HCC board chair takes hard stand on future budgets, reserve fund transfers

The chairman of Harford Community College's Board of Trustees put it bluntly: The college's finances need to improve.

Chairman James Valdes said the college has a "structural deficit" caused by a gap between revenues and expenses that it must cover with funds from its cash reserves.

He said the college's President Dennis Golladay and his staff must take strong measures to get rid of that deficit.

College administrators project the gap in HCC's proposed $48.1 million budget for the 2015 fiscal year will be closed with a $2.4 million "transfer in" from the reserve fund, according to a proposed budget presented during Tuesday night's Board of Trustees meeting.

"It's a structural deficit," Valdes said. "You can call it a transfer in but it's really a structural deficit. I'm going to call what it is; I hate euphemisms and we cannot continue to do this."

Tuesday was the last time the FY2015 budget was reviewed by the trustees before they vote to adopt it during their June meeting. The 2014-15 fiscal year begins July 1.

Valdes praised the efforts of college administrators to reduce the transfers from the fund balance, but he also stressed they all have to do more.

"I think the board has to take some steps that may not be palatable to a lot of a people," he said. "For the long-term health of this institution we have to do it; we can't kick this can down the road with half measures."

In the 2013 fiscal year, HCC posted a $3.8 million operating deficit on a budget of $46 million, according to its annual audited financial report. HCC had an operating deficit of $2.1 million in 2012. The books on the 2014 fiscal year won't close until June 30.

According to the facts and figures section of its website, HCC had about 10,000 students taking one or more credit courses in 2013 and about 12,700 students enrolled in one or more non-credit courses.

In a May 7 interview, Golladay said he is working to bring the deficit down gradually, blaming the situation on several factors, among them the requirement to pay contractors on college construction projects before state reimbursement is received and rising costs of doing business. "We are creating a plan to make the college financially strong," he said.

Board member Bryan Kelly said he did not want to "hand something to future trustees and potential future presidents, a situation that's a lot more dire than we're giving it credit for."

Rick Johnson, vice president of finance and operations, said the reserve fund transfer has been reduced by $1 million over two years, down from about $3.4 million in 2012.

"This is not an expense issue in my opinion...this is a revenue issue and I think it's a revenue issue that's come about over many years," Johnson explained.

He said county funding, which covers nearly a third of the college's annual revenue, has been flat since 2008. The college has also had to deal with "double-digit" increases in employee health care costs, along with an unexpected decline in enrollment.

The college has held down its tuition, but it has raised it by $15 a credit hour during recent years. Another $12 increase is proposed for next year, along with an increase in student fees.

Johnson, who presented the proposed budget, included a chart that compared HCC's fund balance transfer to those of sister institutions. The data, which was from 2012, showed HCC's transfer covered 10 percent of its operating revenue for fiscal 2012.

Six other community colleges – Anne Arundel, Baltimore County, Carroll, Cecil, Frederick and Howard – had revenue gaps ranging from 1 to 4 percent.

When questioned about the 10 percent gap by board members and Golladay, Johnson noted 2012 was the most recent year for which data that showed comparisons among the colleges was available.

Golladay stressed the FY2015 budget does not foresee a revenue gap as high as 10 percent.

"I don't care whether it's 10 percent or 8 percent or 12 percent," Valdes said. "It's too much given the total amount of dollars in our reserve fund."

One bright spot in the revenue picture is an increase in state funding from the current fiscal year. The state provided $10.3 million for HCC operations in FY2014 and will provide $11 million in FY2015.

Johnson gave credit for the increase to the work of college administrators and Harford County's state legislators.

"Every little bit helps," he said. "We continue to have challenges, and those extra funds from the state will mean that we will dip less into our reserves next year to balance the budget."

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