College CFO: MCC’s budget planning centers on success
Recently, there has been a great deal of attention paid toward McHenry County College’s budgeting process and perceived “shortfall.” All budgeting processes can be complex, so I think it is important to clarify some key points and alleviate the recent misrepresentation of the college’s budget.
Budgeting philosophy: It is best practice to think of a budget as a bottom line, total number, rather than one line within the total budget. Just as with an individual’s own budget or checking account, the college looks at what it has in savings, as well as what has been approved to spend. When a fund is down, the institution then looks at how to adjust its expenses so as not to overspend. This analysis takes place on an ongoing basis throughout the year to maintain fiscal responsibility of funds.
For our fiscal 2013 budget (July 1, 2012, to June 30, 2013), there was a larger beginning fund balance in order to transfer funds into the following areas, per the Board of Trustees’ directive:
• Fund Three (long-term planning for future land acquisition and building);
• A reserve of three to six months in the case of catastrophic events;
• Deferred maintenance (20-plus year projects)
MCC’s main campus and most of its facilities are closer to 40 years old. Previous administrations did not focus on deferred maintenance, which is why we now are seeing a bigger impact (i.e. replacing unsafe parking lots, sewage systems, HVAC systems, etc.).
The fund balance is intentionally being used to cover the difference between revenue received and expenses incurred for the year. Spending fund balance is planned when prior fund balances have been purposefully accumulated in prior years, which are then utilized in current/future years. This is an intentional and acceptable method of budgeting.
This type of planning allows a large institution such as MCC to be prepared for possible challenges or growth opportunities, just as a well-run and financially sound corporation would do.
By the end of fiscal 2013, state government revenue is forecasted to be at 95 percent due to concerns about timing and ability of the state to fund its obligations.
Student tuition and fees are expected to hit 100 percent of budget. While we budgeted conservatively with a flat tuition continuation for fiscal 2013, our enrollment has risen in both fall and spring semesters, causing overall revenue to slightly increase. It is projected that the college will meet, and even exceed, budget revenue, as well as continue to take a conservative approach in controlling its expenditures. The combined performance in both revenues and expenditures is projected to produce better operating results than what was originally budgeted at the end of the year.
This information was articulated at our Feb. 19 Committee of the Whole meeting, as well as explained in the mid-year performance analysis at the January Board Meeting, but somehow did not get translated into recent media.
Through a multi-year budget planning process, already under way for fiscal years 2014-2016 and beyond, we are identifying areas of impact that the college must take into consideration when developing the budget:
• New curriculums (which align with workforce and labor needs in the county through 2018);
• Areas of program expansion (robotics, health sciences education, sustainability, etc.);
• Anticipated 4.5 to 6 percent reduction in the State Base Operating support;
• Anticipated state transfer of the State University Retirement System contribution of 0.5 percent a year to the college;
• Funding faculty and staff contractual obligations.
While factoring in the above considerations, college leadership has begun to implement cost-saving measures, as well as identify areas of additional revenue and efficiency implementation. Some of the efforts already under way include:
• Elimination of vice president of administrative services personnel line item in budget;
• Reduction of personnel by not refilling vacant positions;
• Reduction of operating expenses in academic areas by 2 percent;
• Reduction of budget for the executive office and Board of Trustees accounts;
• Reduction of AQIP budget;
• New programs developed to be underwritten by grants;
• Restructuring personnel in IT, physical facilities, Academic Affairs, Children’s Learning Center and fitness center;
• Postpone remodeling of biology lab;
• Transfer of funds from Fund 5 (Auxiliary Enterprises Fund) to Fund 2 (Operations and Maintenance)
• Restructuring of fees and instructional costs in the fitness center;
• Increase in tuition with multi-year options.
Supporting every financial decision we make is what McHenry County College is fully committed to: providing a quality education to all those who seek it in our community; furthering employability skills and increasing wage earning potential through workforce development; increasing the number of residents graduating with a certificate or degree to enhance their employability and quality of life; and providing a safe environment in which to learn.
Our planning always centers on our students’ success, while simultaneously being responsible with taxpayer dollars. As community members ourselves, each of us at MCC is dedicated to shaping higher education opportunities to enhance the economic viability of our county today and in the future.
• Bob Tenuta is chief financial officer/treasurer of McHenry County College.