MISSION VIEJO — Warning of a possible takeover of district finances, state officials want to know how the South Orange County Community College District plans to pay for faculty and staff raises if new contracts call for them.
The district, which administers Saddleback College in Mission Viejo and Irvine Valley College in Irvine, already is under a strict financial watch by the chancellor's office of California Community Colleges, which is concerned about dwindling year-end reserves it said could lead to a "fiscal crisis" next year.
But the oversight could be intensified, with on-site monitors and other measures, depending on district decisions on issues including talks that are underway with two employee associations representing more than 500 faculty and staff members.
"If there's an increase, we certainly expect them to explain to us how they're going to fund that," said Gary L. Cook, administrator of fiscal and business services for the chancellor's office. "This is an increasing level of contact."
District officials say their financial situation is better than that portrayed by state overseers and that the balance will increase by the end of this budget year on June 30.
Nonetheless, the state's warnings have forced a delay in an expected contract settlement with the South Orange County Community College District Faculty Assn. and the district chapter of the California School Employees Assn.
Trustees didn't act after a four-hour closed meeting Dec. 17, and have scheduled another closed session for Jan. 6.
Faculty bargainers had hoped for a settlement before the holiday break, but administrators said any raise for the professors, already the state's highest-paid community college instructors, is secondary to the concerns of the state chancellor's office.
"We have to be very careful. We have to meet our contingency requirements from the state of California," said Kathleen O'Connell Hodge, acting district chancellor. "We have to be very vigilant."
Because of the dwindling reserves, the state chancellor's office moved the district's monitoring status from Priority 3 to Priority 2 in November, citing "declining fiscal condition" and predicting "possible fiscal crisis within six to 18 months."
At Saddleback and Irvine Valley colleges, the district's year-end balance has dropped from $6 million in 1994-95 to $1.2 million in 1996-97, according to the state. In a budget of about $70 million, that means the district has only a 1.6% cushion, and Cook suggested the district increase it to 5%.
District officials said in early December that they believed a 3% balance was sufficient. However, Hodge last week said the district has decided to strive for a 5% balance, in part to avoid deeper problems with state officials.
A change to Priority 1 early next year could bring about on-site monitors or other drastic measures, including bankruptcy or emergency tax levies on local property owners to protect academic programs. The tax levy is considered a remote possibility. Failing to meet a 5% balance is among failures that could force a change to Priority 1.
"We will be looking to see how well they're achieving that," Cook said.
Trustees argue that, state criticism aside, the district is on the rebound. In disputing the state's assessment, district officials said it was based on old data and that newer figures show a brighter future.
"The [Orange County] bankruptcy devastated us, no question about it," said John S. Williams, president of the district board. "But this district is far from insolvent. It's looking much better for us; we've turned it around."
But state officials have not softened their warnings in response to the protests from district officials.
"Our intention is to keep them from being a Priority 1," Cook said.
The state's 71 college districts submit financial data quarterly and are supplying new data now, said Kyle Orr of the state chancellor's office. Updates of the monitoring status of colleges will be made in January, he said.
A key element of the district's report will be the staff and faculty raises, Cook said.
One faculty bargainer, Kenneth G. Woodward, a Saddleback economics professor, agreed with Williams that the district finances are better than reflected in the state's report. But he said faculty and staff bargainers may have to accept lower raises in the face of stringent state monitoring.
"This year is tough because the district is on that watch list," Woodward said, predicting raises in an eventual settlement would be "very, very modest."
"That causes a problem, obviously, with some of our membership," he said.
Hodge, the district's acting chancellor, said school officials will be "vigilant" in following state recommendations.
She predicted the watch would be lifted by the end of the budget year in June and district officials and union bargainers both said incoming revenue combined with an improving state economy will lead to economic stability.