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Review, Restructure, Renew

July/August 2016

By Shelley Temple Kneuvean and Kathy Walter-Mack

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Faced with dwindling reserves, this multicampus community college undertook the hard work of change—in budgeting methods, benefits management, infrastructure, and more.

When Mark James became chancellor of Metropolitan Community College (MCC) in 2010, the multicampus institution in Kansas City was in danger of exhausting its reserves within the next five years. State appropriations had declined 30 percent, while the cost of insurance, benefits, and utilities continued to rise. In addition, the enrollment burst that followed the 2008 economic crisis had dissipated, pulling down revenue from tuition, fees, and textbook sales.

The first difficult decision made was to end an early-retirement incentive plan that had remained in place, without interruption, since the 1970s. The program simply wasn’t financially sustainable going forward, especially when changes in federal regulations required us to book all the money obligated for those retirement benefits.

Ending the program, a popular and highly valued benefit, was difficult for the college’s culture to accept. To soften the blow, we kept the program open for 18 months so that people nearing retirement could still take advantage of it. In the end, 150 employees opted for early retirement, which helped us realign our human capital without doing any layoffs. For instance, a number of upper-level administrators accepted the buyout, and, rather than replacing them all, we collapsed some responsibilities under other positions.

Next we addressed medical insurance, another high-value benefit because the college covered nearly all the costs. We introduced more cost-sharing for family and dependents—a decision many employees had difficulty dealing with until they became more educated about costs, utilization, and providers. Even with the changes, MCC still offers a top-tier health plan and covers most of the cost for its employees.

In addition to reducing the expenses associated with the early-retirement and health insurance programs, the chancellor put a moratorium on IT purchases, allowing time to review the current IT infrastructure and needs going forward.

These efforts were only the beginning of the college’s close examination and analysis of many other areas.

The Bases for Changes

The college began the difficult work of analyzing the many components that affect operational and financial outcomes.

Collegewide, zero-based budgeting analysis. Every group with a budget was required to participate in the exercise, which examined how money was spent and how those expenditures related to each group’s goals and accomplishments. They had to consider, for instance, which programs needed to stay in place for the community—and how to close the gap if those programs weren’t functioning at the ideal revenue level.

We published all the results, giving employees the opportunity to look at other programs’ revenue and expenses, staffing levels, outcomes, and so forth. Because it identified potential reductions, this exercise received a lukewarm reception at best; in fact, we did sunset one academic program following the analysis. On the other hand, it encouraged people to look at programs through a different lens, introduced a common language to the budgeting process, and provided valuable data for formulating budgets in following years.

IT audit. This looked at our existing situation, the type of equipment that we were purchasing, and the forecast for future needs. Our consultant developed a strategic and refresh plan specifically for IT.

Facilities review. Conducted by professional engineers, this review revealed the need for dedicated funding to address deferred maintenance of the physical plant.

The results of these efforts set the stage for numerous changes to MCC’s administrative and finance areas.

MCC is now in the process of developing a new strategic plan that includes the entire college community. Planning kicked off with a facilitated review of relevant data on each campus and an all-employee SWOT analysis exercise. The planning effort is currently underway, as is the rollout of new software that will enable the entire college to prepare a zero-based budget, aligned with strategic goals, for 2017–18.

Back on Solid Ground

For several years, the two prevailing questions on campus were: How big of a deficit are we trying to close? What can we not do for the rest of the year to save money? One year, for example, the college did not provide any raises—a move unprecedented in any employee’s memory.

We’re now in the position of restoring items that had been cut from the budget, including annual salary increases for MCC’s nearly 900 full-time employees. Sabbaticals returned last year, and this year we reinstated a $40,000 professional development fund for faculty. Those reinstated items are primarily due to ongoing cost containment: We don’t have an overabundance of new revenue, and property taxes remain fairly flat.

MCC’s general fund—currently at $110 million—has been experiencing about 1 percent annual growth. Thanks to lobbying efforts, the state has increased its contribution to MCC by $1.3 million this year. On the other hand, we project a 1.5 percent decline in tuition and fees, especially from the traditional students who represent 60 percent of enrollment. To better serve them and the remaining 40 percent—who are unemployed, underemployed, or seeking midcareer retraining—we have revamped our enrollment processes and installed new client relations management systems.

Reserves, which had been in a precarious place a few years ago, now stand at a healthy $42 million. Initially, we drew down reserves significantly when phasing out the early-retirement plan, but we replenished them through underspending and cost savings. Having been in the habit of sweeping that money into the reserve, we plan to continue doing so to meet the college’s ongoing infrastructure needs.

During the past six years, MCC’s employees and leaders have experienced a lot of change. Much of it was difficult work. Despite some disagreements and disgruntlement along the way, everyone has pulled together to rethink how we do business and return to financial stability. In fact, the team that completed our recent re-accreditation not only applauded MCC’s high financial ratio, but also commented on the passion exhibited by all employees. We may not always agree, but we’re all passionate about wanting to serve our students.

SHELLEY TEMPLE KNEUVEAN is vice chancellor, financial and administrative  services, and KATHY WALTER-MACK is chief of staff and associate vice chancellor of human resources, Metropolitan Community College, Kansas City, Mo.


Persistence Pays
Poised to Deliver a Strong Workforce

We're now in the position of restoring items that had been cut from the budget, including annual salary increases for Metropolitan Community College's nearly 900 full-time employees.