Community Colleges’ Fiscal Rating Hiked

Signaling that the Los Angeles Community College District’s finances are returning to health, state officials have improved the district’s standing on a watch list of financially troubled districts.

“This is an affirmation that we are on the right track,” said Beth Garfield, president of the district’s Board of Trustees. “We have worked very hard in the last year to put the district on firm financial footing. We haven’t done all we need to do, but we are working in the right directions.”

The district is projecting an $11.6-million surplus at the end of this year. The surplus is a sharp contrast to sizable deficits posted last year after years of stagnant enrollment and a raise for faculty.

Although the state has no power to take over troubled districts, the watch list is considered an important symbolic measure of fiscal health.

After last year’s deficits were made public, the district had been given a Priority 2 rating on the watch list because it had failed to meet the state’s required minimum for reserves. But the district has now been upgraded to Priority 3, the final step before being taken off the list. There are no districts currently in the worst-case Priority 1 category.

State officials recommend that community college districts maintain a 5% reserve, and consider 3% a minimum. Reserves cover emergency costs. They are also important for maintaining financial stability because community college funding tends to fluctuate.

Los Angeles was placed high on the chancellor’s watch list after failing to keep even 3% of its budget in reserves. But district officials now project that Los Angeles will end this year above the 3% mark.

“They are getting better and that’s good news,” said Patrick Ryan, fiscal analyst for the chancellor.

The district’s finances improved after the board took a number of short-term cost-cutting measures last year, and followed these with an effort to discourage deficit spending.

The board has pressured presidents of each of the district’s nine colleges to live within their budgets. “I personally told the college presidents they would not have a job if they did not balance their budgets,” said Garfield.

All the colleges are projected to end the year in the black with limited subsidies, she said, adding: “We expect in a short period all of them will be self-sufficient” in terms of spending only what they generate in state funds.