I.    REVENUES

A.    State Sources

1. The college relies on state projections based on the biennial allocation of funds to the community colleges.
2. The projections for FY05 are based on the “new” funding formula and include $10.7M expected for allocation by E-Board for FY05.  The new funding formula maintains a cap on enrollment.
3. Projections for FY06 and FY07 are based on maintaining final revenue received from the state in FY04/FY05 plus an inflationary adjustment of 2%.
4. A ballot measure to repeal HB2152 (income tax surcharge) would lower Lane’s state revenue by approximately $900,000 for the current biennium.  The projections assume passage of such a ballot measure.

B.    Local Property Taxes

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

C.    Tuition

1. Tuition revenues are projected based on enrollment projections developed by Institutional Research, Assessment & Planning
2. Tuition revenue projections are based on total tuition assessed.  Tuition waivers and uncollected tuition are reported as expenditures.
3. Tuition revenues include tuition generated by Fund IX instructional units.
4. Projection of FY05 tuition revenue uses rates adjusted for inflation using the Higher Education Price Index (HEPI) for 2003 (per Board Policy D.110).
5. $453,000 has been added to projections for differential pricing revenues in FY04.  On full implementation of differential pricing in FY05, the revenues are increased to approximately $586,000. Revenues from differential pricing are increased by the same percentage as tuition increases for FY05 and beyond.
6. For FY06 and beyond, future inflation adjustments use the average annual percentage increase in the HEPI since FY97. 

D.    Instructional Fees

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

E.    Investment Income

1. The estimated rate for annual return on investments in FY04 is 1.5%.  The rate for FY05 is estimated at 2.0%.  Rates are estimated based on historical returns and current economic indicators.  The average amount invested is estimated at approximately $19 million for FY04. The rate and average investment amount will be adjusted throughout the year to match existing conditions.

F.    Sale of Goods and Services, Administrative Recovery, all other sources:

1. These revenues are projected based on historical trend analysis.

II.  EXPENDITURES

A.  Personal Services

1. Personal Services expenditures for FY04 are based on actual position lists.
2. Budgeted figures are used for part-time compensation projections in FY04.
3. 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.
4. OPE rate is recalculated every year using projected actual costs of benefits. Calculated rate for FY04 is 49.9% for full-time and 32.3% for part-time employees. The calculated rate for FY05 will vary with different scenarios.  However, benefit calculations for FY06 and beyond include an estimated annual increase in health premium costs of 10%.

B.  Materials & Services

1. Projections use historical trend analysis to predict M&S expenditures for FY04 and beyond.

C.  Capital Outlay

1. Projections use historical trend analysis to predict Capital Outlay expenditures after FY04.  Because spending on Capital Outlay was curtailed deliberately in FY02 and FY03, the FY04 projection for Capital Outlay has been adjusted upwards to compensate.
2. In FY04, $200,000 recurring was added to Capital Outlay for equipment replacement.  For FY05, FY06 and FY07 an additional $350,000 recurring is added each year to the projection based on needs identified in the Capital Assets Replacement Forecast.  (Note: Equipment needs will be reviewed and documented in the unit planning process taking place this year.)

D.  Contingency

1. By Board Policy, the Unappropriated Ending Fund Balance (UEFB) is set at 3% of budgeted General Fund expenditures.
2. According to Local Budget Law, the UEFB budgeted for the current year may not be expended except under extraordinary circumstances and therefore will be part of the total Ending Fund Balance and a resource for the ensuing year (Net Working Capital Unrestricted and part of the Beginning Fund Balance).
3. On the projection spreadsheets, the UEFB amount is added back to the projected Ending Fund Balance as “Minimum Fund Balance (not available for appropriation).”
4. Expenditures of current year Board and Administrative Contingency are included in trend analysis for Personal Services, Materials & Services and Capital Outlay expenditures. (Note: this is a significant change from previous years.)

III. OTHER FINANCING SOURCES

• Transfers In and Out are projected using historical trend analysis.
• In FY04, $300,000 was added to the budgeted Transfer Out for major maintenance and $150,000 was subtracted for the LTD bus pass subsidy now covered by the Transportation fee.
• In FY05, $426,000 is estimated for an additional recurring major maintenance allocation.  An additional $426,000 recurring is added for both FY06 and FY07.  These numbers are in accordance with the proposed plan to phase-in adequate annual allocations for facilities maintenance and improvement.
• In FY05, $400,000 is added to Transfers Out for LASR debt service according to the Board approved budget for LASR.  In FY06, the debt service for LASR drops to $200,000.
• Intrafund Transfers are projected each year as a result of rebalancing the M&S portion of the Restricted Ending Fund Balance.

IV.    BEGINNING/ENDING FUND BALANCES (Net Working Capital)

• 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 (Ending Fund Balance) is “on the table” during budget development.  For the current fiscal year (FY04) the Beginning Fund Balance was budgeted at $6,574,682 on the resource side.  The actual Beginning Fund Balance on 7/1/03 was $6,930,589 or $355,907 above budget. (Note: These are estimates pending final audit figures.)
• The FY05 projections include $810,000 for “Deferred Maintenance Catch-up.” FY06 and FY07 show $350,000 each year for maintenance catch-up.  These amounts are non-recurring and will be used to fund a backlog of approximately $2.2 million.  Since these are non-recurring expenditures, they are shown as an offset to the ending fund balance.  In reality, these funds would be budgeted as a transfer out to Capital Projects Fund 4.
• Projections for FY06 and FY07 include $460,000 each year to establish a Facilities Capital Reserve Fund.  These are shown as an offset to the ending fund balance (see explanation for C).

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 accompanying spreadsheet and chart (“State and Federal Resources”) show budget and actual revenues from the State of Oregon and from Federal Sources for the fiscal years 1995 through 2003. (Note: Federal Sources are a very small portion of this revenue.)

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 2003 session of the Oregon Legislature, Lane is expecting $1.4 million less in state revenues for FY04.   A measure to repeal an income tax surcharge passed by the Legislature may be on the ballot in January of 2004.  Should this measure pass, Lane will lose approximately $900,000 revenue this biennium.

A new funding formula maintains a “cap” on enrollment for the purposes of allocating state funds.  The E-Board is expected to allocate an additional $10.7M to community colleges for FY05 and this amount is included in the projection.  Note:  The 4th quarter state payment in FY03 was delayed to July 15 but is shown as revenue in FY03.

(Note:  At the time the FY04 budget was adopted, the Legislature had not yet passed a funding bill for community colleges.  The budget was built using the Governor’s balanced budget proposal of April 2003.  The Governor’s proposal resulted in approximately $25 million in state revenue per year for Lane over the FY04/FY05 Biennium.  This is approximately $800,000 less than the final allocation to Lane for FY04 and approximately $1.4 million less than current projections for FY05.)

Projection Assumptions for FY04 and Beyond

·        The college relies on state projections based on the biennial allocation of funds to the community colleges.

·        The projections for FY05 are based on the “new” funding formula and include $10.7M expected for allocation by E-Board for FY05.  The new funding formula maintains a cap on enrollment.

·        Projections for FY06 and FY07 are based on maintaining final revenue received from the state in FY04/FY05 plus an inflationary adjustment of 2%.

·        A ballot measure to repeal HB2152 (income tax surcharge) would lower Lane’s state revenue by approximately $900,000 for the current biennium. The projections assume passage of such a ballot measure.

Local Property Taxes

The accompanying spreadsheet and chart (“Property Taxes”) show budget and actual revenues from Local Property Taxes for the fiscal years 1995 through 2003.

Since the passage of Ballot Measure 5 in 1991, Oregon community colleges have relied 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 FY04 and Beyond

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

Tuition

The accompanying spreadsheet and chart (“Tuition”) show budget and actual revenues from tuition for the fiscal years 1995 through 2003.

Projection Assumptions for FY04 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.
• Tuition revenues include tuition generated by Fund IX instructional units.
• Projection of FY05 tuition revenue uses rates adjusted for inflation using the Higher Education Price Index (HEPI) for 2003 (per Board Policy D.110).
• $453,000 has been added to projections for differential pricing revenues in FY04.  On full implementation of differential pricing in FY05, the revenues are increased to approximately $586,000. Revenues from differential pricing are increased by the same percentage as tuition increases for FY05 and beyond.
• For FY06 and beyond, future inflation adjustments use the average annual percentage increase in the HEPI since FY97

Instructional Fees

The accompanying spreadsheet and chart (“Instructional Fees”) 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 FY04 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 expenditures.
• 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 FY04 and Beyond

Investment Income:

• The estimated rate for annual return on investments in FY04 is 1.5%.  The rate for FY05 is estimated at 2.0%.  Rates are estimated based on historical returns and current economic indicators.  The average amount invested is estimated at approximately $19 million for FY04. The rate and average investment amount will be adjusted throughout the year to match existing conditions.

Sale of Goods and Services, Administrative Recovery, all other sources:

• These revenues are projected based on historical trend analysis.

Note on investments:
While expenditure patterns for the college are relatively stable from month to month the receipt of revenues is not.  The college receives large amounts of money at particular times of the year as noted below:

Quarterly payments from the state:    August, October, January, April
    *Note: in FY03 the April payment from the state was delayed until July 15.  Future 4th quarter payments may be similarly delayed.

Property tax revenues:            December or January
Tuition and fee receipts:        September, January, March

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 and beyond take into account reductions made in the FY03 budget development process.  Other additions and reductions to Current Service Level are noted in specific expenditure categories.



Personal Services

The accompanying spreadsheet and chart (“Personal Services”) show budget and actual expenditures for Personal Services for the fiscal years 1995 through 2003.

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 FY04 and Beyond

·        Personal Services expenditures for FY04 are based on actual position lists.

·        Budgeted figures are used for part-time compensation projections in FY04.

·        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.

·        OPE rate is recalculated every year using projected actual costs of benefits. Calculated rate for FY04 is 49.9% for full-time and 32.3% for part-time employees. The calculated rate for FY05 will vary with different scenarios.  However, benefit calculations for FY06 and beyond include an estimated annual increase in health premium costs of 10%.

Note:
The figures for total salary base and compensation increases (Salary Provision) are based on the most current updated Position List, which is employee-specific and takes into account where each employee is placed on the appropriate salary schedules.


Materials & Services
The accompanying spreadsheet and chart (“Materials & Services”) show budget and actual expenditures for Materials & Services for the fiscal years 1995 through 2003.

Projection Assumptions for FY03 and Beyond

• Projections use historical trend analysis to predict M&S expenditures for FY04 and beyond.

Capital Outlay

The accompanying spreadsheet and chart (“Capital Outlay”) show budget and actual expenditures for Capital Outlay for the fiscal years 1995 through 2003.

Projection Assumptions for FY04 and Beyond

·        Projections use historical trend analysis to predict Capital Outlay expenditures after FY04.  Because spending on Capital Outlay was curtailed deliberately in FY02 and FY03, the FY04 projection for Capital Outlay has been adjusted upwards to compensate.

·        In FY04, $200,000 recurring was added to capital outlay for equipment replacement.  For FY05, FY06 and FY07 an additional $350,000 recurring is added to the projection based on needs identified in the Capital Assets Replacement Forecast.  (Note: Equipment needs will be reviewed and documented in the unit planning process taking place this year.)

Contingency

Projection Assumptions for FY04 and Beyond

Unappropriated Ending Fund Balance:

• 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 budgeted for the current year may not be spent except under extraordinary circumstances and therefore will be part of the total Ending Fund Balance and a resource for the ensuing year (Net Working Capital Unrestricted and part of the Beginning Fund Balance).
• On the projection spreadsheets, the UEFB amount is added back to the projected Ending Fund Balance as “Minimum Fund Balance (not available for appropriation).
  

Contingency:

• Expenditures of current year Board and Administrative Contingency are included in trend analysis for Personal Services, Materials & Services and Capital Outlay expenditures. (Note: this is a significant change from previous years.)

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 FY04 include transfers to Fund IX for Workforce Training, Specialized Employment Services, Athletics, The Torch and KLCC.

In FY04, an additional $580,000 recurring will be transferred to Fund IV for major maintenance.

Projection Assumptions for FY04 and Beyond

• Transfers In and Out are projected using historical trend analysis.
• In FY04, $300,000 was added to the budgeted Transfer Out for major maintenance and $150,000 was subtracted for the LTD bus pass subsidy now covered by the Transportation fee. A one-time transfer out to LASR for $1 million was subtracted from FY04 before the trend analysis was applied.
• In FY05, $426,000 is estimated as the additional recurring major maintenance allocation.  An additional $426,000 recurring is added for both FY06 and FY07.  These numbers are in accordance with the proposed plan to phase-in adequate annual allocations for facilities maintenance and improvement.
• In FY05, $400,000 is added to Transfers Out for LASR debt service according to the Board approved budget for LASR.  In FY06, the debt service for LASR drops to $200,000.
• Intrafund Transfers are projected each year as a result of rebalancing the M&S portion of the Restricted Ending Fund Balance.

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)

Administrative Overhead at the rate of 8% of gross revenue is charged to the Bookstore and Foodservices. This amount is transferred annually to the General Fund.



The accompanying spreadsheets and charts show the history of fund balances from Fiscal Year 1995 through Fiscal Year 2003.  The Beginning Fund Balance (the sum of Unrestricted Ending Fund Balance and Restricted from 6/30 the previous year) is shown in dollars and as a percentage of the annual budget.

The size of the Ending Fund Balance 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 1999, Restricted Ending Fund Balance was $5.3 million and has dropped since then to $2.2 million.

Unrestricted Ending Fund Balance declined from a high of $6.0 million in FY99 to $2.9 million in FY03.  Overall, the total Ending Fund Balance decreased from a high of $11.3 million in FY99 to $6.9 million in FY03.

Note: The FY03 Unrestricted and Restricted Ending Fund Balances are estimates as of November 12, 2003, and are awaiting final audit figures.

Projection Assumptions for FY04 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 (Ending Fund Balance) is “on the table” during budget development.  For the current fiscal year (FY04) the Beginning Fund Balance was budgeted at $6,574,682 on the resource side.  The actual Beginning Fund Balance on 7/1/03 was $6,930,589 or $355,907 above budget.  (Note: these are estimates pending final audit figures.)
• The FY05 projections include $810,000 for “Deferred Maintenance Catch-up.” FY06 and FY07 show $350,000 each year for maintenance catch-up.  These amounts are non-recurring and will be used to fund a backlog of approximately $2.2 million.  Since these are non-recurring expenditures, they are shown as an offset to the ending fund balance.  In reality, these funds would be budgeted as a transfer out to Capital Projects Fund 4.
• Projections for FY06 and FY07 include $460,000 each year to establish a Facilities Capital Reserve Fund.  These are shown as an offset to the ending fund balance (see explanation for C).