April 1, 2005
MOREnet Council Meeting Minutes
Council members in attendance: Sara Parker, Ralph Caruso, Susan Cole, Margaret Conroy, Robert Stein, Donald Doucette, Curt Fuchs, Jeanie Gordon, Bill Mitchell, Dan Ross, Jim Tom (representing Cheryl Bielema), Tom Stokes (Representing Dan Ross)
Guests present: Dave Byland, Bill Giddings, Holly Fine, Deborah Sutton, Barbara Reading, Nathaniel Albers, James Tice, Debbie Rodman, Velma Steinman
The MOREnet Council met on April 1, 2005, in the Secretary of State Conference Room - James C. Kirkpatrick State Information Center in Jefferson City, Mo.
Sara Parker called the meeting to order.
Bill Mitchell spoke to the progress of the External Performance Measures Project. Phase I - Status Report (Attachment 1) is in final wrap up stages. This was generated at the request of ex-interim Commissioner of Higher Education. The status report evaluated the impact and outcomes of MOREnet on higher education as opposed to the outputs.
This is a three phase project. The other phases are: Phase II - Public Libraries, and Phase III - K-12 schools.
Work has been completed in the current contract, and the final report is now being written. Fuchs asked if there would be recommendations with the final report. Mitchell said it was not an assessment to look at what we should do differently, but rather to determine what the outcomes are so they can be documented clearly. The final report will contain the findings, outcomes, and the impact of having a statewide network for institutions of higher education.
Stokes said Ross was discussing the budget for Phase II and III and wanted to know the difference between these phases and phase I. Stokes said Ross thought it was a rather large expense in light of the budget situation. The state might possibly be criticized for this type of expenditure.
Cole asked when it was determined the costs were underestimated and was there any consideration of dropping back or rethinking the project. Mitchell said when it was put out to bid he thought it would cost twice as much as it actually did.
Caruso said the real question based on earlier discussion is whether or not to go any further with the project. Conroy asked if a decision was needed today. Parker said yes, if the Council was finished with the discussion on Phase I. Mitchell said a decision needs to be made on Phase II. It's a good time of year to move forward with the public library phase, and it could be completed by summer if started now. Phase III could then begin in early fall, which would be in FY06. Phase III is in the FY06 preliminary budget. MOREnet is not asking for a decision on the FY06 budget, except for the Phase III item.
Rodman presented the allocation for the Phase II project for the FY06 budget using the same methodology (using FTEs to calculate a percentage figure) as was used in FY05.
Parker told the Council if action was to be taken, a motion would need to be made.
Conroy moved for Phase II of the project to be deferred until FY07. Fuchs seconded. Motion carried with one abstention. Doucette asked if there were contractual obligations with OSEDA for Phase II of the project. Mitchell said no.
Parker asked for discussion or comments on Attachment 3. There was no discussion of Attachment 3.
Mitchell spoke to the customer satisfaction project (Attachment 4). There were over 2,000 letters and e-mails distributed last week. In one week, there was a 14% response rate bringing in 286 returns. The survey closes on April 6, 2005. The final phases of project are the analysis and reporting of any recommendations. Currently the project is in the data collection mode. It is a committed expense.
Cole asked if this was under contract and if the costs were fixed. Mitchell said it is under contract and the costs are fixed. Cole asked what would happen if some of the obligated funds are not used. Mitchell said the contract would have to be cancelled to use those funds elsewhere. Fuchs asked if the data would be available for the July meeting of the Council. Mitchell said yes, both Phase I and the customer satisfaction project would have final reports submitted to the Council at the July meeting.
Mitchell spoke to the organization development project (Attachment 5). This project focuses on improving MOREnet's productivity and delivering better service. 85 of 105 staff members participated voluntarily, and the project will be concluded in May.
Stokes asked if the $199,614 was a fixed cost. Mitchell said yes. There is nothing allocated for FY06 as it was completed in FY05. Rodman presented the cost allocation for this project as follows:
- $60,000 - Shared network funds
- $54,500 - T & P
- $20,700 - REAL
- $13,000 - MERC fees
- $51,800 - Other customer fees
Caurso said this type of activity, while important to the growth and health of the organization, should be suspended due to the budget situation, particularly for FY06.
Parker asked the Council for any follow up on what Caruso expressed which was that outside expenditures should be curtailed until they are absolutely mandatory. Parker said this could be written as consensus in the minutes if this is a comfortable approach for the Council. Parker asked if anyone wanted to dissent from this. No one spoke.
Parker asked the Council to note the dates on the budget items. The most current date is the one to use. For the Council's purpose at the July meeting there would be a closing of FY05 with the end categories running either short or long against the re-projected budget. Mitchell said in the past MOREnet has presented just the final budget for the particular fiscal year. There has not been a comparative analysis in the past. Doucette said the Council should see the most up to date budget information at the July meeting.
Parker said the July discussion will be strategy and the preliminary budget.
Mitchell spoke to Attachments 7, 8, 9 and 10. The budget does not contain any decision items today. This is just a preliminary first look under the assumptions. At the July meeting, the operation budget would be presented based on the discussion today. MOREnet is in a different place than it has been in the past, and MOREnet will need help from the Council as they develop and continue to refine the preliminary budget. The strategy for FY06 would be for MOREnet to continue business as usual: meaning MOREnet would continue to operate the network, meet the growth demands of TNP and REAL as projected, continue the services currently being delivered, and operate the HELP desk.
What services does MOREnet offer that should be moved strictly to a fee-for-service? What do you do with the ones that fall in between these two categories? The strategy will give MOREnet the time between now and January to go through the process, get the answers, have a plan, which allows the Executive Director six months to adjust the organization, make whatever adjustments need to made and customers to make adjustments. MOREnet's basic strategy is setting a time frame that can be evaluated with some deliberation, look at the result, and make the hard decisions about what is part of the bundle, what should be moved into the fee-for-service, what might be eliminated, and then allow six months to implement it.
Mitchell said when the budget was prepared there was no expectation of receiving E-rate for this year. MOREnet is so far into the reserves now that it is at risk. An internal audit by University's auditors showed the levels of reserves are insufficient to meet the contracted operating expenses.
Fine said MOREnet needs approximately six months of working capital to process contracts. MOREnet would also need approximately six months of staffing level funding. This was the basis for the recommendation for the reserve policy. This total was approximately $14 million when the Council first adopted this policy. Parker asked if the two years of E-rate projected in FY06 were actually allocations from FY05 plus projections for FY06. Fine said it was only the allocation from FY05.
Mitchell said MOREnet had presented to the legislature and to the Governor that MOREnet will pass these fees onto the customers and will make internal reductions if the budget cuts are passed. There has not been a fee increase in over eight years. The Council will have to make decisions about how House Bill 3 will be distributed between the Shared Network, TNP, and Higher Education. The figures in the packet are based on historical figures.
Doucette expressed concern about when the Council will review the FY06 information. If we wait until January to start making cuts, the Council will be so far behind that we will not be able to implement a lot of the critical items in FY07.
Stein asked how much time the Council needs to make an informed decision. Stein asked if it was realistic to make the decision today, or should we offer the customers additional opportunity to be heard. Stein felt the budget strategy needs to be looked at again. Conroy said when the Council first started talking about the strategy the component of increasing customer fees came up, as did the total elimination of the help desk and reducing some services entirely. The library directors would like to have a face-to-face discussion as opposed to an e-mail discussion about this and information from MOREnet about what services are not solely cost recoveries.
Parker said MOREnet could give Conroy the kind of tools she needs for the June MPLD meeting. MOREnet will also have to do a cost analysis on the various scenarios.
There was some discussion about the time frame for developing scenarios, and Mitchell said he felt 6 months was too long and three weeks is too short. The cost analysis part is not something that can be done in a week or two. Mitchell said MOREnet is ready to have the discussion on this. Douctee said the Committee should look first at the list of services without the cost analysis. It is not a matter of three weeks or six months, it is a matter of two months or nine months. The time frame is nine months according to the strategy.
Mitchell said they have the list of services with very specific definitions and the customers' use of those services.
Fine said K-12 membership fees range from $1,500 to $6,000 a year. Libraries start at $250 to $6,000 (depending on size of library) and higher education figures are between $2,000 and $12,000 a year. These are participation fees. Spreading cost increases over a lot of constituents is one of the best ways to make this agreeable. Parker asked if the Council needed further discussion on the strategies. There was no further discussion.
Fine spoke to Revenue Assumptions 1 and 2. On Revenue Assumption 1 the budget matrix presented is built on the Governor's originally recommended $2.9 million cut in his January budget. On March 25 the Governor announced an additional $1.4 million cut to MOREnet, which means a total of $4.3 million cut. The House Appropriations Committee meeting restored $618,000 to the MOREnet budget. The appropriations bills were filed yesterday. House Bill 3, including the MOREnet appropriation, was funded at the House Appropriations Committee approved level which was a cut of $2.2 million.
Fine spoke to item number 2 - E-rate: The preliminary FY06 budget has an estimate for E-rate reimbursements that were originally FY05 and will be received in FY06. There will continue to be a one year lag in E-rate. There was a funding commitment letter for a 2003 amount and then a denial. Cole asked if the denial would be challenged. Fine said yes.
Fine spoke to the preliminary budget for FY06 (Attachment 7). The first columns are the revenue columns. House Bill 3 and 12 are shown as recommendations by the Governor in his January budget withholding the normal 3% to which House Bill 3 funds are subject. The E-rate expectations, customer fees, and other revenues that come in as participation fees, services, and reimbursable are included for a total revenue of $28 million. On the expenses side, telecommunications costs allow for growth in Higher Education, DESE, and REAL. MOREnet is taking a hard look at operating expenses to make sure the line item is accurate. Non-customer related expenses - anything that is a customer service or customer-related expense, such as equipment, software, and licenses is now in other customer related expenses.
Parker said Attachment 9 is included in the strategy and does not require action.
Parker spoke to the recommended customer announcement (Attachment 10). This is a recommendation from the Director on a message to MOREnet users about the possibility of fee increases. Doucette said the purpose was not to lay out the strategy for what MOREnet is doing, but to tell the people who are preparing their budgets that they should allow extra money in their budget should the fee increases occur.
Doucette said what Stein is suggesting is to either add a dependent clause or something that might say the MOREnet Council is currently considering a variety of strategies to cut costs, modify services and/or increase revenues; therefore institutions should begin planning for the possibility of some cost increases in FY06. Parker asked if the timing of the letter should be before or after receiving the survey input. Doucette said he felt the letter should be sent now as people are in the process of preparing their budgets and will need to plan for an increase. Stein said he did not see any problem with the agreed upon language or the proactive stance of Council members sending out some form of message. Conroy said she felt informal communication is called for regarding the possibility of increases. She said a formal message should not be sent until the Council is better informed, and should be done as soon as possible.
Parker said per consensus of the Council the communiqué should be informal and by each program sponsor.
Ross said he spoke with the budget office and advised that if budget cuts were made to MOREnet, then MOREnet would have to pass these costs onto their customers; some of which would have a hard time paying.
Ross spoke to the possibility of an opportunity on possible access to MoDOT's fiber technology. Discussions are continuing. This is also being discussed as a possibility for MOREnet. An opportunity from National Guard in conjunction with the Missouri School Board Association regarding up to 60 free satellite stations throughout the state is also being discussed. There are tremendous opportunities and new hardware will need to be purchased.
Conroy asked if the other departments are aware of the fiber optic opportunity. Ross said yes. It was addressed at the ITAB meeting held yesterday.
Parker spoke to the preliminary process of the FY07 budget (Attachment 11). Mitchell said the FY07 budget request needs to be submitted to the University by April 15. A decision needs to be made by the Council today as what should be submitted by the April 15 deadline.
Caruso said the request should ask for an increase in money for increased capacity.
Byland said the fiber cost is a flat cost. Mitchell said it is a ten-year lease on the fiber paid up front. Parker asked if this request could go through a capital budget. Caruso said it would be highly unlikely to be approved as a capital expenditure. Mitchell said if the MoDOT arrangement is approved, this item becomes moot or will be substantially changed. MOREnet has until October to see what Chief Information Officer develops with MoDOT. Then the lease could be modified. The lease option was submitted to the Council before the MoDOT issue came forward. Doucette said the fact that it can be explained makes it worth going forward with the request for the funding. Mitchell said there will be a cost recovery component involved in the use of the MoDOT fiber optic. The funds for the current backbone are committed through January of 2007.
Doucette moved to omit item 1and combine 2, 3, 4, and 5 into one request for increased bandwidth. Conroy seconded. Stokes asked if the University adds an inflation amount and if so do those dollars go to MOREnet or does the University retain them. Caruso said this would be included in MOREnet's total.
Stein asked for separation of the items. Item 2 would a separate item with 3, 4, and 5 as one item. Stein will abstain from the vote. The previous motions were withdrawn.
Doucette moved for the FY07 budget request to be structured as a onetime capital expense and a combined item for bandwidth expansion. Conroy seconded. Stein abstained. Motion carried.
Doucette moved this be submitted to the University. Cole seconded. Stein abstained. Motion carried.
Cole said two years ago superintendents and technology people named connectivity as the highest priority. A list was made of priorities. She will send this to Parker for circulating the Council.
Parker spoke to House Bill 12. The REAL appropriation is in two parts:
- Public library connectivity
- Electronic licenses
The Senate requested various scenarios for reductions at various levels. The State Library did this, giving priority to the preservation of the EBSCO database and public library connectivity. Any cut will probably mean very little will be left of the newspaper database. At the break even point there is a hold on to the economic development database for business services and labor and industry. Under a 25% reduction, the State Library would be able to keep the EBSCO database unless new bids were submitted with higher costs. The REAL appropriation is recommended at the current level.
Parker spoke to the Government Accountability Office (GAO) a study of the E-rate program. The report is at www.gao/gov. The testimony formed the basis for the news stories in March. The report is from February, and is not flattering in terms of the Federal Communications Commission and its administration of programs.
Part of the report was the key unanswered question - was all of this "wonderful" connectivity for schools and libraries the result of E-rate or were there so many other factors in connectivity for schools and libraries one can not know what effect E-rate had.
Jim Tice announced there will be a Distance Learning demonstration for the House Education Committee on April 27, 2005, beginning at 8 a.m.
Parker asked if the Council would like to have another meeting prior to the July 15 meeting. Doucette suggested moving the July meeting to June and have one meeting in place of two.
The next meeting is set for Thursday, June 15, 2005. Mitchell requested Council members to hold the July 15 date also.
The meeting will be held at the James C. Kirkpatrick Information Center, 600 W. Main, Jefferson City in the SOS Conference Room located on the 3rd floor.
Parker adjourned the meeting at 2:15 p.m.