Publicly traded companies are required to provide their audited financial statements no later than four months after the close of the fiscal year. If only municipalities would abide by the same or similar deadlines.
I make this lament because I’ve just recently received the final audited financial statements for California’s 72 Community College Districts (CCD), but for the year ended June 30, 2020. We’re talking a waiting period of more than 23 months! So much for transparency in the public sector.
I did not obtain the financials for the new 73rd Online District, a recent endeavor I opposed while serving in the State Senate, because it has, as I anticipated, already folded. You can thank former Governor Brown for this short-lived costly boondoggle.
Taking the audited financial statements and going to the Statement of Net Position, we pull one number from the Balance Sheet, the Unrestricted Net Position. For well run and viable businesses, this number would be positive. Only one CCD can make this claim.
Then I obtain the population the CCD supposedly serves. This gets a little complicated. The state provided these numbers several years ago, but the total was roughly 63 percent of the state’s population. And the notes for the audited financial statements for CCDs, unlike those for cities and counties, do not provide the CCD’s overall population. Consequently, I decided to use the population numbers the state provided in 2018 for every year, with three exceptions. The three CCDs that serve Orange County (see asterisk *) provide maps on their websites, and the populations can be somewhat calculated by taking them from the cities and unincorporated areas served.
The next exercise is to take the Unrestricted Net Position and divide it by the population. This provides a per capita of what, in all but one district, would be owed by a resident if they were assessed an amount that would return the CCD’s deficit balance to zero. This metric provides a range that starts at a positive $179 (thank you South Orange County CCD) to a negative $4,926 (thank you Santa Monica CCD). The table of the rankings is provided below. You should hope that the district within which you reside and pay property taxes to, directly or indirectly, is closer to the top of the list.
The per capita rankings are provided for each CCD for the years 2020, 2019, 2018 and 2017. This allows the reader to see the trends occurring within their own CCD. Let me use a personal example. My home is a stone’s throw from Orange Coast College, where two of my three children enjoyed being on the Crew team. It is in the Coast CCD, which is now in 23rd place. It moved up 26 places from its 2018 ranking, most likely because its population increased dramatically, as explained above, which reduced its per capita amount.
What is amazing about the chart is the amount of movement that occurred over the four years. For example, Ventura County CCD dropped 36 places, or one-half of the list, and its trend does not look good. On the other end of the scale, Feather River CCD moved up 44 places, thanks to efforts to cut its Unrestricted Net Deficit in half, to $3 million over the period covered. This puts this District in second place when ranked by the actual Unrestricted Net Positions. Marin CCD moved up 45 places for the same reason.
South Orange County CCD has traditionally had a Board of Trustees that has been very conservative, going back to the days when former Orange County Republican Party Chair Tom Fuentes served on its Board. It has set the bar and has Unrestricted Net Assets of $190 million. This district proves that a CCD can be well managed and not incur more liabilities than assets. And it has done so consistently.
North Orange County CCD was one of the municipalities that borrowed to invest in the Orange County Investment Pool back in 1994, incurring a disruption in their finances for many years. It moved up two places to make it to the top 10. Besides South Orange County CCD, those staying in this top-10 bracket over the four years are Los Rios, Mt. San Jacinto, Desert, San Bernardino, Sequoias, and Kern CCD.
Santa Monica CCD has been consistently in last place. Imperial, Napa Valley, Foothill-DeAnza, Glendale, and Santa Barbara CCD have stayed in the bottom ten.
Those falling from grace out of the top 10 had major increases in their unrestricted net deficits. Shasta-Tehama-Trinity CCD’s quadrupled and Ventura County CCD’s jumped up five-fold.
Getting back to movement in the rankings. Of the 72 CCDs, 60 percent had ranking changes of 10 places or less. More than one-fifth moved 11 to 20 places. And 18 percent had movement greater than 20 places. These are the districts that need to provide you an explanation. Why did they deviate so dramatically from the trend? If the district moved up, what counsel can they provide the other districts to assist in helping them improve their fiscal status? If they dropped precipitously, why, and what have they learned?
Excluding South Orange County CCD, the other 71 CCDs have a combined Unrestricted Net Deficit of $8.8 billion! And the legislature in Sacramento believes that these institutions can provide free educations. When the audited reports for the year ended June 30, 2021, are fully released, we’ll be able to determine the impact of the coronavirus lockdowns and the resulting federal and state funding infusions.
With a recession on the horizon, Governor Newsom will have to pay even closer attention to how the Community College Districts are doing. A down economy impacts the defined benefit pension plans by increasing unfunded liabilities and, accordingly, annual required contributions. This will create even more fiscal hardship for those districts lower on the list.
The finances of the various layers of the Golden State’s government and its educational system are complex. It’s time to put the surplus to good use in shoring up this critical resource that has a major impact on a significant portion of California’s next generation.
