Budget Scenario Planning FY2018 FY2020 December 14, Presenter: David Bea, Ph.D. Facilitator: Anthony U. Martinez, J.D.

Transcription

1 Budget Scenario Planning FY2018 FY2020 December 14, 2016 Presenter: David Bea, Ph.D. Facilitator: Anthony U. Martinez, J.D.

2 Overview of Study Session Foundational information Budget scenarios Questions Discussion Direction Restricted Fund $ % Capital Fund $19.1 8% Designated Fund $14.0 6% Auxiliary Fund $2.5 1% General Fund $ %

3 Foundational Tenets Institutional Financial Health Indicators Enrollment Trends Financial Health Indicators/Metrics College Business Model Revenue Sources Cost Drivers Expenditure Limitation Future Needs Educational Master Plan, Strategic Plan Program Quality, Relevancy, Sustainability Pathways to Student Success Centers for Excellence Outreach Centers Organizational Challenges

4 Financial Health Indicators Audited Financial Statements & Management Letters Changes in Net Assets, Cash & Investments, Liabilities, Statistical Section Information Ongoing concerns Key Financial Ratios Budget and Operational Measures Revenue mix Fixed versus variable costs Personnel Costs Share of Total Costs per student Employees per student Market Position/Costs Red = Significant Concern Orange = Moderate Concern Green = Minimal to No Concern = Improving Trend = Maintenance of Trend = Declining Trend

5 Dashboard of Financial Indicators Key Red = Significant Concern Orange = Moderate Concern Green = Minimal to No Concern = Increase in Trend = Maintenance of Trend = Decrease in Trend

6 Gauging the market and anticipating the future

7 PCC Enrollment Summary 25,000 PCC FTSE 20, , 15,364 15,000 10, , 15,382 5,000 -

8 Enrollment Potential Age Pima County population % PCC students ,000 58% ,000 41% Percentage of students enrolling in CCs one year after HS graduation Pima CC Arizona United States 43% 37% Less than 30% Percentage of students attending online, nights, or weekends Pima CC Arizona 61% 63% Source: Arizona 2020 Vision 2015 reports; U.S. Census Bureau American Community Survey five-year estimates

9 Pima County population projections compared with Fulltime equivalent enrollment 1,400,000 25,000 1,200,000 20,000 1,000,000 Pima County Population 800, ,000 15,000 10,000 Total Pop Other Ages YO FTSE 400,000 5, ,

10 Market Comparison: Tuition

11 Year over Year Fall Credits Taken, In-State versus Out-of-State Tuition Codes 300,000 20,000 18, ,000 16, ,000 14,000 In State Credits Taken 150, ,000 12,000 10,000 8,000 6,000 Out of State Credits Taken 50,000 4,000 2, In-state Out-of-state

12 Expenditure Limitation Projections $130,000 $120,000 $110,000 $100,861 Expenditure Limit (in $000's) $100,000 $90,000 $95,661 $85,801 $80,000 $70,000 Original Methodology SB1322 Methodology $60, Estimated Limit Flat Enrollment Grow 500/Yr Actual Expenses

13 Expenses General Fund Predominately personnel (~75%) Operational expenses little to cut/reduce Capital expenses need to operationalize/find a sustainable revenue source Admin Fac Staff Other Benefits Operations Capital Transfers Contingency Facts to Remember 1% increase in salaries and wages = $900,000 Health care increases ~ $1 million per year Depreciation is $8 million per year 1 % increase for adjunct faculty = $150,000

14 Historical Budget Summary: General Fund and Combined All Funds Budgets $350 $300 $250 $ Millions $200 $150 $100 $50 $ Al Other Funds $71.5 $76.2 $83.7 $105.2 $138.3 $137.4 $122.3 $107.8 $106.5 $94.0 General Fund $134.2 $142.7 $142.3 $172.3 $149.6 $161.5 $161.7 $158.4 $152.2 $153.9 General Fund Al Other Funds

15 Staffing Levels

16 National Community College Data Comparisons: Integrated Post Secondary Education Data System Staffing Comparison Average of Sample 2-Year Colleges PCC PCC s Rank Headcount 17,025 39, FTSE 7,469 15, FTSE/FT Faculty FTSE/FT Total Staff FTSE/FTE Total Staff Expenditure Comparison FY14 Total $/FTSE $11,308 $11,

17 Full Time Staff Comparison: FTSE/FT Staff, yr Colleges 2,000 1,800 # FT Staff 1,600 1,400 1,200 1, y = x R² = ,000 10,000 15,000 20,000 25,000 FTSE Regression for FT Staff Ratio with Estimated Reduction Impact FTSE FT Staff Vs. PCC % Pos. Cut 14, % 15, % 16, % 17, % 18,000 1, % 19,000 1, % 20,000 1, % 21,000 1, % 22,000 1, % 23,000 1, % PCC 1,344

18 400,000 IPEDS Expenditure Comparison, FY2014 Peer Institutions Total Expenses and FTSE 350,000 y = x R² = Total Expenditures ($000s) 300, , , , ,000 50, ,000 20,000 30,000 40,000 FTSE

19 Future State Realities Fewer Resources More Competition Faster Speed of Change Increased Accountability Increased Regulatory Compliance Requiring colleges to: Be More Nimble, Adaptive, and Responsive Innovative, Entrepreneurial, and Inventive Continuously Improve Employ Evidence and Data-Based Decision Making Assess Effectiveness Improve Coordination & Communication

20 Revising and Renewing Pima Community College: What We ve Done & What We Need to Do Recognize new reality Reorganize and improve efficiency Adapt to state changes State budget reduction SB1322 Strategic Enrollment Management Maximize Pima County enrollment Recruitment, Enrollment, Retention, Completion Lifelong Learner tuition program, Tuition cap Stimulate and support out-of-state and international enrollment Anticipate the future and adapt Educational Master Plan Programmatic needs and capabilities Reinvestment

21 Funding the Renewal of the College Educational Master Plan Priorities Ensure program quality, relevancy, and sustainability Create pathways to student success Establish centers for excellence Emphasize outreach centers and leverage adult education

22 Finance and Administration Financing the Educational Master Plan Priorities: Revenue Bonds Revenue bonding authority defined in ARS Title 15, Chapter 12, Article 5 Board Authority to Issue Inform Joint Committee on Capital Review (JCCR) Annual debt service limited to 8 % of annual expenditures Sample Finance Tables for various Rev. Bond Scenarios with Finance Metrics Bonds ($mil) $ 40.0 $ 50.0 $ 40.0 $ 40.0 $ 60.0 Interest Rate 5.0% 5.0% 5.0% 4.0% 5.0% Years Annual Payment ($mil) ($3.21) ($4.01) ($5.18) ($2.94) ($5.78) % Rev Bond Capacity 22% 27% 35% 20% 39% Est. Viability Ratio (>1.0 goal)

23 Budget Scenarios Scenario A: Delay Impacts for Now with Larger Tuition Increases Small to no reductions for FY18 and FY19. Plan for $15 mil reduction in FY20 Continue to reduce via attrition Mitigate cost increases and Expenditure Limitation impacts with larger tuition increases No funding to implement Educational Master Plan or other strategic changes until FY20 Large reduction pending due to Expenditure Limitation Scenario B: Rejuvenate the College Reduce current operations by $5 mil per year in each of next 3 years Identify programs for elimination and begin phasing out Reduce infrastructure/staffing Implement most of the first 5 years of the Educational Master Plan (EMP) Rely on GO Bonds for some EMP projects Scenario C: Revolutionize the College Reduce current operations by about $10 mil per year in each of next 3 years Identify programs for elimination and begin phasing out Eliminate at least one location Significantly reduce infrastructure/staffing Large and immediate investment in Educational Master Plan Ensure future financial stability and ability to grow

24 FY18 Incremental Budget Scenario Examples ($mil) Scenario A B C Tuition $ 3.5 $ 1.5 $ 1.5 Property Tax Growth $ 1.5 $ 1.5 $ 1.5 Property Tax Increase $ 2.0 $ 2.0 $ 2.0 Subtotal Revenues $ 7.0 $ 5.0 $ 5.0 Health Insurance $ 1.0 $ 1.0 $ 1.0 Contractual Obligations $ 2.0 $ 2.0 $ 2.0 Salary Increases $ 2.0 $ 2.0 $ 2.0 Subtotal Expenses $ 5.0 $ 5.0 $ 5.0 Operational Reductions $ - $ (5.0) $ (10.0) Net Change $ 2.0 $ 5.0 $ 10.0 New Financing Payment $ - $ 3.0 $ 6.0 Financial Impact/Funding Depreciation $ 2.00 $ 2.00 $ 4.00 Expenditure Limitation Impact $ 1.50 $ (1.50) $ (6.50)

25 Expenditure Limitation Projections for Budget Scenarios $130,000 $120,000 $110,000 Expenditure Limit (in $000's) $100,000 $90,000 $95,661 $85,801 $100,861 $80,000 $70,000 Original Methodology SB1322 Methodology $60, Estimated Limit Flat Enrollment Actual Expenses Scenario A Scenario B Scenario C

26 Reductions: There is no magic wand Reduce staff Eliminate positions Convert positions to partial FTEs Eliminate obsolete programs Reduce locations Sell/lease vacant space Streamline service delivery do not provide all services at all locations Decrease Benefits costs Health premiums Vacation/holiday benefits Increase contract and tuition revenues

27 Key Takeaways Impact of continued enrollment declines Upcoming expenditure limitation problems Tracking fiscal health and ensuring good stewardship of public funds Need for strategic renewal and investment Difficult decisions at hand

28 Next steps Board feedback Communications plan College community feedback Governance and leadership groups Forums on Educational Master Plan and Budget External community feedback Governing Board Meetings January: Update on FY17 Financial Reports February: Property tax outlook March: Tuition, benefits, and budget update

29 Budget Decision Criteria Expectations and base assumptions to guide budget development: Decisions concerning allocation, cuts, income, and investment will be reached through a process that is evidence-based, collaborative, transparent, defensible, and consistently applied Decisions will be openly and widely communicated When applicable, performance and formula metrics will be developed and implemented with stakeholders at all levels of the College in order to justify funding, staffing, and resources. These formulas and metrics should be published and distributed internally throughout the College

30 Budget Decision Criteria (continued) Criteria for budgetary decisions: Resources will be allocated to ensure the success of the College s Mission, Goals, and Strategic Plan All regulatory and compliance requirements will continue to be met and funded All programs and services will be evaluated in terms of their benefits, costs, relevancy, and impact to our students and external community Once identified, under performing areas should be modified or eliminated As needs arise, it will be necessary to fund new programs and services Human Resources should be optimally assigned throughout the District Employee assignments will correspond to real needs, student enrollment, and organizational demands All services need not be offered at all locations