City Colleges of Chicago FY2020 Tentative Budget: Analysis and Recommendations

July 31, 2019

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Click here to read the press release for this analysis.

SUMMARY

The Civic Federation supports the City Colleges of Chicago FY2020 Tentative Annual Operating Budget totaling $447.5 million, but has concerns about the future fiscal stability of the District. The District is still recovering from the two-year State budget impasse that severely underfunded higher education institutions and reduced and delayed MAP grants, impacting student enrollment. In an effort to stabilize its finances in FY2020, the District is proposing to increase its property tax levy to the maximum allowed under state law for the first time since FY2009, finalize the sale of its downtown headquarters and control costs by reducing staffing and better managing vacancies and turnovers. However, despite these positive efforts, the District continues to face a structural deficit and plans to use one-time revenue sources to balance this year’s budget.

The District’s FY2020 total budget will increase by 2.6%, or $11.4 million, above the FY2019 adopted budget of $436.1 million. This is primarily due to a $12.4 million increase in capital spending tied to the State of Illinois passing its first capital budget in over 10 years. The FY2020 budget for City Colleges is the third budget since FY2015 in which the District will receive a full year of funding from the State of Illinois. Total State funding in FY2020 is expected to be $87.4 million, which is an increase of $24.8 million, or 39.6% from the budgeted amount of $62.6 million in FY2019. In FY2016 and FY2017 City Colleges received only a fraction of the State funding it expected, which caused significant financial distress. In order to balance these budgets, City Colleges relied on short-term solutions, such as using its cash reserves, delaying capital expenses, not filling vacant positions and instituting a hiring freeze instead of relying on property tax hikes and tuition increases.

The damage caused by the two-year State budget impasse along with the delay in selling the District’s downtown headquarters and a continued decline in student enrollment require a sound multi-year plan by the District to restore long-term financial and operational health. While the District was able to settle negotiations with the majority of its labor unions, which provides greater predictability for future year’s budgets, labor costs continue to grow as student enrollment continues to decline. Adding to the District’s future financial challenges is the decision to use $12.9 million in proceeds from the sale of its downtown headquarters building and $4.0 million in tax increment financing surplus to help balance this year’s budget. As result, the District will need to find additional cuts or increases in revenues in future years to help balance its budgets and is diminishing the effect of the savings and efficiencies proposed in the FY2020 budget.

The Civic Federation offers the following key findings on the City Colleges FY2020 tentative budget:

• City Colleges is projected to receive a full year of State funding in FY2020. This is the third full year of funding from the State since FY2015. However, the FY2019 level of funding is still less than FY2015 State funding levels;
• Appropriations for all funds in FY2020 total $447.5 million. This is a 2.6%, or $11.4 million, increase from FY2019 adopted appropriations of $436.1 million;
• The unrestricted operating budget will total $290.1 million in FY2020. This is a 1.6% or $4.7 million, increase above the adopted FY2019 unrestricted operating budget of nearly $285.4 million;[1]
• Property tax revenue is expected to increase by $1.8 million or 1.5% in FY2020, mostly due to an increase in the tax year 2019 property tax levy to the maximum increase allowed under the Property Tax Extension Limitation Law. The District will also levy for new property;
• Tuition and fee revenue is projected to decrease by $10.2 million, or 10.3%, below the FY2019 adopted budget;
• Between FY2019 and FY2020, appropriations for employees’ salaries in the unrestricted operating funds will increase by $5.6 million, or 3.2%, from $177.3 million to $182.9 million, but offset by a $1.8 million, or 4.5% decrease in salaries;
• Between the FY2019 adopted budget and tentative FY2020 budget there will be a net decrease of 58 total full-time equivalent positions, or a 1.7% decrease in total FTEs; and
• Student enrollment decreased between FY2018 and FY2019 by 1,463 FTE students, or 4.3%, shrinking from 34,109 to 32,646 FTEs.

The Civic Federation supports several elements of the FY2020 City Colleges tentative budget:

• Dedicating a portion of the funds from the sale of the District headquarters to rebuilding reserves;
• Implementing prudent cost containment strategies to stabilize the financial position of the District;
• Livestreaming the public hearing on the FY2020 Tentative Annual Operating Budget;
• Developing a new strategic plan to help guide future decision-making; and
• Increasing the property tax levy to the maximum under the Property Tax Extension Limitation Law for the first time since FY2009.

The Civic Federation has the following concerns related to City Colleges’ tentative FY2020 budget:

• Using one-time revenue sources to cope with a structural deficit; and
• Continued decline in student enrollment.

The Civic Federation offers the following recommendations for City Colleges:

• Provide greater detail on the number of full-time equivalent employees across all funds;
• Develop a tuition and fee policy and explore indexing tuition and fees;
• Improve the fund balance policy in the unrestricted funds that is approved by the City Colleges’ Board of Trustees;
• Continue to advocate for the State of Illinois to change the community college equalization formula to more fairly fund City Colleges and other community colleges located in counties subject to the Property Tax Extension Limitation Law;
• Improve transparency and accountability by livestreaming board and committee meetings;
• Institutionalize the long-term financial planning process by including more frequent updates and enhance opportunities for stakeholder input in financial planning decisions; and
• Provide more frequent updates on the District’s strategic plan while maximizing stakeholder input.

 

Click here to read the full report.
Click here to read the press release for this analysis.