Budgeting For Results - March 08, 2010

[Guest sullinss]

School District No. 2, Yellowstone County

High School District No. 2, Yellowstone County

Billings, Montana

March 08, 2010

Call to Order

 

The Budgeting For Results Committee of School District No. 2, Yellowstone County and High School District No. 2, Yellowstone County, Montana met at Lincoln Center, 415 North 30th Street, Billings, Montana, on Monday, March 08, 2010. Committee Chair Joel Guthals called the meeting to order at 6:38 p.m. and led those assembled in the Pledge of Allegiance. Committee members present were: Joel Guthals, Peter Grass, Paige Darden, Barbara Bryan, Bruce MacIntyre, Kelly Donovan, Joan Sleeth, Rod Gottula, Deana Elder, Sandie Mammenga, Tom Bick, and Peter Gesuale. Absent was member Don Stanaway. Community member Ross Johnson has resigned due to an employment move. Also in attendance were Superintendent Jack Copps, Thomas Harper, Gail Surwill, Dan Martin, Scott Anderson, Dennis Holmes, Stan Barr, Bob Whalen, Dave Cobb, Mary Jo Fox, Kathy Aragon, Joyce Weber, and Barb Buss.

Chair Joel Guthals welcomed Tom Bick, a new community member on the BFR Committee. Mr. Bick is employed at Billings Clinic and has two grade school age children.

 

Communication from the Public

 

There was no communication from the public.

 

Consent Agenda

 

Superintendent Copps requested Agenda item A-2, Joint BFR/Board of Trustee Minutes of January 11, 2010, be pulled from the Consent Agenda to be considered as a separate item.

 

Rod Gottula moved to recommend the Board approve the remaining Consent Agenda items as follows:

A-1 BFR Minutes of January 11, 2010

A-3 Joint BFR/Board of Trustee Minutes of January 25, 2010

A-4 Addition of Fitness Center Trust Account at West High

Bruce MacIntyre seconded the motion. The motion carried unanimously.

 

Joint BFR/Board of Trustee Minutes of January 11, 2010

 

Superintendent Copps said there is a request that a statement from him be included in the minutes regarding Central Administration costs only represents 1% of the budget. If you would review the tape you would hear that the conversation specifically refers to the Central Office Administration, and it is that budget that is 1%. The administrative costs of the entire District are closer to 5% which is substantially less than most districts.

 

Barbara Bryan moved to approve the minutes as amended. Peter Grass seconded the motion. Paige asked for a clarification as to who is included in the Central Office Leadership Team. Superintendent Copps said it includes 11 administrative staff at Lincoln Center. Paige asked if she understood that Superintendent Copps said he couldn’t cut any of those 11 people. Superintendent Copps said he did not say that; he said he did not recommend it because we would reduce the Central Office to a point where any of those cuts would cost as much as you would gain because the work is still there.

 

The motion carried unanimously.

 

Budget Update

 

Chief Financial Officer Thomas Harper referenced the letter in the agenda addressing the budget forecast changes. Thomas said his revised forecast (from Dec. 2009 to March 2010) shows the deficit increased in the Elementary General Fund budget FY2010-11 by $268,362 from changes in revenue and expenditures. The ANB is official and the revenue is now solid unless it is changed at the State level. The increased forecast in Elementary General Fund expenditures of $819,638 is primarily those people where we used one-time money to balance the budget in FY2009-10, and they were not included in the forecast FY2010-11. Thomas said his revised forecast (from Dec. 2009 to March 2010) shows the deficit increased in the High School General Fund budget FY2010-11 by $939,172. The increased forecast in High School General Fund expenditures of $946,308 is primarily due to those people funded by one-time money to balance the budget in FY2009-10, and they were not included in the forecast FY2010-11. We made an adjustment after budget adoption in August and September of about $775,000 because that was the reduced number of FTE’s and their cost. Thomas said he reduced the forecast by that amount; but, he didn’t take into consideration the costs funded outside of the General fund. Thomas advised the General Funds forecast FY2010-11 after utilizing one-time funds indicates deficits of: Elementary ($1,028,286), High School ($1,662,088), and total District ($2,690,374).

 

Thomas advised that in his forecast FY2011-12 he held Elementary ANB at the same level as FY2010-11. Thomas expects little growth in revenue; and, expenses reflect assumptions of a 12% increase in health insurance, and 0% increase in wages except for steps and lanes for teachers and administrators. In FY2011-12 the Elementary General Fund deficit is $2.96M. Thomas forecasts a decline in High School ANB for the next 4-5 years.

 

Rod Gottula questioned the letter in the agenda on Budget Forecast Changes as being unclear since it seems to say the large budget deficit increases in the forecast are due to ARRA. Rod wants to know who is responsible for the mistake, what kinds of things were involved, and how the situation came about. Rod said we’re asking the public to pass a mill levy and asking members to consider making salary concessions, so we need to be forthcoming with the information. Thomas Harper said he was responsible for the forecasts. Thomas said once we move costs out of the General Fund they’re not part of that forecast because you’ve lowered the base. Rod said it seems the amount we’re off is more than the ARRA funds allocated. Thomas explained when we balanced the budget in FY2009-10 we used ARRA funds, one-time non-ARRA funds such as Title carryover, one-time Special Education funds, Indirect funds based upon ARRA, carryover MAC funds. carryover Indian Education For All funds, Flex funds, and Kindergarten startup funds. Detailed budgets are not built until January and February. This problem came to light after the February enrollment count. When we took those people out of the General Fund budgets, we did not put them back into the General Fund budgets forecast FY2010-11.

 

Peter Gesuale said he is uncomfortable with the numbers because he does not understand the process we’re using to determine if the numbers are correct. Peter said we’re too far along in the year to have a $1.9M error. Peter asked what level of reconciliation has been done between the building staff and our departments and the budgets we have. Peter said $946k at $50K each would equal 18 staff members; and, the HS Principals would know if they are each missing 6 FTE from their budget. Peter is not willing to use these numbers going forward until he knows the numbers are verified by department or location.

 

Thomas has budget information available by budget manager or line-item by line-item. Thomas said he knows we have the right FTE, salary and health insurance amounts because part of the process is to pull rosters by building and department. When we looked those rosters and looked at what we moved out of the General Fund, that’s when we realized we didn’t pick up those people in the forecast vs. what was in the formal budget. Thomas said we now have a working budget because we have accounted for all those pieces.

 

Peter Gesuale asked what test or process have we relied upon from that working budget to compare who’s actually working in the field for us. Thomas said we look at current staff by location vs. the dollars and staff FTE we have forecasted and budgeted for in FY2010-11, and we verify this information line-item by line-item.

 

Peter Gesuale asked if the reconciliation has been verified at the department or building level. Thomas said each Central Office Leadership Team member has a copy of the budget document. Peter Gesuale said he is leaning to a vote of no confidence in our current numbers until someone describes the process we’ve been through that would restore that confidence.

 

Paige Darden asked if the District hired 35.6 employees with one-time-only funds. Thomas explained the staffing levels didn’t change, it reflects moving those staff outside of the General Funds into one-time funds to balance the budget.

 

Joan Sleeth said two new math coaches not previously employed were added with the ARRA money. Dan Martin explained that some of those ARRA funds are restricted to spend “X” percentage via Title I and must be used on professional development; and, it was a Central Office choice to apply this to hiring coaches. Those positions will end in two years and be absorbed in the system through attrition.

 

Bruce MacIntyre asked Thomas who is his oversight on the budget and who else sees the information after it’s prepared. Thomas explained the Central Office Leadership Team members get a copy of the budget. Thomas explained the budget is a work in progress until budget adoption. Thomas said Kathy Olson, Dan Martin, and Scott Anderson review their FTE. The FTE numbers are pretty solid because the process hasn’t changed in the six years he has been here. Thomas said an oversight did happen.

 

Chair Guthals expressed appreciation that the forecast oversight was called to the Committee’s attention, and we have revised numbers that Thomas is confident that are correct. Chair Guthals stated the need to have a detailed examination of the line item projected budget by members of the Central Office Leadership Team, and the High School Principals. The Chair said we’ll have another BFR meeting this month or next for a further report concerning these numbers.

 

Chair Guthals suggested to Committee members that we assume the revised numbers are correct as we move forward in our budget examination. The Chair said it is important if we are looking at a larger deficit that we found out about it early. Chair Guthals said we don’t have an error in budgeting since no budget has been approved; we have an error and refinement of a projection. The process the Committee is going through is to understand these progressions and what we can do to balance the budget for next year.

 

Peter Grass wonders if we would question this much if the mistake resulted in a positive amount rather than a negative amount. Peter doesn’t dismiss the severity of the mistake, but he also understands it’s a work in progress.

 

Chair Guthals asked Thomas if he could have that examination by the Central Office Leadership Team and the building Principals completed within the next 30 days to insure correct numbers. Thomas agreed it could be completed by then.

 

Paige asked how many non-tenured teachers we have K-8 and 9-12 since we can’t eliminate a tenured teacher. Paige thought it might give us an idea of the number of those hired in last few years to understand the associated dollar amount of those people we would lose if we make some of these budget reductions. Paige would also like to better understand the process to identify the errors in the FTE that we’re missing.

 

Superintendent Copps said you can layoff non-tenured staff; however, if you have no more non-tenured staff you cannot layoff tenured staff. Dan Martin stated we have more than 100 non-tenured staff.

 

Deana Elder was concerned it has taken this long to find that error. Deana said you give us these projections every month and it’s not been there. The BCEA entered into an agreement with the District three years ago and agreed on the salaries for the next three years; and, now they have to look at a possible salary reduction next year because of somebody’s mistake that was made.

 

Chair Guthals responded that is an incorrect statement and assumption. Regardless of this error in projections, we were still looking at very significant deficits. Deana said at the last couple BFR meetings we were told we were okay this year and next year but the following year we had to worry about it, and there was never any mention about looking at our contract. Chair Guthals said this Committee has no jurisdiction over contracts; we have been consistently projecting unresolved deficits for the FY2011 for both Districts and enormous unresolved differences for FY2012. This Committee did not make recommendations for any substantial cuts in the Elementary District budget.

 

Peter Gesuale said the budget deficit hasn’t changed, it was just reported wrong. These budgets were always the numbers; we just had our expenses wrong. Peter said no decisions were made as a Committee or Board or Administration to the expense line that shifted the budget deficit. Peter asked if the Committee would be readdressing the Elementary numbers as well as the High School. Chair Guthals agreed we would.

 

Joan Sleeth requested clarification on the salary numbers in the budget. Thomas confirmed salaries were projected at a 3.60% increase FY2011, and with a zero percent increase in FY2012 except for steps and lanes for teachers and administrators. Thomas said the only thing we know for sure is the revenue; the assumptions built in the Elementary and High School budget are same and have not been changed.

 

Rod Gottula requested the following information for the next Committee meeting: a list of all members on the teacher’s salary scale who are not in front of kids in a classroom on a daily basis, and also the cost of providing free summer school. Thomas said we haven’t forgotten any of the other items on the list of alternative cost saving ideas; we plan to revisit those items.

 

For the next meeting Barbara Bryan requested a document showing the checks and balances used for establishing budget numbers, and what checks were missing to explain why the error was not caught earlier, and what’s been done to correct the process. The purpose of this would be to restore confidence in the numbers.

 

Bills Paid – February, 2010 (summary sheet)

 

Peter Gesuale moved to recommend the Board approve the bills paid for February, 2010. Bruce MacIntyre seconded the motion. The motion carried unanimously.

 

Financial Reports – February, 2010 (unaudited) and Quarterly Reports ending December, 2009

 

Thomas reported the fiscal year is 66% complete and we have spent about 55% of the General Funds budget. We are holding our own in utilities expenditures. There are no significant variations.

 

Thomas explained if we under run permissively levied or budgeted funds the money flows into reserves. If those funds are at the maximum allowed by State law then those funds are cash reappropriated or carried over to the next budget year thereby reducing the amount of the permissive mill levy for the next budgeted year. Our permissive levied funds are Transportation 110/210, Tuition 113/213, Retirement 114/214, and Adult Education 117/217.

 

Paige asked if the Elementary Transportation Fund is carried over every year. Thomas said each year varies, but we are close to the maximum allowed by law.

 

Thomas explained there is no provision in the General Fund to carry money from one year to the next; it would require a change in State law to do that. Superintendent Copps added it’s the Board’s objective that we try to maintain a minimum of 5% reserves in our General Funds because it affects our bond rating if we fall below that level.

 

Health Insurance – Report from Joint BFR/Insurance Sub-Committee

 

Bruce MacIntyre reported last fall this Committee had questions about Health Insurance costs and what the Insurance Committee was doing about wellness programs. After meetings with the Insurance Committee it was a simple determination that they were pursuing what could be done with wellness. Questions were answered and there is no reason to continue with the joint committee meetings. We recommend the Insurance Committee give a quarterly report to the BFR Committee because it affects our financial position.

 

Health Insurance – Proposed Health Insurance Rate Increase

 

Sandie Mammenga asked if stoploss insurance and administrative fees will increase. Dan Martin replied stoploss insurance could go up 2-3%; we get that bid toward the end of the year. Claims administration did not increase. Chair Guthals asked Dan Martin how confident he is with a projected 6% health insurance cost increase. Dan said he follows the cash report all year long, and it has always suggested an approximate 6% increase. It looks like claims will equal revenues at the end of the fiscal year. Medical inflation can vary, but our actuary recommended 5.6%, so we settled on a 6% increase.

 

Rod Gottula moved to recommend the Board approve a 6% increase in health insurance FY2010-11. Bruce MacIntyre seconded the motion. The motion carried unanimously.

 

Dan Martin reported the Wellness and Disease Management Program has been approved by the Insurance Committee and they are currently working out details on the scope and cost. The program may focus on 4-9 of the most troubling diseases. There are several other wellness issues in place. Disease Management will return our investment. We can identify 40 people that are not following their doctor’s guide. The Disease Management Program cost is $3.50/employee/month which is $70-80k. We currently have $40k in a Wellness fund. The Insurance Committee recommends increasing the fund before implementing the program. We expect payback in12-18 months depending on how members react to the program.

 

Chair Guthals directed Dan Martin to bring the Disease Management Program back to this Committee next month for review since details and funding options have not been finalized.

 

Health Insurance Financials – January, 2010 (unaudited) & Actuarial Report 2nd Qtr.

 

Committee members reviewed the Health Insurance Financials, and there were no further questions.

 

Agreements of Donations for Signs at Senior High

 

At the February 15, 2010 Regular Board Meeting, the Trustees voted to refer the attached letters of agreement from Stockman Bank and Fun Foto regarding their donations to Senior High in return for advertising rights, to the Budgeting For Results Committee for their consideration.

 

Superintendent Copps said Board Policy governing signage requires Board approval. Board Policy states no signage contracts will be extended beyond a single year. West High, Will James, and Daylis signage have all been Board approved. This request for signage is from Senior High, but there’s a request to find out if we’re getting our best benefit for the dollar, and if we’re satisfying Board policy. Superintendent Copps prefers not take this item to the Board until we have time to review all information and make administrative decisions if we’re going to send it to the Board with the current offer. The proposal is to put up a sign that would generate additional revenue to build the sign. Maintenance and lighting costs would be provided by BPS. It is similar to the West High contract which is up for renewal. Administration will bring both matters to the Board for consideration.

 

Joel asked if it was a commercially reasonable proposal. Superintendent Copps doesn’t know unless they go out and see if there are other commercial interests. These businesses have stepped forward and we accepted their offers.

 

Chair Guthals referred this item back to administration for further study. The Board Chair will determine if it will come back to this Committee or go direct to the Board.

 

Enhanced PCard

 

This item will be addressed at a later time.

 

Review of Proposed Budget Changes for FY2011

 

 High School General Fund Budget

 

 

Superintendent Copps stated after subtracting out the One-Time-Only Funds of $317,893, the adjusted High School General Fund budget shortfall as of March 8, 2010 is $1,662,088. Superintendent Copps presented and reviewed the following items to reduce the budget shortfall. Some items were previously discussed:

 

 

 

Technology

“Cloud Computing” Google Enterprise for Education, Single Platform, Ink/Toner Refill Program, Help Desk, Virtualization

$57,000

Business

Warehouse, Print Shop

Under Study

High Schools (FTE Reduction does not impact accreditation requirements)

Math

Counselors

Special Education

English

Family Consumer Science

Business/Health & PE

Attendance Clerk

Paraprofessional

Curriculum TOSA/assessment 12.67 FTE

2.2

2.0

2.4

1.4

1.0

1.0

1.0

1.0

.67 $805,503

Office of Development and Advancement

Contracted Services/operations

$25,000

At Risk/Gifted Funds

West, Senior, Skyview

$450,000

Building Supply Budget Reduction

West, Senior, Skyview, Career Center

$56,800

Health Insurance (previous assumption of 12% reduced to 6%) $217,548

Additional Retirement Savings $65,000

TOTAL REDUCTIONS $1,676,851

Difference $14,763

 

Superintendent Copps said we are looking at staff reduction since approximately 90% of the budget is compensation and involves staff. We have lost over 350 in high school enrollment in the last three years.

Obviously, we can make cutbacks in the high school program. We have examined all programs to cut and none of the cuts listed here will violate accreditation standards. Superintendent Copps said we have figured ways to cut 12.67 FTE at $805,503 without anyone losing their job, which may involve some bumping down of personnel into the Elementary District. He said they are reluctant to cut the At Risk/Gifted funds by $450,000. The listed reductions total $1,676,851. Discussions are being held with the bargaining units; and, if 1% of next year’s raise is moved forward one year it will result in savings of $330k in the High School District. This amount would be specifically used to offset the $450k in the At Risk/Gifted funds.

 

Chair Guthals asked if any programs were being cut with these changes. Superintendent Copps stated they were not; they are within accreditation guidelines. Scott Anderson said some outside programs may be cut like Rimrock and Tumbleweed; however, they’re still available to us in the community and just won’t be located in our schools. Chair Guthals asked what the impact of losing the $450k At Risk/Gifted funds would be. Skyview Principal Bob Whalen said they would shift duties and responsibilities from a Tumbleweed counselor to current counselors, social workers and psychologists. Skyview has a counselor with a social worker degree. Support services would need to be adjusted, and their Angel Fund could supplement some student needs. West High Principal Dave Cobb said Tumbleweed and Rimrock services would be cut. They have an At Risk mentoring coordinator that oversees students (homeless) and facilitates after school programs that could assume some duties. Their Angel Fund would supplement some out of school student needs. Some field trips for gifted and talented would be cut. Senior High Principal Dennis Holmes reported they would reduce professional development. The Rimrock Foundation Counselor would be eliminated. Other reductions would be tutoring during lunch and after school, a .2 FTE in Science and English, and technology. Career Center Principal Stan Barr said cuts at the other high schools affect the Career Center as well.

 

Chair Guthals asked what percentage is the $450k of the At Risk budget. Superintendent Copps said it was 50% of the budget. The State used to fund $10M per year for At Risk students, which was $1M for Billings. The last Legislature eliminated the entire amount even though At Risk is constitutionally guaranteed.

 

Bruce MacIntyre said if you eliminate these funds it will potentially increase the drop out rate which will add to our problems with less revenue. Superintendent Copps said we must be more creative in how to reach these students. When we closed Crossroads we reserved $150k per high school to serve At Risk students. Peter Gesuale asked how Gifted programs would be affected. Scott Anderson said some programs may have to shift in some areas to keep other programs going. Each principal used this money as needed for both At Risk and the Gifted areas. Senior High’s .2 FTE reductions in Science and English are in the Gifted programs. Chair Guthals asked the location of the two counselor positions to be eliminated. Scott Anderson said there is one at West and one at Senior. These two schools have seven counselors and accreditation guidelines say they only need five counselors. Superintendent Copps said the dollars are based on actual salary savings and bumping for the savings.

 

Rod Gottula moved to recommend to the Board that we accept all of the High School reductions to address the budget shortfall except for the At Risk/Gifted until we know the result of bargaining. Bruce MacIntyre seconded the motion.

 

Chair Guthals asked for clarification from Rod as to his intent of when this committee would review this item. Rod’s believes we will know within 30 days if there will be concessions by bargaining.

 

Peter Gesuale asked about the impact of cutting the building supply budget by $56,800. Principal Bob Whalen said the $185/student budget would drop to $175/student based on falling enrollment counts. Joan Sleeth wants the warehouse reduction item to come back to the Committee for consideration since no dollar amount is assigned to it.

 

Rod Gottula withdrew his motion so the Committee can consider each item separately. Bruce MacIntyre withdrew his second.

 

Tom Bick asked how much money we have invested in Microsoft Outlook. Dan Martin said we are due to make another significant investment with them to update servers. Tom asked if there were any FTE savings involved in the helpdesk item. Scott Anderson said there was not, the savings was from Google.

 

Paige Darden asked how Administration made these decisions. Superintendent Copps said hundreds of hours were involved at the Central Office and building level in deciding on these items for reduction. Principal Cobb said at West there were faculty meetings with department heads to bring forward suggestions for discussion, and meeting notes went to the entire faculty.

 

Bruce MacIntyre moved to recommend the Board approve the Technology changes for a budget savings of $57,000 as presented. Peter Grass seconded the motion. The motion carried unanimously.

 

Chair Guthals said there are no qualifications for the Business Office Warehouse/Print Shop changes so this item will not be considered at this time. Thomas Harper explained we are looking at a document strategy, and different methods of handling purchasing. We will have something to present at the next meeting.

 

Bruce MacIntyre moved to recommend the Board approve the High School 12.67 FTE reductions for a budget savings of $805,503 as presented. Kelly Donovan seconded the motion.

 

Peter Gesuale asked what we lose educationally with these 12.67 FTE. Superintendent Copps explained no programs have been eliminated. Principal Stan Barr did confirm that losing a teacher in a core class does impact a number of students at the Career Center. Peter Grass stressed the need to retain counselors. Superintendent Copps said staff has discussed the options thoroughly and they are able to accomplish these savings without causing accreditation problems. Superintendent Copps said the State of Montana doesn’t fund Career Centers. We are trying to balance offerings to students at the Career Center as well as students looking at four year institutions. Superintendent Copps said they talked about equity in the buildings and the buildings were involved in these recommendations. The FTE reductions will be accomplished through attrition.

 

The motion was called for. The motion carried unanimously.

 

Rod Gottula moved to recommend the Board approve the Office of Development and Advancement budget reduction of $25,000 for contracted services/operations. Bruce MacIntyre seconded the motion.

 

Superintendent Copps explained that money was used for grant purposes, lobbying purposes, and data management. He said the money is gone, duties will be reassigned, and there will be no travel to Washington, D.C.

 

The motion carried unanimously.

 

Rod Gottula moved to postpone the proposed reduction of $450k in At Risk/Gifted Funds until the bargaining session takes place, and schedule this item on the Budgeting For Results April agenda. Bruce MacIntyre seconded motion. The motion carried unanimously.

 

Peter Grass moved to recommend the Board approve the Building Supply budget reduction for a savings of $56,800. Bruce MacIntyre seconded the motion. The motion carried unanimously.

 

Joan Sleeth moved to recommend the Board approve reducing the Health Insurance budget to 6% from the previous assumption of 12% for a savings of $217,548. Bruce MacIntyre seconded the motion.

 

Barbara Bryan asked if projected health insurance rates were considered when the contracts were signed three years ago. Dan Martin said we know insurance will increase in the range of 6-12%. Our 10-12 year average increase is 6-7%. Our negotiated contracts have language that say the District will pay 100% of a single premium for each employee; but, it is a bargained benefit.

 

The motion carried unanimously.

 

Joan Sleeth moved to recommend the Board approve the Additional Retirement savings of $65K. Bruce MacIntyre seconded the motion.

 

Superintendent Copps said that we based the $65K figure on actual declared retirements.

 

The motion carried unanimously.

 

Program/Budget Review

 

Agenda items H-2 Technology, and H-3 Warehouse & Printshop were not addressed at this time.

 

Adjournment

 

There being no further business the meeting was adjourned at 9:13 p.m.

 

 

 

 

 

 

Joel Guthals, Chair

 

 

 

 

Sherrill Sullins, Recorder