1. Early Retirement and Budget Overview As of May 2011 1

2. Budget Overview If MCC work processes remain the same and no budget changes are made (as of April 2011) 2 *Does not include the legislatively approved 4.81% reduction for higher education instead of the governor recommended 7% reduction. MCC will benefit by a $600,000 revenue increase.

3. 3 MCC’s Debt Schedule Funding Source for Payment * Includes auxiliary revenue – bookstore, fitness centers and leasing

4. Unexpended Plant Fund with Debt Schedule 4

5. The Plant Funds 5 As of June 30, 2010 Figures include depreciation

6. 6 Unexpended Plant Fund (UPF) Realities The UPF balance as of June 30, 2010 was $36 million: Portion that can be used for Debt/Projects $25 million Portion that was identified for investment $11 million earnings to be used to fund operations 2001 bonds were issued with the intent that Unexpended Plant Fund (UPF) would be in a position to cover a significant portion of the annual debt payments. Historically, any unplanned year end operational dollars would be swept to the UPF to fund debt payments and preserve the UPF. There are no longer additional operational funds to be swept into unexpended plant funds so to ensure sufficient funds are available, MCC needs to budget more of the debt payment out of operational funds.

7. 7 HLC and Reserves The Higher Learning Commission (HLC) (MCC’s accrediting agency) views RESERVES as a primary indicator of the institution’s financial health. Target Benchmark is to have Reserves = Long Term Debt (1:1 ratio) MCC at .743 Target Benchmark is to have Reserves = 40% of Total Expenses (includes grant expenses, scholarships, interest, depreciation) MCC at 50%

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9. Early Retirement Program Current criteria for early retirement 10 years of consecutive, benefit-eligible service at MCC and meet age requirements 30 years of consecutive, benefit-eligible service with MCC regardless of age 10 years of consecutive, benefit-eligible service at MCC and 30 years of retirement service with PSRS or PEERS 9

10. Early Retirement Program Early retiree receives An incentive payment up to 85% of their final contract or annual salary - $860,000 expensed in FY 11 Insurance coverage provided equal to that of active employee - $2.6 million expensed in FY 11 Opportunity to teach at premium pay for 13.86 hours - $1.6 million expensed in FY 11 Currently, MCC spends (expense) over $5 million each year for early retirement with a present value *of $65 million and we carry a $3.5 million liability (growing). 10 *Represents dollar amount needed today to pay for the retirement system over 20 years with an earned interest rate of 3.2%

12. Early Retirement Program To grandfather current teaching early retirees (73) at premium pay would cost $17 million (actual dollars). To pay current early retirees (73)at the adjunct rate would cost $6.0 million, of which MCC would incur anyway. 12

13. Early Retirement Program BRT (budget response team) recommended to Chancellor to change the early retirement program to: Rule of 80 at MCC with at least twenty years of consecutive, benefit-eligible service to MCC. “Use it or lose it” the first year you reach the rule of 80. Choice of either incentive payment of 50% of final contract/annual salary with cap of $50,000 or healthcare coverage for employee only. This plan would cost (expense) MCC over $1 million annually with a present value* of $22 million and an ongoing $1 million or more liability (growing). 13 *Represents dollar amount needed today to pay for the retirement system over 20 years with an earned interest rate of 3.2%

14. Chancellor’s Early Retirement Program Recommendation Current Early Retirees and those retiring before July 1, 2013 What stays the same? Same qualifications to retire early Same healthcare and incentive pay benefits Same bumping rights remain What changes? Premium pay limited to 3 work units in FY 12 Premium pay for 0 work units thereafter Pay rate goes to adjunct rate of pay for faculty and temporary rate schedule for staff and administrative roles for the remaining eligible work units MCC could reduce its liability by $1-$2 million immediately with further reductions each year. The expense would be about $500,000 each year because of the implicit rate for healthcare. The present value* is $12 million. 14 *Represents dollar amount needed today to pay for the retirement system over 20 years with an earned interest rate of 3.2%

15. Chancellor’s Early Retirement Recommendation Those retiring July 1, 2013 and after No Early retirement incentive program means: No incentive payment No bumping rights Adjunct rate of pay for faculty and temporary rate schedule for staff and administrative roles for 13.86 work units or 550 hours. MCC Healthcare offered to regular retirees at their own expense 15

16. Early Retirement Recap 16 *Represents dollar amount needed today to pay for the retirement system over 20 years with an earned interest rate of 3.2%

17. Early Retirement Recap 17

18. Early Retirement Recap 18

19. Early Retirement Recap 19

20. Early Retirement Program Eligible for Retirement under MCC’s current early retirement program: 20 * Based upon actual eligible employees. Historically, 22 employees early retire a year.

21. Other Budget Considerations Allocation Model Adjust current model for revenue projections Zero-based budgeting Compensation package (contract for FY 13) Auxiliary Services Online course expansion Annexation 21