ARIZONA STATE LEGISLATURE
SENATE K-12 EDUCATION COMMITTEE
AND HOUSE K-12 EDUCATION COMMITTEE
COMMITTEE OF REFERENCE
Minutes of the Meeting
Wednesday, September 26, 2007
9:00 a.m., Senate Hearing Room 1
Members Present:
Members Excused:
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Senator Leah Landrum Taylor |
Staff:
Dawn Nazary, Senate Education Committee Analyst
Brian Lockery, House of Representatives Education Committee Analyst
Ingrid Garvey, House of Representatives Education Committee Assistant Analyst
Co-Chairman Tobin called the meeting to order at 9:03 a.m. and attendance was taken.
PRESENTATIONS
The Auditor General’s Office on School District Performance Audits
Sharron Walker, Director, Division of School Audits, Auditor General’s office, distributed the following handouts:
Ms. Walker gave a brief overview of the audit process. In November 2000, voters approved Proposition 301, which increases state sales tax by 6/10ths of 1% for 20 years to fund educational programs. The school districts can only use this money for specified uses and the proposition requires the Auditor General’s Office to monitor the dollars spent in the classroom and conduct performance audits on randomly selected school districts. Also, in the 2006 Legislative Session House Bill 2064 added various audits of the state’s English Language Learner (ELL) Program. She explained that the most recent fiscal year data is compared to the National average, the State average and a pool of similar school districts. The performance audits focus primarily on four operational areas: plant operations, administration, food service, transportation. Ms. Walker distributed a handout “Implementation Status of DSA Reports” (Attachment I) and stated that there is a statutory requirement to follow up on the school districts implementation of the audit recommendations.
Ann Orrico, Manager, Division of School Audits, Auditor General’s Office, explained the findings and recommendations of the Amphitheater Unified School District audit as shown in the PowerPoint presentation Attachment H.
Vicki Balentine, Superintendent, Amphitheater Unified School District, explained the progress, as outlined in the handout “Amphitheater Public Schools” (Attachment J), that the district is making on the recommendations from the performance audit.
Senator Linda Gray questioned literacy levels of ELL students graduating from the Amphitheater Schools.
Ms. Balentine explained that not all ELL students and Special Ed students reach Adequate Yearly Progress (AYP) (National Assessment of Education).
Representative Thrasher asked for more information about the intergovernmental agreement with Pima County.
Ms. Balentine explained that the intergovernmental agreement is in reference to security and will save approximately $20,000. The staffing levels will continue to be monitored but not at the sacrifice of school safety. She stated that parts of the district are in high crime areas and rural areas.
Scott Little, Chief Financial Officer, Amphitheater Unified School District, further explained the agreement with the Pima County Sheriffs Office. He also explained that a portion of plant costs is due to the age of many of the buildings in the District.
Senator Soltero stated that student’s and parents’ sense of safety concerning schools has a large impact on how that student succeeds in that school.
Senator Gray asked how many state supplied resource/probation officers the District has.
Ms. Balentine stated that there is a grant through Oro Valley for two resource officers that are shared between two high schools. She said the City of Tucson has reallocated their resource officer staff this year to focus at the elementary and middle school levels only. She stated that the District has had to hire off-duty police officers to provide that service.
Ross Ehrick, Manager, Division of School Audits, Auditor General’s Office, explained the findings and recommendations of the Bisbee Unified School District audit as shown in the PowerPoint presentation Attachment H.
Paul McDonald, Superintendent, Bisbee Unified School District, explained what progress has been made in implementing the Auditor General’s recommendations. He explained that the taxpayers in this district are willing to support the district as long as no schools are closed. An override is expected this year. He explained that schools sharing administration have shown to lower performance levels in both schools. The community is firm that all four facilities stay open due to the fact that the school facilities are the only facilities in the area.
Senator Gray questioned the teachers being paid less in this school district and how the district is able to keep teachers. She also asked about enrollment fluctuations.
Mr. McDonald stated that it must be the weather and that the district has been able to keep all positions filled with teachers from all across the country without the salary coming into question. He explained that the enrollment stays in the area of 1,000 students.
Senator Soltero asked what percent of teachers have been employed a while and what percent are new.
Mr. McDonald stated that approximately 75% of the teachers grew up in the area and came back. He said that about 25% are transplants. He stated that specialists are not on staff and are paid under support staff which adds to administrative costs.
Representative Tobin asked about storage of Bisbee museum antiques.
Mr. McDonald stated that the storage of various town items was just allowed and that the Auditor General’s recommendations authorized all of the items be evicted. He stated that some of the storage space is now being rented out to various groups for activities or storage.
Representative Crump questioned meals per student dollars being higher than comparable districts.
Mr. McDonald stated that since the audit, the district is better able to accurately calculate cost per student. He also stated that suppliers charge a fuel surcharge for the distance to deliver to the district.
Representative Tobin asked if distance learning technology has been considered.
Mr. McDonald stated that nothing in that field has been considered to this point.
Ann Orrico, Manager, Division of School Audits, Auditor General’s Office, explained the findings and recommendations of the Alpine Elementary School District audit as shown in the PowerPoint presentation Attachment H.
Representative Tobin questioned reimbursing parents for two round trips to take their children to school.
Ms. Orrico stated that monthly payments were approximately $200 to $300 per month per student for transportation. She stated that comparable districts do not pay parents to transport their children.
Senator Gray questioned the district filing any 1099 forms for the payments to parents.
Ms. Orrico stated that question was not asked in the audit.
Michael Cox, Administrator, Alpine Elementary School District, distributed a letter to Michelle Corse (Attachment K) which shows that Alpine School District was following a formula received from Arizona Department of Education (ADE). The Auditor General’s Office and ADE are conferring to decide on the correct formula and Alpine School District will follow the formula it is instructed to use. Mr. Cox distributed a handout “Alpine Elementary School District 6-Month Follow-Up Report To Performance Audit Report Issued October 2006” (Attachment L) and explained what progress has been made in implementing the Auditor General’s recommendations.
Senator Johnson questioned how parent transportation is organized and reimbursed. She asked why Alpine Elementary School District reimburses transportation costs when other schools do not.
Mr. Cox stated that some parents carpool and now only those who would qualify for free and reduced lunches are being reimbursed. Alpine Elementary School District was told that it is legal.
Senator Gray stated, in 2005 the Alpine Elementary District was given $355,000 in transportation money, but spent less than $64,000. She asked where the rest of the money was spent. She asked if the $125,000 that was charged over was paid back.
Linda Fite, Office Manager, Alpine Elementary School District, explained that the monies were spent on the new building, grounds, furniture, and equipment.
Senator Gray questioned how transportation monies could be used to build a facility.
Ms. Fite explained that during budgeting when you find your revenue control limit you can spread it between M&O and Outlay.
Senator Gray stated that she feels there is a flaw in the law in which it is said “may provide transportation”. She said she sees this as a scheme to be able to get additional revenue to put in other areas. She asked if reimbursement to parents for transportation is considered income for those parents and if the district filed 1099 forms. She also asked what the highest amount was paid to a parent to drive their children to and from school.
Ms. Fite stated that no the District did not file any 1099 forms. She said that the largest payment she believes was approximately $5,000 for the year.
Senator Gould asked if the children bring their lunch to school.
Mr. Cox stated that was correct.
Senator Gray questioned whether the $125,000 in excess revenue the Alpine Elementary District received was paid back.
Ms. Fite stated that the District did not pay that money back because they were working under the guidance of ADE and did not see the money as excess. Ms. Fite stated that the District is willing to do whatever is necessary to come into compliance.
Representative Tobin asked if the Auditor General had any comments about Senator Gray’s concerns.
Ms. Orrico stated that ADE instructed Alpine School District to report transportation costs in the way they did and has not asked for reimbursement. She stated that the Auditor General’s Office and ADE are working together to clarify the situation. Ms. Orrico explained that the transportation excess monies can be spread to other areas. She said that because ADE has not agreed with the Auditor General’s Office on proper reporting they have not asked for the money to be returned.
Senator Gray asked what the Governing Board has decided to do on the subject.
Mr. Cox stated that the Governing Board has decided to continue as it has been doing.
Senator Gray questioned what the excess money would be spent on in the future.
Ms. Fite stated that since the audit, the number of reimbursements paid out has decreased and that the money is now being put back into the classroom. She explained that the number of teachers has also been increased to a ratio of one teacher to nine students.
Representative Clark made a statement about being proud and wanting to commend the product coming out of the Alpine Elementary District, however, the District needs to follow the letter of the rules and not the spirit of the rules. He stated that the system needs to be above reproach.
Co-Chairman Tobin recessed the Committee at 10:51 a.m. for a short break.
Co-Chairman Tobin reconvened the Committee at 10:57 a.m.
The Auditor General’s Performance Audit of the School Facilities Board
Shan Hays, Performance Audit Manager, Auditor General’s Office, explained some background, the findings and recommendations of the School Facilities Board audit as shown in a copy of the power point presentation “School Facilities Board Performance Audit August 2007” (Attachment M).
Representative Lujan questioned the recommendation for the Legislature to change the building renewal formula to make the funding more predictable.
Ms. Hays explained that the Legislature has not funded according to the formula except for one year. The districts have suggested it would be easier if there was a way to insure how much money would be received.
John Arnold, Executive Director, School Facilities Board (SFB), explained that one of the most important things done by the Board is to raise awareness of facilities. He explained that the formula for inflation is retroactive, which means it works for facilities being built now but not appropriate for facility grants for future projects.
Senator Johnson questioned the stabilization of inflation costs.
Mr. Arnold said that yes costs have stabilized for the metro area, but in rural areas a premium is still being paid due to travel costs. He explained that districts were losing up to 30% of their buying power between the date the project was awarded and the date they started construction. He said that the Board established the Minimum Existing Standard and then recognized the need to cap certain areas of construction.
Representative Tobin questioned the Board’s statutory authority to alter the formula.
Mr. Arnold said that the statute is not entirely clear on this issue. The statute dictates that the School Facilities Board establish a standard. The Board has discussed this issue with the Attorney General’s Office, the Joint Legislative Budget Committee and the Auditor General’s Office. The Attorney General’s informal decision is that it is within the Board’s statutory authority.
Senator Gray questioned how many gyms a school can have.
Mr. Arnold stated that the districts can outlay their money however they see fit. The Board said that it will only fund one gym floor, if they build more than one gym they need to get the funding locally.
Representative Lujan stated that for the first four years he was the Assistant Attorney General for the School Facilities Board. He said that he agrees the Board is responsible to provide any extra monies needed to build a school to the minimum standard.
Mr. Arnold stated that the School Facilities Board clarified minimum guidelines. He said that programs have been put in to effect to improve oversight and reporting. He stated that in some places statutes are vague enough that interpretations will have to be made and agreed upon.
Senator Gray questioned an audit regarding doors, where the SFB is criticizing the district but the SFB would have had to approve the building. She asked if the industry standards for energy saving were guidelines or standards that must be met.
Mr. Arnold stated that state law requires that school districts meet the current IECC (International Energy Conservation Code) standards and that the SFB enforces those standards on all schools. He said the statute gives the districts full design authority.
Senator Gray questioned the audit done on the Union School District that lists the doors opening directly outside is an energy wasting design.
Mr. Arnold stated that there has been much discussion about the subject, but that design is allowed under the state law.
Senator Johnson questioned building a school with a capacity of 100 when only 40 children attend that school.
Mr. Arnold stated that particular school building was approved to replace a building that had exceeded its usefulness. He stated that the school has asked for more space because they think they are going to grow.
Senator Soltero questioned using two doors then a space and two doors like in restaurants.
Mr. Arnold stated that the design is a local decision but that most do not do that because it costs space.
Senator Johnson questioned a final decision on the Auditor General’s finding playground equipment, landscaping, public address systems and such being inappropriate expenditures.
Mr. Arnold stated that the statute says that the SFB will review the findings and report to the Department of Education, but the SFB does not yet have a system to review the issues. He takes full responsibility for not getting that set up. He said the Auditor General’s Office is helping to set up standards for this purpose.
Representative Tobin questioned controls not being applied, relying too much on outside consultants and the state ownership of a database.
Mr. Arnold stated that the SFB has 15 employees and is the 9th largest expender in the state, spending almost $500 million a year. He said that they do not have dedicated technology staff. He said that the Auditor General has a concern that any information or technology would not be owned by the State. He explained that this would be corrected when the new contract comes due. He said that the SFB needs to formalize and improve their controls.
Senator Johnson questioned Mr. Arnold’s opinion on prototype schools and the opportunity to save money with them.
Mr. Arnold stated that he is a supporter of using prototype schools, but again that authority rests with the school districts. He said that he does not think they will completely eliminate design fees.
Senator Gould stated that as a contractor a standard floor plan would save money and increase the bidding process.
RECOMMENDATIONS BY THE COMMITTEE OF REFERENCE
Senator Johnson moved that the Senate K-12 Education and the House K-12 Education Committee of Reference recommend that the School Facilities Board be continued for three years until June 30, 2011.
Senator Gould made a substitute motion that the Senate K-12 Education and the House K-12 Education Committee of Reference recommend that the School Facilities Board be continued for two years until June 30, 2010.
Senator Gray asked if the Auditor General would do another audit in two years.
Debbie Davenport, Auditor General, stated that it is the Joint Legislative Audit Committee who determines whether the Auditor General’s Office or a Committee of Reference would hear the next sunset.
Senator Soltero stated that he supports continuing the Board for three or more years.
Senator Gould stated that the logic behind his substitute motion is that the Legislators all serve two-year terms. He said that due to the amount of money, it deserves the Legislature’s attention and continuous review.
Representative Tobin requested Dawn Nazary to restate the substitute motion. The motion PASSED by roll call vote of 5-4-1 (Attachment 1).
Co-Chairman Tobin recessed the meeting for one-half an hour at 12:05 p.m.
Co-Chairman Tobin reconvened the meeting at 12:44 p.m.
The Auditor General’s Office on School District Performance Audits
Ann Orrico, Manager, Division of School Audits, Auditor General’s Office, distributed a copy of her PowerPoint presentation “Education Committee of Reference September 26, 2007 School District Performance Audits” (Attachment N) and explained the findings and recommendations of the Union Elementary School District audit.
Representative Tobin questioned increases in administration costs despite previous overspending.
Ms. Orrico stated that salary and benefit costs were going to be increasing in fiscal year 2007 due to pay increases for administrators.
Representative Clark questioned if they are contracts that are already in place or new contracts that have been written.
Ms. Orrico stated that the pay increases are contracts put in place at the end of fiscal year 2006.
Peter Davis, Receiver for Union Elementary School District, stated that as a receiver he has to file a 120 day report on the financial situation and a plan for restructuring the district. He said that he just took over in June and the report is not yet finished, but should be out in approximately three weeks.
Bill Christensen, Superintendent, Tolleson Elementary School District, explained that through an inter-governmental agreement (IGA) he has been retained as a Superintendent for Union Elementary School District as well as providing business services, transportation and various other services. He said that with the audit they are better able to quickly address the main problems. He stated that progress is being made but there is still a great deal of work to be done. He stated that for transportation they have consolidated bus routes to reduce cost. He said that the administrative costs have been reduced by three administrators that have resigned. He stated that plant operations and maintenance has been addressed, in that there is no longer overtime and the employees are now fiscal year employees instead of 12-month.
Representative Tobin asked how a receivership works.
Mr. Davis explained that there are no preset models for a receivership, but it is a work in progress involving many agencies. He explained that while the 120 day report is being put together action is being taken to eliminate costs. He said that the receiver takes control of the Governing Board and gets advice from neighboring districts.
Representative Tobin questioned the district failing academically and asked what goals are being set to get the school on track academically.
Mr. Christensen explained that an improvement plan has been designed. He explained that each school in the district operated very independently of each other. They had different texts, different evaluations, different curriculums and different models. The curriculums were blended together, a staff development calendar was put in place and teacher committees were brought together to concentrate on making academic improvement. He stated that the academic side is of more concern than the financial side.
Representative Tobin asked where the parents are in this situation.
Mr. Christensen explained that they are split down the middle. Many are very supportive, but a lot of parents are not supportive due to lack of information regarding the situation.
Representative Tobin asked Mr. Christensen for his opinion on how the state should track superintendents. He asked what can be done to Superintendents that put districts in poor financial and academic positions.
Mr. Christensen stressed that early intervention is necessary.
Senator Gray questioned what should be done to superintendents that create these situations.
Mr. Christensen said he would support removing the superintendents and possibly sanctions to prevent them from doing this again.
Mr. Davis said one option that has been reviewed are breaches of fiduciary duty by Governing Board members, Superintendents, and other fiduciaries of the districts and holding them accountable. He said he had looked into the receiver bringing a lawsuit or otherwise against those individuals for their gross negligence and for their breaches of the confidences of the taxpayers of that district.
Senator Gray questioned the custodian that was paid over $44,000 being a relative of either a Board member or administrator.
Mr. Davis stated that situation is currently being investigated along with several others. He said that across the board every position in the district is grossly over paid. Many of the administrators gave themselves massive raises after a year that they over spent the budget by $1 million and during a year that they were overspending the budget by $1.2 million which was approximately 20% of their budget.
Senator Gray asked if this fraud is at the level that charges could be brought against individuals at the school district.
Mr. Davis stated that he has contacted the Attorney General about some of the things that have been found. He said the intent is to submit his report to the Attorney General so that further investigation can be done.
Senator Gray asked about unification with another school district.
Mr. Christensen stated that there are many areas with problems with unification or consolidation. One problem is tax rates and the financial impact on the people of the district. He stated that consolidation is basically what is happening currently.
Senator Johnson questioned if there is enough evidence at this point to bring charges.
Mr. Davis stated that is the job of the Attorney General’s office. He said that the receivership is involved civilly with this but not criminally. He said the school does not have the resources to perform a criminal investigation.
Mr. Christensen stressed the sustainability of the school in the future.
Representative Crump questioned special needs transportation being so high and the ethics and reliability in the program.
Mr. Davis stated that is the top problem discussed with the Attorney General’s office.
Mr. Christensen stated that student transportation is an area of great alarm. He stated that the contract was terminated in July. He said that there was no oversight of the transportation program. That all transportation employees were put through training and health screenings and a few employees were eliminated through that process. Now the district is down to a core group of employees that are fully compliant with standards.
Representative Crump asked staff to provide the general standards for a school bus.
Mike Quinlan, Manager, Division of School Audits, Auditor General’s Office, explained the findings and recommendations of the Avondale Elementary School District audit as shown in the PowerPoint presentation Attachment N.
Dr. Catherine Stafford, Superintendent, Avondale Elementary School District, explained that they had a wonderful audit. She stated that half of the recommendations from the Auditor General’s office have been implemented and the other half are being implemented currently.
Ross Ehrick, Manager, Division of School Audits, Auditor General’s Office, explained the findings and recommendations of the Deer Valley Unified School District audit as shown in the PowerPoint presentation Attachment N.
Representative Crump questioned monies the Auditor said were supplanted, but the District said they were not.
Mr. Ehrick stated that the records are incomplete so a definitive answer is unavailable. He said the Auditor General’s office has talked to the district about putting money back into the 301 fund.
Jim Migliorino, Executive Director of Fiscal Services, Deer Valley Unified School District, explained that four of the 12 recommendations from the audit have been implemented, seven are in the process of being implemented and the district disagrees with the Auditor General’s recommendation about the supplanted money.
Representative Tobin questioned the issue of supplanting money.
Mr. Migliorino stated that part of the problem is the ability to account for the funds. He said that they added teachers from the class reduction funds.
Mr. Ehrick stated that the district budgeted for eight additional staff, but they added 22 staff.
Mr. Migliorino stated that the district grew enough throughout the year so additional teachers were needed.
Senator Gray questioned the satellite transportation facility.
Mr. Migliorino stated that the issue is being studied and savings calculated.
Mike Quinlan, Manager, Division of School Audits, Auditor General’s Office, explained the findings, recommendations and follow-up of the Litchfield Elementary School District audit as shown in the PowerPoint presentation Attachment N.
Senator Gray questioned the administrator who received $50,000 bonus money.
Mr. Quinlan stated that the district has now worked the bonuses into contracts and have set up goals to earn the bonuses.
Dr. Julianne Lein, Superintendent, Litchfield Elementary School District, stated that the district concurs with the audit findings and has implemented all of the recommendations.
There being no further business, the meeting was adjourned at 1:52 p.m.
Respectfully submitted,
Shelley Ponce
Committee Secretary
(Tapes and attachments on file in the Secretary of the Senate’s Office/Resource Center, Room 115.)
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SENATE K-12 EDUCATION COMMITTEE AND
HOUSE K-12 EDUCATION COMMITTEE
COMMITTEE OF REFERENCE
September 26, 2007
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