FROM:   Mary Spilde

RE:  Budget Update

DATE:  March 10, 2003

I had planned to send out an update every week. Frankly, I ran out of steam at the end of the week and just didn’t get it done! I want to keep you informed of changes in the projections as a result of legislative action, as well as let you know how the work of the Executive Team is progressing.

You probably read in the paper about the additional $245 million state revenue shortfall announced in the March forecast.  There will be one more forecast before the end of this biennium.  At this point it does not look like the legislature is going to make any more cuts for this year.  Just as well since the state gave us our last payment in January (they delayed our April payment until July) and so we would have to pay them back if they made any more cuts! Of course, this just moves the pain to the next biennium.

In other business, the legislature has been working on a number of PERS bills. To date, the change they have made to make the 8% standard rate the ceiling as opposed to the floor, as well as our board’s decision to sell bonds to cover our PERS unfunded liability (now estimated at $68 million but likely to increase) will have a positive impact on our budget for next year.  This could reduce our deficit by as much as $1 million.  We are developing new projections to share with the board this week.

With respect to the Executive Team we are working on several fronts to develop a balanced budget that deals with the $5.9 million shortfall.   We are generating additional revenue proposals and reviewing cost cutting measures within the framework of maintaining a comprehensive community college and being true to our mission.

At this point we have not made any final decisions.  We are in an information gathering, strategy development phase.  Let me give you a few specifics:

• We are focusing most of our energy right now on developing revenue options.  For example, instructional areas (Professional technical, Lower Division Transfer, Developmental and Continuing Ed.) are developing proposals to help reduce the budget shortfall.  The proposals include revenue generation by increasing tuition and/or introducing differential pricing.  The board directed us to look at differential pricing for our more expensive programs that pay higher wages in the labor market.  Faculty from a couple of professional technical programs have developed examples and we are building on that for discussion with the board.  One of the factors in this is to look at the number of contact hours as opposed to the number of credit hours a student is in class.  Therefore we are also looking at some of the transfer courses that have labs.  Differential pricing is already being done throughout Business, Workforce Development, and Extended Learning, the part of the college that has traditionally been responsible for generating some portion of its operating revenues.  Another program that uses the concept of differential pricing is Flight Technology, which charges students the direct cost of flight instruction.  The concept and experience with these operations are serving as possible models as we continue our discussions on differential pricing.  We do have concerns about the shift this strategy represents but we are also concerned that failure to do something on the revenue side might result in more expensive programs being reduced or eliminated. Again, we are in the very early stages of this and expect to receive some direction from the board as to whether we should include this in a balanced budget proposal.
• We are organizing student forums on tuition.
•  A team of division chairs has been working on a proposal to move summer term toward self-support.  We would phase this in over a couple of years.
• We have been meeting with division chairs and faculty in programs that were on the initial reduction list or were reorganized during the process last year.  We want to make sure we have the most up-to-date information. 
• The transfer programs are also looking at the AAOT, AAS, AGS, AS requirements to see how we can best retain an adequate number of choices for students and a comprehensive mission while reducing the number and breadth of sections taught.  This analysis takes into account the cost/revenue data for each of the classes so that we do not reduce those classes/sections that generate revenue. 
• We are developing a calendar for hearings and board work sessions for the month of April to lead up to decisions by the board.  We will post it as soon as we have finalized dates with the board. 

I think those are the major items for now. Let me repeat no final decisions have been made; we are exploring ideas and generating information on which to base proposals for the board.  As always, I welcome your feedback.  In the meantime, enjoy this lovely, damp, spring day.  Only five more days of classes!  Don’t forget to look at the trees in Bristow Square and the daffodils blooming around the college.  They’ve made it out of a dark hole – so can we!