As we pass the halfway mark of the spring semester, it is a bittersweet time for our district. The sweet part is that both of our colleges were rated by the Aspen Institute as being in the top 150 of community colleges in the United States. This is a remarkable accomplishment. Recently, College Choice came out with their rankings of the 50 Best Community Colleges for 2016-17, also based on the Aspen Institute criteria, and Santiago Canyon College was rated number 13 and was the only community college in Orange County to be rated in the top 50. Congratulations to both colleges, but especially to SCC for this outstanding recognition!
The bitter part has to do with our budget. As you all know, we have been dealing with declining enrollment over the last few years. We have all been strategizing and working hard to find solutions, establish partnerships and create innovative pathways to increase enrollment. We must continue to do so; however, we must also take immediate steps to deal with the budget deficit caused, in part, by decreased revenue from declining enrollment and increases in fixed costs and expenses, especially STRS and PERS increases.
The following provides you with the status of our budget and an overview of the steps we are taking to control expenses, make reductions, and achieve a balanced budget.
Throughout this fiscal year, members of my Cabinet as well as both President's Cabinets have been reviewing, analyzing and discussing various strategies to deal with the increasing budget deficit. Now that we have settled with all of our employee groups and can more clearly project what our enrollment numbers will be for the 2016-2017 academic year, we are projecting that we will have a budget shortfall of about $8 million in the 2017-2018 budget.
To close this projected shortfall will take time, require difficult decisions to be made, and necessitate our collective effort. On March 27, 2017, I called a meeting of all three Cabinets to discuss the projected shortfall and recommendations for next steps. After careful analysis and with a focus on making measured reductions that would have the least amount of impact on students, it was decided to recommend to the Board of Trustees that we make the required budget reductions in two phases.
The recommendation for Phase I is to make $4 million in reductions in our current 2016-2017 budget in time for the 2017-2018 adopted budget. Based on our budget allocation model, this will require District Services to make reductions of $753,200 and the colleges making reductions, based on their 2016-2017 FTES, of $2,270,487 at Santa Ana College and $976,313 at Santiago Canyon College. I understand how difficult and disruptive it is to make these reductions in our current budget; however, we have no choice but to work toward bringing our district to financial equilibrium where our expenses do not exceed our revenues. I assure you that every recommendation for savings and reductions made by members of all three Cabinets is made after careful analysis and with the well-being of our students, faculty and staff in mind. I will continue to work with the members of my Cabinet to ensure that we meet the reduction goal for Phase I by the adopted budget and will continue to be in communication with all of you regarding this important matter.
In addition to making reductions and controlling expenses in our supply, equipment and travel budgets, we must also limit our hiring. Effective immediately, I am instituting a hiring freeze for all newly vacant positions and any new positions. These include positions funded by the General Fund as well as categorically funded positions that require match funding from the General Fund. Positions that are currently in the hiring process will continue to move forward. Although a hiring freeze means that all hiring is stopped, I realize that sometimes there are critical vacancies that occur that must be filled. If such situations arise, those positions will now be required to go through Chancellor's Cabinet for approval and they will only be approved if there is no impact to the General Fund.
Again, I understand how difficult and limiting this is to our work and our programs, but our main goal in making these reductions, controlling our expenses, and implementing a hiring freeze is to save jobs. If we do not take immediate steps to deal with our budget deficit, especially in light of projections over the next few years showing decreasing enrollment and increasing PERS and STRS costs, we will have no choice but to ultimately make drastic reductions in personnel. Unfortunately, as we move into the 2017-2018 fiscal year, we cannot take lay-offs off the table, however, the more we work together to control expenses, the better chance we have of saving jobs.
Phase II Reductions
In regards to Phase II, we project that we may be required to make an additional $4 to $5 million in reductions starting in the 2017-2018 fiscal year. The timeline for these reductions and the exact amount cannot be fully determined until we receive, amongst other information, final enrollment numbers from the 2016-2017 academic year as well as the Governor's final budget. Unfortunately, regardless of the amount of reductions required, we will not have many of the cost savings and reduction options available to us in Phase I, so we must continue to work together to reduce expenses, find innovative ways to increase enrollment and identify new sources of revenue. As we move forward together in this important and difficult process, I will continue to keep you updated on the status of our budget, recommendations being made, and how each one of us can contribute to the solutions.
We Must Work Together
My ultimate goal is not to simply achieve a balanced budget, but to put our district in the best position to be fully responsive to the needs of our students and our community. We must work together to reduce expenses and increase revenue in a manner that is consistent with our mission. I believe we have the collective will and capacity to bring our institution into long-term, sustainable financial equilibrium while maintaining our values and priorities. Only by working together can we achieve the sustainable financial health that will allow us to continue to offer our students the transformative learning experiences that help shape the rest of their lives.
Thank you for your understanding and patience in this difficult time. Many thanks for the daily efforts that you make on behalf of our students.