WARWICK PUBLIC SCHOOLS

The RIPEC Management Study and Benchmarking Analysis is a very detailed analysis that includes significant research with a large volume of data and statistical tables. This information will be reviewed and analyzed by the Superintendent and his staff, and a detailed response to all of the findings will be prepared and submitted to the School Committee, City Council, and the Mayor in the near future.

However, we are very pleased at several of the major results of the RIPEC report, and we believe that those results should be highlighted at this preliminary presentation.

Five Year Financial Forecast

Teacher Contract Negotiations

This report confirms the position that the School Committee has long maintained, and that position is that the School Committee has offered a fair contract proposal that goes to the limit of the City’s ability to finance. RIPEC has found that, under the School Committee’s contract proposal, the City will have to fund an additional $13.6 million dollars to the School Department for the 2006-07 budget. This funding increase will certainly be a major financial challenge for the City and includes all retroactive pay increases for the teachers.

In contrast, RIPEC has also determined that the City would have to fund an additional $22.9 million dollars to the School Department under the Teachers’ Union proposal for the 2006-07 budget. The Teachers’ Union contract proposal would cost the City $9.3 million dollars more than the School Committee’s proposal just for the 2006-07 fiscal year alone. Over the 5-year forecast period, the Teachers’ Union proposal would cost Warwick taxpayers $35.9 million dollars more than the School Committee has proposed.

We are very pleased that the RIPEC report has confirmed the enormous financial difference between the contract proposals offered by the School Committee and the Teachers’ Union, and has also taken that difference a step further by determining the huge financial impact the outcome of the teacher contract negotiations will have on the City’s financial condition. We believe this report absolutely confirms the School Committee’s offer for a reasonable new teacher contract and that the City cannot afford to go beyond this offer.

In addition, the RIPEC report does offer the Mayor and City Council an independent review and analysis of the impact of the teachers’ contract on the City’s financial position, and the School Committee believes that the Mayor and City Council should take this opportunity to state their position on the financial outcomes that have been presented by RIPEC.

The School Committee is not asking the Mayor or City Council to negotiate the teachers’ contract, since the School Committee is well aware of its obligation to complete that responsibility. However, the School Committee does believe that the Mayor and City Council should set some financial parameters at this time based on RIPEC’s independent financial report.

Status Report of the FY 2006 Operating Budget

We are very pleased that the RIPEC study did not identify any inaccuracies in the School Department’s budget for 2005-06. Actually, RIPEC has determined that the School Department’s projected expenditures for the 2006 fiscal year will be within $522,000 of the total $142.2 School Department spending plan that was put in place at the start of the year. Given that the RIPEC forecast was made with a full four months remaining in the fiscal year, we believe this confirms the accuracy of our budget process and our internal management controls.

The RIPEC report makes the following statements:

- “The School Department’s management of financial information and its process for developing and representing its budget provided sufficient information to develop a baseline of spending expectations.”

- “The School Department provides good explanations to what they remove or add from the budget as funding decisions are made, and that has proven valuable in guiding policymakers through the process.”

The RIPEC report also confirms that the School Department has set aside $2.3 million dollars as a reserve for the settlement of the teachers’ contract from current available school funding, and that this $2.3 million, plus any available surplus from the 2005-06 fiscal year, would be the only pool of resources currently available to the School Committee to fund a new teacher contract.

Regarding the school budget process, RIPEC has recommended that we should
”Modernize the School District Budget Document.” Again, since the RIPEC study did not identify any errors or inaccuracies in the current budget process, their reference and recommendations about modernization refer to presentation only. Their report indicates their recommendations will “educate others” about the budget, offer the chance to “discuss future educational challenges,” and would represent “an excellent opportunity to make a compelling case for the needs of the School Department.”

RIPEC has identified the need for the school business office to provide updated financial information during the year. We will be glad to provide any information requested and we do currently provide the following:

- Monthly revenue and expenditure reports to the School Committee.

- Monthly reports of transfers between accounts that are subject to School Committee

approval.

- Quarterly reports to the City’s Financial Director updating our revenue and expenditure position for the period.

- There are four public meetings held to discuss the proposed school budget for the following year, two at the School Committee level, and two at the City Council level.

- The School Committee also has four public meetings where it adopts and modifies its budget over the course of the year.

- The School Committee often places items that affect the school budget on their regular monthly agenda for discussion and action as necessary.

RIPEC suggests that we “provide the business office, the Superintendent, and the School Committee the kind of information needed to determine how effective their budget was,” and we believe all of the above indicates that we are currently doing that.

School District Revenue Trends

The RIPEC report also confirms the position that the School Department has taken at previous budget presentations that Warwick’s allocation of State aid to education has been growing at a rate that is less then the State average and has resulted in a larger share of our budget being funded by local taxpayer allocations, putting an increasing burden on the local property tax rates.

We firmly believe that the State of Rhode Island should be funding a much larger share of the cost of education than they currently provide, and that those State funds should be distributed more evenly across all the school districts in the State.

Since 1991, the State has gone from providing 33% funding of the Warwick School Department’s operating budget to only 24% in the current year’s budget. The RIPEC report sites that “the State has not had a true school funding formula system since FY 1995.” From FY 2000 to FY 2006, Warwick’s total school aid has increased by $5,693,608. However, only $2,824,221 of this increase, or approximately half of this increase, was unrestricted since all of the other funding had specific categorical requirements and we had to identify the intended use of those restricted funds to RIDE and get their approval before we could spend the funds.

Clearly, the State is not only reducing their relative funding for education statewide and particularly here in Warwick, the State is also designating how the money can be spent on specific programs and, therefore, can not be used to pay for such things as a new teacher contract, sharply rising teacher pension costs, health insurance premium increases, etc., which are the major issues that are driving the increasing costs of education. The obvious result is an ever-increasing burden on the local property tax payer.

Benchmarking Analysis

RIPEC has used the communities of Cranston, East Providence, Pawtucket, and North Providence as the peer group to which Warwick is compared. Obviously, Warwick is different from each of these communities in a variety of ways and, therefore, comparison to state averages may be a more meaningful comparison.

The Warwick School Department’s total expenditures grew from $122.9 million in FY 2001 to 147.3 million in FY 2005. This growth history is below the State average and equal to the peer group as follows:

	Average Annual Growth
Peer Group	4.6%
State Total	5.5%
Warwick Schools	4.6%

If you compare Warwick’s expenditure by function to the State average, the following shows that Warwick’s expenditure pattern is very similar to the state-wide expenditure pattern.

Warwick

Total State

Instruction

Instructional Support

Subtotal

Operations

Other Commitments

Leadership

Total

54.6%

15.4%

70.0%

16.6%

7.9%

5.5%

100%

54.1%

15.6%

69.7%

15.3%

9.2%

5.8%

100%

On a per pupil basis, we must include a teacher contract provision called “weighting” in any calculations, since weighting requires that we count some students as 1.5 students, and other students as 2 students for staffing and scheduling purposes. As a result of this contract requirement, Warwick has to staff and schedule our classrooms for a total of 13,090 students. (11,892 actual students and 1,198 additional non-existent students caused by weighting). Based on that enrollment number, Warwick’s FY 2005 per pupil expense is $11,249, which compares as follows:

	Per Pupil Expense
Peer Group Average	$ 11,455
State Average	11,876
Warwick Schools	11,249

The Warwick School Committee is attempting to eliminate weighting through the current teachers’ contract negotiations, and we believe it is inaccurate to compare other districts’ per pupil costs without including the weighting factor into the calculations.

In addition to weighting, we must also look at the single largest cost item in the school budget, which is the step pay for our teachers. Step pay for teachers for 2004-05 represented $62.7 million dollars or 43% of our total expenditures. This expense does not include additional pay for longevity, degrees, coaching, extra curricular activities, or any other additional pay items included in the contract, and also does not include any fringe benefit expense.

	Top Step Pay (Including FICA)
Peer Group	$ 63,176
State Average	63,555
Warwick Schools	64,703*
* Does not include proposed retroactive pay.

Given the weighting factor for teacher staffing levels and the higher teacher pay rates in Warwick, it would be expected that Warwick would have higher per pupil costs on the comparative basis that RIPEC used.

Operations Expenditures

RIPEC has identified the area of Operations Expenditures as an area where Warwick is high compared to the peer communities, and we have reviewed this information and have found the following:

2005 FY Operations Expenses

Percent of Budget

	Cranston		E. Prov.	No. Prov.	Pawt.	Warwick	State
Safety	0	0		0.2%	0.1%	0.3%	0.3%

Facilities	7.7%	8.0%		7.3%	5.8%	8.7%	7.5%

Business
Transportation	4.3%	4.5%		1.3%	2.0%	3.3%	3.6%
Food Services	2.0%	2.5%		2.3%	3.3%	2.2%	2.5%
Data Processing	0.1%	0.0%		0.3%	0.4%	0.2%	0.2%
Business Operations	1.6%	1.1%		0.6%	0.7%	2.0%	1.3%
Sub Total	8.0%	8.1%		4.5%	6.4%	7.7%	7.6%

Total	15.7%	16.1%		12.0%	12.3%	16.7%	15.4%

Regarding safety, 95% of Warwick’s expense for safety is for crossing guards which are hired and managed by the City and expensed through the school budget with an equal additional City appropriation. It appears that other districts are either not using crossing guards or are expensing them through the city budget and not the school budget.

The School Committee should consider discontinuing this crossing guard practice to more accurately reflect school expenditures as compared to other communities.

Regarding facilities, RIPEC has shown that Warwick’s expenditures are higher than the peer group and they suggest this to be subject to further study. Looking at the data collected, we find the following:

	Expenditures
	Per Sq. Ft.*
Peer Group Average	6.18 per sq. ft.
Warwick	6.61 per sq. ft.

	Expenditures
	Per Student
Peer Group Average	807 per pupil
State Average	1,082 per pupil
Warwick	893 per pupil

	Square Feet Per Student*
Peer Group Average	130 sq. ft. per student
Warwick	164 sq. ft. per student
*No State Figures Available

If you compare the above expenditure data to the following school enrollment size, you can see a clear picture of the relationship between school size and relative expenditures.

Elementary	Students Per School*
Peer Group Average	322
Warwick	290

Jr. High/Middle
Peer Group Average	677
Warwick	620

Senior High
Peer Group Average	1,416
Warwick	1,258

While Warwick’s expenditures on facilities may be more expensive than the peer group, Warwick does maintain more smaller schools based on the philosophy of smaller neighborhood schools and that has been the history of Warwick’s educational delivery system for many years. This is a policy issue and not an issue of expenditure per pupil or efficiency. If the City leaders (Mayor, City Council, and School Committee) wish to change this neighborhood school concept to reduce the cost of the maintenance of our facilities, a study should be initiated to determine the best way to accomplish this goal.

Regarding Business Expenditures, the above chart indicates that Warwick’s total business expenditures at 7.7% of budget is less than two of the peer group members and just about equal to the state average. RIPEC has noted that Business Operations, at 2.0% is higher than any of the peer group members, as well as the state average.

We have reviewed this observation and we have identified that Warwick has reported three major expenditures under the Business Operations category that all four of the peer group members have advised us that they do not report under Business Operations, but rather distribute these expenditures out to the user departments.

The three major expenditures noted above are:

Substitute Clerks	$ 301,691
Lease/Purchase Payments	179,513
Medicaid Collection Expenses	164,318
Total	$ 645,522

Removal of these items from the Business Operations area would result in a revised 1.5% of budget, which is less than one of the peer group members and, again, very close to the state average.

Scope of RIPEC Management Study

As we look at RIPEC’s two management studies and their recommendations, it is important to look at the scope of study and the tools used by RIPEC in their analysis. First we must note that the only two areas studied and reported in detail by RIPEC were the Information Services Department and operations of the Central Business Office. The total expenditures for these areas were $3.2 million out of total department expenditures of $138.2 million for 2004-05. In reality, RIPEC only issued detailed reports and findings on 2.3% of our total operations. The much larger areas of our budget such as employee contracts, fringe benefits, weighting, outside services, etc., were not reviewed or subject to a detailed analysis by RIPEC. At several meetings, School Committee Chairman, Robert Cushman, recommended that RIPEC look at these areas but we were told that was not part of the scope of their study.

However, we have reviewed the reports and recommendations provided by RIPEC regarding the Information Services Department and the Central Business Office, and our initial responses follow.

Information Technology Evaluation

The RIPEC report goes into great lengths to detail all of the education initiatives that are being implemented to address the needs of the school district, especially as it relates to No Child Left Behind and the many other federal and state mandates being imposed on all districts. The following is a list of some of the more demanding initiatives required to achieve the “high standards, accountability, and school improvement” cited in the RIPEC report.

· Personal Literacy Plans

· Individual Education Plans

· Digital Graduation Portfolios

· Senior Exhibits

· Technology Plan

· Online Student Grading

· Increase student accessibility to computers

· On line student attendance

· Many various specific state education reports

All of these initiatives are educationally based and have no resemblance to the types of work that would be done in the City’s Information Services Department. Because of these extremely important education requirements, we believe that a “unified IT function with the City and School Department” would not be a viable goal.

The IT Staff must have a firm understanding of educational software and systems and the various reporting requirements to adequately support our educational initiatives. Over the years we have trained and developed our IT staff to be able to specifically address these educational needs.

In addition to the above, there are a variety of discounts available only to school departments as well as reimbursements from the E Rate Program for school department expenditures. We received over $502,000 in E Rate reimbursements over the last five years. We also have very favorable agreements with RINET, Verizon, RIDE, which are available only to educational institutions.

We do, however, support the concept of looking at ways that both the City and the School Department’s IT departments can work together on mutual projects to save money wherever possible. We believe that we should explore these opportunities and work towards shared equipment, software, maintenance, and support services, etc., in ways that will benefit both departments and keep operating costs as low as possible.

We support RIPEC’s recommendations that we should “explore the feasibility of moving toward a unified Financial Management Information System for the City and the School Department,” and RIPEC has been advised that we have already started to look at this issue.

Some projects that involve the cooperation of the City and the School Department have already been initiated, such as:

- The School Department has purchased and installed a Disaster Recovery System, and we have offered the City the opportunity to use our system free of charge.

- The School Department has been studying the feasibility of implementing a voice- over IP technology system for the last six months and we have invited the City to participate in the meetings we have held with our consultants.

- The City is running fiber-optic cable in the City, and the School Department has an opportunity to take advantage of a joint RINET/Verizon venture to provide free fiber-optic lines to our school buildings.

We will continue to work with the City on any and all IT opportunities that become available to ensure the most efficient, cost-effective, and productive IT infrastructure possible, given the resources available.

Central Administration Management Study

Although “RIPEC was asked to review the central administrative function of the Warwick School Department, RIPEC focused most of its attention on the operations of the Central Business Office.” RIPEC’s review of these operations consisted of looking at job postings, budget numbers, and personnel supplements and was a very limited review of these departments.

As we look at their recommendations in this area, we must keep in mind that no one from RIPEC ever entered any of the offices that they evaluated to observe the actual office operations, and, therefore, have no knowledge of the type of work being done, working conditions, the volume of work, the full scope of the duties of each position, etc. Since they only reviewed a one-page job posting of each position, they can only have a very general idea of the work being completed by each employee. That having been said, we make the following observations of the RIPEC recommendations in this area:

1. The RIPEC recommendations should only be considered opinions at this time since there is not one single statistic or analysis that identifies any specific savings, other than that the RIPEC authors’ opinion that combining two offices into one will produce savings. We believe this concept assumes that some of the employees at the School Department and/or at City Hall do not have a full work load and can therefore assume a larger work load than they currently have.

RIPEC states “the City and School Department should jointly pursue independent position analyses to evaluate current job duties and skills,” acknowledging that their study was not adequate to make this determination.

The RIPEC report states that any office consolidation should be done without layoffs, indicating there would be no immediate savings and any potential savings if even possible, would be accomplished through attrition over time in the future.

RIPEC also states that “some of the positions that are moved to consolidate functions may actually acquire additional duties and therefore may require salary adjustments to accommodate increased workload.” This again calls into question the actual savings that would be accomplished by the proposed recommendations since some positions may require pay upgrades.

The current contract with the Warwick Independent School Employees prohibits work currently being done by WISE Union employees to be done by people not in that bargaining unit. Although that contract expires August 31, 2006, that provision has been in the contract for over 20 years and may be difficult to remove from a contract renewal.

Given all of the above concerns, the School Department is prepared to enter into any appropriate study with the City of the duties that are common to both the School Department and City Hall to see where cooperation and/or consolidated office operations could be implemented to produce a more efficient and cost-effective method of delivering operational services. This should include studies to determine if there are any deficiencies in the current system and a detailed feasibility study that addresses all of the concerns addressed above.