Budget Development

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I. REVENUES

A. State Sources

• The college relies on state projections based on the biennial allocation of funds to the community colleges.
• The projections for FY03 include a reduction of $3.1 million expected during the current year. This projection may change as a result of future state revenue forecasts and/or if voters pass a January 2003 measure to increase income taxes.
• Projections for FY03 through FY07 will be presented for “worst case,” “best case” and “middle case” scenarios.
• Projections for FY04 are based on maintaining the current service level of the final revenue received from the state in FY03 plus an inflationary adjustment.
• The last Special Session of the Legislature passed a bill delaying the FY03 fourth-quarter payment to community colleges until July 15, 2003. However, the projections show State Resources as if the payment were received in FY03.

• Property tax revenues are projected using statistical trend analysis based on historical data.

• Tuition revenues are projected based on enrollment projections developed by Institutional Research, Assessment & Planning
• Tuition revenue projections are based on total tuition assessed. Tuition waivers and uncollected tuition are reported as expenditures.
• Projections use $1698-per-credit-FTE and $687-per-non-credit-FTE to calculate total tuition revenues for FY03. These per-FTE rates are based on historical data adjusted for rate increases.
• Tuition revenues include tuition generated by Fund IX instructional units.
• Different projection scenarios will be produced using the following assumptions for FY04 and beyond:
• Future inflationary adjustments using the average annual percentage increase in the Higher Education Price Index since FY97.
• No future increases in tuition except those approved by the Board.
• Any other tuition rate scenarios as needed to make budget decisions.

• Projections for instructional fees use predicted expenditures based on historical trend analysis.
• Projections assume that all fees collected at 100%. Uncollected fees are reported as an expenditure.
• All instructional fees are administratively restricted revenue. That is, fees are tied to specific expenditures.
• Technology Fee revenue is classified as an instructional fee and is a restricted revenue in Fund IX.

• The estimated rate for annual return on investments in FY03 is 1.5%. Rates are estimated based on historical returns and current economic indicators. The amount invested averages approximately $22,500,000 for FY03. The rate and average investment amount will be adjusted throughout the year to match existing conditions.

• These revenues are projected based on historical trend analysis.

A. Personal Services

• Personal Services expenditures for FY03 are based on actual position lists for Classified and Faculty. Compensation for Managers is based on Board parameters.
• Budgeted figures are used for part-time compensation projections in FY03.
• Personal Services expenditures for FY04 and beyond use “steps” plus estimated COLA increases each year. Projection scenarios will vary COLA rates to determine the effects of different possible compensation increases.
• Each year, approximately 3.6% of Salary Provision (the account for compensation changes not yet allocated to departments) is for non-recurring compensation changes.
• OPE rate is recalculated every year using projected actual costs of benefits. Calculated rate for FY03 is 46.7% for full-time and 27.0% for part-time employees. The rate has yet to be calculated for FY04. However, the PERS employer contribution rate for FY04 will increase by 3.75% to 4.25%. This increase is expected to have an impact on OPE expenditures of approximately $1.9 million.

• Projections use historical trend analysis to predict M&S expenditures for FY03 and beyond.

• Projections use historical trend analysis to predict Capital Outlay expenditures after FY03. Because spending on Capital Outlay was curtailed deliberately in FY02, the FY03 projection for Capital Outlay has been adjusted upwards to compensate.

• By Board Policy, the Unappropriated Ending Fund Balance (UEFB) is set at 3% of budgeted General Fund expenditures.
• According to Local Budget Law, the UEFB from previous year may not be spent except under extraordinary circumstances and therefore will be part of the total Ending Fund Balance and a resource (Net Working Capital Unrestricted and part of the Beginning Fund Balance) for the ensuing year.
• On the projection spreadsheets, the UEFB amount is added back to the projected Ending Fund Balance as “Minimum Fund Balance (not available for appropriation).”
• It is assumed that current year Board and Administrative Contingency will be 100% spent during the year. This assumption will change toward the end of the current year to reflect a higher projected Ending Fund Balance (Net Working Capital Unrestricted) based on levels of unspent contingency.

• Transfers In and Transfers Out are projected using historical trend analysis.

• For the purposes of projecting future budgets, it is assumed that restricted resources, including Net Working Capital Restricted, are expended according to historical patterns.
• All projected carryover (Net Working Capital Unrestricted) is “on the table” during budget development. For the current fiscal year (FY03) Net Working Capital Unrestricted of $2,801,946 was budgeted on the resource side with offsetting expenditures. The actual Net Working Capital Unrestricted on 7/1/02 was $1,476,855 above budget
• It is anticipated that some of the Net Working Capital above budget will be used to cover part of a $3.1 million shortfall in state revenues expected in the current year (FY03).
 

Fund IX was created in the FY03 budget to separate from the General Fund those units that rely entirely or primarily on resources other than state revenues, local property taxes and other general use revenues. For the purposes of maintaining historical trends and in order to properly monitor these units, Fund IX revenues and expenditures are included in budget projections spreadsheets under the “Restricted” column.

State Revenue

The spreadsheet and chart (Revenue Chart 1) show budget and actual revenues from the State of Oregon and from Federal Sources for the fiscal years 1995 through 2002. (Note: Federal Sources are a very small and constant portion of this revenue averaging around $175,000 per year.)

Since the passage of Ballot Measure 5 in 1991, Oregon community colleges have relied more and more on funding from the State. Economic conditions in Oregon have resulted in a significant shortfall in income tax receipts for the state. After the latest special session of the Oregon Legislature, Lane is expecting $3.1 million less in state revenues for FY03. Economic forecasts in December and March may result in a larger reduction. A measure to increase income tax rates for the next three years in on the ballot in January of 2003. Should this measure pass, Lane will realize approximately $1.9 million in additional revenue this year, partially making up for the $3.1 million shortfall.

Projection Assumptions for FY03 and Beyond

• The college relies on state projections based on the biennial allocation of funds to the community colleges.
• The projections for FY03 include a reduction of $3.1 million expected during the current year. This projection may change as a result of future state revenue forecasts and/or if voters pass a January 2003 measure to increase income taxes.
• Projections for FY03 through FY05 will be presented for “worst case,” “best case” and “middle case” scenarios.
• Projections for FY04 are based on maintaining the current service level of the final revenue received from the state in FY03 plus an inflationary adjustment.
• The last Special Session of the Legislature passed a bill delaying the FY03 fourth-quarter payment to community colleges until July 15, 2003. However, the projections show State Resources as if the payment were received in FY03.

Local Property Taxes

The spreadsheet and chart (Revenue Chart 2) show budget and actual revenues from Local Property Taxes for the fiscal years 1995 through 2002.
  

Since the passage of Ballot Measure 5 in 1991, Oregon community colleges have relied less and less on local property tax revenues. Since the passage of Ballot Measure 47/50, revenues from property taxes have stabilized and are much more predictable than before FY 99.

Property tax revenues are projected in future years based on historical increases and collection rates adjusted for current economic conditions.

Projection Assumptions for FY03 and Beyond

• Property tax revenues are projected using statistical trend analysis based on historical data.

Tuition

The spreadsheet and chart (Revenue Chart 3) show budget and actual revenues from tuition for the fiscal years 1995 through 2002.
  

Projection Assumptions for FY03 and Beyond

• Tuition revenues are projected based on enrollment projections developed by Institutional Research, Assessment & Planning
• Tuition revenue projections are based on total tuition assessed. Tuition waivers and uncollected tuition are reported as expenditures.
• Projections use $1698-per-credit-FTE and $687-per-non-credit-FTE to calculate total tuition revenues for FY03. These per-FTE rates are based on historical data adjusted for rate increases.
• Tuition revenues include tuition generated by Fund IX instructional units.
• Different projection scenarios will be produced using the following assumptions for FY04 and beyond:
• Future inflationary adjustments using the average annual percentage increase in the Higher Education Price Index since FY97.
• No future increases in tuition except those approved by the Board.
• Any other tuition rate scenarios as needed to make budget decisions.

Instructional Fees

The spreadsheet and chart (Revenue Chart 4) show budget and actual revenues from mandatory and non-mandatory instructional fees for the fiscal years 1995 through 2002.

Increases in fee revenue from year to year can be the result of (a) increases in enrollment or number of users, and/or (b) increases in fee rates.

Projection Assumptions for FY03 and Beyond

• Projections for instructional fees use predicted expenditures based on historical trend analysis.
• Projections assume that all fees collected at 100%. Uncollected fees are reported as an expenditure.
• All instructional fees are administratively restricted revenue. That is, fees are tied to specific expenditures.
• Technology Fee revenue is classified as an instructional fee and is a restricted revenue in Fund IX.

Miscellaneous Revenue Sources

Most Other (miscellaneous) Revenues are restricted. Exceptions are Administrative Recovery and Interest on Investments.

Projection Assumptions for FY03 and Beyond

Interest on investments:

• The estimated rate for annual return on investments in FY03 is 1.5%. Rates are estimated based on historical returns and current economic indicators. The amount invested averages approximately $22,500,000 for FY03. The rate and average investment amount will be adjusted throughout the year to match existing conditions.

• These revenues are projected based on historical trend analysis.

Quarterly payments from the state: August, October, January, April

*Note: in FY03 the April payment from the state will be delayed until July 15

Quite large amounts of money may be invested in January, for example, awaiting expenditures over the remainder of the fiscal year.
  

General Assumptions

Budget projections start with the assumption that the college will maintain “current service level” expenditures. That is, the college will continue to offer the current mix and level of programs and services. (The budgeting model used by the college is a modified incremental model where current-year budgets are considered as the starting point for budget development for the following year.)

Projections for FY04 are an exception in that some expenditure reductions identified in budget development for FY03 will take effect in FY04. Projections for FY04 will take into account these reductions.

Personal Services

The spreadsheet and chart (Expenditure Chart 1) show budget and actual expenditures for Personal Services for the fiscal years 1995 through 2002.   

Annual changes in Personal Services expenditures are due to (a) increases in employee compensation levels, (b) changes in the OPE (Other Personnel Expenses) rate, (c) changes in staffing levels, or a combination of these factors.

The Office of Instruction & Student Services annually allocates money to instructional divisions during the year for “extra” class sections. This money is spent for faculty Personal Services however the funds are budgeted under “Reserve for Restricted Revenue Changes” on the Contingency/Projects & Provisions page of the budget.

Projection Assumptions for FY03 and Beyond

• Personal Services expenditures for FY03 are based on actual position lists for Classified and Faculty. Compensation for Managers is based on Board parameters.
• Budgeted figures are used for part-time compensation projections in FY03.
• Personal Services expenditures for FY04 and beyond use “steps” plus estimated COLA increases each year. Projection scenarios will vary COLA rates to determine the effects of different possible compensation increases.
• Each year, approximately 3.6% of Salary Provision (the account for compensation changes not yet allocated to departments) is for non-recurring compensation changes.
• OPE rate is recalculated every year using projected actual costs of benefits. Calculated rate for FY03 is 46.7% for full-time and 27.0% for part-time employees. The rate has yet to be calculated for FY04. However, the PERS employer contribution rate for FY04 will increase by 3.75% to 4.25%. This increase is expected to have an impact on OPE expenditures of approximately $1.9 million.

Materials & Services

The spreadsheet and chart (Expenditure Chart 2) show budget and actual expenditures for Personal Services for the fiscal years 1995 through 2002.
 

Projection Assumptions for FY03 and Beyond

• Projections use historical trend analysis to predict M&S expenditures for FY03 and beyond.

Capital Outlay

The spreadsheet and chart (Expenditure Chart 3) show budget and actual expenditures for Personal Services for the fiscal years 1995 through 2002.
  

Projection Assumptions for FY03 and Beyond

• Projections use historical trend analysis to predict Capital Outlay expenditures after FY03. Because spending on Capital Outlay was curtailed deliberately in FY02, the FY03 projection for Capital Outlay has been adjusted upwards to compensate.

Contingency

Projection Assumptions for FY03 and Beyond

Unappropriated Ending Fund Balance:

• By Board Policy, the UEFB is set at 3% of budgeted General Fund expenditures.
• According to Local Budget Law, the Unappropriated Ending Fund Balance (UEFB) from previous year may not be spent except under extraordinary circumstances and therefore will be part of the total Ending Fund Balance and a resource (Net Working Capital Unrestricted and part of the Beginning Fund Balance) for the ensuing year.
• On the projection spreadsheets, the UEFB amount is added back to the projected Ending Fund Balance as “Minimum Fund Balance (not available for appropriation).”

• It is assumed that current year Board and Administrative Contingency will be 100% spent during the year. This assumption will change toward the end of the current year to reflect a higher projected Ending Fund Balance (Net Working Capital Unrestricted) based on levels of unspent contingency.

Funds are transferred out annually for a variety of purposes, including annual transfers to Capital Projects, Debt Service, Telephone Services, the Laundry, Financial Aid and Student Health Services.

Transfers Out in FY03 will include transfers to Fund IX for BIS, Specialized Employment Services, Athletics, The Torch and KLCC.

A Transfer Out of $1 million to Capital Projects (Fund IV) for the LASR Project was budgeted for FY02. This transfer was delayed until early in FY03. That transaction shows as an Operating Transfer Out under the “restricted” column for FY03.

Projection Assumptions for FY03 and Beyond

• Transfers In and Transfers Out are projected using historical trend analysis.

Funds may not be transferred to the General Fund from several sources outside the General Fund, including:

• OPE (Other Personnel Expenses in Fund II Internal Service)
• Financial Aid Fund (Fund V)
• Bond Construction Funds and other plant funds legally designated for a specific use (Fund IV Capital Projects)
• Trust and Agency Funds
• Special Revenue (grants and contracts, Fund VIII)
• Endowment Fund (Fund X)

Beginning Fund Balance and Net Working Capital

The spreadsheet and charts below show the history of Net Working Capital from Fiscal Year 1995 through Fiscal Year 2002. The Beginning Fund Balance (the sum of Net Working Capital Unrestricted and Net Working Capital Restricted from 6/30 the previous year) is shown in dollars and as a percentage of the annual budget.

The size of Net Working Capital Restricted grew steadily during the first few years that both ICP and department Materials & Services balances were carried over into the ensuing fiscal year (after Fiscal Year 1994). In Fiscal Year 99, Net Working Capital Restricted was $5.3 million and has dropped since then to $3.6 million. In the current fiscal year, Net Working Capital Restricted includes $1 million authorized for transfer in FY03 to the LASR Project (implementation of Banner information system). Transfer of these funds was delayed until early in FY04. NWC Restricted also includes $188,911 in contractually obligated funds.

Net Working Capital Unrestricted has declined from a high of $6.0 million in FY99 to $4.3 million in FY02. Overall, total Net Working Capital has decreased from a high of $11.3 million in FY99 to $7.9 million in FY02.

Projection Assumptions for FY03 and Beyond

• For the purposes of projecting future budgets, it is assumed that restricted resources, including Net Working Capital Restricted, are expended according to historical patterns.
• All projected carryover (Net Working Capital Unrestricted) is “on the table” during budget development. For the current fiscal year (FY03) Net Working Capital Unrestricted of $2,801,946 was budgeted on the resource side with offsetting expenditures. The actual Net Working Capital Unrestricted on 7/1/02 was $1,476,855 above budget
• It is anticipated that some of the Net Working Capital above budget will be used to cover part of a $3.1 million shortfall in state revenues expected in the current year (FY03).