Budget Message

April 8, 2015

The college district has very diverse educational and business support needs. This proposed budget is the culmination of many months of planning at all levels of the college. The budget encompasses fourteen funds, and together, they enable the college to implement the strategic plan designed to fulfill these needs. The Budget Summary in the introductory section shows the relative size and purpose of the funds. When developing the proposed budget, the General Fund receives the most focus but the impacts to activities in all of the funds are considered as a whole.

When preparing for the upcoming year’s budget, revenue and expenditure forecasts are prepared within the context of current economic conditions. Recent economic data support a modest but sustained recovery. Job growth in Oregon is currently outpacing the national average with the smaller metro areas of Salem, Eugene and Medford leading the growth. The demand for new housing is also picking up. Plus, a majority of the forward-looking economic indicators also show the economy is improving. An improving economy brings a mix of financial impacts to Chemeketa. On a positive note, state funding and property taxes are expected to show strong improvement. But, continued enrollment declines are anticipated due to the availability of more jobs which will reduce tuition and fee revenue. Although enrollment has declined by only about five percent, tuition and fee revenue has dropped by nine to ten percent for the current fiscal year. The decline was anticipated as the economy improves since more people will favor going to work rather than going to school. These declines are returning us closer to our long-term enrollment growth trend. Our current projections anticipate a seven percent reduction in tuition and fee revenue for fiscal year 2015-16 and then another five percent loss for fiscal year 2016-17. 

The improving economy has led to stronger income tax collections and slightly stronger state revenue forecasts. Since we are entering a new biennium, state funding is unknown at this point. The range of potential funding for all community colleges appears to be from $500 to $535 million. The Governor’s recommended budget included $500 million for community colleges. The Higher Education Coordinating Committee proposed $519 million and the co-chairs of the Ways and Means Committee are considering $535 million. All of these amounts are higher than the current biennium which is funded at $465 million for all community colleges. The final amount likely won’t be known until near the end of the legislative session.

To receive the allocation from the state, all Oregon community college Boards of Education are required by statute to enter into an Achievement Compact with the state’s Oregon Education Investment Board (OEIB)—the state body that oversees P-20 education. In our Achievement Compact, we set targets that will contribute to reaching Oregon’s 40/40/20 educational goal. The compact sets specific outcome targets and reports results from prior years in the areas of student completion, progress at the college and progress to and from the college. The state is moving forward with migrating toward an outcomes-based funding model. This is a dramatic shift from the current model that funds community colleges based on student FTE. The final model is currently under development but preliminary work shows that the formula will emphasize four major categories: progression, completion, remediation success, and workforce training. The college could have a reduction of state resources if our performance does not meet the targets in those areas identified for funding.

To manage the uncertainty in state funding, the college proposed varying rates of tuition depending on the level of state funding as shown in this table.

Appropriation

Tuition Rate

Universal Fee

Out of State/International Tuition Rate

$500 million or less*

Increase of $2 per credit to $82 per credit

No increase in $14 per credit rate

Increase of $2 per credit to $244 per credit

>$500 million <$535 million

Increase of $1 per credit to $81 per credit

No increase in $14 per credit rate

Increase of $1 per credit to $243 per credit

$535 million or more

No increase in $80 per credit rate

No increase in $14 per credit rate

No increase in $242 per credit rate

Based on this proposal, the college created three possible funding scenarios and associated investment priorities. The first scenario is State funding at $500 million with a $2 per credit hour tuition increase. The second scenario is State funding at $519 million with a $1 per credit hour tuition increase. And, the third scenario is State funding at $535 million with no tuition increase. To develop the 2015-16 budget, it was decided to set state funding at $500 million with the $2 per credit hour tuition increase.  This was the most conservative option considered. The priority one budget changes included modest investments with offsetting budget reductions. If state funding reaches $519, the priority two investments will be considered and if it reaches $535, priority three investments will also be considered. Any of the new investments implemented are intended to further the attainment of the core theme objectives.

An additional challenge is that when total General Fund revenues are projected forward several years based on varying assumptions, it shows a range of modest growth in the best case to significant declines in the worst case. This drives the need for contingency planning and thorough reassessment during each budget year to position the college to meet changing needs and contain costs to match the revenue sources. Typically around eighty percent of the General Fund budget is for personnel costs. The college is striving to maintain the talent level of employees and minimize layoffs while at the same time controlling labor costs. The cooperation of our employee groups has helped tremendously to maintain increases to personnel costs to a manageable level and help reduce pressure on the General Fund. Plus, inflation has remained low to slow down the increases to other costs as well. There is still uncertainty regarding the direction of PERS employer contribution rates since recent reforms have been appealed to the state supreme court. A decision on the appeal is expected this spring. An additional concern is the rate of increase for employee health insurance.  Although the annual increase of the college contribution is capped in the bargaining agreements, the difference becomes an out-of-pocket cost for employees. The college strives to be an employer of choice and affordable health care will contribute toward this goal.

Chemeketa has always strived to keep the price of a college education affordable for its students. Textbooks and course materials now make up a significant part of the student’s costs. This issue affects students in several ways. In an attempt to reduce costs, students often elect to share, borrow, or do without required course materials.  The effect of this is to reduce student success in terms of academic performance, completion, and time to complete. We have heard this directly from students.  Developmental students are often among those most impacted. They must take additional courses—and many have expensive course materials attached. These courses are in addition to what they need for degree completion, and often necessary to become ready for college level courses. The college has set aside funds to support faculty in the selection, revision, remixing, and/or creation of textbook and course material alternatives to help reduce these costs for students.

In June 2014, the college issued the last series of the $92 million of bonds voters approved in 2008.  The final sale of bonds will allow the college to complete two major projects.  The larger project is a 53,000+ square foot lab and classroom building to serve the college’s Machining, Drafting, and Engineering programs.  The second major project is the final phase of the remodel of building 4 which serves the college’s Electronics, Automotive, and Visual Communications programs.  Once all of the projects are complete, the college will have completed approximately $140 million of capital projects over a seven year span.  We were able to leverage the general obligation bonds with additional funding sources such as several state capital construction grants, the college’s internal capital funds plus a variety of other sources.  While the need for additional facility improvements continues, the completion of the projects provided by this funding has significantly increased the capacity and quality of Chemeketa’s facilities.

The college has a long history of strong financial management.  We have weathered the recent severe recession on a solid financial foundation.  We feel that the level of reserves are adequate to manage the volatility of General Fund revenues, properly fund technology and equipment, and ensure the repayment of long-term debts. We should be well-positioned to adapt to the changing needs of students and with the changing nature of education itself.  We remain committed to our students, community and employees as we face uncertainty about the new governance structure at the state, the state distribution model and our enrollment.  We are hopeful that the Legislature will continue to see the value of investing in all levels of education and translate this into increased funding for Oregon’s community colleges. We will continue to work to show them the important contribution community colleges make to our students and the future economic vitality of the state.

Respectfully submitted,

Julie Huckestein

 

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