Funding and Impacts

Summary of All Funds Budget

General Fund

In spite of restructurings and cost cutting initiatives over the last several years, the long term trend indicates a fundamental imbalance between the rate of increase of expenditures and available resources.  The current economic recession will likely have a permanent impact to make the imbalance even worse.  All of the General Fund resources will be impacted:

State Appropriation

The amount originally allocated to the community college support fund by the legislature for the 2007-09 biennium was $500 million for all of the community colleges.  For the 2009-11 biennium, there have been a wide range of funding levels discussed ranging from the governor’s initial budget at $485 million to a low of $350 million due to severely reduced revenue forecasts.  The latest state revenue forecast shows a shortfall ranging from $3.1 - 4.4 billion.  This range shows there is significant uncertainty in the level of funding from the state.

However, the state does have two sources to potentially lessen the full impact of the loss of tax revenue.  They are the Federal stimulus funds and the rainy day funds that could be used to backfill losses.

Tuition and Fees

The college has adopted a policy of aiming toward the middle third of all community colleges in its tuition rate while balancing affordability and access.  The tuition rate is currently $61 per credit hour.  It was $58 per credit hour for 3 years prior to that.  The college is sensitive to the cost of tuition and fees for students and strives to keep the cost as affordable as possible.  However, due to the size of the state budget deficit, a $9/credit hour tuition increase has been approved for fiscal year 2009-10 to help minimize the loss of program offerings.

Property Taxes

The property taxes were estimated using the same methodology as in past years except the assumed rate of growth was reduced from 3.5% to 2% to allow for reassessments of residential property and tax appeals by area businesses.  The college is also closely monitoring these potential impacts:

• An increase in the rate of default on taxes paid.
• The possibility of large tax appeals by area businesses.
• The ratio of assessed value to real market value.  The current ratio is about 50% but, as property values decline, the spread will narrow.

Ending Fund Balance

The college has an informal target to build the carryover to approximately 10-15% of revenues.  The graph below shows that the target had been achieved just prior to the last economic downturn but was used up quickly after the reduction in state funding.  The college was nearing the target again in 2007-08 but the ending fund balance will likely decline over the next 2-3 years as the state funding is now expected to be reduced again. See below for more information on the ending fund balance.

Capital Projects

In contrast to the funding challenges in the operating fund, the capital projects funds look promising.  The college has a variety of funding sources to build and renew facilities with an emphasis on sustainable and energy efficient design.

General Obligation bonds

These bonds are approved by the voters in our district.  A tax is levied to retire the debt.  In May 2008, voters approved a $92 million bond levy for the college.  Projects that will be funded with the General Obligation bonds are:

• A health sciences building on the Salem campus
• A professional/technical building on the Salem campus
• A classroom building on the Salem campus
• A college center on the McMinnville campus
• An emergency services training center in Brooks
• A variety of remodel and deferred maintenance projects

Certificates of Participation

The college periodically issues certificates of participation (COPs, also called full faith and credit obligations) as an alternative way to acquire and construct facilities.   The debt is repaid by the revenue generated from the asset, typically income from rental of building space.  Two of the more recent projects funded with COPs are partially funding the construction of the Chemeketa Center for Business and Industry and the site acquisition for the McMinnville Campus.

Community College Capital Support

The state periodically funds community college construction projects with bonds they issue.  The bond debt is retired by future state allocations.  These funds require a 50/50 match of local funds.  Chemeketa received $5,625,000 in the latest round to help fund the construction of the health sciences building on the Salem campus.  The matching funds will be the General Obligation bonds described above.

Oregon Deferred Maintenance funds

These funds are an economic stimulus package from the state of Oregon focused on deferred maintenance projects.  The state is looking for “shovel-ready” projects to provide a short-term stimulus with a lasting benefit.  Chemeketa’s portion of these funds is just over $8 million.  With matching funds, the total value of the projects is just over $16 million.  The projects will focus on:

• Roof repair
• Electrical system upgrades
• HVAC system replacements
• Rebuilding deteriorating roadways
• Upgrading existing classrooms and laboratories

More information on the ending fund balance:

In 2003, the legislature deferred in perpetuity the final state payment of the biennium into the next biennium.  This resulted in the college receiving 7 payments for the 2001-03 biennium and 8 payments for each biennium thereafter (see figure 1).

Prior to this, each individual year’s difference between revenues and expenditures would either add to or subtract from the carryover.  Now, both years of the biennium need to be looked at together, otherwise the carryover for the first year will look artificially high.  Yet, the payments do need to be accounted for when they are actually received and the alternating high and low carryover is correct for the audited financial statements.