APS – Superintendent Davis Recommends NO on Atlanta Classical Academy (ACA) Charter School Petition

June 30, 2013

As reported by Mark Niesse at the AJC,

Superintendent Erroll Davis is recommending that the city school board deny a petition to open Atlanta Classical Academy. [It] needs to address concerns about its facilities … Sutton Middle School doesn’t have enough room to share space, and modular units don’t serve students’ long-term needs. … The 500-student, K-8 school hasn’t identified a principal.

 Additional detail and the full text of Davis’ recommendation is at the article written by Dave Whisenhunt at the Reporter Newspapers.

In a lengthy response to Superintendent Davis, Matthew Kirby – ACA’s launch chairman – laid out a long list of the positive impact ACA would have on the community and why Davis’ objections should be overridden by the Board of Education. (See Mr. Kirby’s full letter at the link)

Some of the positive issues identified by Mr. Kirby are as follows:

  • The efficacy of classical education,
  • The strength of our leadership team,
  • The strength of our HR/staffing plan,
  • The reasonableness of our budget,
  • Our ability to attract teachers suitable to teach in the classical environment,
  • Our commitment to … enroll a diverse student body,
  • We have … community support.

In his letter to supporters, Mr. Kirby indicated that the ACA plan had been revised and that it would open with a K-8 student body versus a K-10 as originally planned. However, the plan would be to grow to the 12th grade as students advance.

As noted above, Davis indicated that one of his reasons for opposing the petition was that a Principal was not yet in place. However, Mr. Kirby notes that 16-18 candidates being considered and that no candidate can commit to taking the position until the petition is approved. He also notes that APS has provisionally approved charter petitions in the past subject to the hiring of a qualified Principal.

Davis also indicated concerns regarding the use of sharing Sutton Middle School as the preliminary site for ACA. However, Mr. Kirby presents a strong case that Sutton is a very workable solution for the short-term for both APS and ACA.

Currently, Sutton has a 700 seat unused capacity and ACA needs only 486-540 seats in the first two years – 700 at maximum enrollment. Sharing the facility would help APS defray the operating expenses of the building. Further, the rent that would otherwise be paid to a landlord for a separate site would instead be infused into teachers and upgrading the public facility. Additionally, Mr. Kirby notes that this would be a short-term solution and ACA would continue pursuing a separate campus in the future.

Note – In a subsequent post I will provide my opinions and additional thoughts on why the ACA petition should be unanimously approved by the Board of Education.

APS – FY14 Budget – Implications of Not Considering Additional Spending Cuts – Short Term Thinking & Major Election Issue

June 29, 2013

As I noted in a prior post, the Budget Commission instructed Superintendent Davis to come back to the full Board with an additional $1.3 million in cuts prior to approving the FY14 Budget. During the meeting on Thursday, the Board went into Executive Session to discuss this and other issues.

When the Board returned, the budget resolution offered did not include the additional $1.3 million in cuts. Superintendent Davis indicated that due to a $1.5 million higher FY13 year-end General Fund reserve, the “risk” of dropping through the $41 million critical threshold was overcome and therefore the additional $1.3 million in cuts did not have to be enacted.

Let’s think a bit about Superintendent Davis’ assertion and the implications of not adopting further cuts.

While the contention may be accurate; this tells us a lot about Superintendent’s time perspective on issues. It is short-term at best – this is his last year at the helm and FY15 issues are not his problem. But FY14 issues are and his pushing aside the additional $1.3 million in additional cuts (or more as I have contended) is irresponsible.

The General Fund reserve is now projected to be at approximately $45.3 million – a $4.3 million cushion over the $41 million critical threshold. But remember, there are other significant financial risks on the horizon, such as:

  1. The $6 million in revenue from the sale of the property to AIS is now in question. Without this sale, the reserve could easily drop to $39 million.
  2. In each of the FY11-13 years, the Board approved a budget and then spent far more. In FY11 – $23 million more, in FY12 – $28 million more and in FY13 – $6 million more than the original budget. Is the fact that they Board has a track record of spending far more than the original budget approved not a significant “risk” in FY14? Even using the lowest amount, again, the reserve could fall to the $39 million level or lower.

Are there other unknown “risks” that will affect the FY14 Budget?

If history serves as a guide, the answer is yes. The unknown “risks” (some positive – most negative) always show up. Whether it is additional encumbrances (which are not in the current budget – $5 million in additional cost over budget in FY13), the new program “du jour” or the understatements of cost in the original budget – it is with almost certainty that they will appear in the coming months.

What then?

The fiscal cliff is still there and will have to be dealt with – Superintendent Davis’ is short-term and has punted on the issue. But the Board members who approved the FY14 Budget – COB Reuben McDaniel, VCOB Byron Amos, Emmett Johnson (not running for reelection), Yolanda Johnson (not running for reelection), Brenda Muhammad and Courtney English should explain their fiscal decision in the upcoming election.

While there are many issues the candidates for the Board will have to address, the looming fiscal crisis is one of the most important as it will affect every decision the Board makes going forward. With their votes to approve the FY14 Budget with a $26.6 million deficit, McDaniel, Amos, Muhammad and English are now firmly on record with their positions on the issue.

APS – FY114 Budget Approved – In Millions – Revenue $568.5, Expenditures $595.1 and Deficit $26.6 – Burks, Harsch-Kinnane and Meister Vote Against [UPDATED]

June 27, 2013

UPDATED – I have added some additional information that is included in Mark Niesse’s AJC article today (behind pay-wall).

The Board of Education today adopted the FY14 Budget with $568.5 million in revenue, $595.1 million in expenditures and with a deficit of $26.6 million. The budget resolution passed with six in favor and three against. Here are the highlights of the discussions:

  1. The Board went into Executive Session to review the additional $1.3 million in additional cuts requested by the Budget Commission. There was no discussion of the cuts in open session and they were not included in the final budget passed.
  2. Butler-Burks who is the Chair of the Budget Commission voted against the proposed budget. She did not speak to the reasons why in open session, but her comment this past week in the Budget Commission meeting indicating that the Budget Commission had never passed a budget resolution was prescient of her vote today. She did not appear to be happy.
  3. The two most vocal contributors to the Budget Commission meetings – Meister and Harsch-Kinnane – who participate in those meetings, but are not formal members of the Budget Commission voted against the proposed budget. They each voiced concerns regarding the average class size issue.
  4. Superintendent Davis laid a rather significant new fact on the table – the ending General Fund balance will be higher than originally projected by at least $1.3 $1.5 million if not more. He did not give a specific number. As tomorrow is the effective end of the FY13 year, it seems strange that he had this information today and not during the Budget Commission meeting this past Tuesday.
  5. Superintendent Davis indicated that due to the higher ending General Fund balance, the risk of the General Fund reserve going below $41 million in FY14 was minimal and therefore the additional $1.3 million in cuts did not have to be made.
  6. The risk to the General Fund reserve from the continuing deficit spending – on average $22 million per year since June 30, 2009 – and the projected deficit of $26.6 million in FY14 – did not get discussed as a major “risk” factor going forward. [However, per the AJC, this was a major concern for those Board members voting against the budget.]
  7. Superintendent Davis indicated that the administration had showed its capability to manage expenditures as they had eliminated $16 million of cost during FY13. I am not sure how this statement holds up as the FY13 Amended Budget is at least $6 million higher than the FY13 Approved Budget.

All in all, the vote was a bit anticlimactic, but there are some victories that came out of the process. There are at least 64 additional teachers added since the start of the process. The administration knows that it has to be very proactive in dealing with overly large class sizes quickly when the school year begins and not wait until the end of October to make adjustments the way they did this past year.

In addition, the Board knows it is facing a fiscal cliff at the end of FY14 and the sooner they begin planning on how to deal with this the better. This will be a key question for any Board of Education candidate running in November.

So the war of the budget is over. Time to start the next battle on getting it amended!

APS – Special Board Meeting Today at 3PM to Approve FY14 Budget

June 27, 2013

Today at 3 pm at the central office, the Board will meet with the intent of approving the FY14 Budget. There are still a series of questions and issues that were raised in the Budget Commission meeting this past Tuesday that need to be resolved as part of completing the process. The key ones are as follows:

  1. Consideration of the Superintendent’s recommendation for an additional $1.3 million in cuts to the Salary line item.
  2. A review of additional real estate that might be sold (although if done, it will likely be in Executive Session).
  3. A review of the $250 thousand in cuts in C&I – as the positions currently exist, this will likely be done in Executive Session.
  4. Approval of the class size waiver at +5 with a commitment by the administration to plan for no more than average class sizes of 24 at the Elementary Schools and 30 at the Middle and High Schools.

It is interesting to note that in the Budget Commission meeting, the question was asked “What happens if a budget is not passed on the 27th?” Mr. Burbridge answered that the process would then require a Continuing Resolution to keep the system funded until such time as a final budget was passed. Given the issues that are still on the table, this may happen today.

APS – How to “Fix” the Gains & Losses Report – Make it a Truly Useful Oversight Tool

June 27, 2013

[WARNING – the following post is “geeky” internal control stuff (a la Sarbanes-Oxley which governmental entities conveniently do not have to follow). If you enjoy reading this, you should immediately consider buying green eyeshades and consider a change in career to accounting. Read on if you must, but you were warned!]

In a prior post, I wrote about the Gains and Losses Report and noted how difficult it is to keep up with it throughout the year. As I said, lots of data, but not much information that is useful to the Board in performing their oversight duty.

In advance of providing a relatively simple fix, I spoke with Budget Commission Chair Burks. She indicated that:

“All positions must be approved by the Board based on the Gains and Losses Report submitted to the Board on a monthly basis”.

OK – sounds straightforward enough. So let’s ensure that is what is happening by amending the process and the Report as follows.

Pass a Resolution to Amend the Report – the Board should consider and pass a resolution that only the positions and specific titles as shown in the FY14 Approved Budget are approved. All positions and position titles not specifically identified and listed in the FY14 Staffing Report are abolished.

Why pass this resolution? Because a position created in prior fiscal years appears to remains active during the current year. This resolution eliminates the ability to fill a position created in a prior year unless it has been budgeted for the current year – which appears to have happened many times in FY13 without having to go through the Gains and Losses Report. Additionally, there are up to five or six different titles that refer to the same position – this resolution requires that the titles be identified in the budget (or in a cross-reference document – see below) and allows for much easier tracking of position changes during the year.

Create a Cross-Reference of Position Titles – Have the administration create a cross-reference of all position titles. As noted above, a position may have up to six different titles that are used in various reports – (i) the Budget Staffing Report (generally generic – i.e. Director), (ii) the Human Resources website (sometimes still generic – sometimes more specific – i.e. Director of Nutrition), (iii) the Departmental website and organization chart (often very specific – i.e. Director of Community & Legislative Affairs), (iv) the Gains and Losses Report (should be very specific), (v) the Salary Report used to prepare the budget and (vi) the State Report showing actual salary for specific years (usually generic – i.e. Human Resources Personnel).

While it is understandable that several position titles are necessary for various Reports, a simple presentation showing how each position is identified in each Report would allow easier tracking of the position flows. In addition, the Gains and Losses Report should remain “as is” with titles presented in a very specific fashion and consistent with the title used by the employee and contained in the employees personnel records.

Require Division and Department with Department Number in Report – The Gains and Losses Report generally presents the Division and Department – but not always both. In all instances, the Division, the Department Name (as referred to in the budget – if the name of the Department has changed, present the present and previous name) and the Department number should be shown. This includes Special Revenue Fund names and account numbers (i.e. – Title II-A Improving Teacher Quality – 2413).

Include Salary Information for All Position Changes in Report – For all new hires, the Step Level, salary Band and budgeted salary should be presented. For anyone receiving a promotion or a reclassification of their position, the current salary and future salary should be presented. This should also include both the current and future Step Level and salary Band. In the event a new position is created, the budgeted salary, Step Level and salary Band should be presented. When the position is filled, the budgeted salary and the actual salary should be presented in the Gains and Losses Report. And no increase in salary should go into effect (regardless of whether it requires Board approval) until presented in the Gains and Losses Report to the Board (currently, the salary changes are in effect prior to the Report being approved – essentially, the Board is given a fait accompli).

Present Quarterly Updates on Department Changes – On a quarterly basis- the original budgeted salaries versus the Amended budgeted salaries for each Department should be presented. This allows the Board to see how Departments may be changing over time.

This all sounds like a lot of changes, but it really is not. The only additions are the salary information, the Department numbers and the quarterly summaries.

The key here is to wipe the slate clean and abolish any prior approved positions that are not included in the FY14 Budget. That way, any positions filled that are not included in the FY14 Budget MUST be newly created, go through the Gains and Losses Report and be reviewed and approved by the Board. And in all instances, when a newly created position is proposed – if the addition is considered to be “budget neutral”, then the positions being abolished should also be presented at the same time.

I can hear the complaints about this now. However, it is important to remember a couple of things – all salaries are public information (available through the Open Records Act), all salaries are reported at the end of the year by the State and the APS Budget Department has a position specifically designated as “Position Management”.

Oh, and the Budget Department gets the benefit of a complete and up to date salary and title information file – which represents the bulk of the initial work in preparing next year’s budget.

The Board improves its control of salaries and positions, the Board keeps up to date on departmental and division changes and much of the work required to prepare next year’s budget is done.

What a deal!

APS – Scary Chart of the Day – Fund Reserve Balance

June 26, 2013

A picture is worth a thousand words. The Chart** below is the General Fund Balance from June 30, 2009 to the projected balance on June 30, 2014. Since FY09, on average, the balance has decreased by $23 million per year. The red line is the level at which point the cash flows of APS will become critical.

APS FY14 GF Balance 062613

Does anyone still think we are not nearing a fiscal cliff?

**Sources – CAFR, APS FY13 Fund Balance Projection and the FY14 Tentative Budget.

APS – Budget Commission Actions – Detail and Analysis

June 26, 2013

In a prior post, I gave you the highlights from yesterday’s Budget Commission meeting. Let’s take a look at each item more closely and analyze what is happening.

$6 million Additional Revenue – the value of the property tax digest (a listing of the taxable value of each property in Atlanta) increased by a bit over 1% resulting in the additional revenue. As a result of the increase being over 1%, the millage rate will have to be republished in local newspapers as the change is considered a tax increase since the millage rate was not reduced to lower the incremental taxes to less than 1%.

This is all rather complex, but it is important to remember the millage rate stays the same as last year – what has changed is the underlying value of property taxed with the result of incremental property tax revenues flowing to APS. While I am generally against tax increases, I will give the Board a pass on this as property values have decreased over the last several years and this is simply a reversal of that trend.

$3.2 Million for 38 Additional Teachers – this is a major incremental victory for the parents who have been begging for reduced class sizes. The Commission – especially in an election year – is listening and taking some action. However, the cost presented by the administration of $3.2 million is still based on the $80 thousand average per teacher.

As I noted in a prior post, I think this is overstated and the number is closer to $61 thousand if teachers with an average of three years’ experience and a Bachelor’s degree are targeted for hiring. If they did so, the $3.2 million would buy 52.5 teachers.

I do not understand why they stick to the $80k number when it would be in their interest to lower the targeted cost for incremental teachers.

Class Size Waiver Remains at +5 – the Commission is still struggling with the level of the waiver and received a commitment from the administration that the average class sizes would not exceed 24 in the Elementary Schools and 30 in the Middle and High Schools (with only minor variations). However, the administration will not budge from the +5 waiver number.

The additional $5.2 million ($3.2 million plus the $2 million added for teachers in a prior meeting) could in fact bring in 85 additional teachers if the lower cost per teacher is used versus the 64 additional teachers proposed by the administration. My sense is that the incremental 21 teachers could reduce the waiver request to +4.

Everyone needs to keep pushing on this as Commission and Board members are not focusing on the “teacher cost” number.

$750 Thousand for Charter Schools – this increase is required by statute and is a result of the increase in local property taxes. You should not read any “goodwill” towards charter schools in this increase – the administration is required by law to provide these incremental funds.

$750 Thousand Reduction in Personnel Costs – this number is not even a good start as it likely only represents 10-12 employees from a total staff of nearly 5,500. Of the $750 thousand, $400-500 thousand is related to a number of vacant positions in Finance, Operations and IT that will not be filled – several of which the administration admitted would not have been filled anyway as they were not needed. One position is simply being transferred to the Special Revenue Fund (no cost savings there). The remaining personnel cuts of $250 thousand will come from positions that are currently filled in C&I. However, that likely only represents three or four positions out of a staff of over 830 (excluding teachers).

Like I said, this is not even a good start. It was interesting to note that Superintendent Davis said that he “did a very detailed review of the staffing budget” to propose these cuts – and made is sound as if this was the first time he had done so. Quite frankly, given the limited number of administration personnel changes to-date (other than ones that had to be dragged out of him); I believe this was the “first time”.

$8 Million Atlanta Beltline Payment Taken Out of Budget – I have addressed this in a prior post – also, for additional detail, see Katie Leslie’s and Mark Niesse’s excellent AJC article on the subject at the link.

However, one detail on this matter continues to bother me. The $8 million payment has been in the budget since it was originally released in early May. As part of the budget approval process, Budget Commission Chairwoman Burks voted for passing the tentative budget.

What concerns me is that Ms. Burks is listed on the Atlanta Beltline site as a Board member and Treasurer of that organization. How is it possible that she held these positions at the Beltline and did not know that the Beltline Project was in serious financial difficulty? Given her position and knowledge of the Beltline’s financial condition, how could she vote to approve a tentative budget with the $8 million still in the revenue projection?

I will continue to pursue this in the near term.

FY14 Budget Deficit Increased from $21.5 Million to $26.7 Million – here are the numbers – begin with the $21.5 million approved deficit. Add $8 million for the loss of the Beltline payment, $3.2 million for additional teachers and $750 thousand for Charter Schools. Deduct $6 million in additional property tax revenue and $750 thousand for personnel cuts. The net impact is an additional $5.2 million added to the deficit.

Projected General Fund Reserve Down to $42.8 Million at End of FY14 – again, the numbers – start with the $48 million projected General Fund reserve at the end of FY14 and deduct the incremental net change of $5.2 million noted above. Everyone agrees that a $41 million General Fund reserve is needed – this is getting perilously close to that number. Even worse, there is still some “risk” in the revenue projection – possibly as high as $6 million.

If the General Fund reserve falls below $41 million, it is likely that APS will have to rely on Tax Anticipation Notes (TAN’s) to manage cash flow and pay its bills on a timely basis. Further, TAN’s are generally very short-term Notes (90-180 days) and must be repaid with subsequent year’s property taxes.

Reliance on next year’s revenues to cover current year cash flows is a perilous territory to enter – think “Payday Loans”.

What is also interesting to note is that the administration is clearly stating that the “can has been kicked down the road” year after year – and the road now ending at a fiscal cliff.

Candidates running for the Board this year are warned – you will face a fiscal disaster during the next budget season. Future “one time revenues” are limited and there is no cushion left in the General Fund reserve. Good luck – and as you deal with the mess, you will certainly earn the $16 thousand stipend you receive as a Board member!

Commission INSTRUCTS Administration to Propose $1.3 Million in Additional Cuts – the capitalized INSTRUCTS was intended. This “instruction” showed that the Commission is losing patience with the administration and the administration’s frustration with the Commission also became more apparent.

At one point, COB McDaniel said, “if all you bring back to us is additional furlough days, we will be very disappointed.

”Superintendent Davis said, “the can has been consistently kicked down the road … to get additional reductions, you [the Board] must consider following policies that are now being ignored”.

It was clearly a bit testy on both sides. However, the Commission was clear – while previously proposed cuts could be brought back to the table – they wanted new ones to consider.

This is going to get interesting!

$6 Million Atlanta International School (AIS) Property Sale at Risk – included in the revenue budget is $6 million for the outright sale of the real estate to AIS that is currently leased by APS to them. This issue has been contentious in the last several meetings and, my sense is that there is a growing consensus on the Board to not proceed with the sale.

This brings into question the $6 million revenue number included in the budget and, if the sale is not completed, the General Fund reserve could fall to $37 million – well below the $41 million fiscally prudent threshold. The Commission requested that the administration look at other real estate that could be sold to replace the $6 million in doubt. Superintendent Davis indicated that the process was already underway.

Summary – All in all, while the budget for teachers (and the implication for “average class size”) is improving to some degree, the fiscal cliff is clearly still looming. The Board members acknowledged that they had to make the tough decisions, but the fact of the matter is that the General Fund reserve could easily fall below the critical threshold.

I will believe that the “tough” decisions are being made when there is at least another $5-6 million taken out of the expenditures budget – until then, in Superintendent Davis’ words – the Board is simply “kicking the can down the road”.

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