Portland Community College | Portland, Oregon

Rising Operational Costs

Like many institutions, PCC faces rising costs due to inflation and economic trends, especially in areas such as fuel, utilities, and IT. The cost of utilities alone has increased by up to 22% over the previous year. Increasing IT-related costs are also a concern as PCC invests in technological improvements to protect student and institutional data.

Personnel Costs: Supporting an Equitable, Employee-Centered Workplace

PCC is committed to being an equitable employer, fostering a workplace that values public service, supports living wages, and provides strong benefits for employees. Personnel costs are the single largest component of the college¡¯s budget, comprising approximately 82% of the General Fund. This significant allocation reflects PCC¡¯s dedication to ensuring fair compensation, robust benefits, and a supportive work environment for all employees.

As part of this commitment, the college must plan carefully to manage these expenses, which are influenced by various structural and external mandates. To ensure the long-term stability of PCC¡¯s budget while continuing to support employees, accurate forecasting is essential in addressing projected increases in wages, benefits, and legally mandated provisions. Key factors affecting personnel costs include:

• Wage Increases: PCC honors negotiated agreements that provide step and structure increases to employees and support the right to fair, competitive wages. These scheduled increases represent an investment in the college¡¯s workforce, requiring budget allocations to ensure that employees are compensated appropriately for their work and dedication.
• State Mandates: New statewide mandates, like Oregon¡¯s Paid Family Medical Leave program, introduce additional costs related to staffing and insurance. While these programs are critical for employee well-being, they are not typically accompanied by additional funding sources. PCC proactively integrates these unfunded mandates into our budget planning to ensure compliance and to support employees¡¯ rights without disrupting service delivery.
• PERS Obligations: The college participates in the Public Employees Retirement System (PERS), which provides essential retirement benefits to employees. As the costs of these benefits are subject to anticipated increases, PCC incorporates these obligations into our financial planning, reflecting our commitment to providing employees with a secure retirement. To mitigate the increasing costs in PERS we have issued two PERS Bonds, to reduce the impact of our employer contribution rate and assuage the volatility in PERS earnings over time. Without this financing our PERS rate would be considerably higher, creating an additional burden on state funding requests.

Through careful budgeting and financial planning, PCC continuously adapts to support the evolving needs of its employees, ensuring that the college remains a competitive and equitable employer. This approach enables PCC to deliver on its mission while valuing and upholding the essential contributions of its workforce.

Enrollment Trends: Stabilizing Numbers but Declining Revenue per Student

PCC¡¯s enrollment trends reflect both opportunities and challenges in a post-pandemic landscape. While the Strategic Enrollment Plan has helped stabilize current enrollment, we recognize that the pre-pandemic enrollment boom is unlikely to return. Instead, we project a modest annual growth of approximately 3% from current enrollment levels. However, this is coupled by students enrolling in fewer credits per term, leading to reduced tuition revenue per student even as demand for support services continues to rise.

We¡¯ve seen the highest rates of success for underserved and first-generation students when we provide comprehensive support throughout their college journey. This includes long-term financial and advising support, high-touch orientation for new students, success coaches, job and internship assistance, career guidance, and connections to four-year universities. However, this level of support carries substantial staffing costs.

To address these challenges, PCC is prioritizing strategic enrollment management to balance enrollment revenue needs while continuing to deliver the essential support services that enhance the student experience and improve retention.

Balancing costs and maintaining core services

Given both the decrease in student enrollment, which accelerated during the pandemic, and the end of Higher Education Emergency Relief Funds, PCC took proactive steps earlier this fiscal year to implement significant budget reductions, as outlined below:

• $20 million, including $17 million primarily in permanently budgeted vacant positions (achieved through attrition¡ªprimarily resignations or retirements) and in casual/pooled (non¨Cbenefited) positions.
• Over $3 million in ¡°hard savings¡±¡ªmaterials, supplies, and services, including the reduction of the institutional travel budget by half, and a limited number of layoffs.
• Another $8.6 million in Spring, half of which was achieved from reducing pooled positions, including adjunct faculty, with an emphasis on part¨Ctime faculty in lower division transfer programs.

Minimum requirement to navigate the changing financial landscape

The General Fund Reserve Policy (B510) is central to PCC¡¯s financial strategy, demonstrating the college¡¯s dedication to long-term resilience. As part of our action plan, we are aiming to maintain a minimum of a 12%-18% ending fund balance over the next 6 fiscal years (3 budgeting cycles). By our calculations, as of September 2, 2024 this figure is the minimum requirement to navigate the changing financial landscape over the next several budget cycles. A 12% ending fund balance will also:

1. Provide a minimum financial buffer for service continuity
   The 12%-18% reserve serves as a necessary financial buffer, ensuring PCC can continue delivering essential services even during times of economic uncertainty, funding delays, or unexpected expenses. This target helps secure resources to support student programs, academic services, and operational needs when external funding fluctuates.
2. Protect against revenue shortfalls
   By setting the reserve at 12%-18% over six years, PCC is better equipped to manage enrollment fluctuations and potential state funding reductions. Given that state funding is often competitive and subject to change, this reserve level is critical for ensuring the college can sustain its mission and commitment to students without severe financial disruptions.
3. Ensure cash flow stability
   A 12%-18% reserve allows PCC to maintain stable cash flow throughout the fiscal year, reducing any need for short-term borrowing to cover operational costs. This stability is especially important when there are gaps in state funding disbursements, providing PCC with the financial flexibility to manage our day-to-day operations efficiently.
4. Align with fiscal goals for financial integrity
   Maintaining a 12%-18% fund balance aligns PCC with the goal of financial integrity, supporting both fiscal sustainability and prudent financial management. This target reflects PCC¡¯s intention to balance the need for a stable reserve with the responsibility of investing funds in programs that enhance student success.

It¡¯s critical to understand that a 12% ending fund balance is the minimum that we need to ensure fiscal sustainability for the college. As we navigate through our action plan, we¡¯ll aim to bolster the ending fund balance to between 12%-18% through a variety of measures to ensure that we are being responsible stewards of PCC¡¯s fiscal future.