April 6, 2009
Recent Changes to the Structural Deficit Forecast as per Andy Dunn
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.
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.
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.
Full-time Faculty Positions – Fund 14 (Unrestricted General Fund)
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.
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.
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:
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.
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.
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 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.
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.