Funding and Impacts

Historical Funding and Long-Term Trends The percentage of tuition revenue has increased due to a reduction in state funding levels, the change in the state payment structure, and increased benefit costs. The percentage of the college's ending fund balance has decreased from 10.7 percent in 1999-2000 to 4.0 percent in 2004-2005 to balance budgets and prevent further cuts in programs and services. The college began using the GASB 35 reporting model as of June 30, 2003. The college financed two issues of pension obligation bonds –effective April 30,2003 and February 27, 2004-to offset the college's unfunded actuarial liability in the Public Employees Retirement System (PERS) The college spent the $35.2 million of voter approved general obligation bonds for major capital improvements and to build a new library, student center and technology building on the Salem campus, to build the Northwest Viticulture Center at Eola, and to upgrade facilities at the Woodburn campus. The bonds were refinanced in 1998 and 2003 in order to take advantage of lower interest rates.
General Fund The college's three primary sources of general fund (operating) revenue are the state allocation, tuition and fees, and local property taxes. Prior to 1990, the college's primary source of revenue was local property taxes. Several statewide measures that passed in the 1990's limited local property taxes and phased in permanent changes to the funding structure for community colleges. At the time of the last full-scale accreditation visit, the changes from one of the measures, Measure 5, were still being phased in and state revenue made up 42 percent of the operating revenue, tuition and fees made up 16 percent and local appropriations made up 31 percent. The remaining 11 percent was made up of carryover and other revenue. Since that time, the state passed Measures 47 and 50, which created additional limitations on state property tax assessments and collections. The impact of the measures and the drop in statewide tax revenue resulting from the economic downturn after September 11, 2001, has caused a shift in resources where students are supplying a greater portion of the general fund resources and local property taxpayers are providing less. The 2005-2006 budget shows a shift in the percentages that make up operating revenues to 45 percent from state revenue, 22 percent from tuition and fees and 24 percent from the local appropriation (property taxes). The remaining 9 percent is from carryover and other revenue. Over the last three budget years the college filled the gaps between resources and expenditures of $9 million in 2003-2004; $7.3 million in 2004-2005 and $5.1 million in 2005-2006 in the general fund. The gaps were caused by decreased, flat or minimal increases in state appropriations and increased costs for personnel due to contractual obligations, the increased costs of health care and double digit increases in the rates charged for the college's retirement program through the Oregon Public Employees Retirement System (PERS). In each of the years, the college used a strategy of decreasing expenditures and increasing resources by increasing tuition and fees and using carryover from previous years. Some cuts had to be made in salaried staff positions, but most personnel savings resulted from retirements, transferring of staff to other funds or by attrition. In 2004-2005 the college worked with the State Board of Education to make permanent changes to move the funding formula to one based on an equity model where students from any region in Oregon receive the same amount of public resources regardless of where they attend. The college also worked tirelessly with the other 16 community colleges to increase the state appropriation for community colleges for the 2005-2007 biennium by over $50 million from the governor's recommended budget. Without these changes the college would have had a larger gap between revenues and expenditures and additional cuts of $2.75-3.0 million for the biennium would have occurred.
State Appropriation Biennially, the state legislature appropriates the funding for all of Oregon's 17 community colleges through the Department of Community Colleges and Workforce Development. The funding flows through to individual colleges based on a statewide funding formula per Oregon Administrative Rule 589-002-0100 approved by the State Board of Education. In the last two biennia the mechanics of the funding formula has changed several times. After September 11, 2001, Oregon, like many other states suffered a severe economic downturn, which caused massive reductions in the amount of funding available for appropriations to community colleges and state agencies. In order to adjust for the reduced state revenue, the legislature passed SB 1022 thereby changing the payment structure for community colleges in the 2002-2003 budget year.
The bill allowed the state to delay the last payment of each biennium to July of the first year of the subsequent biennium. Explaining the payment structure change to local constituents and staff has been difficult because the college must plan to receive three revenue payments in one year and five in the next year. To assist with budgeting and planning, the Chemeketa board of education directed administration to budget revenue on a consistent basis. Resolution 03-04-09 requires the fifth payment in any year will be recognized as revenue and budgeted as the first payment in the following year. The smoothing affect has allowed the college to budget and plan using more consistent revenue amounts. Other changes to the state payment structure included the elimination of funding of certain self-improvement courses and the slashing of the overall appropriation amount. The changes to the overall appropriation and the changes to the statewide funding formula netted Chemeketa Community College a 12 percent reduction in state funds between the 2001-2003 and 2003-2005 biennia. With an increased overall community college appropriation and a new equity based funding formula, the college is hopeful that state revenue will increase slightly over the next few years, but the actual outcome is dependent on the legislature, the State Board of Education and the college's ability to sustain or increase FTE in reimbursable course categories.
Local Appropriations (Property Taxes) The college receives local property taxes from property owners within the district boundaries. Permanent rates of 0.6259 per thousand for operating funds and 0.0818 for the Regional Library were established and took effect in the 1997-1998 budget year. By state statute, property taxes cannot increase more than three percent over the previous year except for new building within the district. For the 2004-2005 budget year, one-half of the property taxes are included in the statewide funding formula which distributes funds to all community colleges. For budget years 2005-2006 and beyond, all of the property taxes will be included in the formula. However, taxes will continue to appear as a separate revenue source in budget documents and financial statements.
Tuition and Fees Tuition and fees are the only revenue source over which the college has any control. In the last three years of declining state revenues and slight increases in local appropriations, the college has reluctantly relied on tuition and fees to assist with budget gaps. Since 2000-2001, the per credit tuition and fee charge to students has increased 63 percent from $38 to $62. Prior to the 2003-2004 budget year increases ranged from $1 to $4. In the 2003-2004 budget year, tuition was increased by $7 per credit followed by a $6 per credit increase the next budget year. For 2005-2006 the college is limiting the tuition increase to $2 per credit. The college is extremely concerned about the impact that tuition increases have had on access for our students.
Ending Fund Balance In 1999-2000, the college ended the year with a fund balance of $5.4 million and in 2004-2005; the general fund was $2.0 million. The college's long standing practice of reserving funds for future decreases in revenues or increase in expenditures paid off when the large gaps between resources and expenditures began to occur in the 2003-2004 budget and beyond. Since 1999-2000 the ending fund balance has decreased from 10.7 percent of total resources to a low of 2.3 percent of total resources in 2004-2005.
Other Funds The college continues to be committed to its efforts of pursuing other sources of revenue to complement and enhance services and to provide funding to meet program and workforce training needs. During the 2004-2005 budget year, the college received $17,188,671 from grant activities. Applying for and receiving grants and contracts such as Title III, TRIO, HEP and CAMP allows the college to provide services to students that would not otherwise be available. Without these other sources of revenue, the college would not be able to provide extensive services in support of students and their success. Additionally, decreases in general fund support have led to less flexibility in instructional department offerings. In order to facilitate the additions of new offerings, the college allows instructional departments to establish programs outside the general fund through a self-supporting structure.
Support of Offerings and Financial Aid Chemeketa provides a wide range of courses and programs including transfer, professional technical, workforce training and developmental education. The college has maintained a comprehensive list of offerings and continued to serve throughout the district in spite of budget challenges. Significant shifting of General Fund resources within Academic Services over the last five years has allowed the college to reposition its support of instructional and student services programming during challenging times. The college has shifted funds to support faculty in health services programs and information and life sciences and the McMinnville Campus. In other areas where the college has been unable to shift general fund resources, it has funded most new credit courses and all community education courses with monies other than operating funds. The operating budget for 2005-2006 includes $470,000 in support of financial aid for students. During the annual budget process, the financial aid director works with the budget department to project financial aid needs for the ensuing year taking into account projections in enrollment and any tuition increases or changes in programs. The college's support for student grants along with revenue from the Oregon Student Assistance Commission and federal and local sources, are used to create student grant and loan packaging for a grant year. The college has a strong history of funding instruction, instructional support and student services. It has continued to invest wisely in those areas in spite of declining resources. The 2005-2006 budget shows an investment of 52.7 percent for instruction and instructional support and 7.7 percent in student services. Actual expenditures for instruction and instructional support for 2004-2005 were 52.7 percent compared to 58.4 percent five years ago. Actual expenditures in student support services for 2004-2005 were 7.7 percent compared to 7.8 percent five years ago. General fund budgeted instructional support and student support services have been augmented by the variety of grants the college has been awarded.
Auxiliary Operations The college has one auxiliary operation: the bookstore. The bookstore is responsible for generating its own revenues through sales of goods and paying for its own personnel and other expenses. Annually, the bookstore pays the college $150,000 for repayment of debt incurred when constructing the building it occupies. College operating funds are not used for bookstore operations.
Capital Financing Debt The college uses General Obligation bonds fully backed by the taxing authority of the district to fund a majority of capital projects. When bond money is not available, or to complete a project outside of the strict General Obligation bond requirements, the college funds additional projects with Certificates of Participation. When Certificates of Participation are used, they are generally issued at a modest amount which can be repaid in twelve years or less. The college has a history of repaying all of its Certificates of Participation prior to the final maturity date. The debt for projects funded by Certificates of Participation is repaid with lease revenue from strategic partnership agreements and other dedicated, non-operational sources to ensure there is no drain on resources available for educational purposes.
Reserves The college maintains a reserve for debt service to plan for future debt payments. Payments received from the assessment of bonded debt tax collections are placed in the debt service fund to be used for principal and interest payments for repayment of bonds. The college charges department personnel budgets a PERS bond rate monthly to establish a reserve for future principal and interest payments for repayment of PERS pension obligation bonds.
Transfers Transfers among funds and interfund borrowing are restricted according to local budget law and require board approval. Annually, the board receives and approves a resolution authorizing interfund borrowing in the event that circumstances necessitate the action.
Fundraising and Development The Chemeketa Community College Foundation is a 501c(3) non-profit, public corporation, organized under the laws of the state of Oregon and the United States. The foundation maintains an arms-length relationship with the college. Even though the college provides office space and equipment to the foundation and pays foundation staff salaries, the activities of the foundation are governed by a separate board of directors. In turn, the board of directors is guided by its own bylaws and policies. The foundation reports its income annually on IRS Form 990 and pays for an annual audit of its financial statements. The foundation is authorized in Oregon to transact business in charitable gift annuities, and it files a report each year on its annuities contracts. The Chemeketa Community College Foundation has developed policies and procedures to administer endowment, life-income and other gifts to the foundation. The executive director of the foundation is chief administrator of these funds, and he is the college's director of college advancement. The college provides accounting services for the foundation, and, together the college and foundation keep complete records of gifts. The foundation contracts with an investment management firm to direct the investment of foundation funds. The investment manager's activities are guided by an Investment Policy Statement that is monitored and updated from time to time by the foundation's board of directors. Oregon is one of about a dozen states that closely monitor organizations involved in charitable gift annuities. The foundation is registered with the state to transact business in these annuities, and the foundation reports its annuities business annually to the state. Since its founding as the Chemeketa Endowment Corporation in 1973, the foundation has enjoyed a clear and productive relationship with the college. The foundation raises funds for the college (buildings and equipment, primarily) and for student scholarships. The college provides office and equipment and limited funds to operate the foundation. Chief executives of the college and the foundation report back and forth to each other's boards at least monthly. A member of the College Board of Education currently sits as a member of the foundation board, providing liaison between the two bodies without attempting to control the foundation board.
Future Challenges Ending fund balance as of June 30, 2005 is too low to accommodate any further gaps between resources and expenditures Increasing tuition costs make college less affordable for some students Rising cost of health benefits and PERS/OPSRP retirement costs has contributed to expenditure increases that exceed resources