BOARD OF FINANCE
MARCH 13, 2007
REGULAR MEETING
1. CALL TO ORDER
The Regular Meeting of the Board of Finance was called to order at 6:04 P.M. in Conference Room D-172 at Simsbury High School. The following members were present: Chairman Paul Henault, Peter Askham, Nicholas Mason, Anita Mielert and Kevin North. Also in attendance were: Finance Director/Treasurer Kevin Kane; First Selectman, Thomas Vincent; Director of Administrative Services Brandon Robertson; School Superintendent, Dr. Diane Ullman; Board of Education Business Manager David Holden; Board of Education Commission Member Jack Sennott and other interested parties.
Mr. Mason made a motion to move the first agenda item, Approval of Minutes, to the end of the meeting. Mr. Askham seconded the motion and it passed 5-0.
Mr. North made a motion to adjourn to Executive Session pursuant to Connecticut General Statutes section 1-200(8) to discuss claims pending before the State of Connecticut Workers' Compensation Commission. Mr. Mason seconded the motion and it passed 5-0.
2. EXECUTIVE SESSION
The Board adjourned to Executive Session with Mr. Kane, Mr. Vincent and Mr. Robertson at 6:08 PM. Board Member Candace Fitzpatrick joined the Executive Session shortly thereafter.
3. SUPPLEMENTAL APPROPRIATION FROM RESERVES
The Regular Meeting reconvened at 6:28 PM.
Mr. North made the following motion:
Be it hereby resolved that the Board of Finance authorizes the First Selectman to enter into a full and final settlement for the purposes of settling outstanding claims before the State of Connecticut Workers' Compensation Commission with Lieutenant John Mendela in the amount of $313,000 and hereby authorizes a supplemental appropriation in the same amount pursuant to Charter Section 908(c).
Ms. Fitzpatrick seconded the motion and it passed unanimously.
Mr. North made the following additional motion:
Be it hereby resolved that the Board of Finance authorizes the First Selectman to enter into a full and final settlement for the purposes of settling outstanding claims before the State of Connecticut Workers' Compensation Commission with Sergeant Brian Logan in the amount of $275,000 and hereby authorizes a supplemental appropriation in the same amount pursuant to Charter Section 908(c). It is also understood that Mr. Logan will remain on the Town's payroll until his normal retirement date, which is February 1, 2008.
Mr. Mason seconded the motion and it passed unanimously.
4. BOARD OF EDUCATION BUDGET PRESENTATION PURSUANT TO SECTION 905 OF THE TOWN CHARTER
Mr. Sennott gave an overview of the transmittal letter to the Board which was prepared by Richard Hogan, Chairman of the Board of Education (Addendum I). Mr. Sennott stated that the Board of Education (BOE) approved a budget to present to the Board of Finance of $58,081,705, which represents a 5.07% increase over the 2006/07 budget. Mr. Sennott pointed out that last year's base included $300,000 for an OPEB contribution and, if that amount is removed from the base, the percentage of increase becomes 5.64%. He noted that the BOE had many meetings with school and administration representatives in which it was always mindful of the 4.5% guideline. He explained that, in the last few years, the BOE has been trying to move from a one-year planning process to a longer view. Enrollment projections indicate that there
are is a large population moving through the middle school to the high school and, when such patterns are looked at through a one year window, the opportunity to make significant changes is lost.
Mr. Sennott stated that, upon Dr. Ullman's arrival, the BOE started a long-term priority process and their budget considerations included:
" A five-year technology plan from which a gap analysis was created
" A six-year capital plan that has minimal disruption of classroom services or supplies
" A comprehensive high school review of curriculum and offerings
" Recommendations of the NEASC accreditation review
" Enrollment changes and the ability to align certified staffing with them
" People costs, which represent 70% of expenditures, in relation to class size
" Insurance and utility costs
Mr. Sennott indicated that the budget area of most concern was technology. He stated that originally the BOE submitted a capital request of $500,000 to invest in technology in response to the gap analysis. However, this project will not move forward in 2007/08. Mr. Sennott stated that there is technology currently in place which requires approximately $400,000 in annual spending to replace. In order to make up the shortfall identified in the gap analysis, it would take approximately $1 million per year over the next five years. Ms. Mielert asked if the $600,000 being requested in the current presentation would replace the original $500,000 capital request. Mr. Sennott replied that there are some overlaps, but the $500,000 capital improvement item consisted primarily of infrastructure expenses, whereas the
amount in the current operating budget is targeted specifically for classrooms.
Mr. Sennott summarized that, of the $2.8 million in their operating budget, the BOE is requesting that $627,000 be directed specifically to improve technology that is currently in the classrooms with curriculum. He also stated that the BOE would be prepared to provide an accounting on an annual basis of how this money would be spent and that it could be tracked through a separate account. He concluded that the BOE would meet the 4.5% guideline were it not for the critical need for technology improvements.
Mr. Henault asked the Board members for their questions. Mr. Mason clarified that the center column on page 1 of the Annual Budget booklet should read "2006/07 Forecast" rather than "2006/07 Budget". Mr. Mason asked about how the $300,000 OPEB line item was dealt with. Mr. Holden explained that the $300,000 item is not included in the 2007/08 budget as it was the Board of Finance's instruction that it should be removed from 2007/08 as it would be entirely in the Town's budget. However, the 2006/07 budget number is what was approved at the May Town Meeting and, therefore, cannot be altered and must serve as the base. For purposes of the transmittal letter, the percentages worked off the lower base.
Mr. Askham confirmed that next year's enrollment would be down by approximately 44 students. He asked about full time equivalents. Mr. Sennott indicated that the FTE's were down by approximately .7 of a position and that non-certified personnel were up by 10 FTE's, although the substitute and temp pool was reduced by an amount equivalent to 3 FTE's and were replaced by 3 FTE's in various elementary schools, resulting in a net increase of approximately 7 FTE's. The positions are primarily in elementary math paraprofessionals and an Assistant to the Business Manager position in response to the management letter from the auditors. Dr. Ullman indicated that they have projected 4.5 less teachers for the elementary schools next year and have added positions at the high school, resulting in a net change of .7 FTE.
Mr. Askham asked about the current status of class size. Dr. Ullman responded that in the budget being presented they would meet the class size guidelines at the elementary and middle schools, but that this year 62 classes at the high school remain over the guidelines. By moving staffing from elementary to the high school, they hope to be very close to meeting the class size guidelines at all three levels.
Mr. Askham asked how they arrived at the $627,000 amount for technology. Mr. Holden stated that, in lieu of the $500,000 capital expenditure, they took the $227,000 that was in their operating budget and consolidated it with $400,000 that they were going to request out of CNR, and included the total amount in their operating budget for full funding.
Mr. Askham asked about the $526,000 reimbursement to CNR that was in the operating budget. Mr. Holden explained that their CNR request is $513,000 as opposed to the $1,054,000 that was originally going to be requested. $102,600 would be their first repayment, which increases their total funding amount to $526,000 for the prior four years plus 2007/08. Mr. Askham noted that CNR has been used in the past to fund things like school buses that were behind so as to get them into a recurring current funding schedule. He stated that he would like to use CNR to address the technology gap issue. Mr. Holden stated that they have only included items in CNR which meet the original intent of Capital Nonrecurring: school bus replacement, maintenance vehicles, and building modifications such as interior improvements,
ceiling/flooring replacements and plumbing improvements and restoration of restrooms.
Mr. Askham noted that the gap analysis identified a need of $501,480 per year for five years. Mr. Sennott clarified that the amount is in addition to what is needed for replacement. Dr. Ullman noted that technology is not evenly distributed and is just in the high school. Mr. Sennott stated that anything above the $416,000 helps chip away at the shortfall and that they are asking for an amount to close the gap within a five-year period. He also noted that the BOE recognizes that it can not all be funded by the taxpayers and that funding should be sought from corporations, etc.
Mr. Askham stated that, given all the recent demands on reserves, he is inclined to try and deal with this issue through the Capital Nonrecurring Fund, although he was uncertain if there would be enough money to accomplish the full plan, but perhaps a partial start could be made.
Ms. Mielert asked if the technology investment would have an impact on reducing personnel over time. Mr. Holden responded that, as technology equipment is added, there is an impact on the operating budget in that digital projectors have bulbs that wear out and must be replaced and that repair technicians to service the internet in a timely fashion are needed so that the equipment is functioning. Dr. Ullman stated that the technology is aimed more towards significantly enhancing the quality and the structure that is provided, rather than replacing people. Mr. Sennott stated that an application currently in its infancy that requires some further study would be the remote classroom opportunities that technology provides. But he concurred with Dr. Ullman that the primary intent is to enhance the learning experience and
to aid classroom teachers.
Mr. Henault noted that, from an efficiency standpoint, the technology investment would not fit the usual corporate world scenario where you invest in technology to lower your personnel needs. Mr. Sennott replied that another way to measure technology's impact in the business world is to evaluate what it does to enhance the product and, in this case, the return on investment measure would be through learning and not reduction of cost; technology improves curriculum, which results in better student achievement and provides a more effective way to teach. Dr. Ullman noted that it also is a method of staying competitive with similar districts and Simsbury is behind, which means students are losing a competitive advantage, which would be another concern in the business world analogy.
Mr. Askham noted that the Governor's budget involves a certain level of confusion in that there will be a different way of providing reimbursement for education and, if revenue amounts are known, it makes the decision process smoother. He asked if there were any indications as to what will be received. Mr. Sennott replied that, although the amounts are not quantified, the widespread belief is that there will not be a negative change.
Mr. Askham asked about the changes in the ECS formula. Mr. Holden stated that the proposal is to increase the excess cost reimbursement for special education to 100%, which is reflected in their operating budget as a $30,000 increase, and that there is a projected increase to $3,000 for each Project Choice student, which has been reflected as well. If those dollars are not realized in the Governor's budget, there would be $70,000 at risk. Mr. Askham inquired if there were any more "moving target" revenues. Mr. Sennott replied that there has been much discussion over whether or not to include grant revenue if there is uncertainty as to whether it is obtainable and they decided not to include such projections. Mr. Askham asked about "pay for play" programs and Mr. Holden indicated that they
would remain at the same level as 2006/07.
Mr. Askham noted that salary expense increased by only 3.1% and Mr. Holden stated that this was due to the contracted wage increase being offset by nine retirements.
Ms. Fitzpatrick asked Mr. Askham if he agreed with Mr. Sennott's feeling that moving the technology gap funding from the operating budget to CNR would result in a loss of funding. Mr. Askham responded that, from the perspective of the BOE budget process, there is a loss, but from the perspective of setting tax increases, it would not be totally true. Mr. Sennott noted that the number could be grossed up for a net effect, but that his point was, if you put a dollar in an operating budget, it is all in the budget, whereas if you put a dollar in CNR, you only get 80 cents of the benefit. Mr. Askham stated that he favors feathering things into the budget and, with regards to the BOE's long-term outlook, there is declining enrollment, which would allow for a perfect time to feather this funding in. It is more difficult to
put a large number in all in one year and it is easier to smooth it in over five years.
Mr. Mason thought that it is important to keep operating items in the operating budget and put capital items in either the capital plan or CNR. If the CNR budget keeps accumulating, eventually that amount essentially ends up in the operating budget anyways. If there is an ongoing long-term need over a five-year period, Mr. Mason thought that it makes sense to keep the amount in operating.
Mr. North thought that the technology gap funding is an ambitious and worthwhile project to consider in whole or in part and that by funding it through CNR, the expense is effectively absorbed over ten years instead of five and the depreciation part is picked up in the sixth year, resulting in a reduction in tax increase to the taxpayer. Mr. Mason felt that the need is constant and repetitive. If the equipment had a longer actual life, Mr. North thought there would be a net decrease. Mr. Mason stated that he was making a simple assumption that the useful life and the actual life were the same, although admitted that was not necessary the case.
Mr. Askham stated that if reserves are used to fund CNR and the expense is put into CNR, there is less of an immediate tax increase. If the expense is put into the operating budget, the result is an immediate tax increase. Mr. Askham felt the question is how much of the reserves are available. Mr. Henault pointed out that the reserves have been hit pretty hard this year. He also noted that, if the budget request had come in at 4.5%, this discussion would be short. What has to be dealt with is the difference and if there are additional revenues to offset taxes or can be used to provide for education.
Mr. Henault noted that 19 of the 20 people who spoke at last night's public hearing on senior tax relief were not happy with BOE spending and tax increases. He said that, when the Senior Tax Relief Committee presented to the Board of Finance, one of the questions they were asked was, when the tax burden is shifted to other taxpayers, how does the Board explain the increase in their taxes? He asked the BOE to be able to answer to the seniors as to why their taxes are getting raised. Mr. Henault stated that, with declining enrollment, it is difficult to justify additions to staff. He said he has the same comment as he made to the Board of Selectmen when they proposed adding staff, namely, when you hire new staff, you "own" them relative to benefits, liability, etc. Relative to technology, he reiterated
that normally addition of technology results in efficiencies of staffing.
Mr. Mason stated that the comments at the public hearing concerning senior tax relief were not aimed directly at the BOE but rather higher expenses for the Town in general and high tax rates.
Mr. Askham said that he believes in technology and has seen the power of it, although wondered if there might be ways to adjust the program, such as making a five-year plan a seven-year plan, etc. He reiterated that he would like to work it through CNR due to the lesser tax impact. He noted that the favorable OPEB funding amount frees up some dollars that can be used.
Ms. Fitzpatrick asked if the technology component would have to be removed from the budget proposal if the BOE were to be asked to adhere to the 4.5% guideline. Mr. Sennott responded that he could not answer for the full BOE. Mr. Mason stated that making that kind of adjustment would represent almost 25% of their increase, which is no small adjustment. Ms. Fitzpatrick asked if the implementation of the new math program was causing budgetary increases. Dr. Ullman responded that the significant increase in textbook expense is largely attributable to elementary math and additional staffing involves math tutors. Dr. Ullman explained that the new math program is a problem-solving based curriculum involving very clear basic skill practice and opportunities for students to learn the regular algorithms.
Mr. North pointed out that 1.14% of the 5.64% increase is technology. He thought it might be reasonable to take that 1.14%, divide it by 5, and try to fund it out of CNR. He thought that, if the 4.5% were increased to 4.75%, the expense would be covered if it got paid via CNR. Mr. Holden pointed out that it should be recognized that this scenario would involve putting the digital projectors with a ten-year useful life and computers, items which would normally not meet the criteria for CNR by definition, into CNR. He noted that the Board of Finance had previously advised that it did not want computers being bought out of CNR. Mr. North thought that, with a 4.5% Board of Selectmen increase and a 4.75% Board of Education increase, the overall increase would be in the area of 4.65%. He proposed that Mr. Kane
and Mr. Holden work with that scenario.
Mr. North asked that the BOE provide a FTE Exhibit, which has normally been included in their presentation. Mr. Holden indicated that he would e-mail this exhibit to the Board members. Mr. North stated that he agrees with Mr. Askham in that the issue needs to be addressed and the task at hand is to figure out how to fund the technology initiative and also keep tax increases reasonable. He thought that what was heard at the public hearing was the need to control expenses Town-wide, which are borne by everyone, not just some select slice of the community.
Mr. Mason asked if the NEASC report issues were being addressed. Dr. Ullman stated that the issues are being addressed in part, but that it would be impossible to accomplish everything listed in the report in one year. She stated that an action plan is being developed to track progress at responding to the report and that it will take 2-3 years to address all the issues. Mr. Mason stated that he becomes concerned when he sees references to "textbooks without covers and missing pages". He complimented the BOE for their efforts with the capital plan and the technology gap analysis.
Ms. Mielert concurred, stating that the BOE is addressing issues that have long needed attention. She also agreed with Mr. North's suggestions as she felt that the role of the Board of Finance is not just to hold costs down, but also to find ways to provide the people what they want.
Ms. Mielert asked about the non-public schools budget, noting that it used to be $35,000 and is now $500,000. She asked if this amount included magnet schools. Mr. Sennott replied that it did not; the budget is for transportation, nursing, and psychological services for all of the private schools in town (St. Mary's, the Masters School, Montessori, Ethel Walker and Westminster). By statute, the Town must provide the same services to those schools. Mr. Holden clarified that, in order to receive theses services, 50% or more of the students must be from the State of Connecticut. Mr. Henault also noted that the IDEA program is a federal mandate requiring that psychological services must be provided to private schools and is what is driving this expense increase; Mr. Sennott stated that it represents over half of
the increase.
Ms. Mielert asked about the magnet school program. Mr. Holden stated that there are students who attend the Magnet School for Performing Arts, the Math/Science and the University of Hartford Magnet School and fixed dollar amounts that are paid for them. Dr. Ullman noted that there is also pending legislation that would require payment for students who opt to attend Hartford Host Magnet Schools and local control as to how many seats to provide could be lost or limited.
Mr. Holden stated that there are currently 94 Project Choice students and that they are projecting 100 for next year. A fixed dollar amount per student is received from the State as a restricted State grant and the tuitions are paid out of that amount. The cost is approximately $124,000.
Ms. Mielert asked about the teacher contracts. Mr. Sennott replied that they are in Year 2 of 3 and that the percentage increase for 2007/08 is 4.25%.
Mr. Henault ascertained that the net salary expense increase attributable to the staffing increase would be approximately $200,000 and that the additional staff is primarily paraprofessionals, math tutors, Assistant Business Manager, and part-time resource and tech positions at the high school. Mr. Henault noted that Simsbury is rated 16th out of 27 towns relative to net current expenditures per pupil for 2005/06 and that represented being about $500 per pupil off the median. He noted that enrollment for October 2006 was 4,596, which is just below 2001 enrollment and slightly above the enrollment for 2000.
Mr. Holden confirmed that there is an error that needs to be corrected on page 36 relative to the projected end-of-year expenditures total for "Insurance-Employee". Mr. Holden noted that, in order to achieve level funding in that account, the Connecticare HMO is being moved to a self-insured program as opposed to fully insured to consolidate the risk pool of both the HMO and the PPO into one risk pool, based on a unanimous recommendation of the Insurance Committee. Mr. Askham asked about the current claim status and Mr. Holden replied that, with the exception of a couple of large claims, they are on target with where they anticipated the claims to be.
Mr. Henault asked about the increase of $115,000 for "Non-Instructional Equipment" and Mr. Holden responded that the amount is for specific needs within each building as identified by the principals and represents classroom furniture and custodial equipment. Mr. Holden also confirmed that there are two new school buses included in the budget, which is exactly what is needed.
Mr. North stated that he noted in the minutes of the Public Building Committee that there had been a program request in the Tariffville School renovation to include a backbone for air conditioning and asked if this would be a new standard that could be expected in all future public school projects. Mr. Holden replied that it was the request of the BOE that any future major building renovations include air conditioning for the facility. Mr. North questioned the percentage of use that the school buildings get in the summer months. Dr. Ullman stated that most of the elementary schools are used in the summer months, except for the later part of August. Mr. North asked if anyone had done an analysis of the associated costs that would be incurred due to such a decision. Mr. Sennott stated that the primary focus
was on maintaining temperatures in the classroom and air quality and health in that moisture and mold are effectively controlled by air conditioning.
Mr. Askham asked about joining energy co-ops and Mr. Holden replied that this was done a year ago and that they secured a fixed price for the generation portion of their electricity for three years by joining a co-op along with 60 other Boards of Education. Also, next year's #2 heating fuel has been purchased at a fixed price of $2.07 per gallon. They are also working with CL&P towards retrofitting the schools so as to try and control the energy costs.
The Board reached a consensus to move the budget as presented forward to public hearing and to work on ways to address the technology gap issue.
5. APPROVAL OF MINUTES
Ms. Fitzpatrick made a motion to approve the minutes of the February 27, 2007 Regular Meeting and Mr. Mason seconded the motion. Mr. North requested clarification of one of his statements on page 10. The motion to approve the minutes as amended passed 5-0 (Ms. Mielert abstained).
6. OTHER BUSINESS
Mr. Henault noted that the Board was provided a document prepared by Mr. Kane on projected investment income (Addendum II).
Mr. Henault stated that there would be a presentation at 6:30 PM on March 29, 2007 at the amphitheatre by representatives of the Metro Hartford Alliance. The BOS budget includes a $12,000 line item to use their consulting services.
Mr. Henault stated that he had prepared a letter in response to the letter received from the Planning Committee. He read the letter into the record (Addendum III) and asked the Clerk to mail a copy to the other Board members.
6. ADJOURNMENT
Ms. Fitzpatrick made a motion to adjourn the meeting at 8:00 PM. Mr. Askham seconded the motion and it passed unanimously.
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Paul Henault, Chairman Debra L. Sweeney, Clerk
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