BUDGET BOOK

2012 – 2013

2012 – 2013

BUDGET BOOK

Presented to the Board of Trustees for Adoption

September 11, 2012

Office of Business Services

Chris Yatooma, Vice President of Administrative Services

Kerri Hester, Director of Finance

TO: Board of Trustees

William Duncan, Superintendent/President District Leadership

FROM: Chris Yatooma, Vice President of Administrative Services Kerri Hester, Director of Finance

SUBJECT: Adopted Budget 2012-2013

This memo introduces the Adopted Budget for 2012-2013. In June, the Board approved a tentative budget for 2012-2013. At that time, three key uncertainties existed related to the 2012-2013 fiscal year. One, the state had not adopted its budget. Two, the District still had yet to close the 2011-2012 fiscal year books. Three, the Governor’s ballot initiative was still not finalized for placement on the November ballot. Two of the three uncertainties no longer exist. The state enacted its budget and Proposition 30 is slated for voter consideration in November. The District’s books are 99% closed with the unaudited year-to-date actuals shown in this document. Unfortunately, even with these items settled, there are still many concerns and reservations.

State Revenue Outlook

The state budget, enacted in late June 2012, closes the identified $15.7 billion funding gap with a combination of spending reductions ($8.3 billion) and revenue increases ($8 billion). Most of the revenue increases will be generated from Proposition 30, which raises the state sales tax by one-quarter of a cent and raises the state’s personal income tax rate for Californians with annual incomes of $250,000 or more. The ability of the state to maintain state funded programs and services, including funding for community colleges, at the prior year levels, is predicated on passage of the November initiative.

District Revenue Outlook 2012-2013

The recently enacted state budget for colleges remains a tale of two budget scenarios with the District’s funding fate tied to Proposition 30. If the ballot measure passes, the District can expect a $660,000 increase in revenue over the 2011-2012 year and an additional 146 Full-Time Equivalent Students (FTES). If the ballot measure fails, the District forecasts a $4.8 million decrease in revenue and a 1,058 FTES reduction. The District’s 2011-2012 base FTES equals approximately 14,400. The District’s Adopted Budget takes a conservative budget approach and is built on a worst case scenario where the ballot measure fails.

Reserves

In June 2012, the Board of Trustees approved a tentative budget using $5M in reserves for the 2012-13 budget year.

District Ending Reserve Balances:

 2010-2011 - $14.3 million (15.5%) - Actual  2011-2012 - $14.1 million (16.2%) – Actual

 2012-2013 - $14.1 million (16.1%) – Projected under “Best Case” scenario  2012-2013 - $9.5 million (10.9%) – Projected under “Worst Case” scenario

evaluate core services and make strategic decisions about reductions and protect the integrity of instructional programs to the best extent possible. Again, in 2012-13 a combination of cuts and use of reserves will occur. However, the ability of the District to absorb unexpected mid-year deficits is diminishing, and the window of time required to address these cuts is closing. These expenditure reduction decisions are looming over the District and must be addressed over the next year.

Sincerely,

Chris Yatooma

Vice President of Administrative Services

5000 Rocklin Road, Rocklin, CA 95677 (916) 624-3333 www.sierracollege.edu

REVENUE ASSUMPTIONS

1.) Proposition 30 tax increase does not pass

2.) System-wide Mid-Year Funding Reduction:

($338M)

3.) Budgeted District enrollment:

13,342

4.) 2012 - 2013 COLA (0%):

$0

5.) 2012 - 2013 enrollment growth at State level

0%

6.) Deficit Factor on State Funding - Property tax (1%):

($660K)

7.) Additional mid-year Workload Reduction from State:

($4.8M)

8.) BFAF 2% Admin Fee increase:

$118K

9.) Lottery Revenue decrease:

($189K)

10.) Mandated Cost Grant Block Funding ($28 x 13,342)

$374K

11.) Enrollment Fee:

$46/unit

EXPENDITURE ASSUMPTIONS

1.)

Budgeted salary increases / COLA

$0

2.)

Step/Column adjustments (full-time employees)

$374K

3.)

Longevity adjustments (full-time employees)

($41K)

4.)

Health insurance premiums stable (same as 2011-2012)

$0

5.)

PERS rate increase (10.923% to 11.417%)

$87K

6.)

Unemployment insurance decrease (1.61% to 1.1%)

($189K)

7.)

Worker's Compensation rate stable (same as 2011-2012)

$0

8.)

Seven (7) furlough days – Classified and Management

($625K)

9.)

Retiree Medical Benefit Increase (4.5%):

$170K

10.) Operating costs increase (rent/utilities/election/insurance)

$582K

11.) Schedule Reductions

($1M)

12.) Unrestricted Contingency:

$600K

2012 – 2013

BUDGET ASSUMPTIONS

UNRESTRICTED GENERAL FUND

1.) The 2011-2012 fiscal year's books have not been audited as of the date of this

package presentation. The 2012-2013 beginning unrestricted general fund reserve

balance will could increase or decrease due to unanticipated but potential audit

adjustments. The beginning unrestricted general fund reserve balance is the best

estimate of what the 2011-2012 ending balance will be but could be higher or

lower if there are audit adjustments.

2.) The Omniparty balances are as of June 30, 2012 but include a reduction for the

SCFA payout that occurred in August 2012. These balances could increase or

decrease due to compensation formula negotiations taking place in the

2012-2013 fiscal year.

3.) Proposition 30 passes. If it passes, forecasted revenue will increase by $5.5M

($5.4M in apportionment, $147K in lottery revenues and $33K in mandated

block grant revenue, reduced by $47K in deficit factor)

4.) The deficit factor is currently forecasted at .99, which reduces base revenue by

~$660K. The actual deficit factor could change resulting in additional revenue or

a reduction current projected revenues.

5.) The District currently owes the State approximately $400K for previously denied

mandated health cost claims. The 2012-2013 mandated cost block grant

estimates at $374K could be reduced or eliminated due to the amount owed to

the State.

6.) Approximately $600K in unrestricted contingencies included in forecasted

expenditures might not be needed.

7.) Departments with unspent budgets at year end could increase the ending fund

balance. Unrestricted general fund budget balances do not roll into the next year.

8.) Overall forecast risk/opportunities from unforeseen events.

2012 – 2013 RISKS AND OPPORTUNITIES

2012 – 2013 BUDGET FOR ADOPTION

GENERAL FUND REVENUE

2009-2010 THROUGH 2011-2012

GENERAL FUND EXPENDITURES

2009-2010 THROUGH 2011-2012

UNRESTRICTED GENERAL FUND FINANCIALS

2009-2010 THROUGH 2011-2012

GENERAL FUND HISTORICAL RESERVES

2006-2007 THROUGH 2012-2013

CAPITAL PROJECTS FUND FINANCIALS

2008-2009 THROUGH 2012-2013

2011-2012 CAPITAL PROJECTS FUND

ENDING FUND BALANCE DETAIL

RESIDENCE HALLS

Observations and Plans:

1.) The COPS debt that was refinanced in 2011-2012 included debt for the Residence Halls. Due to the interest rate reduction from 4.68% to 1.94%, the

Residence Hall portion of the COP debt has declined by ~$36K for 2012-2013 through its final payment in fiscal year 2017-2018.

2.) Not all expenses of the Residence Halls have been charged back to the fund, such as their portion of grounds and parking lot maintenance. These

costs will be allocated to the Residence Halls starting with the 2012-2013 fiscal year.

OTHER POST EMPLOYMENT

BENEFITS (OPEB) TRUST

UPDATE ON CERTIFICATE OF

PARTICIPATION LOANS

CERTIFICATE OF PARTICIPATION

2011-2012 REFINANCE UPDATE

1998/2004/2007 VS. 2012 COP

PAYMENT SCHEDULE