Sept. 27, 2005
MOREnet Council Meeting Minutes
Council Member Attendees: Sara Parker, Bill Mitchell, Curt Fuchs, Bert Schulte, Cheryl Bielema, Tom Stokes (for Dan Ross), Jeannie Gordon, Margaret Conroy, Annie Busch, and Jeremy Kintzel (for Robert Stein)
Additional Attendees: Holly Fine, Dave Byland, Bill Giddings, Deb Sutton, Nathaniel Albers, and Nikki Krawitz
Public Attendees: Mary Jane Day (SBC)
Call to Order and Announcements
Sara Parker called the meeting to order. Introductions were made.
Budget Report - Holly Fine (Attachment 1)
FY05 Year-End Actual Results - Holly Fine reviewed the FY05 year-end actuals reflecting the close of books in August. She showed the accrued E-rate receipts for FY05 and FY06 in FY05 due to the timing of the approval letters. The FY06 E-rate receipts are backed out of the FY05 revenue so as not to distort FY05 ending balances or the FY06 revenue budget.
Parker asked if there was a further amount MOREnet is awaiting for FY07. Fine replied that the 2005 E-rate application was denied and there is hope that those receipts would be received in FY07. MOREnet's Letter of Appeal is included in the Council meeting packet.
Fine pointed out that future year obligation and balance after obligation lines have been added to the budget sheets. Future year obligations are FY06 budgeted expenses based on annual cost for telecommunications lines, hub rent, equipment maintenance, I2 expense, facility costs, and accrued vacation. These are items that would have to be paid for six to 12 months as required in a turn-down situation.
Bert Schulte asked if this action was in consultation with UM. Fine replied that it was.
FY06 Revised Operating Budget - Fine reviewed changes made since the Council had seen the working draft shared at the July Council meeting. These changes included:
- Restated E-rate for timing issues.
Fine confirmed for Parker that the fourth line shows the 3% withholding that MOREnet assumed. There was a slight adjustment in E-rate based on a recalculation of the formula used for revenue so it is a little higher than what was originally thought. Curt Fuchs asked if the eMINTs amounts are covered. Fine said that there are zero adjustments for E-rate for eMINTs. Parker asked if this is acceptable to DESE and Schulte replied that is was.
- Changed the way the funding assessment is being shown. The receipt of new revenues to cover all or a portion of the shortfall assessment is reflected as an increase to membership fees in each program. The transfer of this revenue to cover the Shared Network shortfall is shown as a negative in each column and a positive in the Shared Network column.
Fine reviewed changes to the expenditures lines; update of the fund balance start FY06 to reflect FY05 actuals for close of books in August and the adding of future year obligations and balance after obligation lines in order to show the estimated FY07 obligations versus the projected FY06 fund balance.
Annie Busch made the motion to approve the FY06 budget as presented and Fuchs seconded. All were in favor. There were no abstentions.
E-rate Issues Update - Dave Byland gave a brief review of how MOREnet has submitted a Request for Review to the FCC regarding the SLD's denial of the application for reimbursements of FY05 expenses (to be received in FY06). MOREnet was significantly shocked when the application was denied, since all approval forms from members and schools had been received on a timely basis. The application was complete when sent and was on time. The issue is that the letter of authorization was in a slightly different format even though the FCC doesn't have any specifications on what the forms look like.
He also reminded everyone that last year a temporary one year exemption given to the Anti-deficiency Act is due to expire in December 2005. MOREnet has received informal notification that the SLD will again have a one year exemption, but formal notice has not yet been received.
Services Discussion - Next Steps - Bill Mitchell and Sara Parker (Attachment 2)
At the July Council meeting there was agreement that the FY06 budget would be used to review how services are funded. The basic, mid-range and services already at cost recovery were reviewed. There are three major categories: Foundation services, Member services, and For Fee services.
E-rate support is currently funded by TNP through the K-12 E-rate policy analyst grant and by the REAL contract. Both Parker and Schulte voiced their approval of it not being on a cost recovery schedule.
Parker asked for a feeling of how much "Other Support" might be. Mitchell said the tracking method is by call tickets and if you take out the security questions and network consulting, there are very few tickets left. This is not a significant enough amount to be a decision item.
The Video Conferencing estimate is about $670,000, which is predominately bandwidth and staffing with some equipment dollars. Gordon said service is reasonable to be a For Fee service, and asked if it would damage the service. Mitchell replied usage is continuing to grow. Use was predominately in the higher education community with some K-12 use; there is a 60% increase in FY06 for K-12.
Mitchell reported MOREnet was given appropriation dollars some years ago to build a state-wide video conferencing system to eliminate individual state-wide video conferencing clusters that were unable to communicate with each other. There is concern that if MOREnet provides this service as a For Fee service that over time folks will begin to put those individual clusters back together. The Council requested more detailed information. Parker requested a breakout of the $670,000 so the expenditures are known. She also asked for data showing what members are using the service, for what purposes and if there are additional charges within the higher education and K-12 communities. Parker asked if institutions added a telecommunication charge. If a surcharge is added for a distance learning class, that surcharge should come to MOREnet.
Parker asked the information for the next Council packet be assembled in terms of whether the fees include a surcharge related to transmission charges. She also said that it would be helpful to identify the surcharge and say what that surcharge is; telecommunication, facility or textbook. Mitchell said that the Video Advisory Group may be able to help MOREnet gain more information. At this time Parker isn't looking for information on the value of the service, just its use. She added that eventually there may need to be focus groups to determine the value. She would like this information sent to the Council as soon as it is assembled for their review prior to the meeting on November 18th.
If it is decided by the Council video conferencing needs to be a For Fee service, Mitchell needs to make that announcement to the members in January.
Discussions began on training. Busch said public libraries would be willing to pay by use. The question was raised on how staffing would be determined if there were fees. Mitchell said there are five FTE plus support staff. The training group does fundamental training and also does training for For Fee services such as Centra, etc. MOREnet can estimate to the best of their ability but has no funds to cover deficits. What if demand doesn't cover cost? MOREnet may need a certain number of years to break even. Busch said the service may need to be done via subscriptions for a certain number of seats so MOREnet would know the revenue.
Parker said that the Council needs to see the whole training financial picture. Parker and Mitchell will work together to create an issue paper on training.
Mitchell said that while research and development was categorized as a foundation service it could also be an option for elimination. This service currently is directly supported by Shared Network funds. What technology might replace the current network technology is not an issue. Non-network related research funds cover allotment of staff time with some equipment. The Council would like to see past and current examples of non-network research and development. Maybe this service could be purchased instead of contracted. Bielema said this would be hard for MOREnet to do. Busch said if the members want research and development done, they want one place to go for it. This is what MOREnet does. She doesn't think separating research from development would be wise. Fuchs added research and development differentiates MOREnet from being just another ISP.
Internal Audit Report - Dave Byland (Attachment 3)
Byland told the Council there was very little financial disclosure in the audit; of approximately $6,000,000 in invoices prepared there was only approximately $2,000 questioned. He said the audit did identify some areas of risk to the University; 1) the risk that comes in contracted services for telecommunications, and 2) should MOREnet have a reserve and should we manage against it?
Jeremy Kintzel asked if "Perform and communicate a risk assessment of funding sources" is the result of the future obligation lines added to the budgets. Byland replied yes, that line was suggested by the university.
Reserve Strategy and Risk to the University - Nikki Krawitz
Nikki Krawitz told the Council the university has asked MOREnet to develop a risk and reserve strategy that mitigates risk for the university and also for its members. She has asked Mitchell and Byland how that might be done; the rational behind the amount of reserves; and what would happen if state appropriations were eliminated. Once a plan is identified, the university and the Council should then be able to come to an agreement.
Fuchs asked how this might affect the next generation network. Mitchell replied that most states have a fiscal payout of 5 years or less and have a known payout plan.
Krawitz expressed the need to know where the current Governor and legislature stand on state network consolidation.
Appropriations Process and Coordination - Nikki Krawitz (Attachment 6)
Krawitz distributed a Calendar of Activities for the FY2007 appropriations request. This calendar is distributed to all units within the university during the January - February timeframe. She walked the Council through the calendar telling them this year the university wasn't going to request core restoration, however, the President did ask for restoration of cost to continue. She added the top priority for all programs is to maintain the core from the previous year and mandatory costs (benefits, salary increase, insurance, etc.).
Parker asked how the Council members who are representing many clients can be most effective in influence. Krawitz told the Council Mitchell does a great job at working for MOREnet and their agencies. She said he is a great representative to have and that he works very closely with the university governmental relations staff. She said members can help by communicating.
Busch said that she has a meeting on October 7th with the Governor's educational liaison and with the budget director. She will report back with the hopes that a strategy can be developed. She also added rural schools and libraries need to be working with their legislators as they have the most to lose.
Krawitz said an analysis of the benefits MOREnet provides and what it would cost to get these benefits elsewhere might be beneficial.
Organization Realignment - Bill Mitchell (Attachment 4)
After a year's work, MOREnet organized for the future. Member services have all been grouped together to identify authority. Natasha Angell is the new director of Member Services.
Chip Byers will lead the next generation network effort, which will be very important to the success of MOREnet. Mitchell said the organization has been flattened. Mitchell added that all changes were done within the existing budget.
Fuchs suggested if the organizational chart was posted publicly MOREnet might want to add the MOREnet Council.
Next Generation Network Project - Bill Mitchell (Attachment 5)
MOREnet is working to issue an RFP for fiber acquisition. MoDOT might be a contingency. MOREnet is also discussing a managed service (that would look and behave like dark fiber). MOREnet would pay for the initial investment up front and lease for the next 20 years. This would be a one-time investment with ongoing costs not changing. There are 25-30 state networks that have either already done this or are also in the purchasing stage. Busch asked how it fits with current projects. Mitchell replied this phase is only for the backbone, whose contracts expire in February 2007. Busch asked about costs. Mitchell replied MOREnet is working to determine the costs and has created an oversight committee. For the one-time costs, he said MOREnet could borrow and then repay, do a vendor lease purchase, or possibly partner with the university.
There is a question regarding the contractual language in the LightCore contract with MoDOT. MOREnet is asking if research and education traffic can run on state fiber. Stokes added Dan Ross has a team also working on that issue.
Fuchs asked about E-rate eligibility if fiber is used and Mitchell replied that all financial factors would be weighed when determining which option would be best for MOREnet's members. Of the three options being examined, the only option which may qualify for E-rate discounts would be the managed fiber service option.
MOREnet would like to have a Council representative on the oversight committee and someone to represent the K-12 and libraries. The university CIOs have asked MERC for a representative from the higher education community. Busch replied that she was comfortable with just one representative. Parker asked for a show of hands as to who would be interested, seeing no hands she said that she would make an appointment.
There was discussion on Council member terms. That topic will be an agenda item at the next Council meeting.
MOREnet Executive Director Report - Bill Mitchell (Attachment 7)
Cost Allocation Formula - Mitchell explained the current model was built 10 years ago. MOREnet started looking a year ago to see if there was a new model that would be easier to maintain, explain, etc. Timelines did not work out to get it to the Council in time for a decision for FY06. The goal is to bring back a simpler process.
Customer Fee Announcement - Copies of the letters are in the Council meeting packet. Reporters are contacting Mitchell so he is sure the K-12 invoices have been dispatched.
Good News Items -
MOREnet had a booth at the Missouri State Fair this year. There was an interactive video demonstration with the Extension group which seemed of interest to many. Mitchell and a few others from MOREnet attended the Governor's breakfast.
MOREnet will be recognized tomorrow by the Missouri National Guard. They will be presenting the Patriot Award to Mitchell, on behalf of MOREnet, in recognition of the outstanding support MOREnet has given its "citizen soldiers" who have served or are serving on active duty.
MOREnet Council Business (Attachment 8)
Approval of Minutes -
Bielema motioned to approve the June 15, 2005 meeting minutes as written. Busch seconded. All approved.
Conroy motioned to approve the July 15, 2005 meeting minutes as written. Schulte seconded. All approved.
Agency reports -
Jeremy Kintzel - DHE forwarded the MOREnet budget as submitted with overall institutional budgets recommending cores from FY06. There is also a place holder for performance funding. Within the MOREnet budget, a $538,000 increase related to K-12 was submitted as mandatory. There were discussions about this and Kintzel is to verify and send a note to the Council.
Bert Schulte - DESE is working on their legislative contacts. Schulte questioned the ability of schools to acquire internet connections on their own. Mitchell believes they can get access but isn't sure of what speeds might be available to them.
Schulte believes equity, the foundation formula and virtual schools will be of high interested to the legislators. Advocacy for MOREnet may be hard for small schools. MOREnet makes it so easy for them they forget how great the service is. This makes it hard to generate ongoing contacts when they have so many more issues.
Schulte will help with highlighting MOREnet's services to the state. Busch asked what MOREnet provides to the state. Internet service; electronic licenses at the desktop; state of Missouri website; and systems support. The question was raised on what would it cost the state to do that for itself?
Fuchs said Socket has contacted him wanting to become Columbia Public School's ISP. He is going to find out what it will cost to compare their service to the $9,000 currently paid.
Tom Stokes - OA is continuing to work with MoDOT regarding fiber. Parker asked if the fiber is physically where the current backbone is located. Stokes replied the fiber runs east and west through Missouri along I-70 and north and south along I-44. Mitchell said the MoDOT fiber largely parallels the backbone.
Sara Parker - Secretary of State's Office is late in getting out the MOREnet fee letters because of the other budget reductions and one small increase received. There will be more tiers, which is what the library community wanted. Both Busch and Conroy have reviewed the library fee letter. Later there will be a more extensive letter that will compare the FY05 and FY06 state assistance.
Bill Mitchell -Provided FY07 MOREnet legislative materials for everyone's review and asked for comments to be sent to him.
Other Business -
Open Time for the Public to address the Council -
No one spoke
Meeting Schedule -
The next Council meeting will be Friday, November 18th from 10:00-2:00 in Jefferson City.
There will also be a meeting on January 31, 2006 in Jefferson City at the State Information Center. Parker reminded everyone winter meetings are subject to weather. Everyone should check their email if bad weather threatens.
With no additional business or discussion, Parker adjourned the meeting at approximately 1:40 p.m.