McLennan Community College Case Study

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An examination of McLennan Community College data over the last ten years offers a good example of an institution that has met the challenges of increasing enrollments and reductions in state funding while maintaining indicators of quality and financial stability. As with most community colleges, the major sources of revenue for MCC are tuition and fees, state appropriations, and local taxes, as well as strong usage of federal funds. Similar to national trends, state funding for MCC plummeted from approximately 75% of total revenue in the late 1970s to approximately 25% of total revenue in 2012-13. To counter the loss in revenue the percentage of revenue from tuition increased from approximately 10% to almost 50% in that same period of time, while the percentage of revenue from local taxes increased from approximately 10% to just over 20%. Relative to State of Texas averages for other community colleges, MCC is in the bottom quartile with its maintenance and operation tax rate but represents the second highest in-district tuition rate in the state. (Institutional Dashboard, 2014)
Although the average net price of attendance for McLennan Community College students is well above the median measure for a self-selected peer group, the percent of students receiving grant aid is also well above the median measure for the peer group (National Center for Education Statistics, 2014). This data supports the theory that institutions may offset losses in state funding by increasing revenue through substantial increases in tuition as long as the percentage of students receiving financial aid parallels the increases in net price of attendance.
The institutions percent of total expenses related to student services (4.8%), institutional suppor...

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..., but did not meet the established thresholds for Primary Reserve and Viability Ratio. Using the Composite Financial Index (CFI) as an overall calculation of financial health, however, MCC met the established state threshold for stability (Table 1.1) (Texas Higher Education Coordinating Board, 2012). According to the THECB (p. 20), the Composite Financial Index (CFI) “measures the overall health of an institution by combining four ratios into one metric. The four core ratios include return on net assets, operating margin, primary reserve, and viability ratio…The calculation process is taken directly from KPMG’s publication, Strategic Financial Analysis for Higher Education…A CFI below 2.0 calls into question the institution’s ability to carry out existing programs and effectively position itself for future success” (Texas Higher Education Coordinating Board, 2012).

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