College of the Marshall Islands

Financial Recovery Plan

Prepared by Carl Hacker President January 29, 2013

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Contents I.

Narrative Summary.......................................................................................................................... 3

II.

Fiscal Initiatives in Response to Budget Challenges .......................................................................... 4 Initiatives Already Taken...................................................................................................................... 4 Initiatives Planned for FY 2013/14 ....................................................................................................... 4

III. SAVING’S SUMMARY TABLE FOR FY13 TO FY15 ................................................................................... 7 IV. CMI SUPPLEMENTAL BUDGET FOR FY14 ............................................................................................ 8 V. APPENDICES ..................................................................................................................................... 10 Table 1: Combined Utility Bills for FY 2011, 2012 & 2013 .................................................................. 10 Table 2: RMI Subsidy vs. Increasing Enrollment 2007-2012 ............................................................... 10 Table 3: CMI Spending Per Student 2007-2012.................................................................................. 10 Table 4: CMI GED Subsidy 2007 - 2012 .............................................................................................. 11 Table 5: CMI Travel Expenses 2007-2013 .......................................................................................... 11 Table 6: Adjunct/Overload Analysis 2012-2013 ................................................................................. 11 Table 7: Proposed Supplemental Health Replacement Options for Staff ............................................ 12

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I.

Narrative Summary

The College of the Marshall Islands is the only community college in the Marshall Islands established in 1983. The College is currently staffed by 155 employees (i.e. 55 faculty, 15 administrators, and 85 fulltime staffs), who provide services to 1,450 students (i.e. 1,100 CMI students and 350 GED students) and the wider community. Of the 155 employees, 125 employees are paid out of CMI’s general fund, and the remaining out of CMI’s federally funded programs (i.e. Land Grant-15 employees, GED Program-12 employees). It's been identified and accounted for that 67% of CMI fy12 utility bill was the cost of running the ACs on both campuses. There are 210 ACs on the two campuses. Twenty-seven energy efficient ACs will soon be installed at Wapepe Hall. At the start of this new year, the College will be making changes, that will affect its operational budget and the employees. Historically enrollment has doubled, upgraded facilities, and student learning resources over the past 8 years. Although these changes look promising, they come with expensive price tags. The College’s operations have increased exponentially compared to the moderate growth in revenue. This trend continued over the past five years that resulted in yearend negative fund balances. Due to these year end fund balances, the College carefully developed a financial plan by forecasting its revenues and expenses over the next two to five years. The financial future of the College is not without challenges though. As mentioned in previous recommendations and studies done previously, these challenges are both external and internal. The external challenges will continue to exist due to the nature of our economy and the ongoing cash flow challenges the RMI government continues to encounter. The College has no control over these challenges but to rely on its conservative planning and spending. For the College to be financially sustainable, it needs to focus on the internal challenges personnel costs (i.e. personnel costs-salaries and wages, insurance and other benefits) and other non value added monetary costs that can be eliminated without any interruption to the College’s mission. To do that, the College will need a medium term plan to address its immediate financial need. The primary consideration in the development of this plan’s recommendations has been to minimize the impact of budget reductions on our student learning outcomes. The Recovery Plan’s bottom line is to ensure that best possible comprehensive educational programs and services for our students are within the resources available. In developing this plan, the College tried to live within these principles. It is no secret that the College is facing financial crisis and delaying implementation of Phase-I of the Budget Recovery Plan will do nothing but increase the financial turmoil. The plan has been carefully thought out and discussed over the past few months by the administration. This will not only help cut the current deficit but also help maintain stakeholders’ confidence. The combination of cost reductions and additional revenues, as mapped out in the following, should be satisfactory in our efforts to finally balance the budget and produce a surplus toward the end of FY. The importance of the future budget surplus is the ability of CMI to contribute or match contributions to the CMI Endowment Fund and Scholarships, critical items for the future beyond 2023. This is a must.

College of the Marshall Islands

Financial Recovery Plan 4|P a g e As we are making decisions and changes to reflect our budget challenges, we are also mindful of accreditation with WASC and all of the numerous requirements associated with it. We have to ensure that the financial commitments we make are kept because if not, the college's accreditation status will be at stake.

II.

Fiscal Initiatives in Response to Budget Challenges

Initiatives Already Taken 

Electric Energy Conservation Efforts – Has turned out to be a savings of $10,000 - $15,000 a month since May of 2012 o Use of the generator o Restricting AC setting to 25 degrees Celsius o Use of natural lighting o Conducted Energy audits for CMI's Arrak and Uliga campuses o Disseminated Energy audit reports and recommendations to CMI community o Awareness Campaigns o Working with ROC on expansion of solar system



Adjunct and Overload Rates reduced o Adjunct and Overload cost in 2011 was $569,155. This was reduced to $502,117 in 2012 which equates to a reduction of $67,038. o Further reduction is anticipated in 2013 when the College will return to the practice of paying overload after 15 hours, and by a stricter definition and management of Faculty Workload Policy, including Optimizing Number of Students Per Section.



Employee Travel Limitations – Beginning in fy12, most of the travels taken were sponsored and funded by grants. Only very few important travels were funded by CMI's general budget.

Initiatives Planned for FY 2013/14 •

•

Faculty Workload Policy modified to increase workload from 12 to 15 hours per semester. o Under the new policy faculty will be obliged to teach at least 12 hours per semester and will only be paid overload after 15 hours. o Over the past four years the annual average paid for Adjunct and Faculty Overload Services hours is $450,000.  By a stricter definition and management of Faculty Workload Policy (referenced above) it is anticipated that Adjunct and Faculty Overload Services cost will be reduced by an additional $110,000.  Assuming one half (25) of the faculty opt to teach the additional three hours, the anticipated savings from funds currently expended for Adjunct and Faculty Overload Services would be $97,500 (((25 faculty * 3 hours)*$650)*2). o Estimated total annual savings in FY 2013/14 in Adjunct and Faculty Overload Services (in addition to the $67,038 resulting from reduced hourly rates described above under Initiatives Already Taken) resulting from stricter definition and management of Faculty Workload Policy and payment for overload after, 15 hours per semester instead of 12 is $207,500. Employee Salary Reductions – Anticipated savings in 2013 is $128,000; in 2014 an additional savings of$109,000, for a total of $237,000. o Lower tax liability estimated annual saving

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FY 2013.................$13,440 FY2014..................$11,445 TOTAL....................................$24,885

•

Cost Reduction related to RMI Supplemental Insurance o Eliminate the College paid RMI Supplemental Insurance Premium for staff employees and use one half of the savings ($27,000) to fund and provide a new, more meaningful two part benefit for staff.  Reimburse the hospital deductibles (Outpatient, Inpatient and Emergency)  Distribute the remainder ($27,000 minus the amount pay out over the previous twelve months for staff hospital deductible reimbursements) equally among staff as a Christmas cash benefit. o Anticipated annual savings is $27,000

•

Energy Efficient AC retrofitting o Phase I: Wapepe and ToleMour Hall – cost of $106,000 for 56 new Inverter type split units with anticipated annual savings of $40,000. Installations ongoing and to be completed mid March, 2013. Prorated savings for approximately nine months would $30,000. o Phase II: Rebbelip, deBrum Hall, New Education department, Arrak campus – anticipated cost of $131,000 for 69 new Inverter type split units with combined savings of $50,000 annually. To be installed in the Summer of 2013. Prorated saving for six months would be $25,000 for FY 13. o For FY 13, we should anticipate about $55,000 in reductions to the utility bill, for the entirety of FY 14 the annual savings for these two projects would be about $90,000, if utility rates remain the same. o Phase III: Administration, D-building, Old Buildings – anticipated cost of $76,000 for 40 new Inverter type split units with combined savings of $30,000 annually. To be installed in the Christmas break of 2013. Prorated over nine months for FY 14 this figure for savings would be $22,500. o For FY 14 the total anticipated savings would then be FY13 Project savings ($90,000) + FY 14 Project savings ($22,500) = $112,500 total reduction compared to FY 13. o For FY 15 the estimated energy savings from the three phases mentioned for Uliga would be FY 13 + FY14 = $120,000, if rates remain the same as FY 13. o Arrak campus currently has 61 split type units. This will be reduced to 27 units in 2013 by removing all AC units at the dormitories, as well as reducing AC requirements at the housing trailers. Utility Estimate for Arrak Campus is $192,400 for FY 13, of which is $128,900 is AC. After fitting out the dorms with fans and removal of 34 ACs would be a potential savings of $72,000 annually from reduced energy consumption. Prorated savings for three months would be $18,000.

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Elimination of GED subsidy from the College [Please refer to Table 4] o Increase GED registration fee from $30 to $60  At its current enrollment, this will double revenue collected from registration to help supplement the lost from CMI’s contribution to the program.  Employee Salary reduction.............................$17K to $20K ( this will need further discussion on final numbers)

•

Increase of Pell by $85 starting next school year.Calculated at $65 dollars by 900 students will come to $59,000. Increase of subsidy to CMI by the government[Please refer to Table 2]The nominal value of the subsidy has decreased by nearly 40% on a per capita basis alone since FY 2007/08, this is also not taking into account any inflation. To renovate, supply new furniture and covert an existing room at Jaluit High School into CMI DE space would require $15,000 Adjunct and Overload Pay – Payments to be made over pay periods covering the period of work rather than in two installments, alleviating end of semester cash flow issues. Faculty Renewal Incentives – payments to be made over the 26 pay periods of the year in which incentive is payable, alleviating cash flow issues.

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III. SAVING’S SUMMARY TABLE FOR FY13 TO FY15 Budget Description I. Electrical Energy Conservation Efforts a. AC Retrofitting

Fy13 $18,000 $55,000

Fy14 $72,000 $112,500

Fy15 $72,000 $120,000

b. Solar System expansion c. Arrak AC Retrofitting to Energy Efficient Units 2. Adjunct and Overload Rates Reduced 3. Employee Travel Limitations - Managing travel costs (Please see Table) 5. Faculty Workload Policy/Optimizing Number of Students per section - Keeping tighter management 6. Employee Salary Reductions 7. Tax Liability Reduction 8. Eliminate GED Subsidy 9. Increase of Pell by $85 in SY 13-14 10. Amount needed to get RMI subsidy to $1 million 11. Supplemental Budget 12. Eliminate Supplemental Health for Staff

$7,000

$28,000

$28,000 $54,000

TOTAL

$67,038

$103,750

$103,750

$128,000 $13,440

$109,000 $11,445 $120,000 $59,000 $500,000

$500,000

$110,000 $22,500 $502,228

$1,138,195 $774,000

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IV. CMI SUPPLEMENTAL BUDGET FOR FY14 Budget Item A. PERSONNEL 1. Nurse Assistant - 2 2. Advocates - 6 3. Student Engagement Coordinator 4. Data Entry Analyst 5. Registrar's Assistant 6. Athletics, Recreation & Fitness Center Assistant Coordinator 7. Recruitment Coordinator 8. Counseling Director 9. Enrollment Services Director 10. Student Life Director 11. DE Coordinators a. Ebeye Campus b. Jaluit Campus c. Wotje Campus 12. Vocational Instructors a. Maritime Training (3) b. JitokKapeel Training (3) Total for Personnel Fringe Benefits (10.5%) Sub-Total for Personnel & Fringe Benefits

Department

Unit Cost

Total

SS SS SS SS SS SS

$15,000 $14,000 $18,000 $10,000 $8500 $12,000

$30,000 $84,000 $18,000 $10,000 $8500 $12,000

SS SS SS SS IT IT-DE Ebeye IT-DE Jaluit IT-DE Wotje

$18,000 $23,000 $20,000 $19,000

$18,000 $23,000 $20,000 $19,000

$15,000 $15,000 $15,000

$15,000 $15,000 $15,000

Vocational - Arrak Vocational - MPW

$21500 $21500

$64,500 $64,500 $416500 $43733 $460,233

$2050 $2050 $2050 $3600 x 3 trips

$4100 $4100 $4100 $10,800

$2900/month $2900/month $1000 annually

$34800 $34800 $1000

$10,000 x 3

$30,000

B. OPERATIONS I. TRAVEL - To conduct site visits to DE sites a. Ebeye - 2 trips x 2 IT staff b. Jaluit - 2 trips x 2 IT staff c. Wotje - 2 trips x 2 IT staff d. Recruiting to High Schools in outer islands - 3 SS staff/island II. COMMUNICATIONS a. NTA Satellite MRF Charges for Jaluit b. NTA Satellite MRF Charges for Wotje c. NTA Internet Charge for Ebeye

IT-DE Ebeye Jaluit Wotje SS Ebeye/Jaluit/Wotje IT-DE IT- Jaluit IT-Wotje IT-Ebeye

III. UTILITIES a. Electricity bill for DE sites in Ebeye/Jaluit/Wotje

IT-DE

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Financial Recovery Plan 9|P a g e IV. SUPPLIES & MATERIALS a. Training items for Ebeye/Jaluit/Wotje b. Office supplies & program activities c. Textbooks and teaching supplies for DE in Ebeye/Jaluit/Wotje V. POL DIESEL for Generators 1. Uliga Campus - 3000 gals/28 days. 2. Arrak Campus - 440 gals/year @ $4.60

IT-DE SS IT-DE

PP PP PP

$2500 x 3 $15,000 $11983

$7500 $15,000 $11983

$13,800 x 13 refills per year $2024

$179,400

Sub-Total for Operations C. CAPITAL ASSETS I. Vehicles a. Vans (12 seaters) x 2 b. Utility Truck c. Rosa Bus (30 seaters) II. Equipment a. Computers - M300 N Computing Devices for faculty & staff b. Computers - M300 N computing devices for staff c. Office Furniture d. New furniture for JHS DE Room d. Hardware for Ebeye/Jaluit/Wotje Sub-Total for Capital Assets TOTAL

$2024 $339,607

PP PP PP

$22000 $28000 $48000

$44000 $28000 $48000

IT

$8040 for 10 kits

$24120

SS SS PP & ITDE IT-DE

$8040 for 10 kits $18,000 $15,000

$8040 $18,000 $15,000

$5000/site

$15,000 $200,160 $1,000,000.00

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V. APPENDICES Table 1: Combined Utility Bills for FY 2011,2012& 2013 Utilities

FY 2011

FY 2012

FY 2013 Est based on 1st qtr Electricity $318,292.55 $672,387.59 $573,716 Water $16,013.60 $9,581.45 $14,232 Fuel 0 0 $82,000 (Note: In fy2012, $681969.04 x 67% = $456,919.25 cost of running ACs on both campuses based on the 2012 Energy Audit)

Table 2: RMI Subsidy vs. Increasing Enrollment 2007-2012 Fiscal Year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

RMI Subsidy Total Enrollment Subsidy/Student % Decrease $2,988,000.00 850 $3,517.23 n/a $3,143,000.00 1077 $2,919.16 -17.00% $3,106,450.00 1303 $2,384.56 -18.31% $2,876,770.00 1478 $1,946.87 -18.36% $2,874,879.96 1838 $1,564.43 -19.64%

Table 3: CMI Spending Per Student 2007-2012 Fiscal Year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

CMI Operational Budget Total Enrollment Budget/Student % Decrease $6,094,295.04 850 $7,173.71 n/a $7,558,033.28 1077 $7,019.76 -2.15% $8,372,858.95 1303 $6,427.13 -8.44% $8,184,052.17 1478 $5,538.60 -13.82% $8,604,914.54 1838 $4,682.57 -15.46%

Summary of Changes since Academic year 2008-09 (Fiscal Year 2009) The FTE (full time equivalent) students served in a year at CMI have INCREASED 116.31% GL account expenditures at CMI have INCREASED

41.20%

CMI expenditures per individual FTE student have DECREASED

34.73%

The total RMI subsidy of CMI has DECREASED

3.79%

The RMI subsidy per individual FTE student has DECREASED

55.52%

The % of expenditures per FTE student covered by RMI subsidy has DECREASED

15.62%

CMI Enrollment Data

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Semester

Fall '07 Spr '08 Sum '08 Fall '08 Spr '09 Sum '09 Fall '09 Spr '10 Sum '10 Fall '10 Spr '11 Sum '11 Fall '11 Spr '12 Sum '12 Fall '12 Spr '13

FTE PT Ratio =

0.33574

Enrolled

Enrolled FT

Enrolled PT

FTE by semester

557 589 219 688 746 291 847 862 258 867 842 314 994 903 120 1103 974

280 309 0 336 413 0 480 487 0 608 594 0 929 818 0 752 672

277 280 219 352 333 291 367 375 258 259 248 314 65 85 120 351 284

373 403 74 454 525 98 603 613 87 695 677 105 951 847 40 870 767

Table 4: CMI GED Subsidy 2007 - 2012 Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

SEG $109,029.99 $100,000.00 $380,235.55 $125,000.00 $125,000.00 $162,712.80 $253,500.00

CMI Amount $102,725.21 $119,064.17 $125,632.07 $125,518.58 $71,394.42 $89,181.42 $120,000.00

Total $211,755.20 $219,064.17 $505,867.62 $250,518.58 $196,394.42 $251,894.22 $373,500.00

Table 5: CMI Travel Expenses 2007-2013 Year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Amount $549,201.74 $614,423.10 $444,774.38 $267,397.23 $236,700.71 $15,945.83

% Decrease +12% -27.6% -40% -11.5% -93%

Table 6: Adjunct/Overload Analysis 2012-2013

Sum FTE by year

AY Year

850

2007-08

1077

2008-09

1303

2009-10

1478

2010-11

1838

2011-12

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Table 7: Proposed Supplemental Health Replacement Options for Staff