AGENDA ITEM BACKGROUND
TO: GOVERNING BOARD
DATE
FROM: PRESIDENT
February 14, 2011
SUBJECT:
Allocation of One-Time Operating Reserves to FY 2011-12
REASON FOR BOARD CONSIDERATION
ACTION
ENCLOSURE(S)
ITEM NUMBER
Page 1 of 4
B.2
BACKGROUND:
The College is moving forward with budget planning for the 2011-12 fiscal year. The Governing Board
reviewed the projected ending balance for the 2010-11 through 2011-12 fiscal years. The following reserve
categories have been established for the college:



A 5% mandatory reserve; $ 3,209,000
Projected Operating Reserves (Savings); $6,500,000 through 2011-12
A $500,000 FTES reserve. Staff recommend the reserve be increased by $500,000
in 2011-12. The FTES reserve will provide resources to buffer marked changes in enrollment
funding.
On December 3, 2007 the Governing Board approved BP 4030. Per BP 4030 “Unrestricted general reserves
shall be no less than the minimum prudent reserve level established by the State Chancellor’s Office”, i.e.
5%.
The college has saved funds to develop an operating reserve to help bridge the gap between ongoing
revenues and ongoing expenses (the structural deficit). Operating reserves to date total $5,038,000. The
Governing Board directed the President to project unallocated funds or savings that will be available after
the 2010-11 fiscal year is closed. The Governing Board also directed the President to include the estimated
savings in the 2011-12 budget planning parameters. The Business Office has reviewed spending patterns
for the current year and is estimating additional resources available as of June 30, 2011 will be
approximately $1,000,000. Note: there is risk in projecting and allocating savings from current and future
years before the fiscal years are closed. Fluctuations in revenues and expenditures occur on a regular basis.
Projections of savings will increase or decrease as actual revenues and expenditures are known.
FISCAL IMPACT:
Allocate $4,026,000 of operating reserves to bridge the structural deficit for 2011-12.
RECOMMENDATION:
It is recommended that the Governing Board continue to set aside a 5% mandatory reserve, increase the
FTES reserve by $500,000 in 2011-12 and approve the use of 66.67% of the $6,038,000 operating reserves
Administrator Initiating Item:
Victoria Lewis
Academic and Professional Matter
If yes, Faculty Senate Agreement
Senate President Signature
 Yes  No
 Yes  No
Final Disposition
Approved
of the college to bridge the deficit for fiscal year 2011-12. The Board will adopt the Governing Board
Principles for 2011-12 included below.
The Governor’s January Budget for 2011-12 includes a net decrease of $2.9 million in general
apportionment revenue. It is anticipated that the state will implement the reduction by reducing the
college’s funded FTES via a workload reduction. The state budget also includes an increase in enrollment
fees of $10 raising the fees from $26 per credit unit to $36 per credit unit; a 38% increase in fees. The
college is approximately 5% over the enrollment cap for 2010-11. Past experience has shown that
enrollment trends are cyclical. As the economy continues to improve enrollment demand may drop. The
college has cut over 400 course sections over the past four years jeopardizing the stability of some of the
college’s core programs and student success. State revenue received from FTES is the main source of
funding for the college.
2011-12 Reserve Allocations
Governing Board principles of budget planning for 2011-12
1) The unrestricted general fund balance should not continue to increase. The balance has increased for a
variety of reasons - mostly a restricted spending environment and an unknown sense of revenues at the
beginning of each year.
2) Authorize use of up to 66.67% of operating reserves (included on page 4)
3) We use the shared governance process to evaluate the use of one time and carry over reserves to ensure
that the following needs address current priorities:
a. CPC allocations made in prior years
b. New and existing needs for maintenance, information technology, etc. and other one time
program expenses
c. Deferred program/department expenses
d. Consider the development of a revolving student emergency loan fund of $50,000.
4) Develop contingencies for the mid and worst case scenarios to be enacted only if necessary to address
the budget deficit for 2011-12.
5) Direct the President to bring recommendations for personnel/compensation and program cuts to the
Governing Board if there is a need to adopt a mid or worse case scenario.
6) Direct the President to bring the 2011-12 planning parameters to the April Board meeting for action.
The college will know in early to mid-March if the tax measure will be on the ballot
7) Direct the President to use the 2011-12 fiscal year to plan and prioritize future expenses which lead to
student success now that our environment has changed so dramatically.
8) Develop priorities for the college given the current budget environment and bring the budget and policy
discussions into one conversation rather than parallel actions.