Mott Community College Board of Trustees  Committee of the Whole Meeting January 22, 2007

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Mott Community College
Board of Trustees Committee of the Whole Meeting
January 22, 2007
2006‐07 AMENDED BUDGETS
RELEVANT BOARD POLICIES:
™ 3100 Budget Adoption. “Budget revisions will be
brought forward for Board action as necessary, but
not less than twice per year in January and June.”
™ 3920,3930 Financial Stability, Fiscal Reserves. “The
College will designate and set aside appropriate fund
reserves to support plans for long-term capital and
operating commitments.”
™ 5100 Compensation Philosophy. “The Board has
determined based on long-term budget projections,
and other related budget data, that total compensation/
benefits should not exceed 77% of the total operating
2
budget.”
Budget Principles:
1. Budget must support Strategic Plans
2. Minimize/Offset Impact on Students
3. Avoid Overall Reduction in Staffing
4. Maintain Fund Balance/Reserves
3
FY2006‐07 AMENDED BUDGETS
4
GENERAL FUND ‐
Budget amendment process overview
1. FY2005‐06 Audit results‐beginning balances for FY2006‐07 updated
2. Adjusted enrollment expectations
3. Student affordability/access ‐ no mid‐year tuition increase
4. Contingency built in to anticipate mid‐year cut (executive order) in state aid revenue
5. Significant increase in Ballenger Trust income distributions
6. Every revenue line item reviewed and budgets revised accordingly
5
GENERAL FUND –
Budget amendment process overview
7. No change in # of authorized FTEs (446)
8. No change in short‐term savings strategy using vacant authorized position budgets
9. Last summer’s bargaining results built in
10.Fair share rebate payments 12/06 included
11.Input from managers on necessary line item adjustments
6
GENERAL FUND –
Budget amendment process overview
12. Total compensation cost is at Board policy limit of 77%
13. Maintains commitment to contribute capital outlay funding, and build reserves toward Board policy targets
14. 7‐Year Forecast updated to reflect 2006‐
07 amended budgets
7
GENERAL FUND
REVENUE ADJUSTMENTS:
•Tuition & Fees -$876 thousand (-3.6% adj.)
Enrollment below budgeted levels
•Property Taxes
-122 thousand (-1/2% adj.)
Consumers Energy tax appeal refunds
•Ballenger Trust
+$942 thousand (+125.6% adj.)
Court-approved change in distribution method
•Other Revenue
+$58 thousand (+2.7% adj.)
Interest income, indirect cost recovery
=Net +$3 thousand change to revenues
Negligible change from June 2006 budget
8
GENERAL FUND
EXPENDITURE ADJUSTMENTS:
•Salaries & Wages, and Fringe Benefits
+$514 thousand
Terms of new faculty CBA, Dec’06 Fair Share Employee Rebates
•Utilities & Insurance
-$16 thousand
Heating costs down, offset by 12% electricity cost hike Jan’07
•Operations/Communications
-$269 thousand
Timing of strategic initiative/AQIP projects
•Other Categories
-$5 thousand net
Budget transfers, reallocation of discretionary savings
=Net +$224 thousand (+0.35%) increase from
9
June 2006 budget
GENERAL FUND
NET RESULTS OF BUDGET AMENDMENT:
9Balanced budget with very small surplus expected
9Surplus of $89K:
-$221 thousand less
than initial budget (mainly due to non-recurring
expenses, i.e. fair share rebates)
+$1.0M (+20.6%)
9FUND BALANCE of $6.1M :
more than initial budget (mainly due to June 30, 2006
required prior period balance sheet adjustment)
10
GENERAL FUND
Revenues
Expenditures
Excess Revenues Over
Expenditures
Fund Balance - Beginning
Fund Balance - Ending
Fund Balance Percent
05-06
ACTUAL
$ 63,193,382
62,907,643
06-07
INITIAL
$ 65,347,665
65,037,447
06-07
AMEND #1
$ 65,350,738
65,261,835
$
$
$
285,739
310,218
88,903
5,765,062
4,779,567
6,050,801
$ 6,050,801 $ 5,089,785 $ 6,139,704
9.62%
7.83%
9.41%
11
Target = 5% - 10% of Expenditure budget
2006-07
Budgeted
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
6,500,000
6,000,000
5,500,000
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
(500,000)
(1,000,000)
(1,500,000)
1997-98
MCC General Fund Balance History
12
STATE AID UPDATE
13
MICHIGAN’S ECONOMIC OUTLOOK
According to the House and Senate Fiscal Agencies (Jan.2007)…
–
The state has lost an average of 1,850 jobs per
month over the past year. Employment is
approximately the same level as in 2003
–
Unemployment predicted to get worse through 2008
–
Of the total nationwide decline in manufacturing
employment over the past 12 months, Michigan’s
manufacturing employment losses accounted for
70% of them
–
Soft housing market
14
MICHIGAN’S ECONOMIC OUTLOOK
According to the House and Senate Fiscal Agencies (Jan.2007)…
–
Last Q of 2006 tax revenues worse than predicted;
The GF/GP fund for FY06 is estimated to close out
at $102.6 million worse than thought when the FY07
budget was built
–
2007 spending pressures: DHS caseloads, lower
tobacco settlement $, health care costs in
corrections system
–
Inflation is expected to be relatively low: Detroit
CPI projected at 3.0% for 2006, 1.4%-1.7% for 2007
and 2.1%-2.5%% for 2008
15
MICHIGAN’S ECONOMIC OUTLOOK
According to the House and Senate Fiscal Agencies (Jan.2007)…
–
The GF/GP projected deficit for 2007 is -$0.4 billion
million (5% of a $9 billion budget)
–
SBT expires at end of 2007, leaving another $1
Billion potential hole
–
Even if SBT is fully replaced, the state’s General
Fund/General Purpose revenue is projected to grow
by only 0.3% into 2008
16
State Aid
Data as of January 2007; Source – MCC Audited
Financial Statements and Budgets
2007 with 5% cut
2007 current
2006
2005
2004
2003
2002
2001
2000
1999
FY1998
17,000,000
16,500,000
16,000,000
15,500,000
15,000,000
14,500,000
14,000,000
13,500,000
13,000,000
12,500,000
17
State Appropriations as % of GF
Revenues
36% 37% 37% 35%
27%
2007 current
2006
2005
2004
2003
2002
2001
2000
1999
24% 24% 23%
22%
21%
2007 with 5% cut
29%
FY1998
38%
36%
34%
32%
30%
28%
26%
24%
22%
20%
18
$3,600
240,000
$3,400
230,000
220,000
$3,200
210,000
$3,000
200,000
$2,800
190,000
$2,600
180,000
$2,400
170,000
$2,200
160,000
$2,000
150,000
2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006
State Aid per Student FTE
Contact Hours
19
General Fund Revenues by Source
2004-05
2005-06
Grants &
Others
Ballenger Trust
State
Appropriations
Property
Taxes
Tuition and
Fees
25,000,000
22,500,000
20,000,000
17,500,000
15,000,000
12,500,000
10,000,000
7,500,000
5,000,000
2,500,000
-
2006-07
Tuition and Fees, Property Taxes and Ballenger Trust have grown,
20
while state appropriations and grants & other have decreased.
GENERAL FUND REVENUES BY PROPORTION
100%
95%
90%
85%
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
4.8%
4.1%
3.4%
24.4%
22.8%
22.3%
34.3%
34.9%
35.7%
35.3%
36.8%
36.0%
FY04-05 Actual
FY05-06 Actual
FY06-07 Budgeted
Tuition and Fees
Property Taxes
State Appropriations
All Others
21
Peer Comparison: Taxable Value and Millage Rates
(2004-05 ACS Data)
TAXABLE
VALUE
('000)
FYES
GROUP 3
WAYNE COUNTY
$28,966,809
7,599
GRAND RAPIDS
$18,364,399
9,363
SCHOOLCRAFT
$13,332,206
6,815
WASHTENAW
$12,539,706
7,430
DELTA
$10,665,874
6,547
MOTT
$10,612,707
6,234
KALAMAZOO VALLEY
$6,801,268
6,300
HENRY FORD
$4,386,238
8,363
LEVIED
OPERATING
2.4844
1.7865
1.7967
3.4148
2.0427
1.9907
2.4089
2.4596
Peer Average
$13,208,651
2.2980
State Average
$8,710,379
2.1907
MCC ranks 6th of 8 among peers (below average) for taxable
value and operating millage rate.
22
OTHER BUDGETARY FUNDS
23
AMENDED “OTHER FUNDS”
FY06‐07 BUDGETS
Main Point is Impact on Operating Budget:
•Designated Fund—$2 million budget
(Scholarships, Student Enrichment, Copy Machines,
Paid Parking, Designated Technology Fee)
•$ 347,000 funded with General Fund budget (expense)
•Auxiliary Enterprise Fund--$667,000 budget
(Catering,Vending, Bookstore, Computer Lab
Printing, Lapeer Campus Auxiliary)
•$346,000 net “profit” supplements General Fund (revenue)
24
AMENDED “OTHER FUNDS”
FY06‐07 BUDGETS
Main Point is Impact on Operating Budget:
•Debt Retirement Fund—no General Fund impact
•0.69 mill levy (calculated each yr) restricted for bond debt repayment
•Capital Funds—repair, upgrade of buildings, equipment,
technology, vehicles ($99 million in net value)
•Instructional Technology Fee = $1 Million per year
•$1.8 million per year planned transfer from General
Fund still needed ; 06-07 transfer lower at $1.2 million
because of early transfer in 05-06
•$15 million in Series 2006 Bond Proceeds funding25
projects through FY06-07 and into FY07-08
7‐YEAR FORECAST
26
Seven Year Forecast – Updated January 2007
Audited
Initial
Amended
Actuals
Budget
Budget
05-06
06-07
06-07
Forecasts:>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
07-08
08-09
09-10
10-11
11-12
12-13
Total Revenue: $
Revenue Increases:
63.1 $
2.8%
65.3 $
3.5%
65.3 $
3.5%
67.6 $ 70.0 $ 72.5 $ 75.1 $ 77.8 $ 80.8
3.5%
3.6%
3.6%
3.5%
3.7%
3.8%
Total Expenditures: $
Expend. Increases:
Surplus/(Deficit):
62.8 $
3.1%
0.3
65.0 $
3.5%
0.3
65.2 $
3.8%
0.1
70.0 $ 73.3 $ 76.8 $ 80.3 $ 84.2 $ 88.3
7.4%
4.7%
4.7%
4.6%
4.8%
4.9%
(2.4)
(3.4)
(4.3)
(5.3)
(6.4)
(7.5)
Fund Balance - End:
$
6.0
$
5.1
$
6.1
$
3.7
$
0.3
$ (4.0) $ (9.3) $ (15.6) $ (23.2)
This forecast shows -$2.4M projected initially for FY07-08, and -$23M at the end
of FY12-13, assuming millage renewal in 07-08, and before steps are taken to
balance these budgets. It shows what would happen if current trends were to
continue. MCC must implement a balanced budget each year.
27
7‐YEAR FORECAST
What changed from June 2006 to Jan. 2007 forecast? • Property Taxes ‐‐ Lowered future expected rate of increase in property values to avg 4.3% over 7 yrs
• Tuition and Fees ‐‐ Lowered future expected rate of increase due to leveling off enrollment trend
• Other Revenues ‐‐ Increased by approx. $1M/yr due to change in Ballenger Trust distribution income
• Extended forecast to FY12‐13
28
=REVENUES: $16 M higher than Jun’06 forecast
7‐YEAR FORECAST
What changed from June 2006 to January 2007 forecast?
• Salaries & Fringes ‐‐ results of latest bargaining contracts increased some pay scales but lowered benefits costs
• Non‐Salary Lines – lowered discretionary spending budgets based on revised 2006‐07 budgeted spending
• Extended forecast to FY12‐13
EXPENDITURES = $18 million higher over 7 years 29
than Jun’06 forecast
7‐YEAR FORECAST
• Bottom Line
– Current Forecast is ‐$23 Million at end of FY12‐13
– This is $1 Million worse than Jun’06 Forecast
– The Forecast still assumes 0.65 Mill Voted Operating Millage is renewed for FY08‐09 and beyond
– The increase in Ballenger Trust income made a significant improvement in the revenue base
– Future state aid is difficult to predict
– Short‐term savings and flexibility continues to be key
30
– Long‐term strategy of reducing compensation costs continues as focus on expense side
CAPITAL FUNDING
Capital Funding
9 Funding Sources :
9 $45 M Voted Bond Authority Passed June 2004
9 ‐$15 M Series 2004 was spent from 2004‐2006
9 ‐$15 M Series 2006 to be spent by Apil 2008
9 =$15 M Remaining voted authority
9 +$13 M Commitment of Operating Funds
9 +$ 7 M projected from Student Tech. Fees
™=$50 M Secured from now through 2011
™$4 M pending approval from State Capital Outlay
™Future needs will require ongoing deferral and continued requests for voted bond 32
authority and state capital outlay assistance FUTURE OUTLOOK:
Next Steps and Key Issues for Consideration
33
FUTURE OUTLOOK:
STRATEGIC PLANNING
VISION…STUDENTS. MCC is a future-focused organization
where student success and student learning come first.
RESOURCES ARE VITAL. On the local level, MCC is reliant
on tax base revenue and tuition for 2/3 of budget, and
therefore vulnerable to area population shift, changing
demographics, and rapid loss of manufacturing sector
employment. “
HIGH PERFORMANCE = FOCUS. MCC is called upon to be
many things to many people; as a result, we must develop
the ability to prioritize and focus our efforts on the most
critical of our services and functions in order to effectively
accomplish our institutional mission.
34
(exerpts from draft 2007-2012 strategic planning documents;
from AQIP MCC’s Strategy for Action workbook )
Summary of College Financial Indicators (from Draft 2007‐2012 Strategic Planning Documents)
¾ MCC is financially stable and manages its resources
¾
¾
¾
¾
¾
¾
¾
¾
well in spite of negative external conditions
Long-term financial challenges are present and must
be addressed
State support proportion not expected to increase
much if at all
Millage renewal in ’08 is absolutely critical
Voted bond authority renewal in ’10 is also critical
Emphasis on performance funding will increase
Pressure to maintain affordability will continue
Strategic plans should drive the budget, and not the
other way around
Efficiency improvements must continue with
35
operating budget
Some Enabling Steps:
1. Successfully renew 0.65 Operating Millage within
2007-08 and Voted Bond Authority by 2010
2. Reduce Compensation costs – Long-term budget
challenge remains to control rising expenditure levels
3. Continue to study Academic and Service Operations
for contribution to student learning and success,
strategic fit, efficiency, feasibility
4. Position for flexibility to offset results of diminishing
proportionate state support
5. Support continuous improvement projects and strategy
with budget commitment and resource allocation
6. Help grow and better utilize resources of the Foundation
36
for MCC
BUDGET PLANNING
Next Board Actions—
• FY06‐07 Final Budget Amendment:
• FY07‐08 Initial Budget:
– June 2007
37
MCC Board of Trustees Committee of the Whole Meeting
January 22, 2007
Questions or Comments?
For More Information:
Details are Provided with Board Resolution 1.28 Kelli Sproule, Chief Financial Officer
810-762-0525, [email protected]
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