. The district will continue to explore options for alternate continued employment for all affected employees. As indicated previously, the district continues to be committed to ensuring that no employee loses employment as a result of these decisions through December 31, 2009.


Benefit Plan Changes

Negotiations with our vendors and renewal of provider contracts resulted in savings of approximately $.481 million, guaranteed for three years. The employee bargaining units have agreed to changes in plan design of $.371 million. The district will also require full implementation of employee paid PPO (the PPO+) plan co-insurance for dependent and family coverage yielding an additional $.109 million. Across all funds this totals $.961 million. The savings projected in the Unrestricted General Fund (Fund 14) is $.75 million.


The district and employee groups will need to have ongoing discussions regarding significant changes to the benefit plans. Our benefit costs are increasing at a rate disproportional to the revenue received to cover the increase in costs. We must come to agreement to transform our current plan structure in order to reign in the escalating costs associated with benefits. The increases for FY 2008-09 ($2.8M) and FY 2009-10 ($3.2M) account for $6 million of the $11 million deficit.

One-Time Funds

Use of one-time funds will allow the district to delay widespread effects to employees until July of 2010. Use of these funds provides a needed cushion to allow us time to identify, where possible, other options for affected employees and programs. For example, as vacancies occur throughout the 2009-10 year, the district will leverage these vacancies, where possible, to offer continued employment to persons otherwise facing layoff as a result of eliminating or suspending positions. The current estimate of one-time funds is as follows:

$9,900,000 Colleges/Central Services Carryover
$600,000 
Board Stability Fund
$1,600,000 2008-09 Ending Fund Balance
$12,100,000 Estimated One-Time General Fund (14) Funds
$1,300,000 Educational Information System Backfill
$10,400,000 5% General Reserve
$11,700,000 Total Restricted Funds
$6,000,000 Fund 61 Reserve
$1,000,000 
Fund 61 Projected
$7,000,000 Total Other Funds



FTES Estimate

The P-1 enrollment report to the state Chancellor’s Office reflects the district meeting its FTES goal of 33,233 Resident Students (Credit and Non-Credit) and 37,327 Resident and Non-Resident Students, within a 100 FTES margin. This indicates the district will meet its base for the current year. In the budget year, however, the full effect of the Job Corps program reduction means that the district will have to restore approximately 7% on-campus FTES in order to make base and avoid stability funding.


College/Central Services Carryover

Although the structural reduction plans will be identified and implemented in the 2009-10 FY budget, the district will have sufficient one-time carryover dollars to delay the effect of these permanent reduction decisions on employees. This means that the cost of continuing employment for affected individuals can be funded using one-time dollars through most or all of 2009-2010.


Fund 61 – Benefits Fund Balance

The Benefits Fund 61 currently has $6 million in fund balance that may be used on a one-time basis until such time as permanent solutions can be implemented. In addition, the current plan year for 2008-09 is projected to yield an additional $1 million in savings based on current experience reporting. This will yield an estimated $7 million in one-time funds to help carry us into 2009-10.

Other Actions for FY 2009-10

Administrator Contracts

Administrator contracts will be authorized only through June 30, 2010, except for those previously approved by the Board of Trustees. While this does not yield additional savings at this time, this action is necessary to preserve flexibility for decisions affecting FY 2010-11.


Estimated Fund Balance

Total
Restricted Unrestricted
Jun 30,2008 $30,600,000 
$12,700,000 
$17,900,000
Jun 30,2009  
$23,800,000 $12,300,000 $11,500,000
Jun 30,2010 $17,900,000 
$11,500,000 
$ 6,400,000


These figures show actual amounts from June 2008, and projected best case scenarios for June 2009 and June 2010 based on the governor’s proposed budget. This scenario also assumes structural changes will be implemented during 2009-10 with some colleges’ and Central Services carryover used to offset reductions.


Uncertainties/Risks to the Model:

  1. We are assuming full apportionment and property-tax revenues. In May 2009 the California Department of Finance will release estimates of property-tax revenues that will allow us to validate this assumption or adjust our figures as needed.
  2. Outcome of the state’s Special Election.
  3. Ability of district to fill the void created by the full-year effect of De Anza’s Job Corps program reduction and achieve its FTES and productivity goals for the 2009-10 FY.

 



Budget Information
email Email:
Pippa Gibson
Phone: 408.864.8936
sizeplaceholder


Last Updated: 4/9/09