2015-16 Final Budget Presented to the Board of Trustees

September 9, 2015

“Schools have borne the brunt of spending reductions, so this budget maintains funding a the same level the current year”

-Governor Brown

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World Economy California Economy California State Budget 2015-16 Revenue Assumptions 2015-16 Expenditure Assumptions Highlights of the Unrestricted General Fund Ending Balance Reserve All Funds

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Greece and China have been in the headlines lately

Greece teeters on the brink ◦ The success of the deal keeping Greece on the Euro is

uncertain ◦ Its economy is the size of Ohio, but a “Grexit” could

destabilize the European Union China is a big problem ◦ Their stock market plunged 30% between June and mid-

July and China recently devalued its currency. ◦ China’s economy is second only to the U.S. ◦ Some think this could be the beginning of a Global

Economic Meltdown.

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Since the release of the May Revision, the California economy continues to show strength

The state added 54,200 jobs in May, outperforming the U.S. average ◦ If the state had added only its proportionate share of jobs

based on population, it would have gained 35,000 jobs California’s unemployment rate in May was 6.3%, still

above the U.S. average of 5.3% ◦ One year ago, the state’s unemployment rate was 7.5%

The state’s housing market continues to strengthen ◦ The statewide median home price in April was $481,800,

up 7.4% from April 2014 ◦ Residential building permits are up almost 21% for the first

four months of 2015, compared to the same period one year ago

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

SiliconValley

SanFrancisco

InlandEmpire

OrangeCounty

San Diego Los AngelesSacramentoDelta

East Bay San JoaquinValley

U.S. Average

April 2014 to April 2015

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in billions

$97.1

$102.2

$105.5

$111.3

$115.0 $3.1

$95.0

$100.0

$105.0

$110.0

$115.0

$120.0

$125.0

As Enacted

At May Revision, 10 months later

???

Per LAO

2013-14

2014-15

2015-16

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What will cause the next recession? ◦ The collapse of debt in Greece, Puerto Rico, or Spain? ◦ The drought, fires, and power shortages in the western

states? ◦ Another oil-driven energy crisis? ◦ Nuclear threats by Iran or North Korea? ◦ Terrorism or warfare by ISIS or other “U.S. haters”? ◦ Rising inflation spurred by obligations placed on U. S.

employers for sick leave, overtime pay, healthcare, and minimum wage?

◦ Regular corrections in the U.S. or world economies? Asking the questions differently: What is the

probability that we avoid all of these factors for one year? Two years? Three years?

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Included as part of the 2015-16 Unrestricted Restricted General Fund Ending Balance is an unassigned amount totaling $5,392,962. The amount includes both one-time and on-going money. The amount of $4,688,668 is a one-time Mandated Cost Reimbursement.

Also included as part of the Ending Balance is a 5% Contingency totaling $2,505,999

There are several other allocated/assigned amounts as part of the Ending Balance

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Combining allocated, assigned and unassigned amounts to count toward the Government Finance Associations recommended minimum reserve amount may not be consistent with the intended purpose of a reserve.

Allocated and assigned parts of the Ending Balance, if expended for their intended purposes, would not be available to meet unanticipated urgent needs

The following reconfiguration of allocated and assigned parts of the Ending Balance is one scenario showing the amount of funds that could be available to meet future urgent needs. The College’s Budget Committee anticipates reviewing the components of the Ending Fund Balance in the Fall.

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CURRENT RECONFIGURE

a Bookstore $800,000 $0

b One-Time Funding 543,236 0

c Reserve for Capital Improvements

225,000 0

d Reserve for Office Equipment 300,000 75,000

e Faculty Medical Allocation 150,000 150,000

f Computer Replacement 532,875 532,875

g Reserve for Sabbaticals 200,000 200,000

h Reserve for Retirement Cost 1,340,846 1,340,846

i Rainy Day Reserve 1,000,000 1,000,000

j Contingency Reserve 2,505,999 7,520,397

Unassigned 5,392,962 2,171,800

$12,990,918 $12,990,918

The Rainy Day Reserve and Contingency Reserve total $8,520,397 which equals 17% of expenses.

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Description

Fund 10 Unrestricted

General

Fund 12 Program

Distribution

Fund 13 Community Education

Fund 14 Contract Education

Fund 15 Smith Center

Fund 18 Aux. Serv.

Rentals

Grand Total

Unaudited

Revenues 54,753,569 15,000 2,050,000 60,000 180,000 252,829 57,311,398

Expenditures 50,119,983 185,202 2,256,158 213,628 177,000 241,329 53,193,300

Net Activity 4,633,586 (170,202) (206,158) (153,628) 3,000 11,500 4,118,098

Beginning Fund Balance 8,357,332 170,202 1,273,931 476,120 16,556 890,845 11,184,986

Ending Fund Balance 12,990,918 0 1,067,773 322,492 19,556 902,345 15,303,084

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20

Categorical 21

Grants 25

Parking

26 Health Serv.

41 Capital

43 Meas. G

69 Retiree Benefits

Revenues 4,804,330 1,885,429 720,000 351,000 635,705 100,200,000

630,510

Expenditures 4,809,790 1,885,429 710,070 397,340 735,705 70,070,008

630,510

Net Activity (5,460) - 9,930 (46,340) (100,000) 30,129,992 -

Beginning Fund Balance 5,460 1,158,513 333,829 98,535 4,397,717 57,857,438

155,588

Projected Ending Fund Balance - 1,158,513 343,759 52,195 4,297,717 87,987,430

155,588

1. Deficit Spending – Is this area acceptable? YES Is the district spending within their revenue budget in the current year? Has the

district controlled deficit spending over multiple years? Is deficit spending addressed by fund balance, ongoing revenue increases, or expenditure reductions?

2. Fund Balance – Is this area acceptable? YES Is the district’s fund balance stable or consistently increasing? Is the fund

balance increasing due to on-going revenue increases and/or expenditure reductions?

3. Enrollment – Is this area acceptable? YES Has the district’s enrollment been stable or increasing over the past few years?

Are the district’s enrollment projections updated at least semiannually? Are staffing adjustments consistent with enrollment trends? Does the district analyze enrollment and FTES data? Has the district avoided stabilization funding?

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4. Unrestricted General Fund Balance – Is this area acceptable? YES

Is the district’s unrestricted general fund balance consistently maintained at or above the required reserve minimum of 5%?

5. Cash Flow Borrowing – Is this area acceptable? YES

Can the district manage its cash flow without interfund borrowing? Is the district repaying any TRANs and/or borrowed funds within the required statutory period?

6. Bargaining Agreement – Is this area acceptable? YES

Has the district settled bargaining agreements within new revenue sources during the past three years? Did the district address any budget reductions necessary to sustain total compensation increases (step, column, longevity, etc)?

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7. Unrestricted General Fund Staffing – Is this area acceptable? YES

Is the district ensuring that it is not using one-time funds to pay for permanent staff or other ongoing expenses? Is the % of the district’s General Fund Unrestricted budget allocated to compensation at or less than the statewide average?

8. Internal Controls – Is this area acceptable? YES Does the district have adequate internal controls to insure the integrity

of the general ledger? … to safeguard district assets?

9. Management Information Systems – Is this area acceptable? YES

Is the district data timely and accurate? Are required reports filed in a timely manner? Are key fiscal reports readily available and understandable?

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10. Position Control– Is this area acceptable? YES & NO Is position control integrated with payroll? Does the district control

unauthorized hiring? Does the district have controls over part-time academic staff hiring?

11. Budget Monitoring – Is this area acceptable? YES Is there sufficient consideration to budget related to long-term bargaining

agreements? Are budget revisions completed in a timely manner? Does the district openly discuss the impact of budget revisions at the board level? Does the district compile annualized revenue and expenditure projections throughout the year? Are long term debt levels manageable?

12. Retiree Health Benefits – Is this area acceptable? YES

Has the district completed a recent actuarial study to determine its unfunded liability? Does the district have a plan for addressing the retiree benefits liabilities?

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13. Leadership / Stability– Is this area acceptable? YES

Has the district experienced recent turnover in its management team (including CEO, CBO, and/or Board of Trustees)?

14. District Liability – Is this area acceptable? YES

Has the district performed the proper legal analysis regarding potential litigation that may require the district to increase reserve levels? Has the district set up contingent liabilities for anticipated settlements, legal fees, etc.?

15. Financial Reporting – Is this area acceptable? YES Has the district consistently filed the annual audit report with the Chancellor’s

Office on time? Has the district taken appropriate action to address any material findings cited in the annual audit report? Has the district met the 50% Law consistently? Have Quarterly reports been filed on or before stated deadlines? Were they accurate?

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U.S. Department of Labor California Community Colleges Chancellor’s

Office School Services California Department of Labor University of California, Los Angeles

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