From Tom Burke
Subject: 2008-09 and 2009-10 Budget Update
Date: March 5, 2009 4:52 PM PST

Kern Community College District 2008-09
& 2009-10 Budget Update

As many of you are aware the State of California has passed an approved mid-year budget for 2008-09 and a tentative budget for 2009-10. To address a $41 billion dollar eighteen month (2008-09 and 2009-10 fiscal periods) budget shortfall the Governor and Legislature enacted the following measures:

> $15.8 billion in expenditure reductions, including $13.3 billion in cuts and $1.8 billion in other reductions (delays, fund shifts)
> $14.4 billion in temporary tax increases
> $11.4 billion in borrowing
> $1 billion reserve

Overall reductions to Community College state funding were minimal. This is recognition by the Governor and Legislature that the Community College system is better equipped to help California out of its current economic crisis than any other sector of California education. We are part of the solution. However, the Community College system will need to deal with significant cash-flow challenges as the Budget defers $540 million in cash payments to the system into the next fiscal year. In addition, the system has already experienced in 2008-09 a property tax shortfall of $33 million, a base shortfall of $40 million and an enrollment fee shortfall of $3 million.

The impact of the Budget reductions and shortfalls for the Kern Community College District is as follows:

2008-09 Fiscal Year
> Elimination of the 0.68% COLA from Apportionments ( $ 682,000)
> Property tax, base and enrollment fee shortfall ( $1,319,000)
Total Revenue Decrease ( $ 2,001,000)

The District plans to utilize a portion of its funded 2008-09 growth revenue to back fill the Colleges for the above losses in revenues. To deal with the cash payment deferrals the District will use a combination of unrestricted reserves, COP [Certificates of Participation] debt repayment funds and Tax Revenue Anticipation Notes (TRAN) borrowing to maintain adequate cash flow for operations through the next eighteen months.

2009-10 Fiscal Year
> COLA Apportionment funding --- Zero
> Growth --- funded at 3% (KCCD’s growth CAP unknown at this time)
> Enrollment fees --- No change
> No changes to Categorical funds
> No change to CAL Grant funding

There is still a strong likelihood the Governor will issue a May revised budget for 2009-10. This will depend significantly on the outcome of six ballot measures that are a part of the State’s adopted budget plan and how effective the budget measures adopted are working in the second half of 2008-09 fiscal year. Those ballot measures slated for a special May 15th election are as follows:

> Proposition 1A: Creates a spending cap based on a rolling average of the previous 10 years. Additional funds would be deposited into a special Rainy Day fund. This measure is also linked to Proposition 1B, the K-14 maintenance factor measure, and the length of the temporary tax increases. Should this measure fail, then the tax increases enacted as part of the budget would sunset after 2 years and measure 1B would be invalidated.

> Proposition 1B: Would repay K-14 $9.3 billion over a 7 year period beginning in 2011-12. This measure’s passage is contingent on the passage of the spending cap.

> Proposition 1C: Allows state to borrow $5 billion for the general fund expenditures based on future profits from the state lottery.

> Proposition 1D: Shifts a portion of the cigarette tax dedicated for First 5 California Children and Families Program to fund general fund expenditures.

> Proposition 1E - Amends the "millionaires tax" for mental health services from 2004's Prop. 63 to fund some mental health programs funded from the general fund.

> Proposition 1F - Forbids California Citizens Compensation Commission from raising legislators' and state officers' salaries in a year in which the state is running a deficit.

At this time the District will begin its budget development process for 2009-10 utilizing a very conservative and cautious approach. The outcome of the elections discussed above and potential May Revised budget will significantly influence the District’s budget strategy for the coming years. In addition, there is concern that property tax shortfalls (which have a direct impact on our budget) will continue to persist due to the continued decline in California’s economy.

Tom Burke
Chief Financial Officer
Kern Community College District
(661) 336-5124
(661) 336-5178 Fax