[Danielle Weston]

At the 17 Dec 2020 Regular BoT meeting (at the 1:13:00 mark) CFO Adix told us that the last board was comfortable with a $10M budget deficit (for the current FY which ends this summer) and asked us to start thinking about “what’s your number” (amount of a deficit we are comfortable with) as we start budget talks in Jan 2021 for the next fiscal year. Furthermore, Adix explained that though we see a bump in fund balance (up to a $300M balance) in Jan/Feb, throughout the year this dips down to below $100M.

*I want to note here that no current trustee voted for the last budget that was approved in Jun 2020. Four of us became trustees in Nov 2020 (Xiao, Bone, Harrison, Weston), two of us voted “no” on that budget (Weir, Vessa) and one voted to abstain (Feller).

For me, it’s hard to know how much of a deficit I am comfortable with when I have more questions than answers right now about our budget and the future. Some questions I have (just top of mind) are below. Surely, I will have more questions as I think about this more.

1. Will the TxLeg/Governnor/TEA hold RRISD harmless for student enrollment decline in Spring 2021 as they did in Fall 2020? The answer to this question has a significant impact on RRISD revenue.
2. Will any of the 3k students that we expected to show up in Aug 2020, but didn’t, return in Aug 2021? This also impacts RRISD revenue.
3. What will property values be in Spring 2021 (property owners receive their appraisals every April)? According to our last Certified Annual Financial Report (CAFR) dated June 2019 and available on the RRISD website, the total assessed property value in all of RRISD was $33.5B. Is that figure projected to increase (which would bring in more tax revenue) or decrease (which would reduce our tax revenue)? Historically property values in RRISD increase but has COVID impacted this?
4. Delinquent tax payments from property owners typically hovers between one percent and one half of one percent of our total tax levy. My understanding is these delinquent taxes meant a loss of about $2M to RRISD in 2019. Is that delinquency expected to be higher since COVID?
5. How much cash on hand for operating expenses are we as an ISD required to retain? I believe it’s 60 days but I need clarification. How much $ is this?
6. We are currently $1.3 Billion in debt right now ($1B in principal and $300M in interest). Is there a desire to reduce this?
7. How might a potential $500 retention payment for all employees ($3M+ as I recall from the 17 Dec 2020 meeting) impact our decision making?
8. Is the TxLeg expected to be able to fulfill the promises of HB3 as it begins the session in Jan 2021 with a projected $4.6B deficit (as Comptroller Hegar has said)? If the legislature can’t or won’t fulfill the HB3 promise, will we as a BoT be in an undesirable position of having to choose budget cuts or a larger deficit budget?
9. I recall that in the summer of 2018 through the spring of 2020, CFO Adix made mention many times in board meetings of looking for inefficiencies in our budget/finances. I believe he said there would be an “efficiency committee” formed, seeking to look for opportunities of reducing waste. I have only been a board member for four weeks. Has the BoT ever received any findings of inefficiencies as has been mentioned in board meetings for many months/years? If so, please share that with the new trustees as soon as possible.

I’m thinking that I am going to need various scenarios run (with different data points and/or assumptions) and discussion with you all before I am prepared to offer such a consequential opinion. To the extent that CFO Adix can weigh in on these questions in our coming budget meetings, I’d appreciate it. But it’s likely that some of these questions don’t have concrete answers or won’t until the legislative session ends, property tax appraisals are released, etc.

Also, at this time I’d like to request a forensic audit of RRISD. I am aware that every year we do an external audit…the most recent was presented to the BoT in Nov 2019 and was done by Maxwell Locke & Ritter. The audit done by this firm is an overview, reviews financial statements and verifies that we follow policies and procedures and I know the next audit of this kind will be presented to us in Jan 2021.

I am calling for a different kind of audit…one that endeavors to look for areas of inefficiency, redundancy, waste, etc.

We are a large organization with an annual $440M budget and $1.3B of debt. I believe this is an ideal time for a forensic audit for two reasons. First, as we know the state is starting the next legislative session (in Jan 2021) $4.6B in the red (public ed and health and human services are the two largest recipients of state funding) and our student enrollment is down (funding is based on WADA). Now is the perfect time to see if we can find cost savings (inefficiencies, redundancies, waste) before being forced into potential cuts. Second, the ideal time to conduct such a thorough audit is when we are in between superintendents. Selecting the next superintendent is likely to be the most consequential decision we will ever make as trustees. I want to do everything in our power to set the next superintendent up for success on every level and conducting this thorough audit prior to their arrival will do just that.

I look forward to hearing your thoughts.

[Tiffanie N Harrison]

Thank you for starting this in-depth discussion, Trustee Weston.

I am going to spend some focused time considering budget. I appreciate your top-of-mind questions as a start. I am in complete agreement with requesting a forensic audit.

[Anonymous]

I personally, as a community member, saw public trust eroding over the years because of the handling of various bond projects. It’s time for a forensic audit on construction budgets, contracts awards etc to put us on a corrective path to restore public confidence on transparency.

[Amy Weir]

I wanted to clarify the term Forensic audit. This is an audit used to gain evidence for a court case or legal proceedings and I don’t think that is what you mean as I read your definition of the kind of audit you’d like to see happen. Trustee Weston you say, “ look for areas of inefficiency, redundancy, waste, etc.” which is a different type of audit. We should discuss what type of review or audit this board would like to see.

Trustee Weston in reference to your question on efficiency studies, the only thing I have seen is the Gibson study which was presented before I was elected. But as far as the efficiency committee that Dr. Adix was spearheading last year, I do not remember seeing a formal presentation or recommendation on that committee’s findings.

Trustee Xiao as you know I have been very concerned with construction projects and construction spending, but I do believe the new system that has been implemented by the construction department is working. We can ask Mr. Worcester to get that information to the current board. I know the previous board was given a presentation and more information on the new accountability system for the bond projects. We also will be working to make the bond oversight committee more of an asset to the board, and they will be able to monitor these projects more closely for us.

[Danielle Weston]

I am open to having a conversation about the term “forensic” as a board and discussing whether that is the right type of audit that we need. Can we have that discussion at the 14 Jan 2021 or 21 Jan 2021 board meeting? I am open minded and would like to hear from and collaborate with my colleagues on this.

At this point I know for sure what I don’t want. I don’t want the kinds of audits that are already part of RRISD’s processes that suggest the status quo is sufficient and working well with no meaningful recommended changes year after year. I don’t want an audit that merely compares our operations to other ISD’s operations. I have real concerns about the upcoming budget because of our declining enrollment and the state of TX starting the 87th legislative session $4.6B in the red. We have a duty to truly scrutinize where and how our money is being spent because we may be looking at having to make some hard decisions in short order.

As an example, I am regularly asked to explain the number of highly compensated employees that work in central administration and defend their salaries. Right now I can’t make sense of these expenditures of so many individuals, who don’t educate any students, earning twice as much (or more) than our teachers. I need more scrutiny on this, and the auditor needs to not just compare our org chart structure to other school districts who may also be top heavy. If all of these administrative positions are truly needed to properly ensure the education of RRISD students, a meaningful audit will reveal that.

Another example: the McNeil High School construction debacle. Bond 2014 passed in May 2014 with millions of dollars approved by voters for a much needed upgrade and expansion of McNeil High School. It’s now 2021 and the work is still not done. I was present at the 21 Jun 2018 BoT meeting (seated in the audience) when an “auditor briefed” the BoT on this project. Lots of “shoulda’s and woulda’s” were offered as well as a recommendation to use something more meaningful than excel spreadsheets to manage the project. No one was named as accountable, the construction firm was not criticized, RRISD leadership was never mentioned. This wasn’t acceptable to me in Jun 2018 as a taxpayer and it’s not acceptable to me in Jan 2021 as a trustee. The last media article I read on this topic cited $14M in cost overruns. Busted timelines and budgets are unacceptable to me. The $14M in cost overruns on that project is money that will never go to another RRISD school expansion that could remove portables from their campus or address valid needs on many other campuses. It’s waste and as a citizen, taxpayer and now trustee, I have no knowledge that accountability was ever brought to bear. It boggles the mind. I don’t want another audit that says our construction projects and expenditures are on the up and up after what I have witnessed for a long time. I want meaningful scrutiny.

Thank you Pres Weir for letting me know that despite the talk of an efficiency committee that would identify areas of duplication, waste and inefficiency, no such data or information has even been brought to the board of trustees.

Finally, I look forward to the resumption of the much needed Bond Oversight Committee as I have called for that multiple times. Hundreds of millions of dollars are on the table for projects. Having citizens on this committee who are truly empowered as a body to do site visits, ask questions, get access to information and be able to communicate officially with the BoT will go a long way in re-building trust in RRISD.

[Anonymous]

President Weir,

I would love to learn more about the new accountability system and how it will improve future construction projects. I 100% agree with you that bond oversight committee should have been more of an asset for us.

[Amy Weir]

I was on the TEA website and they have a document that lists types of audits for schools districts. I believe given Trustee Weston’s description of what she wants reviewed that the following per TEA is actually what is being requested (Texas Education Agency 2019 Financial Accountability System Resource Guide page 8 Auditing) :

Performance audits are objective and systematic examinations of evidence that provide an independent assessment of the performance of a government organization, program, activity, or function. Performance audits provide information to improve the organization’s public accountability and facilitate decision making that initiates corrective action. Performance audits assess the performance of an entity, a program, or an activity within that entity. Two common types of performance audits are economy and efficiency audits and program effectiveness audits.

* Economy and efficiency audits determine whether an audited entity is operating economically and efficiently, identifying causes of wasteful and inefficient practices, and ascertaining whether the entity has complied with laws and regulations in matters of economy and efficiency.
* Program effectiveness audits determine if a program is meeting the objectives for which it was developed and the entity has complied with significant laws and regulations related to the program.

[Cory Vessa]

Dear Fellow Trustees,

I am glad we got clarification on what a forensic audit is and why it is not appropriate. I have no issue with doing an economy and efficiency audit while we are in between superintendents. However, I would caution against acting on any findings before the new superintendent begins. We are hiring a superintendent for his/her expertise in running a school district and therefore I would prefer we allow him/her to make the decisions.

In terms of the efficiency committee supervised by Dr. Adix last year, these were the efficiencies presented to the Policy, Innovation and Budget Committee on February 3, 2020:

Transportation- Reduce Overtime which Funds
Additional Routes to Reduce Overcrowding
Replace T-8 and T-12 Lights with LED Lights
High Efficiency Toilets and Flushless Urinals
Use Air Driers instead of Paper Towels

When we consider efficiencies, remember that we have two budgets. We have an M&O budget, that covers our operational expenses, and an I&S budget, that covers our bond projects. Those are very different in terms of finding economies and efficiencies.

For the M&O budget, in light of the $27 million budget deficit for this year, the big dollar savings would come from changing our education delivery model significantly. I pray the advocacy at the legislature results in continuance of current funding levels (and an increase for teacher/staff raises) so that the proposals on the table aren’t cutting programs to reduce overall expenditures, but rather reallocating dollars towards initiatives/staffing that will further improve student outcomes.

For the I&S budget, I think a combination of utilizing the Bond Oversight Committee in this capacity (looking for efficiencies and economies) and utilizing an external audit will be helpful. The 2018 Citizen’s Bond Committee put together a bond to serve the district for three years, planning for another bond in 2021. Given a 2021 bond is unlikely with the current economic circumstances, stretching those 2018 bond dollars as far as possible is definitely prudent.

I look forward to a robust dialogue in our upcoming meetings.

[Cory Vessa]

Update: I just learned that Governor Abbott won’t be making a decision on the hold harmless. He is leaving it up to the legislature to decide. What that means is we won’t have an answer until April/May at the earliest. This hold harmless money impacts our budget for this 2020-2021 school year. It will determine the size of the deficit for this year.

The hold harmless has less of an impact on the 2021-2022 budget. The bigger driver of that budget will be whether we are able to get our enrollment back to pre-pandemic levels.

[Danielle Weston]

Thanks Amy and Cory. I am open to a discussion and an opportunity to learn more about a forensic audit as well as the performance and/or efficiency audits mentioned. I appreciate Cory’s addition of efficiencies that were brought to the PIB meeting in Feb 2020. I hope those findings have been acted upon. These kind of efficiencies (light bulb types, urinal types, how best to dry ones hands) are not the kind I am seeking in an audit. I seek to look at operations, expense reports, staffing, pay rates, overhead costs, consultant expenditures and outside professional development investments of both time of staff (days away from the classroom) and expenditures of recourses. We also need scrutiny of legal fees…the number of attorneys that have been paid retainers and the dollars paid for what services. What is the scale and ROI of these expenditures?
I am singularly focused on meeting the needs of students while respecting taxpayer dollars. I need scrutiny and clarity on where our money is going as we plan for the next budget with declining enrollment and a $4.6B deficit the 87th Legislature will be facing in just a few days.

[Dr. Mary Bone]

Dear Fellow Trustees,
I am open to the type, depth, and focus of an audit as the district transitions leadership. I agree that it should be an external audit. With the bond oversight committee having not met for almost a year I think the I&S area is one that should be focused on. I think an audit of the expenses related to the development of the Police Department would also be helpful along with other areas that have already been suggested in this thread.

I have been told that an audit of the McNeil project has been completed in the past and will be requesting a copy from the district.

I would like the board to review and understand how and why the bond oversight committee has been allowed to fall by the wayside for this long and work towards implementing policies and procedures that ensures this does not happen in the future.

I wanted to inform you all that I will not be attending any of the the “Discussion with Trustees” meetings that have been setup with all Trustees in groups of 2-3 today, January 8, 2021, with Dr. Presley and his team. The invite states that discussion is regarding Budget, Audit, Bond Oversight Committee, Construction Workshop. I personally feel that these discussions should be done in an open meeting so the public can hear the discussion between Trustees and administration. I feel transparency is very important to our community and the trust they have in our district; I feel these discussions out of the public view could impair both.

[Tiffanie N Harrison]

I am open to exploring the audit process with a renewed understanding that a forensic audit is inappropriate at this time.

[Anonymous]

I agree with Trustee Weston that we should look at the break down of expense reports, pay rates, overhead costs, consultant expenditures, professional development and legal fees. I also agree with Dr. Bone that a review/report of the police department development and the McNeil project should be in record. I look forward to board discussion on updating the charter of bond oversight committee to make it more effective in the future.

[Danielle Weston]

Thank you Trustee Bone for being in favor of “an audit of the expenses related to the development of the Police Department” as well as Trustee Xiao. I am in agreement 100%. I look forward to a productive discussion on different types of audits and deciding on a path as a board.

In addition, I want to add that I also declined to attend the 8 Jan 2020 meetings of 2-3 trustees. I do not believe that the goal of these meetings was to usurp the Open Meetings Act nor do I believe a walking quorum would result. My concern is limited to what I believe an objective observer might assume.

[Cory Vessa]

Dear Fellow Trustees,

Over the weekend, I reflected a lot. For me, that involves a lot of prayer. And what I came to is that I cannot support an audit at this time. We are in a crisis – the biggest crisis to ever hit public education. We need all focus on our students. An audit is a worthy venture. And we do need to utilize the dollars entrusted to us in the most efficient and effective way possible. However, right now we must get through this crisis. It is like we are sailing a ship and we are in a horrible storm. All of the crew are needed to sail the ship and weather the storm with as little damage as possible. I fear if we venture down the path of audits, our captain, Dr. Presley, and his senior staff, won’t be able to focus on what is absolutely most important – our students – in this time of crisis. Audits take the time of staff and I think everyone can see, our staff is working so very hard. To add more to their plates at this time would divide their focus and I want their focus completely on students’ needs.

If we really focus on students’ needs and providing the best possible education in these horrible and impossible circumstances, next school year, when this crisis diminishes, we will see those students we lost this year return. And much of that $27 million deficit will disappear (because most of it is related to lower enrollment). Moreover, I feel what I can do is focus on the legislature and making sure the money the federal government allocated to support schools (via the CARES Act and the recent stimulus) actually gets to us. I can work hard to make sure we are held harmless for the rest of the 2020-2021 school year (which would erase $13 million of the $27 million deficit) and receive additional funding next year for staff raises and remediation of learning loss. This advocacy at the legislature is what I ran on because I know how much the decisions of the legislature impact us – especially as it relates to our budget.

There will come a time to really take a hard and deep look at our budget and devote staff resources to that end. But right now, in the middle of the storm, we need them 100% focused on students.

[Author]

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