MINUTES. Kentucky Community and Technical College System Finance, Administration, and Technology Committee February 21, 2002

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1 MINUTES Kentucky Community and Technical College System Finance, Administration, and Technology Committee February 21, 2002 Committee Members Present: Mr. Richard A. Bean, Chair Ms. Cynthia E. Fiorella Mr. Henry L. Jackson Committee Members Absent: Ms. Lorna D. Littrell, Vice Chair Ms. Martha C. Johnson Mr. Mark A. Powell Ms. Cynthia L. Read Mr. John D. Jelley, II CALL TO ORDER Committee Chair Bean called to order the KCTCS Board of Regents Finance, Administration, and Technology Committee meeting at 4:00 p.m. (ET), February 21, 2002, in State Capital Annex Room111, Frankfort, Kentucky. He announced that the press was notified of the meeting on February19, There being a quorum present, Committee business began with the approval of the minutes from the last meeting. APPROVAL OF MINUTES MOTION: Mr. Jackson moved that the Committee approve the minutes of the November 29, 2001, meeting. Mr. Powell seconded the motion. VOTE: The motion passed unanimously. ADDITIONS OR CHANGES TO THE AGENDA RATIFICATION OF PERSONNEL ACTIONS By unanimous consent, an update on Information Technology was added to the agenda. RECOMMENDATION: That the Board of Regents ratify the personnel actions listed on pages of the agenda materials. Dr. Candace Gosnell, KCTCS Vice President, presented this item and noted that the open positions were advertised and followed equal opportunity guidelines for nondiscriminatory hiring practices. She noted that the personnel actions under consideration include requests for military leaves. MOTION: Ms. Fiorella moved that the Committee ratify the personnel actions on pages of the agenda materials. Ms. Johnson seconded the motion. VOTE: The motion passed unanimously. 213

2 INFORMATION: BIENNIAL BUDGET AND ADDITION TO THE AGENDA: INFORMATION TECHNOLOGY UPDATE Dr. Michael B. McCall, KCTCS President, provided additional information about the status of the biennial budget recommendation. An updated table that replaces page 125 was presented at the meeting. The table compares the Council on Postsecondary Education budget request for KCTCS to the Executive Budget Recommendation. Over the past several months, Governor Paul E. Patton and members of his staff have talked openly about the critical revenue situation facing the state. The Governor has implemented a number of budget cuts amounting to more than $500 million during this fiscal year. The most recent of those cuts included an approximate 2 percent, recurring operating budget reduction for KCTCS and the other public postsecondary education institutions in Kentucky. For KCTCS, the cut amounts to $3.3 million in fiscal year , resulting in a revised base funding of $181 million. The Executive Budget Recommendation maintains this lower base for the biennium. President McCall noted the following Executive Budget Recommendation items relating to KCTCS: Benchmark funding for KCTCS is $6.8 million less than anticipated in fiscal year KY WINS is included in the Executive Budget Recommendation as a recurring budget item. Enrollment growth funding is $1.75 million less than requested by CPE. Faculty development funds and debt service are excluded from the recommendation. Maintenance and operations funding for seven facilities coming online also is excluded. Administrative systems funding is excluded from the recommendation. Maintenance and operations funding for two buildings in Paducah, the engineering building built with local funds and the Crisp Building that will house the Challenger Center, was transferred from the University of Kentucky to KCTCS. Base appropriations for are recommended to remain level, and the Executive Budget Recommendation includes a benchmark funding increase for the second year of the biennium. Funding for KY WINS, enrollment growth, faculty development, and debt service also is recommended for the second year of the biennium. Executive Budget recommendations for KCTCS appropriations are over $14 million less than requested by CPE. For , the Executive Budget recommendations for KCTCS are over $16 million less than CPE s request. These totals exclude KCTCS special initiative requests, which were omitted from the CPE biennial budget request. Chair Bean noted that if approved, the Executive Budget Recommendation would result in a 7 percent reduction for fiscal year and an 8 percent reduction for fiscal year , relative to the amount requested by CPE for KCTCS. 214

3 Committee members discussed the parameters associated with KY WINS funding and cost avoidances associated with consolidation. President McCall noted that consolidation allows colleges to save by eliminating duplication of services. Mr. Ken Walker, KCTCS Vice President, noted that about one-half of the facilities scheduled to come online in the biennium were approved by the 1998 General Assembly and do have M&O funds available in the base appropriation. The projects approved by the 2000 General Assembly lack M&O funding. Committee members pointed out that KCTCS inherited some of the projects in 1998 when the community colleges were transferred to KCTCS. Funds for the construction of these projects must be expended on the projects for which they were appropriated by the General Assembly and are nontransferable to other projects. President McCall noted that funding for new construction and M&O for new facilities coming online usually are separated. The Executive Budget Recommendation excludes funding for both new construction and M&O for new facilities coming online in the upcoming biennium. Over the next two years, the Board will have to decide what to do with the buildings coming online that lack M&O funds. Governor Patton has publicly stated at ground-breaking ceremonies that M&O funds are unavailable to open the facilities when completed. Mr. Walker commented that some maintenance money is in the base funding recommendation. Each proposed maintenance project will be analyzed, and those determined to be the most critical will be funded. President McCall mentioned that he is working with the President s Leadership Team to determine best approaches for dealing with the anticipated lean budget. At the April 26, 2002, Board meeting, budget development guidelines will be presented; and salary increase guidelines will be presented as an action item. The annual operating budget will be presented as an action item at the Board s June 2002 meeting. Currently, the System is implementing the budget cut, which is covered by the contingency reserve initiated in the annual budget. Current year savings are being achieved by considering the need for vacant positions before filling, developing strict year-end closing procedures, and maintaining a 0.5 percent contingency reserve in each budget. President McCall highlighted possible options for dealing with the anticipated lean budget, including the following: Revenue options: Increase enrollment, increase the per credit hour tuition rate, or increase or remove the tuition cap. Funding for new facilities coming online: Leave the buildings unopened and unfunded or reallocate M&O funded in the current biennium to cover all facilities opening in both biennia. 215

4 Base reallocations: Eliminate some vacant positions, reduce operating expenses further, increase efficiency, increase collaboration/consolidation, establish and fund priorities (salaries, benefits, contingency reserve). Committee members discussed the impact the proposed budget recommendations might have on the System s Information Technology System. Chair Bean commented that Information Technology was a high funding priority for KCTCS. The Executive Budget Recommendation omits a funding increase for the System s Information Technology and, instead, recommends a funding reduction for the priority in the second year of the biennium. Dr. Jon Hesseldenz, KCTCS Vice President, noted that the System s Information Technology area already has been operating with a lean budget. Most of the planned IT initiatives that were to be funded with anticipated new funds must still be implemented. Continued operation and support of current operations is the first priority. Procurement of a new higher education communication and Internet network is essential to KCTCS ability to move ahead in instructional activities and distance learning. The implementation of security, firewall, disaster recovery, and procedural improvements are essential to continued operation. Dr. Hesseldenz pointed out that the Information Technology area plans to respond to budget constraints by obtaining greater efficiency of operations, reallocating internal IT resources, reallocating System-level resources, avoiding new costs, and deferring less critical projects. Some funding that otherwise would have been allocated to the colleges will be used to fund critical projects. Initiatives that may be deferred include implementation of PeopleSoft 8.0, several enhancements to the KCTCS administrative systems (financial, human resources, and student systems), document imaging, and one workflow project. Technology upgrades at the colleges must also be deferred. One way greater efficiency will be obtained in the IT area is by entering into an Application Service Provider (ASP) agreement. Such an agreement will cut costs, regularize costs, and eliminate large and increasingly frequent hardware upgrades. Recently, the System entered into such a contract with Crestone International of Alpharetta, Georgia. For a monthly fee, Crestone will acquire and run the System s hardware for its applications; provide database administration services; license and maintain all database and operational software (except PeopleSoft, Cognos, Microsoft, McAfee, and Xerox); provide all backup and archival services; apply and test all patches and fixes; provide disaster recovery plans and facilities; schedule and run all production jobs; and provide stress testing, migration, and other tools. 216

5 The ASP will allow KCTCS Information Technology personnel to concentrate on developing and implementing enhancements and modifications, providing better service to the colleges, managing the migration to the new versions of PeopleSoft software, and better supporting the RSVP process without adding additional personnel. It will give KCTCS predictable operation costs and provide needed fulltime staffing for the web self-service software. Much of the ASP contract cost will be covered by cost savings on hardware and software maintenance and on a hardware hosting contract with the University of Louisville. Chair Bean mentioned that the Board may need to take positive steps with legislators, community leaders, and media in the areas where buildings lacking M&O funding are scheduled to come online. Members commented that doing so might give communities an opportunity to reprioritize their current interests. UPDATE: KCTCS Mr. Walker noted that the financial report covering the period October 1 QUARTERLY to December 31, 2001, is being implemented as expected. The third FINANCIAL quarter report will reflect the $3.3 million budget reduction. On the REPORT revenue side, four items are higher than budgeted: state appropriations, student fees, investment income, and sales and services. On the expenditure side, student financial aid, debt service, and auxiliary enterprises are higher than projected. Contingency funds currently are funded at 50 percent. The balance sheet shows a decrease in plant fund assets. The decline in value of plant assets is the result of new GASB reporting requirements regarding depreciation. NEXT MEETING The Finance, Administration, and Technology Committee s next meeting will be April 25, 2002, at Elizabethtown Technical College, Elizabethtown, Kentucky. ADJOURNMENT MOTION: Mr. Jackson moved that the Committee adjourn. Mr. Powell seconded the motion. VOTE: The motion passed unanimously, and the meeting adjourned at 5:10 p.m. (ET). 4/25/02 Date Approved by the Finance, Administration, and Technology Committee Richard A. Bean Committee Chair 217

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