An Open Letter to the LCC Board of Education and Budget Committee Members,

Greetings.  I’m writing in an attempt to clarify a key issue raised by both the Association and some Budget Committee members, to which the Administration provided a response at last week’s Budget Committee meeting.  The question is ‘just what would be the actual budget impact of the Administration’s recommended Program and Services cuts?’  Clearly by at the end of last week’s discussion of this matter a number of Budget Committee and Board members remained confused by the Administration’s responses and figures.   At issue is the simple question of whether the Administration has accounted for the revenue that would be lost if these programs are reduced or eliminated, or if, on the other hand, the Administration’s projected “savings” represent not ‘net savings’ but actually only ‘gross expenditure reductions.’  There’s also the related question of whether even the projected “expenditure reductions” are overstated.

The simple answer to the question of whether the Administration’s projected “savings” are only ‘gross expenditure reductions’ is YES:  the Administration’s projected “savings” incorporate only the Administrations projected gross expenditure reductions.  This fact can be gleaned from several sources, included on page two of the LCC Budget Committee 4/26/17 handout, which notes that “Budget reduction calculations are based on hard costs that will not be incurred if the program or service is eliminated…”  The resulting revenue reductions are simply not part of the budget calculations.  The “savings” are the sum of the total expenses of the impacted positions if the cuts were made, and do NOT subtract out any calculation of the revenues currently received due to those positions, nor even to a projection of what revenue losses we would include without those positions next year.

Those of us here two years ago will likely remember that the Administration addressed this same question quite differently, when it proposed three programs for cutting.  That year the Administration did “calculate” the net impact of the reductions, but it also simply “assumed”, with no evidence or argument, that most (75%) of the students who would have come to LCC for those programs would still come to LCC the next year to attend other programs.  The Association was skeptical of that assumption, and asked for the logic and/or evidence to support it, and the Administration provided none, saying it was simply an “assumption”, not based upon any evidence or logic.   Therefore, in order to provide some foundation for such a crucial assumption, the Association conducted a survey of all of the students in the affected programs, and while it varied predictably among programs (more electronics students said they’d still have come to LCC, fewer Medical Office Assistant and Autobody / Paint students), as a whole only 20% of the students said they would still have come to Lane, meaning that if that group of students is representative, then we would have lost 80% of the associated income (i.e., tuition, fees, and state reimbursement), not only 25% as the Administration argued.  That 55% difference between what the Administration assumed, and what the survey’s demonstrated, was undoubtedly a huge factor in determining whether cutting the programs actually saved the college money, or, we believe, simply further reduced enrollment and increased our deficit.

This year, for some unexplained reason (despite our formal requests), the Administration appears not to have made even that calculation this year, presenting the entire expense cut as “savings” (in a previous document they even labeled this as “net savings”, when no subtractions were being made at all; they did remove the word “net”, at our urging, but have made no substantive changes to their calculations of the “savings”; they remain only the gross projected expense cuts, and ignore the impact of the lost revenues tied to the expenses).  So this year’s figures effectively assume that LCC will somehow hold onto 100%! of the students, again, with no logic articulated, nor evidence offered.

So we have to ask -- and, respectfully, the Budget Committee needs also to ask -- is that a fair and accurate calculation or assumption for a Budget to be based upon?

Imagine for a moment that instead of being a college we’re a restaurant, and that in times of declining sales the Manager proposed to cut out all vegetarian dishes, thus saving the salary of their dedicated vegetarian cook and the expensive organic vegetables she prepared.  And imagine that 20% of their total sales were to vegetarians.  Would it be fair and accurate to then propose a budget that projects “saving” the expenses of the cook and vegetables, but not account for the loss of 20% of sales that would inevitably happen when the vegetarians are given a menu comprised solely of entrees with meat in them?  Would a Budget Oversight committee not demand to not only know the cost of the cook and vegetables, but also the revenues tied to vegetarian items?  Would the restaurant manager get away with saying ‘we only looked at the cost side of the equation?’

No, of course not.  One may similarly recognize this obvious conclusion by simply imagining a hypothetical proposal to eliminate ALL faculty positions.  Yes, the college would “save” tens of millions dollars annually, in expenses; but of course, it would also lose 99% of the college’s revenues and would be bankrupt in a few weeks!  Obviously one must factor in the impact on revenue, and yet the Administration has refused to do so. 

Now, continuing with the analogy, it is true that the Administration is are saying that the college will add other subjects for students to study, the equivalent perhaps of ‘adding new dessert items to the menu.’  And they apparently are including both the expenses and the revenues from the expanded programs, and calculating the net ‘profits’ from those areas.  But if it’s proper to look at both costs and revenues when adding programs (or desserts), how is it proper to look only at reduced expenses and not reduced revenues when cutting them?   Wouldn’t a bank considering providing the restaurant a loan ask ‘but what about the vegetarians, who won’t come to the restaurant anymore?’  Won’t they demand to see the net impact of dropping the vegetarian items, not just the gross expense cut, and to calculate the net balance between expense cuts and the lost revenues? 

The Administration has refused the Association’s contractual request for such calculations, and has not provided clear answers to Budget Committee members inquiring about the impact on revenue.  Vice President Kelly significantly understated the matter when he noted to you last week that ‘revenue was by far not the only thing we looked at…’ ; in fact, the impact on revenue isn’t included in their calculations at all.  And President Spilde, in last Thursday’s College Council meeting, responded to our request that the Administration provide the Budget Committee the net impact of the proposed cuts by saying that ‘the Budget Committee can calculate the net impact themselves.’

With all due respect, we do not believe that the Budget Committee has been put in a position to be able to ‘do the calculations themselves’, nor that you should have to.  Yes, the Administration last week provided some columns of data listing expenses and revenues by department, but they were not the figures tied to the projected cuts, nor would they allow a Budget Committee member to calculate the net impact themselves.  Just the first row of the table demonstrates that, showing that “Counseling” brought in $567,733 in “Total Revenue” and cost $2,814,282 in “FY16 Direct Expense.”  Should the Budget Committee conclude that we would save nearly $2.3 million, by subtracting a lost $567k from a gained $2.8M? No, of course not, as those figures are for the entire department, not just the two positions slated to be cut.  The College simply hasn’t even presented the gross data to make the calculations, let along make them itself, as it should.  So it’s impossible for committee members or other interested parties to calculate the impact of the cut on their own. 

In fact, the data in that table and the previous table provided the Board suffer from a number of such faults, including only looking at the expenses tied to the initially impacted faculty member, rather than the actual impact.  For example, the two contracted faculty counselors whose positions would be cut, would, per contract, simply be transferred to other work currently being assigned to part-time faculty, who, of course, are compensated at far lower rates than contracted faculty, so even the “gross expenditure reductions” are grossly overstated.  Similarly, the GIS instructor would simply move to teaching geography classes as a contracted faculty member, replacing part-time faculty members paid at a much lower rate, so again, even the gross ‘expenditure reduction’ figures are inflated. 

The reality is that the projected “savings” are nowhere close to capturing the actual impact on the budget, no more than the hypothetical restaurant manager can balance their books by cutting expenses and ignoring the loss of customers, or than the College could save money by eliminating positions that the college’s revenue depends upon. 

Cutting Early Childhood would actually lose our college over $50,000; cutting GIS would actually lose our college over $25,000;  moving counselors from one position to another would save the college far less than claimed; while Philosophy/Religion brings the college $474,553 a year while only costing it $222,958, thus making (net) a ‘profit’ of over $250,000 annually, according to the College’s own numbers.

In short, the numbers aren’t added up (or subtracted), and they don’t ‘add up!’

Conclusion

We believe the only reason that Board is considering (and the Budget Committee is trying to understand the budget impact of) the Administration’s proposed program and services cuts, is that it has been led to believe that doing so will save the college money (and also that making these cuts is necessary, but that’s another discussion for another time).  However, the reality is that the projected “savings” are only the projected gross expense reductions, not the net budget impact, and even the projected expense reductions are significantly overstated.  The actual ‘net savings’ in most of the cases would actually be negative, that is they would lose our college money.

With all due respect, the Budget Committee cannot, consistent with their duties, pass a budget based upon such false accounting of the impact of the proposal, and the Board should never consider cutting programs without correctly understanding their actual fiscal impacts.

We call on the Budget Committee to request the NET projected final savings from the proposed program and service cuts, including the full calculations, with explanations and justifications for all assumptions, and measuring the final impact on costs and revenues.  Only then will the Budget Committee be in a position to assure that the Budget is reasonable.  And only then will the Board be in a position to fully consider the merits of the Administration’s proposals to cut the programs, as well as the merits of the many calls from across our community to not do so.

Thank you.

Respectfully,

James T. Salt, Ph.D.

President

Lane Community College Education Association