College receives clean audit; bleak financial outlook
Feather River College (FRC) trustees heard the bad news during their Jan. 20 meeting: Governor Jerry Brown’s proposed budget had little good news for the cash-strapped college.
While there are currently no proposed mid-year budget cuts, the governor plans to defer payment of $961 million in current appropriations to community colleges until July 2011.
Brown also proposes deferrals for the 2011 – 12 fiscal year: allocations totaling $300 million, usually made in March and July, are deferred until May and October, respectively.
For the college, that means $1.2 million in sorely needed cash will be slow to arrive.
That’s just the impact of the funds the college will eventually get. Even if Brown’s budget passes as proposed — including timely voter and legislative approval of proposed tax extensions — Jim Scoubes, director of Business Services, told trustees the Community College League estimated a 6.4 percent General Fund reduction.
The league estimated a 9.9 percent reduction if community college funding decreases to meet Proposition 98 minimum funding levels.
Suspend Proposition 98, as some suggest, and colleges will face a 14.4 percent cut. For FRC, that translates to $1.5 million.
In his report to the trustees, college president Dr. Ron Taylor highlighted the comparatively good news: no mid-year cuts, no new proposed cuts to categorical programs, and continued flexibility in how categorical funds may be spent.
Categorical funds are earmarked for specific programs, such as those for disabled students. The state has allowed administrators to “borrow” from those funds to meet shortfalls in their general funds.
What to do
Taylor and Scoubes plan an “if, then” response. The budget committee will begin to develop Plan A and Plan B responses.
If the Legislature approves the governor’s budget as proposed and if voters approve tax extensions by June, the committee will have one budget for 2011 – 12.
Any variation from the governor’s budget proposals and the college will have a second, more draconian response.
Taylor said in either case, trustees would need to make decisions by March 1. There are statutory deadlines for layoff notifications.
Taylor did not suggest any layoff action, but will continue meeting with bargaining units, as well as identify possible cuts.
Scoubes reported continued talks with Umqua Bank on a line of credit to ease cash flow problems. The bank proposes rolling the learning center (currently under construction) line of credit into a General Fund line of credit.
The college’s cash crisis developed because of deferred funding allocations and delays in construction cost reimbursements from the state.
FRC received an unqualified, or “clean,” opinion from its auditors, Perry Smith LLP Accountants, on its financial reporting, policies and procedures.
Partner Tina Tries told trustees that auditors reported only one significant, but not material, deficiency regarding the emergency student loan fund. For details, see accompanying information box.