2010-2011 San Diego Community College District Preliminary Budget General Fund Unrestricted Only Information Item March 25, 2010

So why a Preliminary Budget if it is not a legal requirement?

It provides a status report on budget reduction efforts since 2007-08, which have been implemented in response to revenue reductions over a three (3) year period.

It provides a status report on the relationship between continuous revenue and continuous expenses as of 2010-11( SDCCD Structural Budget issue).

As the Tentative Budget, which is approved in June of each year, is too late to make decisions that impact the first half of the upcoming year, a Preliminary Budget provides time to review, plan, and implement budget revisions as necessary for 2010-11.

It identifies the remaining budget challenges that exist as of 2010-11.

Preliminary Budget 2010-11 is based on the following assumptions:

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No COLA in 2010-11

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A net revenue increase from either Growth or other sources of $1.42 million

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No additional revenue reductions to General Apportionment or Categoricals

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Any funded growth FTES can be achieved through funding campuses at the same FTEF levels in 2010-11 as was funded in 2009-10 (Requires a continuation of 2009-10 FTES productivity levels)

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Total Categorical backfill from GFU will be limited to $1.5 million. In 2009-10 $2.6 million was required to cover Categorical costs

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The current $30.28 million reduction goal is attained by July 1, 2010

In addition, the Preliminary Budget includes the following:

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A roll forward of 2009-10 adjusted budgets (after budget reduction decisions) plus inflationary costs to selected operating expense accounts (utilities, insurance, maintenance contracts, etc)

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Increase funding to cover employee class and step advances, STRS & PERS and other mandated benefit cost increases

Preliminary Budget

General Fund Unrestricted Only

Continuous Revenue

2010-11

2009-2010 Adopted Budget 2010-11 Preliminary Budget Apportionment Allocation Other State Funds Other Funds Incoming Transfers Total Continuous Revenue 190,319,271 7,505,056 6,659,033 1,623,500 206,106,860 193,234,295 6,118,748 6,659,033 1,517,000 207,529,076 Changes Over/Under 2,915,024 (1,386,308) 0 (106,500) 1,422,216 Continuous Expenses Reserves & Set Asides Campus Allocations Districtwide Support District Offices Total Continuous Expenses 7,791,903 139,642,690 52,646,733 16,859,940 216,941,266 8,634,155 138,803,512 54,151,676 16,004,298 217,593,641 Continuous Expenses over Revenue 10,834,406 10,064,565 Budget Gap *Expenses Include: $3.5 million inflation costs $1.5 million Categorical backfill Change in Beginning Balance: 2007-2008 Beginning Balance 2008-2009 Beginning Balance 2009-2010 Beginning Balance 2010-2011 Beginning Balance 842,252 (839,178) 1,504,943 (855,642)

*

652,375 (769,841) 16,698,713 15,496,954 14,160,184 TBD

Reserves and Set Asides

Set Aside for Position changes (interim assignments, reclassifications, etc) Set Aside to fill 2 Deans at City, 4 at Mesa, 1 at Miramar, & 1 at DO Set Aside to fill Classified positions at City (per cabinet 2-2-10) Set Aside to fill behind # 001696 (AFT-OT 100% Release) Set Aside to fill vacant Classified positions at Mesa (per cabinet 2-2-10) Set Aside to fill vacant Classified positions at Miramar (per cabinet 2-2-10) Set Aside to fill vacant Classified positions at CE (per cabinet 2-2-10) Set Aside to fill vacant positions at District Office (per cabinet 2-2-10) Set Aside for Employee Health Benefits through 12/31/2011 Set Aside for future Prop S and Prop N projects

Total Item Budget 2010-11 Projected Projected Expenses Expenses 2010-11 2011-12 1.

2.

RAF Health Benefits through 12/21/2011 $2,051,033 $1,290,600 $1,393,848 Prop S & N Continuous Costs 3.

Staff Totals 3,982,494 1,204,251 2,081,074 2,600,628 2,600,628 $8,634,155 $5,095,479 $3,474,922 Projected Ending Balance $3,538,676 $63754

100,000 957,429 428,685 56,806 226,022 117,757 149,463 564,466 2,051,033 3,982,494

$8,634,155

Analysis of Structural Budget Issue

Use of Beginning Balance (One-Time Uses)

Beginning Balance $14,021,875

To Balance GFU Continuous Operating Budget (Expenses over Revenue) Reserve for Economic Uncertainty

Prior Year Encumbrances Campus Carryforward One-Time Ending Balance Fund Districtwide Advertising Recycle Account Carryforward Carry forward Various Bargaining Unit Balances Carry forward unused balance for Election Expense Total One-Time

10,064,565 1,274,390

300,000 1,057,670 100,000 17,202 1,033,045 175,000 $14,021,872

Covering the Structural Budget Gap 2010-11

Expense over Revenue Less Reserves for Economic Uncertainty Unused Balance from Reserves & Set-asides (One-time) Budget Savings in 2010-11 required to avoid deficit spending $10,064,565 (1,274,390) (3,538,676) $5,251,499

Summary of District Budget Reduction Plan

Budget Reduction Goal (2008-09 through 2010-11)

Original Budget Reduction Goal Eliminate 2009-10 Mid-Year Cut Projection Reduce STRS & PERS Increase from 2.0% to .85% Adjusted Budget Reduction Goal Potential New FTES Growth Revenue in 2010-11 Revised Budget Reduction Goal as of 3/1/10 $36.00 million (2.93 million) (1.07 million) $32.00 million (1.72 million) $30.28 million

Budget Reductions as of March 1, 2010

(100%) Budget Reduction Goal (87%) Reductions to Date from Non-Bargained Items

• • •

Hiring freeze Defunding positions SERP - Gen. Fund Unrestricted (47.125 FTE / $1.50 million) - Gen. Fund Restricted (16.600 FTE / $1.29 million)

• • • • •

Cancelled SunGard/SCT contract Campus reductions Districtwide reductions Class section reductions Proposition S & N offsets (13%) Balance of reductions needed to meet current plan $30,276,957 (26,353,757) $3,923,200

Potential Deficit Spending 2010-11

Budget Savings in 2010-11 required to avoid deficit spending Fair share goal requested from employee units Balance required to avoid deficit spending STRS & PERS increased costs above .85% Additional Categorical backfill funds $5,251,499 (3,923,200) $1,329,299 $1.25 million per 1% $300k - $800k

Potential Deficit Spending 2010-2011

Potential Deficit Running Total 1. No further budget reductions implemented 2. If “Fair Share” goals are not met $1.3 million $1.3 million $3.9 million $5.2 million 3. If STRS & PERS increases to 1.90% $1.3 million $6.5 million 4. If Categoricals require additional backfill $0.5 million $7.0 million

Summary & Budget Issues

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Assuming new net revenue of $1.42 million in 2010-11, the $30.28 million reduction goal is reached, and no other losses in revenue or increased costs, the structural budget gap will be $6.14 million. Deficit spending will be avoided in 2010-11 through use of the ending balance from the Reserves & Set-asides and budget savings.

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In 2011-12, the structural budget gap will be $6.14 million (carryforward from 2010-11) plus increased costs from inflation (approximately $3.3 million). This $9.44 million gap will need to be addressed through a combination of expense reductions and/ or revenue increases.

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Once the structural budget gap is eliminated, normal inflationary costs should be covered through attrition savings, growth revenue, and small percentage of COLA.

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Balance of unfunded future Prop S & N continuous costs needs to be indentified for years 2012-13 forward (approximately $6 million will be needed in today’s dollars).

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A continuing restructuring of instructional and non-instructional expenses needs to take place to be in compliance with 50% law (problem created primarily due to $6.5 million workload adjustment in 2009-10 which forced reductions in class schedules).