BOARD OF TRUSTEES MEETINGJune 27, 2016

Tentative Budget FY 2016-2017 Tentative Budget is the “draft” budget used to 

start out the fiscal year which begins on July 1st; based on best and most conservative assumptions at that point in time

Our fiscal year ends on June 30, 2016, after which we have final and actual revenue and expenses for the year confirmed

Adopted Budget is the year’s Final Budget; annually adopted by the Board in August; based on Final State Budget information and actual amounts from the previous year; assumptions are more concrete 

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Board Philosophy on Budget

Ensure wise and prudent use of public resources

Promote financial strength and stability

Maximize educational opportunities for students

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Budget Development Guidelines 1. Reserve for Economic 

Uncertainties2. Future Long Term Debt 

Issues3. Retirement Incentives4. Area/College Allocations5. Deficit Financing6. GASB 45/OPEB Trust (retiree 

medical benefit liability)

7. Basic Aid8. One time Cost Savings9. Full Time Equivalent 

Student Targets10. Funding for Growth

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Overview of Fund Structure FY 2016-2017 Tentative Budget

General Fund (GF)    $ 310.4 Million, including:Unrestricted GF $   263.4  MillionRestricted GF     47.0  Million

Other Funds* $ 389.6  MillionTotal All Funds    $ 700.0 Million

*Other Funds Include: Community Education, Child Development, Capital Outlay (Including Basic Aid Projects), Self‐Insurance, Retiree Benefit, OPEB Trust, & Pension Stability Trust Funds

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FY 2016-2017 Tentative BudgetAssumptions

TB is based on Governor’s May Revise

SB361 Revenue AllocationONGOING BASE BUDGET

SB361 COLA = 0% Growth Funding  = 0.5%  (approx. $0.66 mil)

Property Tax revenue increase of 4% Enrollment Fees remain at $46/unit

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FY 2016-2017 Tentative BudgetAssumptions (continued)

Salary Increases – negotiated increases (3% for faculty, classified, administrators and managers) and step and column increases built into the budget 

PERS approved rate of 13.888% STRS approved rate of 12.58% 

NOTE:  Significant Increases in Retirement Contributions will be occurring over next several years

Health & Welfare Benefits – 5% estimated increase  Unemployment  Insurance remains flat at 0.05%  Worker’s Compensation remains flat at 1.8%

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FY 2016-2017 Tentative BudgetAssumptions (continued)

$7.5% Reserve for Economic Uncertainties = $12.6M

Property & Liability insurance at $1.25M (increase $50k)

State Categorical Funding ‐ budgeted at 95% of last year’s Adopted Budget

Education Protection Act (PROP 30) Revenue is estimated at $2.8M, the same as FY 2015‐2016

EPA Expenses are budgeted for part‐time faculty salaries and benefits

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Available “Basic Aid” Funds

*Estimated (exact amounts will not be available until the end of the fiscal year).**Final Basic aid recommendations will be allocated at a future time.

FY 2016‐2017 RESOURCES AMOUNT 

Balance at July 1, 2016* $10,905,949

Receipts FY 2016‐2017 $53,582,973

Estimated Property Taxes for Basic Aid $64,488,922

Unallocated Funds** ($25,840,895)

Contingency (20%) ($10,716,595)

Total Allocated Funds FY 2016‐2017  $27,931,432

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Basic Aid ExpensesIncluded in Tentative Budget

Funding for BAARC Allocation = $27.9 million

To fund the categories of:  Capital construction, ATEP operations, insurance deductibles, legislative advocacy and Board of Trustee elections (as detailed in the initial Basic Aid Recommendations to the Board of Trustees earlier in the agenda)

The OPEB trust fund has the normal current year expense ($4.7M) as well as the unfunded liability ($6.4M) budgeted

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Budget Trends For the first time, the tentative budgets conflict with the Board’s Budget Guidelines by using one‐time finds for on‐going expenses.

District‐wide personnel costsmake up an average of 88.2% of total budget (excluding reserves and basic aid funds), which is an increase from 84.9% last year.  This trend is a concern.

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Additional State COLA and Growth have not been adequate to support the increased personnel costs over the past several years

Budget Trends (continued) Some personnel related expense categories are showing upward trends 

in costs: Health and Welfare Costs STRS and PERS Salaries

Negotiated increases Revised part‐time faculty salary schedules Step and column movement Increases in the number of positions Reclassifications Stipends and other additional payments

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Faculty, Classified, Administrators, and Managers:• 6% increase for FY 2015-2106• 3% increase for FY 2016-2017• 3% increase for FY 2017-2018

PERS/STRS Rate & Cost Increases

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Fiscal Year 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Annual Increase Cumulative Estimated Estimated Estimated Estimated Estimated Estimated over 2015-2016 Increase

STRS Annual Rate 10.73% 12.58% 14.43% 16.28% 18.13% 19.10%

STRS Contribution 7,777,325 9,391,790 11,096,124 12,518,704 13,941,284 14,687,177 6,909,852 22,748,455

Annual Increase 1,614,465 1,704,334 1,422,580 1,422,580 745,893

PERS Annual Rate 11.847% 13.89% 16.60% 18.20% 19.90% 20.40%

PERS Contribution 5,900,803 7,124,914 8,771,730 9,617,198 10,515,507 10,779,716 4,878,913 17,305,052

Annual Increase 1,224,111 1,646,816 845,468 898,310 264,209

Combined Annual Increase 2,838,577 3,351,149 2,268,048 2,320,890 1,010,102 11,788,766 40,053,507

Notes: FY 2015-2016 through FY 2017-2018 include negotiated salary increases FY 2018-2019 through FY 2020-2021 estimates do not assume any changes in salaries

Looking Ahead Final State Budget information will be included in the FY 2016‐

2017 Adopted Budget presented at the August Board Meeting

Primary revenue increases are one‐time funds

One time revenue being used for on‐going expenses, contrary to the budget guidelines and conservative budget practices

Lost purchasing power of 15% from lost state COLAs FY 2008‐2009 through FY 2012‐2013

Strict ongoing budget monitoring and budget tightening will need to take place on a district wide basis to ensure financial stewardship

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Looking Ahead (continued) Many budget measures will need to take place at 

the colleges and district services to have balanced budgets for future budget years, which is a major concern

Wisdom, input, and cooperation to meet this challenge will be needed over the next several years

Consensus without panic needed to address the projected budget challenges

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Questions?