District taps into ELAC reserve funds

By Megan Perry

The budget situation at East Los Angeles College for the 2012-13 school  year is getting worse and a new allocation model is not helping matters.

This year’s budget is less than last year’s, requiring more dependence on the school’s reserved balance and more cuts to classes and supplies. The Los Angeles Community College District adopted a new allocation model, which affects ELAC in a negative way.

The new allocation model takes five percent from the school’s income, money from the school’s undistributed balances and money from the school’s college reserve and balances.

For ELAC, the total amount of money taken to be put in district reserve accounts was $25.2 million. Jeffrey Hernandez, academic senate vice president, said the district set up a general reserve fund.

ELAC had money in a college reserve account the district set up, where ELAC could tuck away money for a rainy day. This money is no longer considered money that ELAC set aside, but is now considered money the district set aside for a general reserve account.

The money in the general reserve account is to go untouched for the next year. On top of the district taking the college reserve money, the board of trustees increased the contingency fund, which is part of the operating budget and may be accessed throughout the year.

Usually, all of the colleges contribute five percent from revenue and colleges may access the fund throughout the year.

Hernandez said, “The board of trustees decided to increase the contingency from five percent to 7.5 percent, and that extra money, about 85 percent of it, came out of our (ELAC’s) balance.”

ELAC had money set aside and would dip into it as needed. “The only reason we have had the balance we have is because we’ve run a very tight ship for a longer period of time than all of the other colleges,” said Hernandez.

The board found that there was no other money to cover the new increase, so they took the money from district schools that had the most money in reserve, ELAC and Pierce College.

“The board of trustees felt that if the tax initiative does not pass, they wanted to be in the position to give away more money to other colleges,” Hernandez said.

The district created a transition fund to help the impact of the new allocation formula, which will shrink by one-third each year over the next few years. This year, ELAC will receive roughly $5 million.

“Next year, ELAC will see two-thirds of the $5 million. The year after, one-third. The year after that, none,” said Hernandez. The district has allocated $71 million to ELAC under the new allocation model, which is about $10 million less than last year.

ELAC will also receive an offset transitional fund of $5 million. Including remaining balances and revenue,  ELAC’s budget is at about $86 million for the 2012-13 school year.

That’s roughly $3 million less than ELAC spent last year, as Hernandez said that ELAC’s over expenditure was roughly $89 million.

“Even if we didn’t have the new allocation model, East L.A. College is in deep, deep trouble because of the state budget cut,” Hernandez said, “and with the allocation model, for sure we’re going to be the biggest deficit college in the district.”

Proposition 30 may be the boost ELAC needs. Prop 30 is the tax initiative that would increase personal income taxes on annual earnings more than $250,000 for the next seven years.

“If the tax initiative does not pass, there is going to be even more classes cut,” Hernandez said.  “And even if it does pass, what we have planned for the spring is still a reduction from what we had last spring, because we’re over the number of students the state gave us money for.”

President Farley Herzek said that California has never valued education. “California has always ranked in between 43 and 48 in public school funding.”

The money would be allocated to temporary tax revenues. Eighty-nine percent would go to K-12 schools and 11 percent to community colleges. “If Proposition 30 doesn’t pass … the cuts would be draconian,” Herzek said.

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