JALC should have surplus at end of fiscal year Rosy treasurer's report despite increased wages

Brad McCormick, vice president of business services at John A. Logan College, told the board of trustees recently that he is "very pleased with where the college is positioned financially right now," despite the anticipated impact of the recently passed state law that establishes increases in the minimum wage.

Christy Marrs, director of compensation and benefits, has evaluated the impact of the minimum-wage law as costing the college $139,014 for the first two steps, which increase the wage to $10 an hour, and a minimum of $709,676 by 2025, when those steps are fully implemented.

She has estimated the six-year cumulative cost of the transition to a $15-an-hour minimum wage at $1,890,413, at a minimum, or 1 percent of total expenses.

"It is very difficult to go beyond 2020 in calculations due to the uncertainty of the impact on other wages that are higher than the minimum wage," McCormick told the board. "However, it is safe to assume wages will be impacted and that the cumulative cost will be higher than anticipated."

McCormick was presenting the treasurer's report at the February meeting of the board, something he does monthly. But as he put it, "Occasionally, it's helpful to provide some narrative on what all of those numbers mean."

And since this report cites activity up to Dec. 31, and that makes it halfway through the fiscal year, "It's an excellent time to do just that," he told the board.

McCormick's report shows that the college is carrying $26,314,311 in total cash and investments, less than 1 percent down from last year at this time. But that's only because some local tax revenue was received last fiscal year in December and this fiscal year in January, he said.

The total operating fund balance is $10,725,613, which is 40.3 percent of last year's total audited operating expenses.

The goal for this fund at this time, as recorded in administrative procedures, is 25 to 50 percent. So, that's right on target, McCormick said.

"Given the financial strain in recent years due to the budget impasse and the loss of significant state revenue that we will never get back, I'm well pleased with our regained stability," he said.

"What further solidifies our stable position is the wise step to issue working cash bonds in April 2017, several months before a budget was finally passed by the state," he said. "We now have $7.5 million in working cash fund money, which could be used for cash flow purposes if we face another revenue delay."

When you add that to the current fund balance, the college holds $18.2 million in operating funds and working cash, which is an equivalent of 68 percent of last year's operating expenses or "a little more than eight months of safety," as McCormick described it.

"For the end of this fiscal year, I anticipate a surplus of between $500,000 and $1 million," he told the board.

"At this moment, we have spent $50,000 more than we have taken in, but $700,000 of local tax revenue hit in January instead of December. Understanding that, we are in quite a bit better state than last year at this time.

"All in all, I'm very pleased with where the college is positioned financially right now," he said.

McCormick summarized his report by saying that the college's need for future revenue is fueled by increases in minimum wage and the need to invest in facilities.

For that financial need, he said, the college must have continued support from the community, fundraising help from the college foundation, "and more tuition and fees from our students in the form of increased enrollment, future tuition and/or fee increases, or hopefully, a combination of both."

During the same meeting, the board approved holding all tuition rates at the current 2019 level for the fiscal year 2020 with the exception of the out-of-country rate, which was reduced from $383 to $193 per credit hour to match the out-of-state rate.