Community college officials came in full force to the state Capitol earlier this year to outline the potential ramifications for the proposed steep cuts to their budgets.
They drove home one point: The cuts would likely compel them to increase tuition, and maybe even raise property tax rates. And it might also put other programs in jeopardy.
Yet at the time they made their case, most college districts were sitting atop millions of dollars in cash reserves.
The cash reserves of the state’s 10 community college districts and two provisional districts have since grown to $320 million from $282 million in the last fiscal year, according to the Arizona Tax Research Association.
ATRA president Kevin McCarthy said the cash, which he said has remained largely intact, raises a serious question: why does it exist if the colleges are not going to spend it in times of fiscal crisis?
“When you’re asking for increasing commitments from taxpayers when we’re in a recession and you’re sitting on mountains of cash, I think that raises serious policy questions (about what) that cash is for and what’s the purpose of having it,” McCarthy said.
Some lawmakers were unaware of the reserves, while others were surprised to learn this week how much the colleges have in the bank.
Sen. Paula Aboud, a Democratic member of the Appropriations Committee, told the Arizona Capitol Times she’s “hugely surprised” by the money.
“If somebody is sitting on surpluses and still raising tuition, we need to understand why,” Aboud said.
Sen. Kyrsten Sinema, another Democratic member of the budget-producing committee, said the reserves aren’t exactly huge for a statewide system that seeks to provide low-cost higher education.
But their existence could provide some legislators more ammunition to push for cuts, she said.
“I think they wouldn’t be spared anyway, but this certainly gives more fodder to those who are looking for justifications to make cuts to higher education,” she said.
The bulk of community colleges’ revenue comes from property taxes and tuition fees, and to a lesser extent, state aid.
Senate Majority Leader Andy Biggs said the prevailing sentiment at the Capitol is to maintain the current spending level, which means neither increasing expenditures nor cutting more.
But he said some would be “stunned” to learn about the amount of cash reserves colleges have.
“They might feel like maybe we should make (budget) adjustments,”
But a college official said she hopes no additional cuts in state aid are forthcoming.
“I don’t think that this is a reason for the state to cut us further because these are one-time funds that reflect best practices in financial management,” said Debra Thompson, vice chancellor of business services of the Maricopa Community Colleges.
Not all districts increased their cash balances, and some reserves actually declined compared to the last year.
But all told, community colleges’ cash reserves grew by 13.4 percent.
On the average, these reserves represent nearly 30 percent of their budgets, the Arizona Tax Research Association reported.
A good chunk of those reserves is held by Maricopa Community Colleges, the state’s biggest college district. (The district said its fund balance is
Like most districts, Maricopa raised its tuition and increased local property tax rates to cushion a $38 million cut in state aid.
Actually, state support for Maricopa dropped to less than $7 million from $45 million last year — an eye-popping 85 percent decrease.
Overall, state support for community colleges was slashed by $63 million in the last budget go-round. That represented nearly half of state aid to college districts.
Thompson defended having cash reserves by saying the practice is wise because it ensures money is available to fill an unexpected drop in revenue or pay for anticipated spending.
The district’s cash balance represents only roughly two months of its overall budget.
Asked why the district raised tuition fees and tax rates instead, Thompson said it would be unwise to use one-time funds for ongoing expenses.
“You really want to use your cash reserves as a bridge,” she said.
Increasing tuition, on the other hand, gives the district permanent resources to pay for ongoing needs, she said.
Thompson also pointed out that student enrollment continues grow, which means they’re serving more students than ever.
Tom Gariepy, a spokesman for Maricopa Community Colleges, said using the cash reserves now merely defers solving the problem.
“You can solve today’s problems with that one-time money, but you’ve done it for that one time,” he said. “You’d still have that problem next year when the whole thing starts all over again.”