Birmingham Board of Education Finance Committee Meeting – June 18, 2012

NOTE:  My apologies for not having this completed earlier.  A range of personal circumstances conspired to keep my away from my duties.  Even though the Birmingham board is set to vote today on the financial plan required by the state department of education, the discussion at the finance committee meeting is relevant.

While this is obviously a local issue to Birmingham, Alabama, the whole idea of using committees to conduct the work of a board of education is not a widely accepted practice among Alabama’s school systems.  Birmingham’s Board of Education utilizes standing committees which meet on a regular basis.  Chairmanship of the committee rotates among board members.  Ad hoc committees are also in use.

This was the first committee meeting of any type for the Birmingham Board of Education that I have attended.  Four board members were in attendance:  Virginia Volker, April Williams, Brian Giattina, and Emanuel Ford.  Mr. Ford is Chair of the committee.  Mr. Giattina was previously the Chair.

Much interesting discussion was had during the course of meeting, including a discussion of a mandatory direct deposit program for employees, possible renegotiation of interest rates with Regions Bank on the districts’ deposits, resurrection of a detailed financial report to allow board members to better understand how money is being spent, resurrection of a financial report that would allow board members and principals to get a clear understanding of how money is spent at the school level, and brainstorming of ideas for cost savings across the district.  And after an hour and a half of discussion, an audience member being allowed the opportunity to express her frustration with the inaction of the board and their perceived lack of urgency to deal with the necessary preparations for the next school year.

Upon entering the board room (where the meeting was held), I saw a very large square table set up in the area in front of where the board sits during meetings.  I took my seat in the front row, right side.  There were nearly 10 people in the audience (not counting media).

Just prior to the start of the meeting, Mr. Ford invited all in the audience to take a seat at the table with the board and other members of the committee.  He was genuinely sincere, saying there was plenty of room at the table for us and we were welcome.  If I hadn’t been in public, my jaw would have dropped at Mr. Ford’s invitation.  In my years of attending this meeting or that meeting, never before have I seen a school official invite the general public to sit at the table with them.  It was inspiring.

I kept my seat in the front row, but one parent did take a seat at the table.  In my opinion, this should be standard practice for any working committee of a school board.  Thank you, Mr. Ford.  Ford also asked everyone to introduce themselves, including those of us seated in the audience…including the media.  It was a hospitable gesture and much appreciated.

Also in attendance were Superintendent Dr. Craig Witherspoon, Chief Financial School Officer (CFSO) Arthur Watts, AEA Uniserv Director for Birmingham Lance Hyche,  and Birmingham Federation of Teachers President Richard Franklin.  My apologies to the others seated at the table, but I did not catch your names.  Citizens for Better Schools’ Executive Director Ron Jackson documented the meeting with pictures and video.

Ford indicated that he was waiting on information to be brought to the meeting, and that others were welcome to ask questions during the wait.

Board member April Williams asked for clarification about the timeline the Board needed to meet to comply with the State’s requests.  Apparently the Alabama Association of School Boards  (AASB) is holding its summer conference in Orange Beach June 23rd through the 26th and Williams is concerned about the juxtaposition of the end of the convention (noon on the 26th) and the 3:30 p.m. June 26th Birmingham Board meeting where the Board will be required to approve whatever plan is submitted and approved by the state team (by June 22nd).

[NOTE:  The cost for school boards to attend the AASB summer conference is paid for with local monies.  In addition to registration of $239 or $259 (if you register after June 15), rooms cost between $244 and $264 (for a pool view) at the conference, and meals and travel are covered by school districts, too.  While quality training is provided, the cost to Alabama’s school community could be upward of $1,000 per school board member.  That’s local money.  And school boards typically have five board members at a minimum.  Not everyone goes, for certain.  Superintendents are also invited, as are school board attorneys, all paid for by school districts with local money.  This will all be looked at a little closer in a future post.]

Watts and Witherspoon clarified the timeline for Williams:  June 22 was the deadline for Birmingham school personnel to put together a plan to implement the plan the board approved to bring their reserves to the equivalent of one-month’s operating expenses, an amount calculated to be $17 million.  [That deadline was met.] The Birmingham board must vote to implement that plan by June 26, or the state superintendent will take control of the school system’s fiscal operations (how the money is spent).

Virginia Volker asked about a report format that Brian Giattina had presented more than a year ago which gives board members meaningful information about expenditures at each school in the district.  Watts said that they have not had the technological capability to re-run that report.  The first report was manually entered into a computer and has not been able to be regenerated.

What is this report, you ask?  I had the good fortune to get a look at it when it was first generated, and it is a look at how monies are distributed/budgeted among schools:  personnel and operational.  That is the only document I have ever seen organized that way.  It was developed by the Public Affairs Research Council of Alabama at the Finance Committee’s request in 2010.  A second report developed looked at “object of expenditure” (a term used by accounting folks) which broke out expenditures in, for example, special education, on personnel, materials and supplies, purchased services, and so forth.  The report is limited by the categories used in the ALSDE’s Accounting Manual (which are standard accounting categories).  [NOTE:  I dream of one day creating/having access to an expenditure report that the average person can understand and that actually means something…..  Another post for another day.]

I once saw another, more detailed report, that was generated for the board that went so far as to break out specific expenditures for things like travel, substitutes, and such by school.  Having worked to obtain that type of information from my home district years ago, and being thwarted by school officials that they “don’t have that information compiled in that manner”, and being directed to General Ledger entries to “fish” that information out for myself, I can attest to the value of a document like the one I saw.  The depth at which school-specific financial information is, well, hidden, is discouraging to folks who believe that the public deserves a look at such expenditures.

Anyway, this report got hung up in the “things to do” folder, apparently, and has never been regenerated.  Both Volker and Williams spoke of the usefulness of the report and how they want Watts to pursue making it happen.  He agreed to do so.

Volker stated she would like to see principals get access to the report and be able to compare themselves to other schools, but Williams stated she didn’t believe that would be helpful.  [NOTE:  Once the document is produced, it becomes a public document.  Anyone can take a look at it if they can get their hands on it.]

Williams was very concerned about schools that spent more money than they were budgeted to spend.  She stated that, for example, she was concerned about the large amount of money some schools spend on substitutes (she referred to them as “supply teachers”).  Watts stated, “We do budget substitutes”.  Williams asked, “So how are they (schools) managing it?”  Watts, “Not very well.”  Witherspoon stated, “We’re going to pay closer attention to what was budgeted and teacher attendance primarily from an instructional standpoint.”  Good idea.

Williams went further, stating that there are consequences for being overdrawn (as in, spending more money than you are budgeted to spend).  “You can’t overdraw your checking account,” she added.  She was referring to the disparity between what is budgeted and what is spent by schools.  She said that the budget is just a bunch of numbers if there are no consequences for going over budget.

That was the most thoughtful comment of the meeting.  As a school finance clarity proponent over the past 10 years, this is truly at the heart of the problem and confusion with school spending, in my opinion.

I have been told, by an award-winning CFSO nonetheless, that the budget is simply a planning tool.  Budgets are not made to be adhered to, in other words.  I have example after example where school districts have not adhered to their budgets or have submitted meaningless numbers, approved by boards of education, in order to meet the requirement to have a budget submitted by a certain deadline.  And while the financial reporting requirements have been strengthened in the past few years, numbers still appear to be largely uninterpretable and meaningful only to those who have access to the detail.

Sorry, I digress.  Back to the meeting.

Next most thoughtful comment:  Volker stated, “We don’t ever hear when budgeted numbers are exceeded, and yet the state is saying it’s our fault.”

A discussion then ensued about what reserved fund balance is versus unreserved fund balance.  There was some confusion among board members.

Watts explained that “reserved fund balance” means that the money in that account is already obligated to someone, as in a contract (or multiple contracts).  “Reserved” means that it is “reserved” for someone else and cannot be spent by the district.

“Unreserved” fund balance is the amount with which the state is concerned.  That amount is estimated to be $2 million at the end of the fiscal year (September 30, 2012).

Richard Franklin interjected to be certain that everyone understood that Birmingham City Schools will not have $17 million at the end of this fiscal year even with the cuts that will be made.  Williams stated, “oh yeah, everybody knows that.  It’s gonna take 2, 3, 4 years.”

Watts then stated that given the financial climate of the past few years, it is remarkable that Birmingham City Schools are not in the red.  He stated that proration has cost Birmingham City Schools $32 million in the past 3 to 4 years.  That the system readjusted where they could and used local monies to make up the difference and did not have to incur additional debt.  In my opinion, that is something to crow about.  Proration is very harmful to school districts.  School districts were exempt from the one-month’s operating expenses’ requirement during years of proration, but the exemption only held true during years of proration.

Franklin stated that every year, the brunt is borne by the lower level people, and that if they don’t make the right decisions, right now, they’ll all be right back at the same table.

Williams asked everyone to remember that the board can only take actions on recommendations from the superintendent.  It appeared that she was implying that the board has never been given a viable plan to cut spending.

Williams had many specific ideas for reducing spending, ranging from providing services to generate income (recycling copy paper) to realigning salaries to be more equitable, for example, among teachers and administrative assistants.  She stated that it was not fair for administrative assistants to earn more money than teachers.

Grant writing was offered as a way to increase revenue as well.  I did not catch the name of the woman who suggested that.  She indicated that hiring a grant writer could generate a good return on the investment.  Williams agreed.

Williams mentioned that until the student population is stabilized, continued decline will put the school system in this position every year….having to make deep cuts.

A parent (again, I’m sorry, I didn’t catch her name) sitting with the committee very clearly stated many concerns she had, including unequal/inequitable distribution of Title I funds causing some schools to have to work harder to raise money than others; crime in neighborhoods pushing folks out into other areas, which then causes school populations to shift; illogical distribution of students, causing students to bypass one school to get to their “zoned” school.

She stated that the school system should be looking at what’s going to work for the community, not just the schools when they draw attendance zones.  (Amen.)

Ford asked Watts about outdated yields and deposits and whether the system was earning the best rates.  Watts indicated that they have not looked since the last time Regions was awarded their business.  At that time, a request for proposal (RFP), or bid, was sent to every bank in Birmingham to look at interest rates.  Regions opened a $20 million line of credit for the system to cover shortfalls in the event of proration (which did happen that year) in 2008.  Watts indicated that was a major consideration in choosing Regions.

Volker asked if they should look at banks again.  Watts indicated that it might be difficult to get the same interest rate they have now on their deposits due to the struggling economy.  Hyche asked if the system could negotiate a better rate with Regions.  Watts indicated they could try.  Watts indicated he believed the system has a $3-4 million daily balance.

Williams asked if Witherspoon could bring the board a recommendation regarding recycling of copy paper that could generate income. Witherspoon said they hoped to complete a study about that process by the fall.

Williams asked if they were considering redrawing attendance zones.  Witherspoon said that they do have software that can look at reworking attendance zones, and that he hopes to commission an attendance/demographic study in the fall.  They’re trying to determine if they want to do the study in house or hire someone outside.  He said they’re now at the point where they can “drag a stylus” and repopulate a school based on the new attendance zone.

Williams asked if the system is “missing out” on money from the state for assistant principals due to the system creating more K-8 schools.  Volker indicated that Tuscaloosa was able to split elementary and middle school units and earn more money for assistant principals’ pay.  Williams asked Witherspoon if they could look at that area for improvement.  Witherspoon said yes.

Volker asked a question about leftover Title I money and the budget they amended in April.  Watts indicated that those were federal dollars and thus earmarked.  They used the leftover/carryover for summer programs and professional development.

Volker asked about the per student allocation from the state and whether the dropout recovery program helped with their allocation.  Witherspoon explained that the system will earn additional monies for those students who entered in the 2011-2012 school year during the 2012-2013 school year.  [The state uses the student population from the previous year to calculate per student allocations.]

Volker asked about the J. Vincent Group and where that settlement was.  Witherspoon indicated it was still in the courts.  Volker asked Witherspoon to update the board on that.  He agreed to do so.

Watts unveiled a direct deposit program for Birmingham City School employees, to be tested during July.  He said they are working to go to 100% direct deposit for all employees.  Regions agreed to work with the system to provide checking accounts and training to those individuals who do not currently have bank accounts.

Volker asked whether the system had already done that, and Watts responded they had encouraged employees to use direct deposit, but now it will be mandatory.  Hyche indicated the AEA’s credit union would help employees obtain accounts, too.

Williams asked whether the district would dictate which bank must be used, and Watts said no.

Williams asked about payroll stubs/statements and how those would be provided.  Watts replied that they would be provided through e-mail.  Williams expressed her concern about some folks’ lack of access to e-mail.  Witherspoon said they are prepared to work with individuals or groups of individuals to help them work with e-mail.

Volker asked how many statements they currently mail.  Williams indicated that it was a lot and a lot of manpower is used every month to mail those statements.

Hyche interjected that if Watts could get Regions to provide some financial literacy training with those accounts, the AEA would work with the district.

Williams had further questions about e-mails and Watts indicated that the district will do a test with Central Office employees in July and hope to have it all up and running by September.

Williams asked if they have the ability to do electronic purchase orders yet.  Watts indicated that Birmingham will be one of the first in the state to do electronic purchase orders and that should be ready soon.

Watts then indicated that Ford had asked him to explain how the reserved fund balance changes every month.  While I was not looking at the documents to which they were referring, the conversation indicated that they were looking at one financial document that stated they had $4.8 million in a reserved fund balance in one month that had decreased to $4.1 million the next month.  The balance dropped because $700,000 (the difference) in bills were paid with those monies between March and May. Watts said bank statements are reconciled every month (in accordance with state requirements).

Franklin stated that with an unreserved $2 million amount, at some point, they have to start saving during the year.  Giattina stated that the board would love to build it up faster.    Franklin stated that they can’t keep having these “Come to Jesus” meetings at the end of every year.  Heads nodded in agreement.

Volker asked about the financial plan that the board passed on April 24 that was supposed to provide for a one-month operating fund.  She asked why that plan wasn’t good enough and why the state did not acknowledge it when they said that the district had not submitted a plan, when in fact they had.  Conversation got a bit confusing for me at this point, as there were people correcting each other about dates and plans and requirements. Because none of that matters at this point, I’m not going to try and decipher it here.

Williams said she would appreciate the opportunity to look at the other 15% of the pie, as they always look first to personnel (averaging 85% of a districts’ expenditures) and there may be other ways to save money other than simply cutting personnel.  Good idea. 

Ford mentioned duplication of services, and Watts admitted there is some of that.  Williams asked if an ad hoc committee could be put together to look at all of this holistically.

The question was asked by a parent on the committee whether anyone ensures that schools don’t overspend.  Watts indicated that each school is governed by local school accounting policies and procedures.

The parent then asked about transportation costs and why they are so high.  Watts said that is an area they are looking at more closely.  He indicated that special education students’ transportation is “really really” costing them and they are looking at ways to reduce that.

Ford indicated that he had a neighborhood commitment and they needed to adjourn the meeting.  It was nearly 7:00 p.m. at this point.  The parent was highly agitated that she now had the opportunity to ask some questions and they chose to adjourn the meeting.

The next 10 minutes or so were very intense as that parent accused Williams of taking over every meeting she was a part of and not allowing others to participate.  Williams appeared taken aback by the accusations and conversation between the two continued.

At that point, a teacher who had been sitting in the audience listening took the floor (everyone was standing at this point) and said that she is expected to have a lesson plan, and they can all meet here with no plan at all.  She said she hasn’t seen the financial plans yet, hasn’t seen a budget for next year, and accused the board of playing games.  She said school will start soon and she doesn’t know if she’ll have a job.  She said “we better get this done.”

Williams stated “I definitely understand your plight.  None of take this lightly.”

At that point, some folks left, some folks continued the conversation.  The meeting itself was obviously adjourned, but the dialogue continued.

These committee meetings can be powerful conversation starters.  It will be interesting to see if any of these concerns are addressed at the regular meeting on the 26th.  Committee meetings are an excellent opportunity to hear about what is going on in the district.  My thanks to the committee for providing the school community this opportunity.

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