By Clyde Noel
The decline of the California economy, along with sharp rises in medical benefits and retirement contributions, have created a challenge to balance the 2003-04 budget adopted for the Foothill-De Anza Community College District.
“The budget gap has caused some extraordinary actions to be initiated within the district, including a planned reduction to the general fund expenses of over $10 million,” said Vice Chancellor Mike Brandy. “It should be noted that our budget deficit is caused by falling state revenues as well as our rising expenses.”
The district will not receive a COLA (cost of living adjustment) from the state in 2003-04. This loss prevents the district from giving raises to employees and covering the increases in medical benefits. Without the COLA input, budget expenses had to be reduced.
“As a result of political pressure for enrollment, the legislature approved a modest amount for increased growth, creating a cap,” Brandy said. “We believe we could have increased enrollment by close to 10 percent this year if we did not have a cap.”
It should be noted that the district served slightly fewer students in 2002-03 than it did in 2001-02. The enrollment could have been higher, but many students were turned away because of the state cap.
It is difficult to predict the outcome of increased student fees — from $7 per quarter unit to $12 per quarter unit — since the increase may deter students from attending certain courses.
Medical benefits for active and retired employees are a significant reason the district had to cut the budget in other areas. In addition, medical benefits will continue to rise at double-digit inflation unless modified.
“Our benefit budget for active employees for 2002-03 was approximately $12.8 million,” Brandy said. “We received notice from our consultants and the HMO that our 2003-04 costs would rise an estimated 21 percent or $2.7 million.”
Retirement benefit cost increases to PERS (Public Employees Retirement System) also affected the budget. The PERS rate increased from 2.89 percent to 10.42 percent, and the budget had to be cut more than $2 million to absorb the increase. The money goes to the state, but the state provides no additional help.
Among other funds, the parking fund continues to experience budget problems because the fees cannot be increased under current law. The current budget shows a deficit of $106,074.
Bookstores play a major role in contributing profits back to student programs, but the De Anza contribution of $250,000 was not enough to cover all the operating expenses of the De Anza Campus Center.
The Foothill bookstore showed a profit in 2002-03.
When the San Jose Symphony went bankrupt, it created a big void in the Flint Center budget. With recent improvements in seating and a new audio system, the center expects additional bookings in 2003-04.
The district board is concerned with the unbalanced budget.
“At this stage, if we have forecast correctly, we will be out of balance by about $1 million,” Brandy said. “That is, current expenses exceed the current revenue, and the use of fund balance is in excess of reserves.”
Because of the budget deficit forecast for 2004-05, the district will immediately start forwarding plans to bring the budget in balance.
“The 2004-05 year may prove to be the most challenging fiscal year in the district’s history,” Brandy said.
