Are We Getting Ripped Off?

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Gila Community College pays rent to Eastern Community College for its own buildings, which are owned by Gila County.

During the summer of 2009, one week after passing the 2010 budget that listed $2 million in reserves, Gila Community College Senior Dean Stephen Cullen revealed disturbing news to the board.

Not only did the college have a $2 million deficit, but all college employees would have to take four furlough days each month. Eastern Arizona College ordered the changes to erase the shortfall, although it offered few further financial details to Gila board members.

Members wondered if they could consider other options. But Eastern runs Gila, and Eastern administrators had already decided.

“I’m upset to find out we’re in a $2 million hole,” said board member Larry Stephenson at the time. He said the furlough seemed a draconian measure — “punishment to the staff for our inability to control our own finances.”

Since that fateful day, the year-end budget projections have swung from a $743,000 shortfall to a $50,000 surplus — all without solid financial data to back the wild swings. Some board members said the budget discrepancies caused them to fear for the college’s credibility.

Meanwhile, Gila County pays Eastern about $1.5 million every year to track its finances and run academic programs.

“I find it troubling, as a board member, that we pay EAC to handle our financial matters, but cannot get an understandable accounting of where our money is being spent,” said member Tom Loeffler.

Gila board members have tried to extract information from the college’s often tight-lipped master, but some Eastern officials refuse to return even board members’ phone calls.

We pay what?

And so while Gila grapples with higher-than-average administration costs, rent payments on its own buildings and a $1.5 million annual overhead payment just to maintain the contract with Eastern, the board has essentially no authority to make any of its own decisions.

Eastern holds ultimate authority over personnel, academic and financial decisions.

Community colleges statewide spend an average of 20 percent on administrative costs, which include services like the registrar, student services, accounting and associated salaries.

Gila, however, pays 36 percent of its budget for those expenses. That number includes a 25 percent overhead fee to Eastern and money already built into Gila’s budget for administration.

In 2010, the college spent $874,000 for administrative salaries and the time that Eastern employees spend on Gila business. However, the college’s contract requires it to add 25 percent on top of that $874,000.

For example, the college paid at least $11,000 in fiscal control in 2009 and $300,000 for deans. With the contract’s required 25 percent overhead, the college spent an additional $75,000 on those two categories alone just to maintain the contract.

All told, Gila County taxpayers spent $1.5 million in 2009 just in overhead costs.

Essentially, Gila County taxpayers pay Eastern twice. Once for Eastern employees to shuffle paperwork, and another 25 percent for the contract that outlines the arrangement.

Eastern technically employs the administrators working on Gila campuses, which means those deans are not accountable to Gila County taxpayers or even Gila board members. In fact, all of the people working on Gila’s campus call Eastern administrators boss.

Also in the contract, Gila must pay to rent buildings the county owns. Recent legislation will allow the college to soon take ownership of those structures, however Gila will still pay rent.

In 2010, Gila paid $79,000 in rent to Eastern, up from $35,000 the year before. Eastern stuffed the rent hike onto page 25 of a voluminous budget packet.

Neither board members nor members of the public know for certain that the figure accounts for all rent costs because of the complex way Eastern presents its numbers.

Most tenants facing such an enormous rent hike might consider changing landlords. But this increase occurred without board consent.

Gila advocates point to the contractual clause that requires the college to rent its own buildings as a particularly egregious example of the contract’s absurdity.

Gila founding president Barbara Ganz said the large overhead percentage impacts the quality and quantity of available courses.

Not only did deans like Ganz work for Gila under the Pima contract, but Gila could also purchase supplies without funneling them through Eastern. This saved taxpayers 25 percent.

Under Pima, if Gila wanted to buy a computer, the college bought a computer. Under the current contract, Eastern would buy the computer and then charge Gila for the computer, plus 25 percent overhead.

Gila advocates say the current setup provides no incentive to find the best deals. To the contrary, the more of Gila’s money that Eastern spends, the more money Eastern makes.

“In this financial state, that is absolutely unacceptable,” said Ganz.

Show me the money

Board members have repeatedly asked Eastern to provide financial statements in a more understandable format.

Stephenson once joked that Eastern tells the board how much pencils and notebooks for administration cost, but don’t reveal the size of the deficit.

For instance, Eastern’s documents separate costs for the biology program into more than seven different accounts for each of the two campuses.

Gila employs no one to oversee finances, and the contract requires it to provide Eastern with 30 days written notice to even examine its own books. Peeks are allowed just once a year.

Although state law requires Gila to contract with an accredited college to award diplomas, it also allows the college’s board essentially the same rights as other community college boards. The law doesn’t prohibit provisional colleges from running their own operations. Previous contracts reflected that right.

“No employee has loyalty or can take any direction from the board,” said Ganz.

Her top recommendation is to renegotiate the contract so that the “college board can employ people to oversee and protect the interests of the taxpayers of Gila County.”

Windows to end the contract are allowed at the end of every other year, starting with the first year and continuing to the end of the ninth year.

When the board extended the 10-year contract for another three years in 2008, members didn’t try to add language that would assure an exit window at the end of the 11th and 13th years, despite objections from Payson board members.

However, advocates continue the fight for equal rights.

Read part four of our special seven-part report on GCC: Gila formed too late

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