District Committee on
Budget & Finance
April 17, 2012
2 p.m.
Cañada College, Bldg 8 Room 119
Attendees:
Guest/s:
Kathy Blackwood, Eloisa Briones, Raymond Chow, David Clay, Laura
Demsetz (absent), Jackie Gamelin, Robert Hood, Maggie Ko, Barbara
Lamson, Vickie Nunes (absent), Martin Moreno, Jeff Stanley (absent),
Masao Suzuki, Josef Veres, Linda Whitten
Agenda topics
Budget Update
Blackwood
Kathy reported that recent news from the State indicated that revenues are still falling behind quite a bit.
A bill has been introduced to backfill the current deficit for community colleges (Kathy has no idea where
the money would be coming from) as we await the May Revise which is due in mid-May. The Governor’s
January proposal included $187 million that would be taken away from community colleges presuming
that this money will come from freed up taxes as a result of the dissolution of redevelopment agencies.
However, we have not seen any money as yet. Firstly, to implement this proposal requires legislation.
Secondly, any legislation would require urgency for it to happen. Finally, Kathy has heard that it would be
rolled into budget negotiations for the 2012-13 State budget. It may ultimately end up being a political
decision. The Governor is not really interested in freeing up more money for RDA’s or scraping up more
from community colleges but it is certain to end up in budget discussions before July. Kathy believes we
would again have an “on-time” budget for 2012-13.
Redevelopment Agencies (RDAs)
Blackwood/Chow
District officials that include Kathy, Ray, Barbara Christensen and Jim Keller have been regularly
attending redevelopment agency oversight committee meetings throughout the county. The meetings have
taken up incredible amounts time and mileage, some scheduled the same day but our participation is
crucial. Each city in San Mateo County with the exception of one or two has approved their Recognized
Obligation Payment Schedule (ROPS) which was due to the County on April 15th. San Mateo county
appears to be right on schedule as Kathy found out at a recent ACBO board meeting that many districts
around the State have not yet formed committees.
The redevelopment agencies already received the first half of their tax increment in December. They were
instructed to use that money to cover the entire fiscal years expenses through June 30, 2012. With half the
funding, this essentially means RDAs have to use reserves. By May 11th, the committees are required to
approve the expenses for the next six months, ending December 2012. An allocation will be given in May
for expenses from July to December 2012. The county will review how much cash the entities are
anticipating by the end of June and determine how much they need for the next six months and they will
then be given the allocation. What’s left of the tax increment will be distributed. As a District, our
amounts vary slightly from each RDA, but in general, our share is approximately 7% countywide.
We are now in the process of reviewing the ROPS that have been approved and Barbara Christensen will
give them to our RDA consultant who will then determine our tax increment. The current estimate of how
much we will receive on an ongoing basis is between $2.8 and $3 million annually as part of our property
taxes and will increase over time as bonds are paid off when no new debts are incurred. In the past, the
cities had been using RDA monies for their day to day operations. They are now being limited to $250K
per year for overhead. The oversight committees will continue to monitor the cities and their RDA
spending through 2015 when there will be one countywide oversight committee.
There is a bill AB1585 that is mostly clean up legislation, permitting the successor agencies to keep the
housing component of the redevelopment money. Out of the total tax increment, 20% was required to be
set aside for low income housing. Right now, all the reserves are used to pay for all the obligations. The
bill would allow the cities to have up to four years to spend the reserves. The Governor is likely to veto
this bill.
Kathy and Ray’s experience with RDA’s revealed complexities that included voluminous documentation
for review under very tight timelines. Ray shared that he has learned a lot in knowing how the cities list
and decide on their obligations.
Basic Aid Status
Blackwood
Kathy reported that the State came back and expressed doubt about our becoming basic aid. They
suggested using our total computational revenue ($100 million) rather than the deficited revenue ($97
million). Kathy discussed the issue with State Vice Chancellor Dan Troy. The State counsel was asked
for a legal opinion agreeing with the State and stating that we have to compare to the total computational
revenue. Dan Troy deferred the matter and recommended that Kathy seek counsel from our County for an
opinion as well. He would in turn pursue the issue with the Department of Finance (DOF). After Kathy
contacted our County counsel and their office contacted the State counsel. We are still waiting for a
resolution. It remains unclear how the State would handle the $50 million that we are returning system
wide as we turn basic aid.
Meanwhile, Kathy gave our County Controller’s Office an estimate of our revenue limit showing that we
are basic aid. As far as she knows, we are anticipating all our property taxes ($90) by the end of April.
All the appropriate entities such as the K-12 districts, the County Office of Education, and the cities have
been notified and made aware that we are basic aid. Every scenario that Kathy runs shows us as being
basic aid, regardless if the Governor’s tax initiatives pass or fail. Kathy did not include RDA calculations
for 2012-13.
Kathy announced that the ACBO team will be scheduling a meeting with the Community College League
whose membership comprises District Executives to discuss common issues including accreditation,
GASB, and others.
Linda asked about the FTES numbers for the Second Period (P2) report and Kathy answered the amounts
have not yet been completed. At P1, we were about 30 FTES below our funded cap including the 500
FTES borrowed from last year into this year. Shifting last year helped tremendously, thus, no matter how
much we drop in the current year, it would not matter as we would receive same amount of funding due to
the fact that we are in stability.
Josef asked how the K-12 schools could be affected by our becoming basic aid. Kathy replied that they
should not be hurt. In general, they get their funding from the State once a month. However, it would
have an impact on cash flow for those school districts that are non-basic aid. Much like all schools, the
State has deferred their apportionment and held on to the cash from one year to the next. Those without
reserves will have a difficult time coping and may need to borrow money to make payroll and pay for
operations. Ultimately, they will receive the full allocation.
Bond Refinancing, Other Issues
Blackwood
We have general obligation bonds for both Measure C and Measure A. Because of the low interest rates,
some of the bonds can be refinanced at a lower rate to save taxpayers money. For our district, $70 million
made sense to refinance. This is estimated to yield a savings to taxpayers of about fifty cents per hundred
thousand of assessed valuation. It does not change the term meaning that the bonds would have the same
repayment schedule. Over the years, the total savings on interest to the taxpayers is estimated to be
between $12-$13 million. Since the market has changed a bit recently, we may be able to refinance $100
million. We would not definitely know until sometime in June when the bond refinancing is complete.
We also received confirmation on our credit rating from both Moody’s and Standard and Poor’s declaring
that we are the highest rated community college in the State. Both companies cited our management,
strength of our reserves maintaining fiscal stability and our falling into basic aid as justification of our
superior rating classification.
Linda asked about the status of the Lehmann loss. Kathy answered that the County received the first
payment (of 4 to 5 distributions to occur over a period of two to three years) of over $9 million from the
Federal government but we were not told how much was coming back to us. County Treasurer Sandie
Arnott advised that we not contact them regarding our specific distribution as calculations for over 1,100
accounts is tedious. Each account will be credited or applied based on the average daily balance for the
quarter beginning July 2008 to September 2008 (the period the loss was assessed). Jackie asked if the
distribution would be about the same amount for five years and Kathy thinks we received the bulk of the
distribution on this first payment. Kathy was still hearing that we would be getting 16 cents on the dollar.
Kathy reminded the group that of the $25 million loss, approximately $20 million was bond money. It
would be up to us how the proceeds would be distributed. We would have to figure out an equitable
portion due each District entity that shared in the loss.
Plan Ahead Pay Ahead continues to be an evolving process. Registration for Summer 2012 and Fall
2012 begins on April 30th. Two weeks after the start of registration, at midnight on May 16th, students
with any outstanding balance at all will be dropped from their summer classes for non-payment. Students
will continue to be dropped from summer classes on a rolling basis every Wednesday after the 16th. Two
weeks before the start of summer school, beginning June 4th, daily drops will be performed with a one day
grace period.
On July 18th, students with any fee balance will be dropped from their fall classes. Weekly drops will
occur followed by daily drops.
Students who apply for financial aid (i.e. FAFSA) or whose fees are paid by a third party, or are eligible
for BOG fee waivers or signed up for a payment plan will not be dropped. Kathy commented that the best
way to communicate to students is in class through the faculty. Another way in getting the information
out is for students to sign up for “non-emergency text messages.” ITS is working on applications that
would work with mobile devices/smart phones to make it easier for students to register for courses, check
on their fees, apply for financial, etc...
At the last meeting, Linda had inquired about a way for the community to donate to cover the $20 fee
assessed when students in need sign up for the installment plan. Kathy had discussed the issue with
Foundation Director Stephanie Scott and Stephanie said it was possible to set it up where donations can
be accepted. As it was also mentioned during an Associated Students event, the College student bodies
are willing to assist as well.
Kathy believes that a mechanism and process would have to be developed and she will update the group
at a later date.
An update from School Services of California posed the question regarding community college reserve
levels Statewide--the unrestricted general fund net ending balance as a percentage of the unrestricted
general fund expenditures and other outgo. In 2009-10, the average was 16.2%, the lowest was 5.6%, and
the highest was 36.8%. For 2010-11, the average was 18%, the lowest was 2.6%, and the highest was
36.9%. The data confirms that reserves tend to increase as funding decreases. It also shows that districts
are more prudent in maintaining their reserve levels.
Kathy reported that the California Lottery Commission increased their estimate of $23.25 per FTES in
restricted funds to $23.75 (up fifty cents) and $117 per FTES in unrestricted funds to $118 (up seventy
five cents). The restricted portion of lottery can only be spent on instruction-related expenses.
Masao asked about where to find sources of funding in the budget book. Kathy pointed to the narrative
part of the final budget book in the Revenues section that describes what type and how much revenue are
anticipated for the fiscal year.
Masao commented that topics covered by the committee appear to generally be State news,
redevelopment status and budget updates but he wanted to cover and discuss salary expenditure
comparisons that he has seen in the MidYear report, especially in regards to faculty salaries. Kathy
responded that faculty pay is a collective bargaining item which is not within the scope of this committee.
She also pointed out that hiring faculty is a College decision and is not directed at the District level.
Masao will be emailing the group on this item and find out if there is interest in discussing it at the next
meeting or at a future meeting. Rachelle will add this item to the meeting in May. Eloisa offered to
answer questions that may arise from the topic.
Linda shared that from a recent class discussion, she encouraged her students to send email messages to
the Board regarding their suggestions and feedback on the bond and parcel tax.
Next Meeting
Committee
The next meeting will be held on Tuesday, May 15th at 2pm, District Office Board Room.