January 27, 2015 Audit/Finance Committee Meeting Minutes

The Audit/Finance Committee of the Board of Trustees of Illinois Valley Community College District No. 513 met at 5:30 p.m. on Tuesday, January 27, 2015 in the Board Room (C307) at Illinois Valley Community College.

Committee Members Physically Present

Larry D. Huffman, Chair
Everett J. Solon

Members Telephonically Present

Michael C. Driscoll

Others Physically Present

Jerry Corcoran, President
Cheryl Roelfsema, Vice President for Business Services and Finance
Deborah Anderson, Vice President for Academic Affairs
Sue Isermann, Associate Vice President for Academic Affairs
Kathy Ross, Controller
Jamie Gahm, Director of Continuing Education and Business Services
Renee Prine, Counselor
Sue Caley-Opsal, Instructor
Stephen Alvin, Instructor
Fran Brolley, Director of Community Relations and Development

The meeting was called to order at 5:30 p.m. by Dr. Huffman.

FINANCIAL FORECAST FOR FY 2016-2020

Cheryl Roelfsema presented a five-year financial forecast.  Under revenues, the EAV is projected to remain steady for FY2016 and FY2017 as compared to FY2015.  There was a $30 million reduction in the Equalized Assessed Valuation (EAV) for FY2014 due to the Exelon Generating Station.  This will increase to $460 million from $430 million in tax year 2019.  Revenues from Exelon are 14 to 15 percent of the total and farmland is 16 percent.  Farmland has increased and the trend will hold for tax year 2014.  The total tax rate is estimated at .3681 for tax year 2014.  Tax year 2015 is the last year to levy for the funding bond repayment.  At that time the bond and interest levy will decrease from .0419 to less than .001.  If the College does not issue any bonds, the levy will be zero.  The Liability, Protection, and Settlement Fund levy will not need to be resumed until sometime after FY2020.  This levy was discontinued with tax year 2007 and the College has used the fund balance for those expenditures since that time.  Credit hours are projected to remain steady in FY2015 at FY2014 levels and then increase one percent annually through FY2020.  Tuition per credit hour is projected to increase 6.3 percent in FY2016, 8.5 percent in FY2017, and 4.0 percent annually through FY2020.  If credit hours increase, it is possible to reduce the increase in tuition.  State funding is forecasted to decrease by one percent each year.  In expenditures, the annual salary increases average 2.5 percent for FY2016 through FY2018 and then drop to 2.0 percent in FY2019 and FY2020.  There is a reduction in force included for FY2016 and no additional personnel for the remainder of the forecast.  Benefits are projected to increase by 3.5 percent in FY2016 and then 5 percent per year for the remaining years of the forecast.  Medical inflation remains at 6 percent but with the high deductible health plan, the College will see a decrease in benefit costs in 2015 and 2016 and should continue to keep costs below the national inflation rates.  Contract services and materials and supplies include a two percent annual inflation rate.  Professional development continues to be a high priority.  Actual travel expenditures in FY2014 were $109,500 though $149,209 was budgeted.  The budget was increased to $184,500 for FY2015.  This forecast provides for $200,000 for travel expenditures in both FY2016 and FY2017 and an increase in FY2018 through FY2020.  The interest from the Working Cash Fund can be transferred to the operating funds annually.  A $10,000 match for Project Success is included in each year of the forecast.  Cheryl noted the forecast could be a little optimistic on the EAV.  It is going to be a struggle to balance the operating fund budget.  Over the past several years, cuts have been made to supplies and materials and all the line items except salaries, benefits, and travel which included professional development.  It will be important to match personnel with enrollments realizing enrollments are at a 15-year low.  The question was asked if there is enough focus on the revenue side.  As the administration develops the budget, there is a need to focus on ways to generate revenue through credit hours.  Ideas included: marketing strategies, reaching the adult population, new programs, and an increase in on-line courses.

TUITION ADJUSTMENT

In the 2016 financial forecast, a tuition rate of $118.00 (6.3 percent increase) was used to balance the operating funds.  In order to balance, capital expenditures were only at $65,000; salaries were projected at a 2.5 percent increase but with reductions in force totaling $100,000; and benefits were projected at a 3.5 percent increase.  Five scenarios were given: a five percent increase with a deficit of $99,086; a 6.3 percent increase ($7 per credit hour) with a balanced budget; a 6.75 percent increase ($7.50 per credit hour) with an additional $34,037 to the budget; a 7.0 percent increase with an additional $52,946; and a 7.2 percent increase ($8 per credit hour) with an additional $68,000 in the budget.  The FY2015 state average is $118.77 per credit hour, the peer group average $109.76, and the super peer group average $113.48.  Dr. Huffman was leaning towards the $8 per credit hour increase.  Asking students to pay more is tough, but it is the students that benefit the most by the education.  He suggested the College push to have the PELL grant completed by all high school seniors.  IVCC’s tuition is still much lower than the state universities and for local students they do not have to pay room and board.  There was no contingency in the budget this year and it was nice that it was not needed, but a contingency does give the College a little more cushion and this could be used for more advertising to increase enrollments. Dr. Driscoll noted no one wants to raise the tuition, but in reality an increase is needed and one of the higher options pushes the College towards balancing the budget.  It is the financially responsible thing to do.  There was consensus among the committee members to support the $8 per credit hour increase.