Gavilan College FY 2020/2021 budget responded and adapted to major external pressuresby Jan Janes on Oct 9, 2020
Before the FY 2020/2021 budget was approved by the Gavilan College Board of Trustees, administrative officers offered regular revisions weekly, responding to the external political pressures at play.
The college had two critical tasks: reduce structural deficit and respond to new changes in revenue from the State of California.
“This has been a challenge of many districts like ours, in the apportionment arena,” said Michael J. Renzi, Vice President of Administrative Services. “Most of our revenue is generated by local tax, and the third of it from the state has predictability problems.”
Watching the volatility in the financial markets since the onset of the pandemic, Renzi created an incremental budget-building approach he described as ‘breadcrumb budgets.’
“It’s important to show a clear path,” said Renzi. “Beginning with what tentative budgets stated, political factors from Sacramento, to the final budget approved by the legislators and signed by the Governor into law.”
He raised caution with a comparing a community college budget to a household budget.
“I try to help the campus and college community have an understanding about the language in the budget,” he said. Community colleges are in the middle of political debate at the state and federal levels.
“The prior funding model had protections in place,” he continued. “The new funding model does not.”
Breadcrumb budgets phase in all the factors – the political pressures, funding shifts, reversals – and model the finances from the past, present and future. Renzi had experience generating breadcrumb budgets while working at Stanford, when a multi-million dollar program had to remedy a $2.5 million deficit. He used 18 different scenarios to demonstrate to Nobel laureates and researchers the different steps they could take to eliminate the deficit.
Facing what appeared at one time to be a $9.9 million deficit, college administrators incrementally adjusted the budget as they watched California politicians grapple at the State level with their own cash balance problem. The Governor presented a May 2020 budget; the Legislature reviewed and reversed it in July. In the process, however, they offered a variable called deferrals, which is an IOU to the colleges to fund the same as last fiscal year, but not actually pay it with cash until the state replenished its own cash balances. The Legislature used this practice once before during the 2008 Recession.
“The Legislature funded us at the same base level as last year,” said Renzi. “But it didn’t give us the cash.”
The appropriation allowed the college to pursue a TRAN (Tax Revenue Anticipation Note) in order to borrow funds to cover monthly expenses. This is a practice used by many other districts that rely on State apportionment funding, as Gavilan does.
“The Board had lots of questions,” said Renzi. “Building the breadcrumb budgets helped the Board engage and fully understand the variables. It gave them a clear understanding of why things changed, and confidence when it came to final budget approval.”
The breadcrumb budgets incrementally demonstrated the progress and incorporated the variables as they appeared.
“The information in the budgets included complex issues,” he said. “Plus we needed transparency and clarity about our own structural deficit.”
The plan addresses expenses and budget reductions in a thoughtful way while still maintaining the staffing to serve students.
“We want to help people understand changes in spending behavior,” said Renzi, “And to be both surgical and intentional about reductions.” The job was to get the college through all the baseline tentatives as the story unfolded and new information came from Sacramento and Washington, DC. Especially vital was to avoid, at the end, questions about the changes.
“It was our goal to demonstrate what the college was conscientiously doing,” he said, “With both one-time and multi-year reductions.”
Passing a budget is one thing; keeping to it is another.
Moving forward, the college will monitor this year’s budget and simultaneously start developing next year’s plan.
“By having a plan for how it will roll out,” he said, “It helps the campus community understand what next year’s budget will look like. Expenses and income are based on multiple scenarios.”
Looking ahead, there has been talk of another Federal stimulus package, which would backfill what the State did not fund. The next benchmark is if no Federal stimulus passes, and the State has already built in a response to that possibility.
“We’re not done yet,” Renzi emphasized. “We are building new, healthy fiscal habits.”