PORT ANGELES — Peninsula College is among 34 cash-strapped community colleges in the state scrambling to figure out how to close a sudden and unexpected loss of funding that has had all fingers pointing at Olympia.
On Aug. 22, the Office of Financial Management notified the State Board for Community and Technical Colleges (SBCTC) that it had over-allocated $28 million to the system in the current budget.
And it wanted colleges to give it all back.
Peninsula College’s $339,000 share of the clawback is a little more than 1 percent of its $30 million budget, but the funds are critical to its operations and delivering services to students this year, President Suzy Ames said.
“It’s a small chunk,” Ames said, but it made a noticeable difference to the college’s bottom line by offsetting an overall decline in state funding and rising post-COVID-19 expenses.
“There has been no adjustment for inflation,” Ames said. “A higher electric bill, higher water bill, insurance costs, IT software costs. Everything is exponentially more expensive now than it used to be.”
With the fiscal year starting July 1, the timing of OFM’s announcement upended colleges’ financial roadmaps.
“Each of their college boards of trustees have adopted a budget, an expenditure plan and a revenue plan for this fiscal year,” said Choi Halladay, the SBCTC deputy executive director for business operations. “For OFM to turn around and say, ‘We need that money back,’ was quite a shock.”
Choi said he couldn’t think of another instance of OFM requesting money to be returned due to an error in his 30 years in higher education.
When Gov. Jay Inslee in March signed the state’s supplemental budget for 2024-2025, the SBCTC assumed its allocation was correct.
Ames sure did.
“When we received this initial money, we didn’t know it was additional money and we were told by the state there’s no way we could have known,” Ames said.
The funds enabled Peninsula College to take care of increased operating expenses — like utilities — and freed up money for a new contract with faculty and staff signed in June.
“Our faculty salaries were on the very bottom percentile compared to other colleges in the state, and that allowed us to crawl out of that hole a little bit,” Ames said.
OMF committed the error when it failed to update initial estimations of SBCTC salary adjustments for the 2023-2025 biennium. Instead, both the estimated amounts and the new, actual figures were included.
If schools do end up having to return the funds, Choi said they would first look to improving efficiencies like energy use and then to a reduction in staff.
“To take the money back would require significant budget cuts,” Ames said. “At Peninsula College, it would mean layoffs.”
OFM can’t unilaterally compel colleges to hand back the money.
“They have to actually get the Legislature to agree with them that this is a correction,” Choi said.
In his Aug. 22 letter to the SBCTC, OFM Director David Schumacher said recovering the $28 million would be in Inslee’s proposed second supplemental budget that is due by Dec. 20. With Inslee leaving office in January, Washington’s next governor — either Democrat Bob Ferguson or Republican Dave Reichert — will be in charge of reviewing and passing the budget.
Choi said the SBCTC had been talking to legislators about the negative impact returning the funding would have on colleges, particularly in the middle of the fiscal year. It also had been in discussions with OFM on options for how colleges could continue to operate through next June should they be without the funds they had counted on.
The SBCTC has requested $28 million — the amount of OFM’s over-funding error — be included in the second supplemental budget to offset the reduction and ensure colleges with some financial stability until the end of the fiscal year.
Simultaneously, it made two other requests that could help backfill the loss of funds if OFM prevails in clawing them back: One for improving staff compensation so it is commensurate with nearby states and another for a bump in basic operating funds to meet the rise of fixed costs.
Colleges said they shouldn’t have to pay for a mistake they didn’t make. And, in the scheme of things, $28 million is not a lot of money in Washington’s $69.8 billion operating budget passed last year.
“When you look at the overall state budget, this is just like dust,” Ames said. “But it’s a really big deal to each of our local colleges.”
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Reporter Paula Hunt can be reached by email at paula.hunt@peninsuladailynews.com.
