Santa Monica College may face ‘immediate fiscal problems’
With a thin wallet and uncertain economic outlook, Santa Monica College is in imminent danger of facing even worse fiscal problems, according to a report issued Wednesday by educators in Sacramento.
SMC is one of 13 community colleges with such low cash reserves that it’s been placed on a fiscal watch list by the state’s Chancellor’s Office, which oversees all 108 community colleges in California.
At SMC, where officials cut programs, slashed classes and laid off employees to meet this year’s $200-plus million budget, things are especially bad. The local college, with cash reserves totaling just 1 percent of its budget, was accompanied only by Palo Verde and Compton as a “first priority” on the list.
“We’re going to be in further communication with Santa Monica, in respect to what their recovery plans are. In our opinion, a prudent reserve is 5 percent,” said Frederick E. Harris, an assistant vice chancellor for the state colleges. “In a worst case scenario, the Chancellor’s Office has the authority... to appoint a monitor that could go in and run the district.”
“In a worst case scenario, the Chancellor’s Office has the authority... to appoint a monitor that could go in and run the district.” — — FREDERICK E. HARRIS Assistant vice chancellor, college finance and facilities planning, California Community Colleges Chancellor’s Office
But that worst-case scenario — which last happened in the early 1990s at the Peralta Community College in the Bay area — is unlikely to occur, local officials said. Tom Donner, SMC’s vice president of business and administration, said the school deliberately dipped into reserves to minimize painful cuts.
“We’ve been well aware of the watch-list status and the issue of having a reserve that’s far below the 5 percent,” he said. “The current year, our income and expenses are offset. In other words, there are no reserves that are being used up for the current year.”
That’s different from last year, when cuts were handed down mid-year, forcing the board of trustees at SMC to dip into reserves. Donner said the real issue is that SMC is severely underfunded, even more so than the other cash-strapped colleges.
“We get less money from the state for each of our students than any other district in the state does,” Donner said, later adding, “We’ve been fighting that for quite a few years and we hope that we’ll be able to win it eventually.”
The reason for the disparity in funding is complicated and dates back to before the passage Prop. 13, which set level property tax rates throughout the state. Harris said when Prop. 13 went into effect funding levels were frozen, even though assessments weren’t current for all schools. In the end, what’s called “equalization” of funds has become an entwined, protracted dispute.
In the meantime, there’s another reason the finances at SMC are unlikely to be taken over by Sacramento — Harris’ team also is operating on a shoe-string budget.
“Our problem is that our office has also been reduced massively,” he said. “I don’t have the staff. I don’t have a SWAT team full of people that can get on plane and get down to (SMC).”
Despite the lack of manpower, the report issued Tuesday indicates the Chancellor’s Office will first verify the severity of the situation, evaluate the school’s strategy to address the problem and continue to monitor it until the situation improves.
SMC spokesman Bruce Smith said SMC also was on the state’s watch list in the mid 1990s when funding for community colleges was short. Just like in the ’90s, campus officials will gradually rebuild reserves as the economy improves, he added.
“It sounds worse than it really is,” Smith said. “We knew this was going to come and we weren’t too concerned, because these are extraordinary times.”
Lucky No. 13 A total of 13 community colleges were placed on a fiscal watch list by educators in Sacramento, with various priorities.
FIRST PRIORITY: Compton Palo Verde Santa Monica SECOND PRIORITY: Ventura THIRD PRIORITY: Coast Contra Costa Glendale Los Angeles Marin Peralta San Francisco Victor Valley West Hills
Originally published in the Santa Monica Daily Press print edition on January 8, 2004. Read the original PDF.