Your task is to offer a detailed critique of a peer-reviewed article you located below (Israel, C. A., & Kihl, B. (2005). Using strategic planning to transform a budgeting process. New Directions For Community Colleges, 2005(132), 77-86). The article must be related, somehow, to one or two of the primary topics introduced and discussed in your assigned reading for this unit. In your critique, address the following questions or points:
• What are the main points and arguments of the author(s)?
• What is your opinion of the article?
• How does the article relate to your experience or current job in the public or nonprofit sector?
• How can the points and arguments of the author(s) be applied to the public sector in a practical sense?
The critique should be roughly 500 words in length (approximately two double-spaced pages), with Times New Roman 12 pt. font, and have appropriate APA style writing. Be sure to cite all borrowed, quoted, and paraphrased material appropriately in APA format. Your focus of this assignment is to collect your thoughts and opinions on the topic and relate them in an intelligent, critical fashion (the second and third bullet above).Your task is to offer a detailed critique of a peer-reviewed article you located below (Israel, C.
A., & Kihl, B. (2005). Using strategic planning to transform a budgeting process. New
Directions For Community Colleges, 2005(132), 77-86). The article must be related, somehow,
to one or two of the primary topics introduced and discussed in your assigned reading for this
unit. In your critique, address the following questions or points:
What are the main points and arguments of the author(s)?
What is your opinion of the article?
How does the article relate to your experience or current job in the public or nonprofit
How can the points and arguments of the author(s) be applied to the public sector in a
The critique should be roughly 500 words in length (approximately two double-spaced pages),
with Times New Roman 12 pt. font, and have appropriate APA style writing. Be sure to cite all
borrowed, quoted, and paraphrased material appropriately in APA format. Your focus of this
assignment is to collect your thoughts and opinions on the topic and relate them in an intelligent,
critical fashion (the second and third bullet above).
Using Strategic Planning to Transform a Budgeting Process
Cary A. Israel & Brenda Kihl
(Israel, C. A., & Kihl, B. (2005). Using strategic planning to transform a budgeting process. New
Directions for Community Colleges, 2005(132), 77-86.)
Today’s community college leaders face a challenging ﬁnancial climate not seen in several
decades. Budget shortfalls, state budget cuts, high unemployment, increased health care costs, and
decreased tax revenue create challenging economic times for community colleges and require
difﬁcult decision making to maintain a strong, ﬁnancially sound institution that succeeds in serving
its constituents. The questions college leaders face are familiar: Where can we cut spending?
Which programs need paring back and how far? How and where can we reduce ﬁxed costs? How
can we increase revenue streams? Do we need to make reductions in our labor force? Where do
we invest new revenue? These questions are difﬁcult to address without incurring potential
negative effects on students, staff, faculty, and the community. However, the negative impacts can
be minimized by making clear and logical decisions that are supported by the institutions strategic
budgeting and planning processes. This chapter describes how the Collin County Community
College District (Texas) answered these difﬁcult questions, and discusses steps taken to control
spending, make the most of limited resources, and incorporate the district’s strategic plan into the
Addressing Rapidly Changing Economic Conditions
Collin County Community College District (CCCCD) is a ﬁve-campus district in a
historically afﬂuent county in North Texas. Enrolling more than forty thousand credit and
noncredit students annually, the district serves suburban and rural communities covering nearly
one thousand square miles, with a population of approximately seven hundred thousand. CCCCD
opened its doors amid the strong economic climate of 1985. Located in Texas’s “Telecom
Corridor,” CCCCD ﬂourished during the technology boom of the late 1990s. During that decade,
Collin County’s population grew by 150 percent, and CCCCD’s enrollment rose by 57 percent.
Prior to 2001, the district had never known difﬁcult economic times, and never had to consider
difﬁcult budgetary decisions. This changed in the fall of 2001, when downturns in the
telecommunications and airline industries, the area’s two economic bellwethers, began to require
mass layoffs. Before 2001 CCCCD received the majority of its revenue from local property taxes
(44 percent), and signiﬁcant amounts from state appropriations (28 percent), tuition and fees (15
percent), and other sources, such as grants and auxiliary services (13 percent). Tuition income
remained low because the district’s board of trustees has always been committed to affordable
education and opposes signiﬁcant tuition increases. Unfortunately, this left the institution
extremely vulnerable to economic downturns and dependent on increases in property values and
state appropriations. In 2000, CCCCD was not in a ﬁnancial position to withstand a signiﬁcant
decrease in state or local revenue, yet this was about to occur. State funding for Texas community
colleges is calculated using an instructional formula based on contact hour reimbursement. Each
biennium, the Texas legislature sets a rate to which it will reimburse colleges for instructional costs
incurred. Between 1994 and February 2003, Texas’s contributions to the community college
instructional formula fell from 86.9 percent to 51.8 percent (Texas Association of Community
Colleges, 2003). Local property taxes could not make up the difference in revenue. The district
was already collecting local taxes at its maximum rate of nine cents per hundred dollars of assessed
value, one of the lowest rates in Texas. With a depressed economy, it was unlikely that county
voters would approve an increase in the property tax rate to support the community college. These
circumstances made it increasingly evident that district leaders must make signiﬁcant changes to
their operating procedures to ensure long-term ﬁnancial stability.
The Coming Economic Storm and Enhanced Environmental Scanning
In 2000, CCCCD’s leaders determined that a more comprehensive environmental scanning
process would help prepare for the future and improve the district’s ability to withstand changes
in the economy. All community college leaders analyze enrollment trends, such as the market share
of high school graduates attending our institutions; growth and decline of speciﬁc disciplines; the
overall general economic climate of our communities; faculty salary requirements, retirements,
and new hires; and other factors that affect the budgeting and planning processes. As members of
CCCCD’s leadership team, we monitored this information closely. However, like many
institutions, we did not track other factors that might be better indicators of the overall economic
vitality of our service areas. Anticipating drastic changes in the economy, CCCCD instituted an
environmental scanning process in 2000 that monitors and tracks these other factors, detailed here,
to help us predict where the economy was going and to develop a realistic three-year budget plan.
This scanning also made us aware of pending challenges and allowed us to develop what-if
scenarios as economic conditions changed (as they indeed did). We thus started to track the volume
of food stamps awarded in Collin County over a ﬁve-year period, to see if we could identify trends
that could help predict the economic future of our community. We also tracked trends in
Temporary Assistance for Needy Families, sales tax allocations, and residential building permits.
In addition, we monitored home foreclosures, local public school lunch program recipients,
indigent health care claims, small business bankruptcies, the state’s rainy day fund, appraised
property tax growth rate, and companies moving in and out of Collin County. Nearly all of this
information was readily available from the county, regional council of governments, the state
comptroller, the Small Business Administration, the realtors’ association, ﬁnancial institutions,
and the district’s small business development center. Our environmental scanning paid off.
Residents in Collin County were hit hard by the 2001 downturn in the economy, which also had a
signiﬁcant budgetary impact on the district. Unemployment rates reported by the Texas Workforce
Commission (2005) showed a 163 percent increase from October 2000 to October 2001, and this
had a precipitous effect on other economic factors in Collin County and throughout Texas.
Newspapers reported other disturbing trends; the Collin County home foreclosure rate for the
month of January increased over 300 percent between 2001 and 2004 (Graham, 2003). In addition,
indigent health care claims were climbing steadily, and requests for free lunch programs at our
local school districts were soaring. Indeed, the percentage of economically disadvantaged students
was growing rapidly; in 1999, the district disbursed $2.5 million in ﬁnancial aid, scholarships, and
federal and state grants. By 2000 that number doubled to nearly $5 million, and in 2004 the district
disbursed more than $12 million in ﬁnancial aid. Moreover, local businesses were moving out,
closing, or going bankrupt faster than those that were relocating or being created. Texas’s rainy
day fund was moving toward deﬁcit, and interest rates were beginning to drop. Despite these
disturbing trends, our community was still seeing record population growth. Had we just
concentrated on population growth and housing starts—traditional measures used in planning for
enrollment growth—we might have concluded that the economy was still ﬁscally sound. Yet by
scanning a more expansive set of environmental data, we knew that it was a matter of time before
funding for the district and other community colleges in the state would be cut.
At the fall 2000 State of the District presentation, the president discussed these alarming
statistics. Although some individuals disagreed that the economy might be on the verge of a
downturn, most began to discuss the ﬁndings. Against this backdrop, we started to plan for the
district’s future so that we could minimize the impact of any revenue loss. After thoughtfully
discussing and planning a course of action, we decided to develop a very conservative budget that
anticipated the coming economic meltdown. Although the practice of environmental scanning may
not always be an accurate economic gauge, we believe it helped our college move to a more
strategic budgeting process. We continue to employ all the external environmental data at our
disposal in order to plan for a fast-changing economic landscape.
Planning for Shrinking Resources
Environmental scanning data led us to believe an economic storm was coming, so we began
to plan for shrinking resources. The ﬁrst order of business was stabilizing and reducing
Reducing Instructional Costs. To reduce expenditures, we ﬁrst looked at the cost of
instruction, because it makes up the largest proportion of the overall budget. It was imperative that
any budget cuts in this area not inhibit the district’s ability to accommodate its growing student
population and maintain academic excellence. However, we were able to reduce the number of
extra faculty stipends and contracts by limiting them to only those services essential to the quality
of our educational offerings. For example, we cut instructional release time for faculty serving as
treasurers of faculty constituency groups, because the duties of the ofﬁce required far less time
than teaching a semester-long course. In addition, we challenged college deans to increase the
average class size from nineteen students per section to twenty-three rather than adding new
sections to accommodate enrollment growth. The deans had ﬂexibility to run some classes with
fewer students but were strongly encouraged to keep the average divisional class size at twentythree. These initial steps reduced spending without adversely affecting instructional quality or
Analyzing Third-Party Expenditures. In addition, we started examining existing
partnerships with third parties (such as foodservice agencies, those who rent our facilities, and
local agencies that are freely allowed to use campus facilities) to ensure that equitable relationships
existed. Historically, although the district did not charge rent to local economic development
agencies for their use of college ofﬁce space, the cities charged the district to rent their facilities
for graduation and commencement ceremonies, as well as other functions. By correcting this
imbalance, CCCCD saved thousands of dollars. This was but one of many examples of the ways
in which we saved money by thoroughly analyzing third-party expenditures. It was not easy to
renegotiate these informal arrangements, but an increased focus on external communications
allowed city and county leaders to understand our budget predicament. Indeed, through this
experience we learned that there are always opportunities to be more ﬁscally conservative without
jeopardizing instruction or professional development.
Replacing Revenue Bonds with General Obligation Bonds. Texas state law requires local
community college districts—not the state—to fund construction of new facilities. To
accommodate enrollment growth in the early 1990s, a bond referendum was proposed to fund new
buildings and deferred maintenance but was defeated by area voters. Because new classrooms had
to be built to accommodate enrollment growth, CCCCD’s board of trustees issued revenue bonds
to accomplish this goal. But the revenue bonds carried higher interest rates and were a drag on our
operating funds. We knew that this issue needed to be remedied before revenue streams,
particularly those from state sources, eroded. Thus, in early 2001, the district decided to ask voters
to pass a $57 million general obligation bond. The timing of this initiative was both crucial and
fortuitous. The economic bubble had not yet burst, and enrollment was mushrooming. Fortunately,
voters overwhelmingly passed the bond referendum, which signiﬁcantly relieved pressures on our
operating budget. Our strategic budget preparation and forecasting processes made us realize the
interconnectivity of disparate budget lines.
Making Miscellaneous Budget Cuts. Although CCCCD was able to shrink its budget by cutting
extra instructional costs, reducing third-party expenditures, and moving toward lower-interest
bonds, much more had to be accomplished to align the district’s budget with anticipated revenue
cuts. We consolidated administrative functions, revamped an uncapped salary grid, closed poorly
enrolled programs, created a continuing education proﬁt center, discontinued leisure classes,
bought down the debt of callable high interest revenue bonds, and established a three-year salary
schedule for faculty and staff. All in all, though some decisions were difﬁcult and challenging, our
planning paid off. When the economic storm hit, our academic classes remained open and
accessible, agreed-upon salary increases were honored, more students were admitted, and new
academic programs were created. With spending brought under control, we also began looking at
other sources of revenue to supplement existing streams. We established CCCCD’s ﬁrst deferred
giving program, set lofty fundraising goals, increased federal and state grant awards tied to our
strategic plan, and planned other revenue generating activities. Concurrent with these activities,
we began to revamp a traditional incremental budget process and move toward one that is more
strategic and responsive to changing economic conditions.
From Incremental to Strategic Budgeting
In 2000, an internal survey of CCCCD’s budget process and ﬁnancial management
revealed the need for change, and college leaders began planning to strengthen their budgeting and
planning processes. At that time, the district’s budget process consisted of annual incremental
increases based on the overall amount of revenue. Each division received the same percentage
increase over the prior year’s allocation and was not required to submit evidence of need or prove
effective use of funds. Budget managers maintained the status quo and were not challenged to
move strategically beyond established processes (Ibrahim and Proctor, 1992). The incremental
budgeting system in place in 2000 could not prepare the district for the coming downturn in the
local economy. The district’s practice of incremental budgeting provided too much latitude, and it
did not hold managers accountable for their budgeting decisions. The process also created
administrative “silos” within CCCCD, rather than creating a sense of interdependence and team.
CCCCD’s incremental budgeting process also committed funds to certain budget areas without
evidence that the base allocation or additional monies were needed to meet and accomplish
institutional goals. The incremental process assumed that the district’s priorities remained
constant, which prevented leaders from launching new initiatives or providing access to additional
resources to support growing areas of the district (Curry, 2000). Furthermore, several top-level
administrators did not have a working knowledge of their budgets and found it acceptable to
delegate ﬁscal responsibilities to administrative assistants. This proved to be a signiﬁcant barrier
to making difﬁcult choices about funding priorities as the economy changed. In this age of data-
driven decision making, budget managers must be accountable for their ﬁnances and make
decisions in support of the institution’s strategic plan. Thus, it soon became evident that the ﬁrst
step in building a ﬁnancially sound institution was to modify the budgeting system and make
budget managers accountable. CCCCD also realized that departments and programs change over
time, and that base allocations should be ﬂexible too. A new budgeting system was needed to
distribute funds based on something other than “steady state” existence. Accordingly, we decided
to conduct a series of administrative meetings in spring 2000 to discuss budget responsibility and
the goals of the coming years. The district president informed vice presidents and deans that the
current culture must change and they would no longer be rewarded for over budgeting (hoarding
money) or allowed to continue the practice of under budgeting. In these meetings it became evident
that administrators must thoroughly understand and effectively plan their budgets. The district’s
three-year strategic planning process became the launching point for setting funding priorities and
addressing the difﬁcult funding decisions that lay ahead.
Effective budgeting systems for community colleges must possess the stabilizing processes
found in an incremental budgeting system to minimize annual justiﬁcation of obvious institutional
necessities. However, the process must also incorporate a zero-based budgeting system that allows
for questioning and minimizing redundant expenses (Williams, 1981). The destabilizing process
of zero-based budgeting, unfortunately, requires all expenditures to be justiﬁed each new period,
which is a time-consuming process (Curry, 2000). Neither of these common budgeting practices
alone ﬁts the district’s vision and changing needs. College leaders had to establish a new model
that would meet the four purposes of an effective budget: continuity, change, ﬂexibility, and
rigidity (Wildavsky, 1978).
Thus CCCCD decided to move to a form of zero-sum budgeting, a deﬁcit-neutral budget
process, where new expenditures are paid through cuts in existing programs or increases in
revenue. Keeping the district’s mission and strategic plan in mind, leaders adopted a modiﬁed
zero-sum process to help make decisions that could reduce unnecessary or wasteful spending,
streamline and minimize costs, and strengthen revenue streams. Our desired result was a static
bottom line, with no direct annual increases in expenditures. In order to accommodate the needs
of growing programs, new initiatives, and achievement indicators outlined in the strategic plan,
we added a supplemental budget request process.
The Budget Process. A zero-sum budgeting process takes about four months and begins
with an allocation for each of a college president’s direct reports (for example, vice presidents and
provosts). These allocations are equal to the previous year’s budget, minus a formula reduction for
line items that had spent less than 50 percent of allocations at midyear. Vice presidents and
provosts then distribute this lump allocation among their respective division managers. Each
division manager, who may be a dean, director, or coordinator, is responsible for the budget of one
or more departments. At this point in the budget process, division managers have the ﬂexibility to
reallocate resources between budget lines and across departmental budgets in their division. In the
end, division managers propose a budget that is less than or equal to the previous year’s budget.
However, supplemental budget requests allow for increased allocations for costs associated with
CCCCD’s three-year strategic plan (Collin County Community College District, 2004). Each vice
president and provost then compiles preliminary budgets and associated supplemental requests
from division managers, and if necessary, further reallocates resources; for example,
underspending in one division can meet the supplemental requests in another. Vice presidents,
provosts, and their division managers negotiate budgets and justiﬁcations for supplemental
requests. The communication and information-sharing that occurs during this negotiation phase
ensures that managers are more accommodating of other divisions’ needs (Taylor and Rafai, 2003).
Ultimately, it is the vice presidents’ or provosts’ responsibility to ensure an overall adherence to
the initial allocation and the district’s strategic plan. A budget must be agreed upon in order to
move to the next step in the budgeting process, where each budget is examined in open hearings.
Open Hearings. Open budget hearings take place over the course of a week. One at a time, the
president, vice presidents, provosts, and division managers defend their budgets to CCCCD’s
leadership team, ﬁnance department, and each other. Hearings require division managers to answer
questions and explain signiﬁcant changes—both positive and negative—in any one budget or
individual line item. Supplemental requests are also reviewed during the hearings to ensure that
additional funds will meet the goals and achievement indicators outlined in the district’s strategic
plan. Open hearings are time-consuming, but the public venue requires all employees with ﬁscal
responsibilities to have a rationale for the amount allocated to each line item in their budget. The
budget hearings also serve to provide budget managers, college leaders, and other responsible
budget personnel with a broader, “beyond the-silo” perspective of college operations. Through the
process, budget managers realize there is no “hidden” money in district budgets, and they can no
longer hoard excess money that will not be used. They also learn about the importance of deferred
maintenance costs, bond interest payments, fund balances, encumbered payroll lines, and all the
other categories that affect the district’s overall budget. On conclusion of the budget hearings, the
leadership team considers organizational priorities and makes a ﬁnalized budget proposal to
CCCCD’s board of trustees.
Drawbacks and Beneﬁts of Zero-Sum Budgeting. A disadvantage of zero-sum budgeting is the
potential for competition between managers, because money is reallocated from one department
to another. However, implementing a process for requesting supplemental funds alleviates the
competitive element of zero-sum budgeting and helps mitigate begging for new funds. At the same
time, it forces the leadership team to identify and eliminate funding for lower priorities in order to
fund new initiatives. Budget managers also understand that extra funds can come at the expense
of an existing program if projected revenue falls short of the overall budget increase, and this
knowledge helps create internal accountability. Over time, training for midlevel budget managers,
combined with a budgeting hearing process that ties internal budgeting processes directly to the
district’s strategic plan, signiﬁcantly broadened CCCCD leaders’ understanding of how to manage
scarce resources prudently.
Where Are We Now?
As this chapter is being written in summer 2005, we are conﬁdent that CCCCD is spending its
money better and that because of changes in our budgeting process expenditures are more aligned
to our strategic plan. By implementing a more comprehensive environmental scanning process to
predict the economic environment, and by moving from incremental to strategic budgeting, we
were able to make difﬁcult decisions more easily. We are not yet out of the woods, however.
Community college leaders will always be required to make difﬁcult decisions, but they can do so
with forethought and planning to minimize negative impact and public opposition. In 2003, our
strategic planning process was put to the test. Texas faced a record deﬁcit of $9.9 billion (Hill,
2004), and legislators were challenged to balance the budget. All public colleges and universities
were mandated to cut their state appropriation by 7.5 percent, which resulted in a $1.5 million
reduction in the district’s operating budget. Because of foresight and careful planning, however,
the overall impact of this budget cut was minimized. The district’s ﬁnances were already under
control, a new budgeting system was in place, and new revenue sources slightly decreased our
dependence on local taxes and state appropriations. The difﬁcult decisions CCCCD made in 2000
and 2001 paid off, making the district ﬁnancially and administratively stronger.
Keys to Creating a Strategic Budgeting Process
Planning and accountability are keys to weathering economic downturns and sustaining funding
for community colleges. It is imperative that academic, student development, and technology plans
be aligned with a college’s overall ﬁnancial plan. This is undoubtedly a major undertaking, but it
is a necessary step in achieving ﬁnancial stability. This plan must then be communicated to all who
are involved with or who have a vested interest in the community college. Budget cuts are rarely
met with excitement. Therefore, effective communication with college stakeholders, including
faculty, staff, students, the board of trustees, and the community at large, is vitally important to
continued success. Key stakeholders must buy in to any strategic budget in order to minimize
opposition to any necessary future budget cuts. At CCCCD, internal stakeholder communication
takes place at the annual All College Day, which all faculty and staff are required to attend. The
president delivers a State of the District address to ensure that all college employees understand
the current economic climate and its impact on college operations. In addition, the district has
established the “Committee of 100”—a group of community and business leaders—to facilitate
external communication. The committee comes together every three years, is educated on the state
of CCCCD, and brainstorms the strategic direction the district should follow over the next three
years. Such community involvement not only helps disseminate information about a college’s
needs and goals to the general population but also allows a more informed public to better
understand the difﬁcult decisions community college leaders’ face. Our advice for community
college leaders facing tough economic times is to focus on your college’s mission, goals, and
strategic plan, the fundamental elements that describe your institution and its future. Internal
planning and budgeting processes must support these fundamental elements if your college is to
survive when funds are limited. Institutional constituents must accept the college’s mission, goals,
and strategic plan if they are to support the tough decisions that must be made in a challenging
economic climate. For this reason, it is essential to develop a comprehensive training program for
senior staff and midlevel budget managers and ensure high levels of communication when difﬁcult
decisions are necessary. CCCCD’s move from incremental to strategic budgeting clearly helped
us withstand a downturn in the Texas economy and diminished state revenues, and we believe it
can help other institutions as well.
Collin County Community College District. “Strategic Goals and Achievement Indicators 2004–
2006.” Plano, Tex.: Collin County Community College District, 2004.
Curry, J. R. “Budgeting.” In C. M. Grills (ed.), College and University Business Administration
(6th ed.). Washington, D.C.: National Association of College and University Business Ofﬁcers,
Graham, L. “Home Foreclosures Soar Amid Jobless Recovery.” Frisco Enterprise, Dec. 26,
2003, n.p. http://www.zwire.com/site/news.cfm?newsid=10717727&BRD=1426
&PAG=461&dept_id=528197&rﬁ=6. Accessed May 16, 2005.
Hill, I. “State Responses to Budget Crises in 2004: Texas.” Washington, D.C.: The Urban
Institute, 2004. http://www.urban.org/UploadedPDF/410955_TX_budget_crisis.pdf#
search=’texas%20state%20budget%20deﬁcit%2020042004. Accessed May 17, 2005.
Ibrahim, M. M., and Proctor, R. A. “Incremental Budgeting in Local Authorities.” International
Journal of Public Sector Management, 1992, 5(5), 11–26.
Taylor, A., and Rafai, S. “Strategic Budgeting: A Case Study and Proposal Framework.”
Management Accounting Quarterly, 2003, 5(1), 1–10.
Texas Association of Community Colleges. “Community College Formula Appropriation FY
1990–91 to FY 2004–05.” Austin: Texas Association of Community Colleges, 2003.
http://www.tacc.org/pdf/ctc_formula_tacc.pdf. Accessed May 19, 2005.
Texas Workforce Commission. “Unemployment (LAUS).” Austin: Texas Workforce
Commission, 2005. http://www.tracer2.com/cgi/dataanalysis/AreaSelection.asp?table
Name=Labforce. Accessed May 4, 2005.
Wildavsky, A. “A Budget for All Seasons? Why the Traditional Budget Lasts.” Public
Administration Review, 1978, 38(6), 501–509.
Williams, J. J. “Designing a Budgeting System with Planned Confusion.” California
Management Review, 1981, 24(2), 75–85.
1. CARY A. ISRAEL is president of Collin County Community College District.
2. BRENDA KIHL is assistant to the president and director of the Center for Teaching,
Learning, and Professional Development at Collin County Community College District.
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