Proactive budget strategies

California’s Cuesta College is taking a proactive approach to address a projected deficit for the current fiscal year of $551,000 in its ongoing unrestricted general fund resources.

The budget gap is created by the combination of slow enrollment-related revenue growth and rapid mandatory expenditure increases.

“Most of the college’s funding is derived from enrollment – from each full-time equivalent student (FTES),” said Cuesta College Superintendent/President Gil Stork.

The college is targeting 8,309 FTES this year, down from the 8,646 FTES funded by the state in 2011-12.

“Over recent years, the amount of FTES served by the college has decreased, thereby decreasing the amount of revenue we would otherwise receive from the state,” Stork said. “If FTES continues to decline, the district could eventually face annual budget deficits of about $2 million if we fail to take action.”

Simultaneously, many of the district’s costs are rising, including a significant increase in pension payments to the California Public Employees Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). According to Dr. Stork, increased payments of over $600,000 for CalPERS and CalSTRS play a substantial role in the college’s budget deficit.

“This year the budget deficit will be covered by district reserves,” Stork said. “However, this is not a sustainable practice.”

Looking ahead

As a result, the college’s administration and board of trustees are implementing several proactive strategies aimed at permanently offsetting future budget deficits. They include:

Separation incentive program. At the January 2018 board of trustees meeting, the college recommended a retirement incentive program. Under the program, district employees at the age of retirement, or 50-years-old with at least five years in one of the retirement programs, can choose to retire and receive 75 percent of their base pay over a five-year period.

“Employees will have until February 23, 2018, to take advantage of the incentive,” said Assistant Superintendent/Vice President of Administrative Services Dan Troy. “At that time, the district will determine if the incentive results meet the desired fiscal and operational objectives for each employee group. A recommendation on how to proceed would then be made at the March 2018 Board meeting, and any related employee retirements would be effective at the end of this fiscal year.”

CalPERS/CalSTRS (pension costs) stabilization investment. At the December board meeting, an irrevocable trust for pension costs was approved, authorizing the district to make an initial investment of $3 million in accumulated one-time funds. According to Troy, the trust would achieve a better interest rate than the district would normally realize.

“The state has provided over $5 million in one-time funds over the past few years,” Troy said. “Since it is unwise to spend one-time funds for ongoing costs like salaries and new positions, it makes sense to invest it in the trust. Ultimately, investment returns from the trust can help offset increased costs of the pension systems.”

Selective hiring freeze for management and staff positions and organizational restructuring. Effective July 2017, the district no longer automatically fills vacant positions and instead considers organizational restructuring in order to save funds and increase efficiency.

“For example, in 2017, the college combined a vacant director position with an existing management position in order to create one new dean position,” Troy said. “The result of combining two positions into one equates to substantial monetary savings.”

Other consolidated areas include human resources and public safety. In addition, an analysis of the college’s bookstore is currently underway with the goal of developing fiscally-sound operational strategies.

Faculty salary savings from vacant positions. Effective July 2017, this policy affects faculty positions left vacant by retirees or resignations. Part-time faculty replace most positions; others are not filled based on the need.

Measure L bond funds used to retire debt. Passed in 2014, the $275M Measure L bond includes debt retirement in the form of paying off certificates of participation (COPs) taken out to make urgent and necessary improvements to the college over the years. Absent this debt retirement, the district’s deficit would have increased by $1.2 million.

Generating more revenue

The college is also examining alternative ways in which it can increase revenue by way of increasing FTES. These include:

New in-demand academic and degree programs. For example, due to community demand, a new transfer degree in agriculture plant science and courses in agriculture mechanics are now being offered at Cuesta.

Dual enrollment. Increasing the number of local high school students dually enrolled in Cuesta College courses has become a priority of the college. In fall 2017, more than 2,500 high school students took Cuesta College courses on their high school campuses, generating 300 FTES (8.2 percent of the college’s total FTES attainment).

Award for innovation in higher education. Last spring, the college received $2 million from the California Department of Finance to help reduce the time it takes students to complete degrees and reduce the total cost of attendance. Cuesta College is using the funding to develop a new pilot program allowing Paso Robles High School students the opportunity to earn an Associate Degree for Transfer from the college tuition-free one year after graduating high school. The goal is to expand the program to other local high schools in the future.

Award for Hispanic-Serving Institution status. This fall, the college was awarded a $2.5 million Developing Hispanic Serving Institution (HSI) Grant from the U.S. Department of Education. A designated HSI since August 2016, the college is using the funding to create an academic and corresponding support system for students intending to become K-12 teachers.

The Cuesta College Promise Scholarship. Launched in 2014, the Cuesta Promise is awarded to recently graduated San Luis Obispo County high school students each year. This fall, 876 students received their first year fee-free at Cuesta. The number of local high school students attending Cuesta has increased by 25 percent since the start of the Promise.

Additional revenue-generating considerations include the possibility of increasing parking permit fees, introducing a technology fee, and leasing North County Campus property. At the November board meeting, trustees authorized the superintendent/president to begin the request for qualifications and proposal process for potential leasing of two auxiliary parcels on the North County Campus in order to develop a revenue stream for the district.

More information on the college’s funding is available in the 2017-18 district budget.

About the Author

Lauren Milbourne
is media relations coordinator/public information officer at Cuesta College in California.