Jan. 31, 2006
MOREnet Council Meeting Minutes
Council Member Attendees: Robert Stein, Chair, Gary Allen, Cheryl Bielema, Annie Busch, Margaret Conroy, Curt Fuchs, Bill Mitchell and Bert Schulte
Alternates Present: Rita Gulstad, attended for Don Doucette; Barbara Reading, attended for Missouri State Library Director; and Deborah Sutton, attended for Jeanie Gordon.
MOREnet Staff Present: David Byland, Jennifer Doll, William Giddings, Sherry Loyd and Debbie Rodman
Observers Present: Mary Jane Day, AT&T; Kyung Kim, State Library; Tom Stokes, Office of Administration; and Tony Wening, IBM
MOREnet Council Chair Robert Stein called the MOREnet Council meeting to order. Those in attendance are listed above.
With approval from the Council, Chair Stein moved agenda item III. E. FY07 Cost Allocation Methodology (Attachment H) from the consent agenda to item II. D of the action agenda.
Explanation of Agenda Format
Chair Stein explained the need to design an agreed-upon agenda format that would withstand the test of time, rather than continue to change with each new Council Chair. In the proposed new format for the meeting agenda, after approval of minutes, the first section would include major action items. The second section would include consent items. All items in the consent agenda can be accepted and voted on as a group without discussion; however, any member can request that any item have a full review and discussion during the meeting. The agenda continues with discussion/information items, council business, and open time for the public to address the Council. There was consensus among the Council to adopt the new agenda format.
Minutes of the November 18, 2005 MOREnet Council Meeting
Annie Busch moved that the minutes of the November 18, 2005 MOREnet Council meeting be approved as printed. Bert Schulte seconded the motion, and it passed unanimously.
Chair Stein announced that Sherry Loyd will regularly take the Council meeting minutes, which will be distributed in advance of the next meeting. Council members should send her corrections to the minutes prior to the next Council meeting; however, all Council members will also have an opportunity to make changes at the next meeting prior to their formal adoption.
Plant Fund Establishment
Annie Busch made a motion to approve the establishment of a Plant Fund with the understanding that dollars are not to reside in the fund until there is further agreement from the Council. Cheryl Bielema seconded the motion, and it passed unanimously.
Any plant funds would be considered unrestricted in compliance with state government and University guidelines, but fund use would be governed by the use policy adopted by the Council. In the event of extreme fiscal hardship, plant funds could be transferred back into the MOREnet operating budget, but actions of this type should be viewed as an exception rather than a standard practice. The interest gathered on the plant funds would be retained by the University.
Preliminary FY07 Member Fee Announcement
MOREnet staff will work with each sponsor to draft preliminary FY07 member fee announcements. Sponsors are encouraged to release these fee announcements with appropriate funding caveats by February 17, 2006. Permanent member fee announcements will be released after the Governor's budget is finalized.
FY07 Cost Allocation Methodology
Jennifer Doll thanked Rita Gulstad, Barbara Reading and Deborah Sutton for their input and guidance in the development of the FY07 Cost Allocation Methodology. Council members did not have additional constituent input about the proposed change in methodology. Background material describing the goals for changes to the methodology, estimated impacts to programs and financial reporting, and implementation issues, were discussed in depth. Council members agreed that it would not be necessary to share this level of detail with each of the constituent groups. Any member of a constituent group, however, could request detailed information about the Cost Allocation Methodology used by MOREnet.
Debbie Rodman reviewed the modified methodology proxy and allocation standards, but affirmed MOREnet continues to collect utilization and member data in many forms. Staff has implemented a data analysis tool to assist in pulling a wide variety of member, service and utilization data.
The Council agreed to give consensus to proceed with the FY07 Cost Allocation Methodology with no motion.
Videoconference Service Updates
Training Service Updates
Plan for Research and Member Communications
FY06 Budget - 6 Month Update
Jennifer Doll provided an overview of significant items in the forecast of the year-end financial results. Revenues are expected to increase by approximately $81,000 due to an increase in customer reimbursable revenues. Expenses are expected to decline by approximately $567,000 due to telecommunication cost reductions and salary and benefits cost savings. Margaret Conroy asked about the increased workload due to the vacancies and Bill Mitchell replied that the front line support staff is being impacted.
Margaret Conroy asked if members were lost due to the short fall assessment. Debbie Rodman stated that no members have left due to the shortfall assessment.
Bert Schulte made a motion to approve the consent agenda. Cheryl Bielema seconded the motion, and it passed unanimously.
FY07 Appropriations Update
Bill Mitchell will be meeting with all of the Senate Appropriation committee members before the hearings begin. MOREnet is preparing a formal response for Senator Ridgeway and will attempt to meet with her at the request of the Senate Budget Chair, Senator Gross. The House will do mark up next week. Bill Mitchell thanked everyone for their direct and indirect involvement in the process this year. Chair Stein commended Bill Mitchell for his excellent testimony.
Barbara Reading announced that HB12 House Budget hearing will be tomorrow afternoon and the Senate hearing will be on the 21st of February.
FY07 Preliminary Budget
Jennifer Doll reviewed the preliminary FY07 budget and major changes from the projected FY06 financial results. Bill Mitchell added that the NGN project could increase the total expense budget depending on what option was selected. Total revenues are expected to decrease by $242,000 and total expenses are expected to increase by $406,000. The FY07 budget will be presented to the Council for approval after the Governor signs the FY07 appropriations bills and state budget.
At this time, MOREnet is projecting stable member fees due to expected stability in revenue funding. Detail does show a $286,000 increase in revenues for MERC members due to elimination of the one-time subsidy MERC provided from its program fund balance for FY06.
Barbara Reading asked if MOREnet assumed that the reserve or fund balance within REAL was going to be carried forward in FY07. Debbie Rodman replied FY07 preliminary budget did not assume any use of reserves for any program. Staff will have discussions with each sponsor to determine use of any program fund balance.
There were discussions about the Council's need to see pass-through amounts on the budgets provided; staff will investigate alternatives for reporting those options. Barbara Reading pointed out that all of the funding listed for E-rate is still being disputed. Chair Stein advised MOREnet to provide footnotes explaining budget assumptions.
Bert Schulte thanked Jennifer Doll and Debbie Rodman for the clarity in the budget agenda items.
Future Use of Fund Balances (Reserves)
Council members were presented background issues involving use, restrictions and intended purpose of fund balances in various program and activity accounts. The Council approved a MOREnet Reserve Policy at the November 12, 2004 Council meeting recommending MOREnet maintain a fund reserve equivalent to six months of total operating budget. With changes in the funding environment, as well as the Next Generation Network planning, staff asked the Council to consider if the reserve policy is still appropriate.
Council discussed methods and criteria needed to determine fund transfers to the Plant Fund, uses for positive balances from for-fee operations, and whether transfers from program reserves to the Plant Fund should be considered.
Bert Schulte stated the Plant Fund is a good idea to create a mechanism that can deal with unexpected contingencies and development opportunities. Currently the challenge is the unknowns with MOREnet operations and showing a big reserve complicates matters with the legislature. The Council must look at getting the reserves down, as it is hard to explain why appropriations are needed when there are large reserve balances. However, having appropriate funds budgeted for designated contingencies and opportunities is essential.
Chair Stein asked for input from the Council about guiding principles for the Plant fund. Suggestions included the following:
- Simultaneously look at all reserves from constituent groups, prior to shifting any reserves to the Plant Fund.
- Decisions about moving reserves should not automatically require equal amounts to come from each program reserve.
- Development of criteria concerning amount and general purpose of reserve funds to be maintained by each constituent group separately, and amount to be moved into the Plant Fund.
- Recommendations from constituent groups about the amount of funds to be transferred to the Plant Fund, and whether to designate funds for specific projects prior to moving any funds.
- Development of mechanisms to grow the Plant Fund so that substantial withdrawals could be made and sufficient funds remain for a safety net.
- Decisions to move reserve funds into the Plant Fund should not adversely affect operations, but rather provide latitude for funding contingencies and opportunities.
Chair Stein requested that staff bring recommendations simultaneously about funding the Plant Fund and any changes to the Reserve Policy to ensure alignment. He also advised staff to think carefully about categories in the Plant Fund before bringing a recommendation forward.
Bill Mitchell clarified that the purpose of establishing a Plant Fund is to bring focus to the significant capitalization costs inherent in projects like the Next Generation Network. There is no staff suggestion that all program reserves can or should be transferred to a Plant Fund. Chair Stein observed the Council is moving in a direction that will establish precedent for future actions associated with fund categories. He requested that TNP, REAL and MERC sponsors provide staff a high level summary of ways program reserves have been used in the past. He requested validation from both sponsors and staff about this issue.
After significant Council discussion, Chair Stein expressed concern about reducing program reserve funds to zero at this time. He requested that staff draft categories which describe expenditures covered by reserve funds and address whether the Plant Fund could be structured to reflect all program and capitalization projects categories. Barbara Reading requested discussion by the Council concerning what we are choosing to not do with current reserve funds or the new Plant funds.
Chair Stein suggested a comfort level with the Plant Fund will be linked to a clear understanding of the span of control and oversight the Council will have regarding the number of pathways and amount of funds that would eventually be transferred to the Plant Fund, and the criteria by which Plant Funds could be moved back to the operating budget. Chair Stein encouraged staff to hand pick members from each sponsor to informally discuss principles and implementation strategies to be proposed at a future Council meeting.
Dave Byland advised that MOREnet received a call from the FCC stating that our appeal has been placed on the docket. It is expected the FCC will have a specific date for determination and will ask if there are any verbal or written comments. Staff may have an opportunity to deliver verbal comments in Washington D.C.
With regard to the E-rate application for next year, approximately 91% of libraries and 89% of schools have submitted their Letter of Agency (LOA) form as of yesterday morning.
Next Generation Network Project Update
Dave Byland reported numerous meetings are taking place with parallel engineering teams and with the state MoDOT fiber development team. The MOREnet RFP schedule, however, is somewhat behind due to difficulties in attaining a consensus between engineering teams on network design specifications. Bill Mitchell stressed that the decision of what option will be used and how it will be financed must be made by May 30, 2006, in light of current circuit contract expirations in February, 2007. Curt Fuchs asked about switching mid-academic year and what that means. Bill Mitchell acknowledged the challenges associated with moving mid-year and indicated that staff will work with the current network vendor to assure contract extensions are in place to allow the cutover to be delayed to the end of the semester. This will add cost to the project.
Planning Calendar Update
Next Generation Network dates have been added to the planning calendar so the Council can see interrelation with other key dates and tasks.
Dan Ross reported that Bill Mitchell, Chip Byers and he met to discuss bandwidth options, and an open dialog on the issue continues. Restrictions concerning the state's use of the MoDOT fiber continue to be an area of disagreement with the vendor who owns the infrastructure. He indicated he is unsure if MOREnet, as a research institution, can use the fiber per the Office of Administration's agreement.
The state is building a bid document on a converged voice, video and data network. The intent is to bundle services and get more aggregated services for the state telecommunication dollar. Any vendor bidding could use all or part of the state's fiber. The state hopes to have the fiber fully lit by April 15, 2006. Bill Mitchell added that MOREnet would not be affected by this bid as it would continue providing internet connectivity for the state. There will be a section in the RFP to ensure that MOREnet technical requirements are met.
Dan Ross continued that issues associated with the consolidation effort are not related to the technology but rather involve challenges associated with changing cultures and redesign of administrative processes. They are working to sell information technology as a service. Dan Ross is currently doing visits around the state to discuss first year consolidation and how each agency fits into the consolidation. An information exchange is available so everyone involved in the consolidation project can provide information on what was done that resulted in a dollar saved to show cost savings to the legislators. FY06 started with a $3.5M core reduction. The unit is also doing a skills inventory of staff around the state to help address needs where they occur while minimizing travel expense.
Guiding documents for the consolidation project include a strategic plan, a list of top 10-12 enterprise-wide activities for the legislature and SLAs for each agency. The IT website has information about each of these documents.
As one of the states's consolidated agencies, Bert Schulte commended Dan Ross on the progress that has been accomplished to date. None of the early apprehensions of how consolidations would unfold have come about. He believes Dan Ross has done a tremendous job of presiding over a nearly impossible initiative and the dynamics and spirit of those involved show that they have been energized.
Barbara Reading reported that the State Library has completed upgrading all remaining libraries from 56K connections and are also upgrading several libraries from 384K connections. They are discussing plans to do more upgrades on libraries in FY07. This is one way the REAL program spends E-rate funds.
The libraries are using LSTA funds in new grant programs to 1) assist those libraries that have had security audits and remote vulnerability assessments, by providing funds for routers, servers, and to correct issues identified in the above assessments, and 2) help public libraries reengineer web pages.
The State Library hopes to have a new state librarian soon; they will be finishing up with interviews in the near future.
Deborah Sutton has been meeting regularly with Eric Nicklas and Bill Giddings to develop member fee projections. DESE is planning to collect the same amount of funds, but will spread fees more equitably based on district and bandwidth size. Title II.D funds for next year have been decreased by 45%, which also significantly impacts this plan.
Rita Gulstad shared that MERC is considering a change in their membership fee model. The model being considered won't change the bottom line except for those institutions with increased bandwidth.
The HELIX conference will be March 22-23 at Tan-Tar-A Resort.
Chair Stein told everyone that there is a 2% increase proposed for higher education budgets and that there are positive feelings about the state's acknowledgement of the importance of all education - both K-12 and higher education. The Governor has indicated he will convene a Math Science Summit tentatively scheduled for April 25th. Missouri's Mathematics and Engineering Technology and Science initiative (MO METS) is designed to emphasize the connection to business and industry and having business, industry and education work more collaboratively across all Missouri communities. A data source book is being developed that will address why METS disciplines are so important globally, why METS is important to Missouri specifically, and how well Missouri performs using agreed upon measures. He asked staff to submit several bullets for inclusion in the data book.
Council Member Alternates
Chair Stein emphasized the importance of having all seats filled at each Council meeting; he has asked that permanent alternates be named by the next Council meeting. The alternates will receive all meeting materials and Council communications, and will be encouraged to attend all Council meetings. An email will be sent soon seeking alternates.
Rita Gulstad will be the higher education alternate for all higher education seats.
Development of Council Goals
Chair Stein distributed copies of the Council MOU and referred to the second page, item 3.1.3.e. regarding annual self assessments of the Council. Chair Stein observed this hasn't been happening and he feels the Council needs to establish appropriate goals, which allows engagement in a systematic evaluation of its effectiveness. This will be an ongoing agenda item.
Barbara Reading shared the following thoughts:
- The Council should become less focused on MOREnet operations and have more discussions about where the programs should be headed.
- The Council should receive more of a national view of what is happening, what is happening in other states and if we're falling behind.
- The Council should look at the online database and determine how to maximize usage.
- The Council should talk about how to best express what MOREnet does for the state and why it is deserving of state and government level funding.
- The Council should consider having more focus sharing the needs of the partner agencies, and how they can be met through MOREnet services.
Chair Stein recommended that the Council send their ideas or reactions to Sherry Loyd within the next month. He and Bill Mitchell will review the ideas and reactions received and report back to the Council at the April meeting.
There was no other business.
- April 13, 2006
- July 14, 2006
- September 15, 2006
- November 17, 2006
Chair Stein observed that consideration must be given for another meeting between April and July for NGN budget final decisions. Sherry Loyd will work with the Council to coordinate schedules.
Curt Fuchs thanked the Security group for their excellent response to a recent security incident in their district.
Chair Stein commended staff for their flexibility in how Council materials are presented.
Chair Stein moved to adjourn at 1:49 p.m.
Council Meeting Action Items:
- Staff will work with sponsors to develop preliminary FY07 member fee announcements. Sponsors are encouraged to send preliminary announcements to members with appropriate funding caveats by February 17, 2006. Permanent member fee announcements would be sent after the Governor signs the FY07 budget.
- Staff will discuss the use of fund balances for the FY07 budget and the Plant Fund with sponsors.
- Staff will investigate options for removing pass-through amounts from budgets provided to the Council.
- Staff will incorporate footnotes explaining budget assumptions in future reports.
- Staff will develop recommendations simultaneously regarding plant funding and reserve policy. Careful consideration and definition of categories of use within the Plant Fund must be included with recommendations.
- TNP, REAL and MERC Council members are to provide staff with high level summaries of historic use of program reserves.
- Staff will informally discuss criteria and guiding principles concerning the future use of fund balances with TNP, REAL and MERC prior to submitting appropriate recommendations for future Council consideration and action.
- Staff will provide several bullets for inclusion in the METS data book.
- Staff will send an email to the Council members seeking Council member alternates.
- Council members are requested to send ideas or reactions to the goals development discussion to Sherry Loyd within the next month. Robert Stein and Bill Mitchell will review, summarize, and include on the April agenda.
- Staff will schedule another meeting of the Council between April and July for NGN budget final decisions. Sherry Loyd will work with the Council to coordinate schedules.