BENTONVILLE, Ark. —NorthWest Arkansas Community College’s latest estimate predicts a $1.6 million shortfall for the fiscal year that ended June 30, officials said.
A carryover of surplus money from previous years will cover the loss, said Becky Paneitz, president.
The college needs to turn its finances around, lawmakers said.
“I think all of us have to recognize that we cannot spend more than we take in,” said Sen. Kim Hendren, R-Gravette. “It is starting to affect cities across the nation that are declaring bankruptcy. They have to match the revenue to the expenses. These questions will be raised in the Joint Budget Committee.”
Hendren is a member of that committee.
Sen. Sue Madison, D-Fayetteville, co-chairman of the Arkansas Legislative Council’s Higher Education Subcommittee, said public bodies should be careful when using carryover money.
“When they continue to give raises, several times a year, that just won’t work,” Madison said. “Your operating money needs to be from a reliable stream, and reserves are not a reliable stream. Typically, people use reserves for one-time projects.”
Six administrators received $93,000 worth of raises during fiscal 2012. College officials met with Madison’s subcommittee in April to discuss the raises and increasing costs in higher education. Paneitz told lawmakers the college wouldn’t have an operating deficit.
In fiscal 2013 that started July 1, faculty members received a 4 percent raise. Employees who are not teachers, including administrators, received a 3 percent increase. An additional $250,000 has been budgeted to give raises to select staff. However, overall spending is expected to stay the same because of cuts in other areas.
Paneitz expressed hope in an email as late as July 12 the college would end the fiscal year with a surplus.
“These are challenging and dynamic times for many, including your community college,” Paneitz wrote in another email Wednesday. “NWACC continues to evaluate all areas of efficiencies with an eye toward holding costs down while exploring any and all alternatives for revenue production.”
The college hasn’t closed its books for 2012. Complete financial records are due to the state Department of Higher Education by Sept. 21.
Projections show the college took in $37,473,599 million by June 30 and spent $38,605,386. This would leave a $1.1 million shortfall, but officials said they believe the final shortfall will be larger.
“Work has been occurring on closing the books, and we have a preliminary operating deficit of $1.6 million rather than $1.1 million,” Chuck Ramseyer, college vice president for finance, wrote in an email Thursday. He said the college is still compiling information.
A report from the Arkansas Division of Legislative Audit shows the college ended its 2011 budget year with a reserve of $8,445,957. That figure is inflated slightly because it includes money from another budget that tracks designated money such as service fees, said Gulizar Baggson, college director of budget and analytical services. The balance for operating money the college had at the beginning of fiscal 2012 was $7,380,743, Baggson said.
“We have those carryover funds. That was very intentional,” said Mark Lundy, college board member. “I think people saw some of this coming. I think, going forward, I would encourage the next board to be sure to focus on exploring millage opportunities in other areas that we serve and do what Becky has done over the years: look to diversify that resource base.”
Trustees also should look for ways to increase state funding, he said.
Every trustee position on the college’s board is up for election in November. Lundy has announced he will not seek re-election. Alex Vasquez, board chairman, along with Joan Clifford, trustee, also have said they will not run.
A one-year shortfall “is possible,” Paneitz said in her most recent email: “But we also would point out that the college has a strong carryover and a board of trustees reserve so that the college can move forward and continue delivering a quality and affordable education to so many in Northwest Arkansas.”
Hendren said he believes the college is taking steps to balance the budget. He said the recent firing of the college’s chief financial officer could be the college’s way of moving forward.
The college’s chief financial officer position, Marty Parsons, was fired Aug. 1. Parsons was senior vice president for administrative services and chief financial officer. He was hired in 2010.
Parsons was counseled on issues including insubordination, failure to complete the budget in a timely manner, inappropriate language and low morale in his department, according to a July 25 memorandum from the college. Parsons was given 30 days to improve and “further inappropriate behavior could result in his termination,” according to the memo.