January 26, 2018 Audit/Finance Committee Meeting

Committee Members Physically Present

Everett J. Solon, Chair
David O. Mallery
Jay K. McCracken

Board Members Present

Matthew F. Pehoski, Student Trustee

Others Physically Present

Jerry Corcoran, President
Cheryl Roelfsema, Vice President for Business Services and Finance
Deborah Anderson, Vice President for Academic Affairs
Mark Grzybowski, Associate Vice President for Student Services
Fran Brolley, Director of Community Relations and Development
Kathy Ross, Controller
Renee Prine, Counselor
Delores Robinson, Instructor

The meeting was called to order at 3:14 p.m. by Mr. Solon.

THREE-YEAR FINANCIAL PLAN (FY2019 – FY2021)

Cheryl Roelfsema presented the three-year financial plan.  IVCC has three sources of revenue for the Education Fund and the Operation and Maintenance Fund – property taxes, tuition, and state funding.  Property tax assumptions for the next three years are increases of 1.5 percent for each year. The district’s property tax revenue is restricted by the limited rates on four of the eight funds and very little increase in equalized assessed valuations (EAV) due to no growth in the area and only a slight increase in property values.  In the five-year period from 2010 to 2014, the district’s EAV decreased each year for a total decrease of 6.5 percent.  During the last two years, 2015 and 2016, EAV has risen by 3.2 percent.  Property tax revenues are allocated at 50 percent for each of the fiscal years following the levy.  The levy adopted in December 2017 will be allocated 50 percent each to fiscal year 2018 and fiscal year 2019.  In recent years, the decline in EAV of the LaSalle Generating Station has been offset with increases in farmland values.  For tax year 2017, the EAV of the nuclear plant is $430 million, or 14 percent of the district’s tax rate.  In 2018, the value will increase to $435 million and then increase to $460 million in 2019.  From 2010 to 2016, farmland EAV increased by 28 percent, to $640.7 million, 20 percent of the district’s EAV.  The Bureau Putnam Enterprise Zone expired in 2017.  In tax year 2016, $69,172 in taxes was abated for the college as a result of the Enterprise Zone, based on an EAV of $18,772,706. With the Enterprise Zone expiring in 2017, this will mean more tax revenue for the College starting in FY18 when 50 percent of the previously abated taxes (or approximately $34,000, assuming a level EAV) will be recognized as revenue. The financial plan assumes IVCC will remain eligible for the equity tax which was calculated at a rate consistent with the 2017 tax levy request - $4.2 million.  The increased equity tax is what makes it possible to keep tuition increases lower. Since FY12, IVCC’s credit hours have declined, a trend that community colleges and universities have been facing.  Community college enrollments often follow employment trends with enrollments increasing during times of high unemployment.  The economy has improved and the national unemployment rate as of November 2017 is at 4.1%.  Local demographics also affect enrollments.  Individuals 65 years of age and older make up over 20 percent of the population and an older population is projected by Economic Modeling Specialists, Inc. (EMSI) to continue in the future.  Projections also indicate a decrease in elementary and high school students from 2017 to 2022 and a decrease of 2.6 percent for the 20-39 year age group, which is often the returning student.  For these reasons, a 1.7 percent increase in enrollment growth has been projected for FY19 with one percent increases for FY20 and FY21. A $3 increase in tuition and fees is projected for the next year following with an increase of $4 in FY20 and $2 in FY21.  In comparing tuition and universal fees at similar sized Illinois community colleges, IVCC is lower than seven of the ten colleges.  The state base operating grant is based on credit hours earned two years prior to the current year, multiplied by the current year reimbursement rate.  The decreasing number of credit hours would have had a more detrimental effect if not for the fact that nearly all the Illinois community colleges experienced a similar decrease in credit hours.  In July 2017, Illinois State Legislature passed a FY17 supplemental budget and a FY18 budget.  IVCC’s total FY17 credit hour grant was $2,072,904, 95 percent of the FY15 grant.  The credit hour grant for FY18 was $1,800,070, 82 percent of the FY15 grant.  As of December 2017, $1,465,000 of the FY17 funding and $1,384,000 of the FY18 funding has been received. IVCC received $207,180 in FY17 and $203,470 in FY18 for the Career and Technical Education.  The three-year projection is based on level funding annually from the State at 85 percent of the FY15 level, or approximately $1,885,000, and also includes the Equalization Grant of $50,000 and the CTE Grant at $200,000.   Expenditures projected are salaries (2 percent increase in each year); benefits (5 percent increase in each year); contractual and materials and supplies (1 percent increase the first year, followed by a 2 percent the next two years); conferences/training, fixed costs, capital expenditures, and contingency (no increases for all three years); utilities (1 percent increase each year).  The College is due to update the Facilities Master Plan in FY18.  The Illinois Community College Board requires an updated plan be submitted every five years.  The College maintains a working cash fund of $4.5 million to be used to pay expenses when awaiting property tax receipts or state funding.   Board Policy requires at least 25 percent of annual operating expenses for a fund balance in operating funds.  At the end of FY16 the Education Fund balance fell below 25 percent but the fund balance of the combined (Education and Operations and Maintenance) funds was 35.4 percent.  Due to larger than expected state appropriations in FY17, the Education Fund reserve was at 31.5 percent as of June 30, 2017, and the combined Education Fund and Operations and Maintenance Fund reserve was at 40.5 percent.  Through this three-year projection, the reserves are projected to remain above 25 percent. The Auxiliary Enterprise Fund balance is projected to continue to decrease.  The major source of revenue in this fund is the Bookstore. The athletics program is also accounted for in this fund and requires approximately $200,000 per year from the Auxiliary Enterprise Fund balance for operations.  The fund balance also includes approximately $1 million in reserves from Information Technology projects. The Liability, Protection and Settlement Fund has been running a planned deficit for several years with no property tax levy from tax year 2006 to 2014.  The College has used the fund balance to cover expenditures.  In tax year 2015, $315,000 was levied; $402,000 in 2016 and $350,000 in 2017.  The levy will increase to $853,000 by tax year 2020. With the State’s current economic condition, state funding is not expected to be a major source of revenue to address future needs.   Ms. Roelfsema noted that since 2012 there has been a 45 percent decrease in the number of credit hours.  IVCC is not any different than any other Illinois community college as all colleges are struggling with enrollment.  She added that there is a possibility that the legislature will decide to not address the budget until after the March 20 primaries, which could impact the timeliness of money IVCC receives from the state. 

TUITION ADJUSTMENT

The administration is recommending a 2.3 percent increase ($3 per credit hour) in tuition, increasing the combined tuition and universal fee to $133 per credit hour beginning summer of 2018.  Currently, IVCC’s tuition is below the state average and with the $3 increase will remain below the FY2019 state average.   Mr. Pehoski reported that the student government had been made aware of the expected tuition increase.  The SGA met on January 18 and reviewed the tuition and course fee adjustments and were supportive of the proposed changes.  Mr. Mallery commented that a $3.00 increase instead of $6.00 is movement in the right direction and noted that he would continue to weigh the pros and cons of the increase. There was consensus among the committee to recommend presenting the $3 increase to the whole Board.

COURSE FEES/ADJUSTMENTS

Course fees are reviewed annually by program coordinators and deans using approved course fee guidelines.  We currently have 365 active courses with approved course fees. The recommendation is to change 44 course fees for FY19:  42 increases and two new courses. A list of 44 courses were reviewed by the committee members. Mr. Mallery commented that the list of fee increases was one of the shortest that he had seen during his time on the Board. The committee was in consensus that the fee changes should be recommended to the whole Board.

PROPOSAL – AUDITING SERVICES

The initial contract with Wipfli LLP for a three-year term was approved at the April 9, 2015 Board of Trustees’ meeting.  Board Policy 4.6 requires the College to solicit bids for auditing firms every six years.  Ms. Roelfsema noted that Wipfli LLP has been very thorough, responsive, and provided great service.  There was consensus among the committee to recommend accepting the proposal by Wipfli LLP to extend their contract for independent audit services for fiscal years 2018, 2019, and 2020 to the whole Board.

OTHER

None.

ADJOURNMENT

Mr. Solon declared the meeting adjourned at 4:00 p.m.