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Community College Budgets:Process and Prospects

Jennifer Haygood, EVP and Chief Financial Officer

North Carolina Community College System

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Overview• Overview of State and NCCCS Budget

• Budgeting Process

• College Budget Allocation Process

• On the Horizon: Prospects for the Future

Please feel free to ask questions at any point!

FY 2013-14

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State General Fund Budget by Revenue Source: FY 2011-12 (in millions)

FY 2013-14

Individual Income Tax, $9,921, 50%

Sales and Use Tax, $5,270, 27%

Corporate Income Tax, $856, 4%

Non-Tax Revenue, $693, 4%

Franchise Tax, $650, 3%

Insurance Tax, $511, 3%

All Other, $1,275, 6%

Fund Balance, $522, 3%

Total: $19.7 billion

Source: Fiscal Research Division, August 8, 2011

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FY 2013-14 State General Fund Budget

Area Net Appropriation % of Total

Education• Public Schools• Higher Education (UNC & CCs)

$11.5 billion• $7.9 billion• $3.6 billion

56%• 38%• 18%

Health and Human Services $5.0 billion 24%

Justice and Public Safety $2.4 billion 12%

All Other $1.7 billion 8%

Total $20.6 billion 100%

FY 2013-14

Of the State funds allocated to community colleges for current operating:• 83% supports direct classroom instruction (66%) and academic and

student support (17%).• 90% supports salaries and benefits of community college employees.

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State General Fund Appropriations for Education: FY 2013-14 (in millions)

FY 2013-14

Public Schools; 7867; 69%

Community Col-leges, $1,021, 9%

UNC; 2583; 23%

Total: $11.5 billion

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Financial Support of Institutions

FY 2013-14

LocalG.S. 115D-32

• Operation and maintenance of plant

StateG.S. 115D-31

• Operating costs for instruction, administration, and support services

Capital construction is the legal responsibility of the county. However, G.S. 115D-31 authorizes the State to provide capital funds to local institutions, provided that it is matched on a dollar-to-dollar basis.

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Sources of NCCCS Funding:FY 2013-14 (in millions)

State General Fund,

$1,021.3, 56%

Tuition and Fees; 367.1; 20%

Local; 227.8; 13%

Institu-tional,

$117.4 , 6%

Federal, $36.7 , 2%

Other; 48; 3%

FY 2013-14

Total: $1.8 billion

Source: August 2012 BD-701, DCC 2-1 Summary. Includes college current expense (Purposes 1XX-6XX) and equipment; chart does not include proprietary activities, student aid, and capital improvement projects.

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NCCCS State Budget: FY 2002-2014

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 $-

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

$1,600.0

Receipts Appropriations

In m

illio

ns

FY 2013-14

Budget Drivers: Enrollment Growth and Salary Increases

Source: BD 701: FY 2002-2013 June 30 Authorized Budgets, FY 2013-14 Aug 31 Authorized Budget

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NCCCS State Budget: FY 2002-2014

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Receipts/FTE General Fund App/FTE

FY 2013-14

Source: BD 701: FY 2002-2013 June 30 Authorized Budgets, FY 2013-14 Aug 31 Authorized Budget

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Biennial Budget Cycle: FY 2013-15• Summer and Fall 2012:– Develop continuation budget– Develop expansion budget request– Identify reduction options

• 2013 Long Session (begins in January):– Adopt a two-year budget

• 2014 Short Session (begins in May):

– Adjust second year of the budget

FY 2013-14

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The Gubernatorial Process• Per the NC Constitution, the Governor shall:– Serve as “Director of the Budget”– Prepare and recommend a budget to the General

Assembly – Administer the budget as enacted by the General

Assembly

FY 2013-14

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Legislative Budget ProcessGovernor’s Recommended Budget

Full Appropriations

Appropriations Subcommittees

Full Appropriations

House/Senate Floor

Sent to Other Chamber

House and Senate Appoint Conferees

House and Senate Vote on Conference Report

Conference Report Adopted

Budget Bill Enrolled, Ratified, and Sent to the Governor to be Signed into Law

FY 2013-14

Originating Chamber Fails to Concur

The Conference Report must be voted up or down as submitted by the conference committee; it cannot be amended on the House or Senate floors.

The House and Senate alternate preparation of the initial budget bill.

Gov. veto can be overridden by 3/5 vote of each chamber.

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State Board Approval• State Aid Allocations and Budget Policies

– Guidelines Related to Salaries and Benefits of Community College Employees

– Formula and Categorical Allotments– Use of State Funds and Budget Flexibility– Tuition and Fees– Other Budget Policy Issues

FY 2013-14

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College Allotments: FY 2013-14

FY 2013-14

Instructional Formula Funding

Inst. & Ac. Support Formula Funding

Performance Based Allocation

3yr vs 2yr Transition Funds

Categorical Aid Equipment & Instruc-tional Resources

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$827.9

$486.0

$9.0 $4.0$27.5

$61.5

In M

illi

ons

.7%4%

59%

34%

2%

Source: FY 2013-14 Summary of Budget Allocations. Note that this graph only captures funds distributed to colleges through the routine budget allocation process. This graph does NOT account for any subsequent reversions required by the Governor or allocations.

Total Allotments: $1.41 billionLess Management Flex Cut: $0.07 billionNet Allotments: $1.34 billion

.3%

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Full-Time Equivalent (FTE) Student• Curriculum FTE

= 16 hours x 16 weeks x 2 semesters = 512 Membership Hours

• Non-Curriculum FTE = 16 hours x 16 weeks x 2 semesters

+ 16 hours x 11 Weeks = 688 Membership Hours

FY 2013-14

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Budgeted FTE• Budgeted FTE means the number of FTE which

determines a college’s operating budget

• Curriculum budgeted FTE counting period = Fall, Spring (academic year)

• Non-curriculum budgeted FTE counting period = Spring, Summer, Fall (calendar year)

FY 2013-14

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Budget FTE• For each instructional area (curriculum, con ed, and basic skills), a college’s

budget FTE is determined by calculating the higher of :– the prior year; or – the average of the two previous years’ enrollment

• Budget FTE are further categorized based on actual FTE proportions :– Curriculum:

• Tier 1: FTE in high cost areas of health care, technical education (construction, engineering, industrial systems, and transportation system sciences), lab-based science, and college-level math courses

• Tier 2: All other curriculum FTE

– Con Ed (OE):• Tier 2: Con ed courses that are a) mapped to a third-party credential, certification, or

industry-designed curriculum and b) are 96 hours in length.• Tier 3: All other con ed FTE

– Basic Skills FTE: All Basic Skills FTE are designated Tier 2.

FY 2013-14

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Curriculum Instruction Allotment

FY 2013-14

Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115

FY 2013-14 Equivalent Values

Tier 1: $3,636.31Tier 2: $3,160.79

Step 1 Base Allotment: $383,579

Step 2 Multiply Tier 1 BFTE by Tier 1 equivalent value: = 500 X $3,636.31 = $1,818,155

Step 3 Multiply Tier 2 BFTE by Tier 2 equivalent value: = 1,000 X $3,160.79 = $3,160,790

Step 4 Sum steps 1 through 3: $5,362,524

Total Curriculum Allotment: $5,362,524

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Con Ed Instruction Allotment

FY 2013-14

Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115

FY 2013-14 Equivalent Values

Tier 2: $3,160.79Tier 3: $2,685.38

Step 1 Base Allotment: $63,930

Step 2 Multiply Tier 2 BFTE by Tier 2 equivalent value: = 300 X $3,160.79 = $948,237

Step 3 Multiply Tier 3 BFTE by Tier 3 equivalent value: = 300 X $2,685.38 = $805,614

Step 4 Sum steps 1 through 3: $1,817,781

Total Curriculum Allotment: $1,817,781

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Basic Skills Formula Calculation

FY 2013-14

Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115

FY 2013-14 Values

FTE Allotment: • Tier 2: $3,160.79

• State: $2,545.30• Federal: $615.49

Performance-Based Allotment:

• $874.53 per GED/AHS Diploma

Step 1 FTE Allotment: • State: 115 X $2,545.30 = $292,710• Federal: 115 X $ 615.49 = $ 70,782

115 X $3,160.79 = $363,492

Step 2 Performance-Based Allotment: • GEDs/AHS Diplomas Awarded = 100• 100 X $874.53 = $87,453

Step 3 Sum steps 1 through 2: $450,945

Total Basic Skills Allotment: $450,945

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Institutional Support Calculation

FY 2013-14

Example College: Total Budgeted FTE 2,215

Step 1 Base allotment: $2,154,280

Step 2 MCC Allotment (if applicable): $0

Step 3 Enrollment Allotment:• Calculate allowable FTE: 2,215 – 750 = 1,465• Calculate FTE allotment: 1,465 x $1,676 = $2,455,340

Step 4 Determine President’s Salary with Salary Schedule

Total President’s Salary Requirements: $144,477

Step 5 Sum steps 1 through 4: $4,754,097

Total Administrative Allotment: $4,754,097

FY 2013-14 Values

Base Allotment$2,154,280

MCC Allotment (if applicable)

Level 1: $500,919Level 2: $839,311

Enrollment Allotment $1,676 per FTE above 750

President’s SalaryPer Salary Schedule

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Why Do the Formula Factors Change?• Legislative salary increases (if provided)

• Other changes in benefit rates (i.e. hospitalization, retirement)

• Legislative or State Board adjustments to the formula

FY 2013-14

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Performance-Based AllocationsIn FY 2013-14, $9 million was allocated to colleges based on performance on six performance measures:

1. Success rates of developmental students in subsequent college-level English courses2. Success rates of developmental students in subsequent college-level math courses3. Progress of first-year curriculum students4. Curriculum student retention and graduation5. Attainment of licensure and certifications by students 6. Performance of students who transfer to a four-year institution

In FY 2014-15, the General Assembly has directed the State Board to allocate $24 million based on performance. In addition to the six measures above, two additional measures will be added:

7. Progress of basic skills students8. Attainment of GED diplomas by students

For each measure, funds are allocated based on two factors:• Quality: Funds allocated based on percentage of students who succeed on each measure• Impact: Funds allocated based on the number of students who succeed on each measure

FY 2013-14

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Rewarding Quality: In Concept

Measuring Stick

College A College B College C50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

Perf

orm

ance

Rat

e

100%

FY 2013-14

Goal

Floor

For each measure, colleges would earn PBF based on how they compared to both a floor and a goal:

• If a college did not meet the floor, it would receive $0 in PBF for that measure.

•If a college exceeded the floor, but did not meet the goal, it would receive a portion of its potential PBF for that measure.

•If a college met the goal, it would receive 100% of potential PBF for that measure.

•If a college exceeded the goal, it would receive more than 100% of potential PBF for that measure.

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Rewarding Impact: In Concept• Funds not allocated through the Quality

component would be allocated among colleges through the Impact component.

• Impact = the number of students that succeed on the measure– Step 1: Determine Impact Funding

= Total PBF Funding – Quality Allocation

– Step 2: Determine Impact Funding per Student= Impact Funding / Total # of Successful Students

– Step 3: Determine College’s Impact Allocation= Impact Funding per Student * College A’s # of successful students

FY 2013-14

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Example College’s Total Formula Allotment

• Curriculum: $ 5,362,524

• Continuing Education: $ 1,817,781

• Basic Skills: $ 450,945

• Institutional Support: $ 4,754,097

• Performance-Based Funding: $ 78,252

FY 2013-14

Total Formula Allotment: $12,463,599

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Budget Flexibility

• The General Assembly has allowed colleges to have flexibility in order to meet individual college needs

• Formulas are for allocation purposes only

• Colleges can spend the money however they choose with the following exceptions:– Basic Skills funding may only be used for basic skills programs– Federal vocational education funding may not be transferred– Customized Training funds may not be transferred– Certain State-supported allocations approved by the State Board

outside the budget package

FY 2013-14

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On the Horizon: Summer Term FTE• Section 10.4 of S.L. 2013-360 amends G.S. 115D-5:

“Community colleges may teach technical education, health care, developmental education, and STEM-related courses at any time during the year, including the summer term. Student membership hours from these courses shall be counted when computing full-time equivalent students (FTE) for use in the budget funding formulas at the State level.”

• Effective Summer 2014 termFY 2013-14

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On the Horizon: Fourth Tier?• Section 10.4A of S.L. 2013-360:

“It is the intent of the General Assembly that, beginning with the 2014-15 fiscal year, the State Board of Community Colleges shall implement a fourth tier….in order to fund curriculum programs leading to immediate employment at the highest available funding level.”

FY 2013-14

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On the Horizon: NC GAP?• Section 11.17 of S.L. 2013-360, as amended:“The Joint

Legislative Education Oversight Committee…shall study the feasibility of establishing an alternative admission program to be known as NC Guaranteed Admission Program (NC GAP).” The goals of NC GAP shall be :– To encourage and assist students to obtain a baccalaureate

degree within a shorter time period; – To provide students with a college education at significantly lower

costs for both the student and the State; – To help decrease the amount of debt resulting from loans that a

student may owe upon graduation; and – To provide easier access to academic counseling.

FY 2013-14