SMC’s reserve fund in dire straits, school may face more cuts

California Gov. Jerry Brown’s November tax initiative to increase sales tax by 0.5 percent and income tax 1 to 2 percent for those earning $250,000 and above aims to raise state revenue and more funding for schools. It is something that Santa Monica College is not only counting on, but depending on. Otherwise, SMC could deplete its reserve fund and possibly have a negative reserve for years to come. According to Robert Isomoto, Vice President of Business and Administration at SMC, this year’s reserved fund account began with an amount of $23 million with an estimated expenditure of $11 million, leaving a projected $12 to 14 million by the end of the year.

“We only have one pot of money and whatever we have left over is what we call our reserves,” Isomoto says “If the tax initiative doesn’t pass then it may go way down and that is very bad.”

According to Isomoto, SMC uses $5.5 million of the reserves for operating costs. These costs have been increasing due to more expensive faculty contracts, an increase in insurance premiums and a decline in state funding.

“The reserved funds will not be negative this year,” Isomoto says. “We’ll end the year with 5% left, but next year we will not have that.”

The new faculty contracts cost more money because teachers with the longest tenure are due to receive a pay raise of roughly 2% in addition to the 1.25% raise which the entire SMC staff has already received. According to Isomoto, this would be most of the faculty.

The school is expected to save money on certain things like health insurance for example because of benefits given up voluntary by the faculty.

Isomoto says that in past years the state funded all classes and SMC was paid for every attending student. In those times, the school was able to accumulate a larger reserve fund, but the funds have been depleting since state budget cuts began in 2008.

“The state has already said they would not fund activity courses, those that do not lead to a degree,” Isomoto said, adding “We’re being told to teach only so many students, so if we don’t cut our expenses we eat into our reserves.”

Last year, SMC added money to the reserves because they spent less in contracts and the school had some revenue in non-resident tuition, Isomoto said.

Administrators said the situation would continue to worsen if the November tax initiative is not passed, resulting in another $5 million in cuts.

“We definitely will cut more classes if it doesn’t pass”, Isomoto says.

During a Board of Trustees meeting earlier this year, a vote regarding the tax initiative was not unanimous with two board members voting against it. Trustee Susan Aminoff had originally voted against it—however, in an interview with the Corsair on Monday said she had changed her mind.

Concerns have surfaced claiming Contract Ed was the only salvation to the reserve deficit. However, Trustee Aminoff said that it is an entirely separate issue.

“Supplemental classes do not draw a parallel with the reserved funds,” she said. “They were a  way for students to meet their goals in a timely way.”

Judge David Finkel, the other trustee member to vote against the tax initiative, was not available for an interview.

If the initiative passes, the school could no longer face cuts starting as early as November. “It will stop the bleeding,” said Isomoto.

“We’re not gaining any funding this year if the taxes pass, but the Governor has promised that in the following years he would give us 4 percent more starting in 2013.”

It is up to the college to decide what classes would be cut if the state continues to fund only some classes should the tax initiative fail to pass.

“We will continue to discuss innovative ways in which we can meet the demand,” Aminoff said.  “These are challenging times for all community colleges which is why we don’t have the luxury to sit around and do nothing.”