In what will not come as a surprise to many, Sierra College has scheduled a special board meeting on February 2 at 4:00PM (it will be held in Dietrich Theater to facilitate heavy attendance) to close the nearly $9 million dollar deficit in our 2010-11 budget.

We are not here because of the decisions that Sierra College has made. As evidenced by the generation of $6.5 million in new reserves from 2005-2009, our board and staff have been very fiscally responsible. We have truly lived within our means, and saved for a rainy day.

The simple fact is that the State of California’s severe mismanagement, driven by a dysfunctional legislature and a Governor who can’t decide on his political identity, has finally brought California to the end of its rope.

The state tried raising tax rates to bring in another $10 billion dollars in revenue; proving that there is a finite amount of tax revenue available from the people who pay taxes, revenue actually went DOWN by $13 billion.

As a result, it was near the end of last year when the state legislature passed far-reaching cuts in community college funding that affected both the 2009-10 fiscal year already in progress, and the 2010-11 fiscal year that starts this coming July 1.

Sidebar

Dear Trustee Klein, if the state passed these cuts in September of last year, why didn’t the Board just make all of the needed cuts for the 2009-10 fiscal year that had just started? Signed, Curious

Understand as well, the state legislature has passed numerous laws restricting how local college boards can operate. Here’s one great illustration: our 2009-10 fiscal year runs from July 1, 2009 to June 30, 2010. The state will finalize how much funding we receive some time in September 2010, two or three months after the year ends. But the vast majority of our expenses were fixed in March and June of 2009 – months before the year began. Imagine not knowing your salary until 18 months after you had to start spending it!

So here are the numbers: the September 2009 cuts from the state blew a $9.8 million hole in our budget. Even with the late notice and lack of flexibility, our team identified about $4.1 million in cuts that were made effective immediately.

That left a $5.7 million structural deficit in the budget.

Sidebar

Dear Trustee Klein, Weren’t there a few people complaining a couple of years back that the College was saving too money and “starving” the place of resources, despite the fact that the number of students and staff salaries had gone up every single year? What in the world did you do with those reserves and are people still complaining? Signed, Now I’m Really Curious

The good news about all of this? The reserves that we began building in 2005 totaled $6.5 million. As a result, we were able to use $3.8 million in reserves and another $1.9 million in one-time money to avoid cutting 2009 classes students had already registered for and were counting on.

Hindsight is always 20/20, but I think we’re all very thankful that years ago, we worked together and developed the fiscal discipline necessary to be prepared for this crisis.

Of course, we said we were building those reserves for a rainy day, and this was a lot more like a hurricane. But what that really means is we had to use reserves that should have lasted two or three bad years to cover a single year.

There is a new hole in the 2010-11 budget that totals somewhere between $2.7 and $5.5 million. Combine that with the structural deficit of $5.7 million carried over from 2009-10, and our best estimate is that we have a $9 million dollar problem to fix for 2010-11 — and that is likely too low of an estimate if further cuts arrive from the state.

The board has agreed that we must balance our budget for 2010-11. In doing so, we are accepting the reality that the state is still collecting revenues far below their own projections, and we are reinforcing that our first priority is to establish how many students we can serve in a sustainable way, and protect in every way possible our ability to serve that number of students.

If massive mid-year cuts come in 2010-11 — and given what we are seeing from the state’s revenue numbers, it would be foolish not to expect them, it’s likely that we’ll have to use even more reserves just to get through the year. But that’s what those reserves are for, and that’s why we built that reserve in the first place.

Solving the Problem

Now, to the specifics of these cuts. Our staff came to the Board of Trustees months ago and asked for the policy principles we wanted them to use in the process of making the very difficult decisions of how to cut the budget.

I’m paraphrasing here, but here are several principles that I heard the board establish:

• If the state cuts a specific part of our budget, we have to cut that part of our budget in the same way. Avoid robbing Peter to pay Paul.
• Do our best to save as many of our staff members and protect our ability to serve as many students as possible, while budgeting in a sustainable way.
• We would rather have fewer programs that have the resources to stay relevant and equip students with the skills for tomorrow’s economy, rather than have more programs with inadequate staffing to accomplish those goals. (We did a rigorous review of every educational and operational program at the college to set the benchmarks for this process.)
• Everybody, including the Board of Trustees and the management team, will need to feel the pain of these cuts. (The Board ordered a 5% cut to its stipend at our last meeting.)
• Above all else, strive to use this fiscal crisis to lay a sustainable foundation for the college to grow, both in its ability to serve students, and in its commitment to educational excellence, after the crisis passes.

Our team took those principles and have spent thousands of hours working with every stakeholder across the college to develop the plan they will present to the Board of Trustees at the February 2 board meeting.

I was traveling and unable to be at Spring Convocation, but President Leo Chavez already presented the details of the plan there and I’ve seen his slide deck, so I am aware of many of the specific recommendations in the plan. And as you might expect, I’m already receiving a significant number of e-mails criticizing specific elements of the plan.

All I can say is this: before making any comment on my vote, I’m going to listen to staff’s presentation to the Board on February 2, and to the comments from staff, students and members of the public. The vote on this package will be, without question, the toughest vote I’ve had to make as a Sierra College Trustee.

But I also have confidence in several things.

I have confidence that we have the right executive team to lead this college into its next chapter. We’ve come a long way since 2006, when Leo agreed to helm the ship, and we’ve still got work to do. But our leadership team is made up of exactly the right people to keep Sierra College on the right track. Leo, Doug, Rachel, Mandy and Ron deserve our thanks.

I have confidence they put together a good process, guided by a set of principles that were well-thought out, to work with every stakeholder across the college to solve this massive, nearly $9 million dollar problem. I’m not deciding my vote until I hear the presentation and input, but we have a good foundation to make a decision.

And I have confidence that Sierra College will get through this. We will be a bit smaller, we will be more focused, and we will lose some very valuable programs that helped equip a lot of students for many years. Sadly, with the state’s mismanagement, we can’t avoid that outcome. But we are resilient, and we will come out stronger on the other side, and poised for sustainable growth.

If you’d like to reach me with your input, please either comment on this blog post, or send me an e-mail message at ak@aaronklein.com. My role right now is listening, so I won’t be offering much in the way of opinions, or making commitments about my vote, but I carefully read each message I receive and I value any information you want to share with me.

UPDATE: I tweaked some of the numbers here. I was drawing on a lot of sources to try and explain this number simply, and I was using documents with different assumptions. The math works better with this updated version of the post, and I think you’ll get the picture of the range of revenue possibilities we have to consider feasible for 2010-11.