A brief historical perspective of the DCCCD explains the rationale for using a revenue allocation formula. Over 25 years ago, the DCCCD was constituted as one legal entity to consist of seven colleges, approximately equidistant from each other, and a systems office to give leadership, coordination, and accountability to the public. The colleges were opened more sequentially than simultaneously, and the process for budget development evolved with the district through its formative, high-growth years.
In the earliest years, El Centro was the only college and the budget was developed by people asking for what they wanted. After Eastfield, Mountain View and Richland opened, decisions about how to allocate resources became much more complex and time-consuming. District personnel could not maintain the same depth of knowledge for four colleges as they had had for one, and college personnel were forced, because of the structure of the process, into a competitive posture. At about the same time Cedar Valley, North Lake, and Brookhaven were opening, the budget allocation formula was being developed as a solution. The allocation was implemented for the 1979-80 fiscal year.
The revenue allocation formula is the method used by the DCCCD to distribute educational and general revenue equitably among the colleges. The formula coupled with the ability of the colleges to carryover unused funds from one year to the next, is believed to meet these objectives:
The formula is a combination of flat rates, which are advantageous to the smaller colleges, and proportionate rates, which are advantageous to all colleges. The district has an obligation to all its constituents, and the flat rates are included to insure the demographics in a particular region of the county—such as population density and percent of first generation colleges students—do not adversely affect the quality of education offered there. The formula is not judged to be perfect, but it has proved to be the best solution for the problem of competing interests for the same dollar.
The basic formula has three components - the base allocation, recurring items and non-recurring items. Much of the original data is provided by the colleges through the Vice Presidents of Business Services. The VPBS’s provide enrollment and income projections. The remainder of the information, e.g. state funding, local taxes, interest income, etc. is gathered by the District Budget Office. After compiling and reviewing all the pertinent revenue data, the Vice Chancellor of Business Affairs determines the amount available (the pot) for the allocation.
The base allocation is made up of 4 primary components - the fixed allocation, the maintenance allowance, state funding allocation, and salary adjustments.
A flat rate which recognizes fixed costs at each college. It has been increased when the inflation rate has exceeded what can be reasonably absorbed. The Consumer Price Index (CPI) is the major reference for making a decision to increase the fixed allocation.
A proportionate rate which recognizes the need for an allowance to cover normal wear and tear on the facility brought on by the number of students and the size of each facility. There is a rate for enrollment (contact hours) and a rate for size of the facility (square footage). The maintenance allowance is not intended to reflect utility costs or other routine expenses associated with the facility itself.
Landscaping - A flat rate of $125,000 per college.
A proportionate rate, based on each college’s actual contact hours multiplied by approved reimbursement rates. The DCCCD uses the prior calendar year’s actual contact hours as the basis for the allocation (example: the 2007-2008 allocation uses calendar 2006 actual certified contact hours.)
Amounts to cover the current year’s approved cost of living adjustments, schedule changes
and/or general salary increases are added to each college’s allocation. In addition, each college gets to keep the total amount of the previous year’s approved salary increase for one year. The previous year’s amount is then added into the base formula.
When the allocation was being developed, its authors recognized that there were certain items that occurred on an annual basis, were the result of decisions made by each college and/or were beyond the control of each college. As a result, the second component of the allocation was developed to cover these so-called Recurring Items. Recurring items are made up two components - recurring staff benefits and local college income.
Decisions concerning staff benefits are made at the district level for efficiency and to take advantage of economies of scale. Estimated amounts for staff benefits for each college are added to the allocation initially and later adjusted to actual.
Local college income in the form of continuing education, other fees, miscellaneous income and work study income are revenues considered to be under control of each college and subject to its decisions. This revenue is initially allocated back to each college based on their estimates and later adjusted to actual.
After the district implemented the allocation formula, it became apparent there would be unique or special items that would occur from time to time that did not fit into any of the other allocation components. These kinds of items generally lasted for a year or two and often did not affect all seven colleges. The district adopted a method of handling these unique items by considering them non-recurring items and placing them in separate section of the allocation. This has proven to be a very effective method for distributing and tracking these funds.
The district also allows each college to designate an amount each year to cover commitments (encumbrances and requisitions) made, but unfulfilled at year-end. Since the encumbered or requisitioned amount varies from year to year, it is placed in the non-recurring section. Funds used to cover encumbrances and requisitions are charged against each college’s fund balance and cannot be used for any other purpose.
At the end of each fiscal year each college retains any unspent portion of its allocation in the form of a fund balance. Colleges may use their fund balances for non-recurring costs, e.g., capital improvements, remodeling, major deferred maintenance and major equipment replacement. Colleges may not use their fund balances for operating or recurring costs, e.g., salaries, supplies, utilities and other items that can be reasonably expected to recur on an annual basis. This practice was begun to discourage unnecessary end-of-year spending at the colleges just to deplete their budgets. All indications are that it is an effective financial management technique.
