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Early retirement and budget overview   board
 

Early retirement and budget overview board

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    Early retirement and budget overview   board Early retirement and budget overview board Presentation Transcript

    • Early Retirement and Budget Overview
      As of May 2011
      1
    • 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
      MCC’s Debt Schedule
      Funding Source for Payment
      * Includes auxiliary revenue – bookstore, fitness centers and leasing
    • Unexpended Plant Fund with Debt Schedule
      4
    • The Plant Funds
      5
      As of June 30, 2010
      Figures include depreciation
    • 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
      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%
    • 8
    • 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
    • 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%
    • Early Retirement Program
      11
      • There are currently 130 early retirees of which 67 are
      teaching; there are six additional faculty retiring this year.
    • 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
    • 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%
    • 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%
    • 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
    • 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%
    • Early Retirement Recap
      17
    • Early Retirement Recap
      18
    • Early Retirement Recap
      19
    • 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.
    • 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