Because of a state deficit estimated at $15.2 billion, Hancock College’s newly adopted 2008-2009 budget doesn’t include a cost of living adjustment for any programs, leaving their funding static despite increased costs to run them.

Hancock’s board of trustees adopted the $50,266,194 budget — in which estimated income outweighed expenditures by just $3,630 — without fanfare or public comment Tuesday night.

With Sacramento legislators locked in a stalemate over adoption of a state budget, the board also approved an emergency plan allowing the college — which can’t receive any state funds until the governor signs the state budget — to borrow against some of its own assets in the event the stalemate lasts several more months.

However, despite the state budget situation, the college is fiscally healthy with a 6.12 percent reserve built into this year’s budget, Hancock officials said.

“There are a lot of unmet needs and we’ve had to take advantage of some one-time savings, but, all things considered, we’re going to have a budget that allows us to operate,” Vice President of Administrative Services Elizabeth Miller said.

Though California law requires the legislature to adopt a state budget by July 1, legislators did not announce an agreement until this week. However, Gov. Arnold Schwarzenegger immediately threatened to veto it unless legislators revise it to include long-term solutions for the state’s fiscal problems.

To further complicate matters, while the budget proposed by legislators allows for a 0.68 percent cost of living adjustment (COLA) for programs, neither of the two budgets Schwarzenegger proposed earlier this year allow for any COLA.

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Thus, not only have community colleges and other public institutions that rely heavily on state funding had to build their budgets without a pre-approved state budget, they also had to build their budgets around the assumption they will not receive any additional money.

“It will be very good news us if there is any COLA at all,” Miller said, adding the 0.68 percent COLA in the legislature’s proposed budget would translate into an additional $320,000 for Hancock.

The president of the Allan Hancock Full-Time Faculty Association said faculty members do not fault the college for the lack of COLA.

“We’re not unhappy with the college at all. For the full-time faculty at this point I’m not really aware of a direct impact” of not having COLA, Roger Hall said. “Those kind of things would be down the road.”

To cope with the state budget crisis, the college is offering fewer sections of select courses and will delay filling several vacant positions, Miller said.

With Hancock’s overall enrollment up 10 percent, students may find it difficult to get into the courses they need.

Adding to Hancock’s woes, until the state adopts a budget, the college will not receive any state funding, which means the college may have to take out loans to meet its financial obligations.

Though Hancock has enough money to pay its bills through the first week in October, if the stalemate continues beyond that, the college may have to dip into the several bank accounts it has scattered throughout the community.

As part of the emergency plan approved by the board, If all else fails, the college has the option to borrow against some of its equity in a worker’s compensation consortium.

The Self-Insured Program for Employees (SIPE) — whose members include most Santa Barbara County schools — allows its members to borrow 60 percent of the equity they have in the consortium for 60 days.

The money would have to be paid back at the interest rate set by the county treasurer.

As a final resort, the college can issue a Tax and Revenue Anticipation Note (TRAN).

TRANs are guaranteed by the college’s anticipated property tax revenue, and the college must pay them back with interest by the end of the fiscal year.

College officials said they don’t think the budget crisis will reach the breaking point, but they are prepared if it does.

“If you have a plan in place and you don’t need to use it, that’s not a bad thing. But, if you end up needing it and you don’t have a plan that can be very, very difficult, ” Miller said.

Natalie Ragus can be reached at 347-4580 or nragus@santamariatimes.com.

September 18, 2008