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January 24, 2012

Welcome to my blog!  Over the coming months I hope to use this space to answer questions, recognize the great teachers and best practices I see during my school visits, and to discuss the work we are doing to support you in developing Douglas County School District students to be the best prepared in the world.

Through these posts, I hope you get to know me a little better.  I also hope you will find factual, candid answers to your questions.  I look forward to providing interesting information about legislative activity impacting education, amazing things happening in our profession, and more.  From my view, a blog may not be as personal as an email, but this blog will allow me to differentiate – to provide quick, factual emails to those who aren’t as interested or don’t have the time for more while still providing an in-depth discussion of various topics for those who are interested.

Before I get started, I want to invite you to participate in a telephone town hall with DCSD parents on Wednesday, January 25 at 6 p.m.  Join the discussion by calling 877-228-2184, and entering the passcode 19350. As always, please feel free to email or call me at any time if you have questions or concerns.

Additional telephone town halls have been scheduled on the dates shown below. All town halls will begin at 6 p.m. and you can participate by calling 877-228-2184, and entering the passcode 19350.

January 25                  March 14               May 9
February 16                April 11                   May 23
February 29                April 25                 June 13

There have been many questions about budget and budget development, so I am going to start with an in-depth discussion about the key components of budget development.  I am going to start with a high-level status report and then move into the nitty-gritty of budget development.  After that, I’ll touch on a couple of other timely topics.  I have provided headings in hope that you can skip around – access the parts most important to you.  I realize it’s long.  I have tried to anticipate questions or moments of likely misunderstanding and address them along the way.  Again, don’t give up on novels…just go to the parts you want to know. 🙂

Budget – High Level Status Report

As you may know, Governor Hickenlooper has amended his proposed budget and has recommended that the $89 M cut to education be taken off the plate.  This is great news!  However, there is still a homestead senior tax credit that is to be reinstated for FY 2013 that will cost about $100 M, and is not addressed in his current budget.  In addition, the legislature has not given us their thoughts on the FY 2013 budget.  Therefore, while we are somewhat more optimistic than we were a few months ago, there is not enough evidence to completely change our budget development assumptions at this time.  We will continue preparing for multiple scenarios.

We have been preparing for what we believe is the worst case scenario, and from there, discussing what we will do in the event of a smaller reduction.  Our goal remains to bring the SBB reductions required for a balanced budget down, and while I am not able to discuss details (because they must go through negotiations), like I have said before, there is a pathway that gets us to zero furlough days.  That is a priority also.  I am hopeful that together we can bring our Board a final budget recommendation that requires zero furlough days, requires a $50 or less SBB reduction in our elementary schools (zero is the goal), a $100 or less SBB reduction in our middle schools ($50 is the goal), reduces class size and preserves electives in our high schools.

First Things’ First – Fiscal Years Defined

Ok so here is a piece of background knowledge you need for all of this to make sense.  School district budgets are done on fiscal years (FY) not calendar years.  Fiscal years go from July 1 to June 30 – they are aligned to school years and the FY number aligns to the second year in a school year.  For example, FY 2011 = school year 2010-2011.  We just completed FY 2011.  We are currently in FY 2012, and we are planning for FY 2013 (next year).  Got it?  Where’s the quiz? 🙂

Fund Balance & The Nitty Gritty of Budget Development

I need to take a minute here to explain budget vs. actual, fund balance, and carry forward money.  Each year we take the total revenues of the district and allocate them to our expenditures – this is the budget.  A budget is a plan for spending. (Note: approximately 90% of DCSD revenues go to salaries and benefits – I’ll come back to this.)  Once we allocate money to a budget, it is now that budget holder’s to use.  It might be completely spent.  If it is, the actual will equal the budget, and there will be no carry-forward money.  If the budget-holder does not spend the entire budgeted amount, the actual will be less than the budget and the difference will be part of the carry-forward.  In our district, school and department carry-forward go back to the budget-holder to use in the future.  However, that money shows up as part of the total district carry-forward amount even though it is promised to that budget-holder.

Budget = Actual = No Carry-Forward = No Fund Balance

As a high school science teacher, our department received an annual budget for supplies.  Each spring we would come together as a department to decide how to spend our budget.  If we didn’t spend it, we lost it.  Therefore, we worked very hard to spend every single dime.  I had a closet full of beakers and petri dishes because the goal was not to buy only what we needed, it was to spend the entire science department budget annually, and we did – there was no carry forward money.  Budget and actual usually matched.

Actual Is Less than Budget = Carry Forward = Fund Balance

As a high school principal in Iowa, I always included a snow removal line-item in my annual high school budget.  However, some years we got very little snow, and the money allocated for snow removal was not completely spent.  Therefore, I often had carry-forward money in my budget that I then allocated to one-time expenses.  I could not guarantee that there would not be a lot of snow the following year, so I couldn’t give out the money on an on-going basis, but I could use the money I saved that one year to purchase technology, books, and other items on my teachers’ wish lists.  Anything I didn’t spend went toward the district fund balance, as I was not allowed to carry forward money in my school budget – it all had to go back to the district.

In our district, a budget-holder is not forced to “use or lose” their unspent, budgeted dollars prior to June 30 (end of the fiscal year).  In our district, the budget-holder can keep his/her budgeted but unspent money year over year.  They have the option to save for a large, one-time purchase.  I find this a much better approach.

From Where Does District (or Unassigned) Fund Balance Come?

District fund balance can come from several places.  One is vacancy savings. For example, last year during my first several months in DCSD, I reduced over $500,000 from the cabinet.  I did this through reorganization and flattening the organization.  I am not a fan of bureaucracy and lots of layers – it reminds me of the game of telephone.  Anyway, those positions were budgeted the previous year (when I was still in AZ), so since I made these changes during the budget year, it led to vacancy savings and that money ends up in the fund balance of the district.  District fund balance can also come from district line-items like utilities that do not cost as much as projection or from our 1% contingency budget that if, knock on wood, no emergency arises, can go unspent and end up in the fund balance.

Breaking Down the FY 2011 (Last Year) Fund Balance

I know that $66 M minus $26 M = a hidden $40 M has been thrown around recently in an effort to insinuate that the district is hiding money, and therefore, does not actually require a reduction to balance the FY 2013 budget.  While that would be my dream come true – to end the annual budget cutting exercises of the past four plus years, this insinuation is unfortunate for the health of our district as well as being absolutely false.

If you include all general fund monies, the fund balance figure from our Comprehensive Annual Financial Report (CAFR) is just over $66 M. It is very important for you to understand how this figure breaks down – with the exception of a $15 M unassigned fund balance, all of this money belongs to a budget-holder or has been allocated to a known expense – a past decision that created a future obligation.  The notion that this is somehow hidden money is false. Let’s break it all down.

The $66+ M includes $543,000 that belongs to transportation, $784,000 to the risk insurance fund, $4.8M in ongoing obligations committed by the 2008 early retirement program, $21.3M that belongs to our schools and our departments, including $4.5M that is part of the all-day kindergarten tuition program, $11.7M TABOR Reserve, and $463,000 in supplies inventory.  Finally, with the $26.8 M of unassigned fund balance (11.7 M of that was “assigned” to offset cuts in the current year, 2012).  If you add all of those budgets together, you will see that they add up to $66 M, and all of this can be verified in our CAFR that is posted on our website. Please reference page 72 of the CAFR.

Do We Need a Fund Balance?

Maintaining a reasonable and healthy fund balance is critically important to the financial stability of the district.  Just like many of us try hard to maintain a savings account in our family budgets, the district must keep dollars available for emergency use – one time money for one-time expenses.  For instance, if a boiler breaks in one of our schools, we need funds available to replace it.  Our $15 M in fund balance (considering that $11.7 M of the original $26.8 M has already been assigned to the current year, FY 2012) is a responsible amount, and it meets the requirement of Executive Limitation (EL) 1.6.1 that requires we have a 3% TABOR Reserve + 3% Fund Balance + 1% Contingency (This was revised in 2010 to be 2% instead of 3 % so a total of 5%).

This EL is not new – it has been a board policy for many years.  You might be wondering how we met this EL in previous years when our fund balance was much lower.  In prior years the district administration had to request a waiver from this EL, as they could not meet it. Please keep in mind that I, and my team, prepared the current year budget – FY 2012, and we are preparing next year’s budget, FY 2013.  We did not prepare the FY 2011 budget.  We inherited it.  This is the budget that ended with $26.8 M in unallocated fund balance.  It was, however, our recommendation to use $11.7 M of that $26 M in FY 2012 to stave off cuts, and I am glad we did.  It was the right decision.

Can Fund Balance Be Used to Help Cut the Cuts?

Finally, since the close of the FY 2011 books, my team has been combing through all of the district expenditures (actuals) to find budget line items that have been consistently higher than spending – in other words, actual expenditures are significantly lower than budgets year after year.  We are doing this so that we can decrease the budget to more closely match actuals so that we are no overstating the need.  This process allows the reallocation of ongoing monies to support the FY 2013 budget and reduce the cuts to our schools.  We want to use those dollars to bring down the reductions we need to have a healthy, balanced FY 2013 budget – next year.  You will find these on Bonnie’s budget presentations in the category “cost of doing business.”

So far, we have found “extra” dollars budgeted in utilities, substitutes, and the medical fund.  These dollars plus the Governor’s new budget has allowed us to move those SBB cuts we projected to be approximately $366 per student to $50 in elementary school and $100 in middle school.  We hope to get these down even further.  It has also allowed us to develop an innovative path away from furlough days for all employees.

Professional Development

This year we have 15 schools across our district piloting staff development on backward planning and world-class education, and staff participating in these opportunities are earning additional pay for their work – carry forward (previously unspent) skill-block dollars.  In addition, we have launched (and I believe it is full) restorative practices professional development opportunities (kudos to Wanda Wilson for leading this effort).  Finally, I currently teach an instructional leadership class for principals, and I am now going to launch a professional development opportunity this month for teachers on world-class education.  This will be an opportunity for teachers to fully explore the world of education and construct their own mental models and paradigms about the future of American education.  I believe our professional development efforts, led by Pat McGraw and his team, are extraordinary and expanding/improving every day.  As you probably know, Pat has a long history of professional development in the district, and he continues to lend his expertise to our new effort – to our priority to offer differentiated growth and development to all staff that both model and teach modern, best practices for our students.

Employee Survey

Many of you expressed concerns to me about a survey that was done (not by the District) in November via email.  Some were frustrated that they were not included (early childhood is one example).  Others were upset by the questions, and still others unhappy by the lack of notice/explanation (leaders).  In an effort to quickly address these concerns and more, I sent a note with the factual information I had at that time.  As you may know, a limited portion of the results have been shared with some staff and with the media.  As I promised some of you who emailed me directly, and as I stated to the Denver Post reporter, we absolutely pay attention to data – we value you and we care about what you think.  That said, in an effort to avoid the pitfalls clearly demonstrated by NCLB regarding the collection and (mis)use of limited data, in DCSD we are committed to looking at bodies of evidence.  We value multiple, high-quality data and triangulation of data.  A district that has principles and values should have them all the time – refer to and model them in all circumstances.  Our commitment to using data correctly and to having high quality assessments is an important one.

We should not judge student performance based on one data point and we will not judge teacher performance based on one data point.  This has been our commitment to you as we have developed CITE, LEAD, our balanced assessment system, our system performance framework, and pay for performance – all found in our Strategic Plan.  As you know, this survey is one data point, so we will pay attention to it and continue collecting additional data as we move forward.

During my first board meeting (summer 2010), employee survey data was presented to the board.  Last spring we participated in the TELL survey.  You might be aware that several members of my team are on listening tours and have been in schools collecting information from our staff – another data point.  In addition, Dr. Syna Morgan is currently working to develop a spring survey for our stakeholder groups.  I believe she is inviting stakeholders to be part of developing that instrument.  We are committed to collecting data – a lot of data and all kinds of data.  We want to learn from the past ten years of NCLB where there were too many decisions and statements made based on one data source – high stakes tests.  We know better now, and we will do better now, and if you’d like to be part of this process, please let Dr. Morgan know.

Communication

In addition to telephone town hall meetings mentioned above, we are continually building our website and our publications to include helpful, factual information.  You might visit the Cabinet Communique or take a look at THINK.  This week, we will launch a “Budget Facts” page so you can keep up with the latest news about the budget.

As always, please feel free to email or call me at any time if you have questions or concerns.