State Is Closely Monitoring Finances at Santa Monica College

State officials are keeping a close watch on the finances of Santa Monica College, where budget reserves have dipped to $130,000 from about $3 million in 1991, the college’s acting president said Wednesday.

The declining reserves, caused by a dip in property tax revenues, lower enrollment and salary increases for teachers of foreign students, could prompt state community college officials to appoint a fiscal administrator if the college cannot meet payroll or cover expenses, acting President Tom Donner said.

But Donner expressed confidence that the college’s finances will not deteriorate to that point. He said the Santa Monica Community College District will control costs and benefit from the upturn in the state’s economy, which is expected to bring more state property tax money to community colleges.

“I am confident the state will fill in the property tax shortfall,” he said. “The (district) budget committee will make adjustments.”

Kyle Orr, spokesman for the chancellor of California Community Colleges, said the Santa Monica Community College District is in a “Priority 2” status, meaning it has “demonstrated characteristics that in our judgment require a greater degree of involvement to ensure (its) well-being.” He said the finances of Priority 2 districts--currently there are four in California--are closely monitored by the chancellor’s office.

State officials recommend that community colleges keep 3% of their operating budgets in reserve. That amounts to $1.65 million for Santa Monica College, which has a $55-million operating budget.

But in budget sessions during the last three years, Donner said, the district decided to dip into the reserves instead of cutting school services, out of concern that austerity steps would worsen the school’s enrollment declines.

“It boiled down to a decision by the district, whether to reduce services or reserves,” he said. “If we start losing programs, we start losing students. That would be devastating.”

The state chancellor’s office calculates how much funding a college campus receives based on enrollment and property taxes. The state places a cap on enrollment funding, so once the cap is surpassed the district has to cover the cost of enrolling extra students.

In order to generate more funds, said Donner, the college aggressively recruited foreign students and now has the largest non-resident enrollment--2,300--of any two-year college in the nation. The fees from non-residents have helped the college’s financial situation, Donner said. But those funds, he said, were used to give the teachers of foreign students much-needed salary increases.