Mountain View Voice

News - August 6, 2010

Colleges caught in state budget battle

Foothill-De Anza taps reserves, but other districts need loans to get by

by Nick Veronin

The local community college district is weathering the state's budget impasse better than many other districts in the Bay Area and throughout California.

Unlike the San Jose/Evergreen and San Francisco community college districts, which have borrowed against yet-to-be-received state funds, Foothill-De Anza has not had to go that route, according to Andy Dunn, vice chancellor of business services for the district.

Dunn credited "prudent fiscal management" for keeping his district above the fray.

The district is required by law to keep at least 5 percent of its operating budget on hand at all times. However, Dunn said, cash reserves exceed 5 percent.

Bruce Swenson, president of the district's board of trustees, said that tight bookkeeping has helped the district avoid asking for money so far. He also credited hiring freezes and successful negotiations with employee unions for helping to keep costs down.

Still, both Dunn and Swenson hope the state will decide on a budget soon.

"Eventually, we, just like all branches of government, are dependent on the state," Dunn said. "So it will be very important for the state to get its fiscal house in order."

At the end of July, the state was scheduled to pay $115 million to community colleges throughout California, according to Erik Skinner, executive vice chancellor for programs at the California Community Colleges Chancellor's Office. However, because the budget is not finalized, state Controller John Chiang could not send out those payments. At the end of August, Skinner said, another payment is scheduled — this time for $284 million.

"I start really becoming concerned that some of our districts may start to encounter very significant problems if this budget (impasse) continues through the end of August," Skinner said.

Skinner said if a budget is not passed by the end of August colleges may start to have serious trouble making payroll costs.

While it is not uncommon for California to miss its own deadline for passing a state budget, Skinner said, this year the consequences could be more dire. Districts already experienced deep cuts over the 2009-2010 school year and have had to lean heavily on their reserves, as Foothill-De Anza is doing.

Dunn said that if legislators continue to stall on passing a budget, he does not anticipate cash flow problems until October or November.

So far this year, at least 20 community college districts in California have filed for short-term loans, known as Tax Revenue Anticipation Notes, with the Community Colleges League of California. These loans cover expenditures incurred before tax revenues are paid out to colleges. However, Skinner said, bigger districts often go outside the Community Colleges League to larger debt markets for such loans; the chancellor's office does not have a total count of how many community colleges in California have had to borrow money this year.

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