2019-01-15 Board of Education Study Session-audio
12:33AM Feb 13, 2020
The balanced scorecard I provide that really only for information. It sort of relates to what we'll be talking about, in a proposes that there are probably five major drivers or
or levers of.
Now, I don't think so we're getting some feedback.
I may, I may
try to call you right back.
Okay, let me try that and see if we can minimize the feedback.
I'll call you back.
Yeah. So what what that balanced scorecard does, it relates to one of the slides you'll see in here and it relates to what employers really, I think,
need to be addressing
bend the cost curve on there. So let me go back to the first slide here.
And by the way, I'll try not to be too duplicative of things you might have seen before. Most of most of this is new. A couple of slides, you've probably seen that I'll go through those as quickly as I, as I can. The weight so in December, going back to July in July, insurance commissioner Mike Conway presented to our board, the idea of creating a statewide purchasing Alliance was a state statute that we would have to comply with members of the board and it's a cooperative, it's a purchasing Co Op, just like Excel, just like you know, food co ops and so on. So, so that's the it's like a BOCES really is what it is. It's a BOCES for healthcare. And, and it's organized under state law. It has a very some very specific purposes, one of which is to create a group purchasing, and the second of which is to try to stimulate more competition in the marketplace. So we're caught wave with We've incorporated in December, we called around the country, we talked to a number of folks. Most of what we're doing is not all that new business Coalition's have been around since really about 1996. That's why I put this quote on here about 20 years ago. And in those conditions, those Coalition's that are reasonably mature, they've been around 10 to 20 years have generally premiums anywhere from 10 to 20 to 30%. Below the regional differences the Savannah business group was started in 1993 has, which is all 13 manufacturers in Southeast Georgia has premiums 40% below the southeast manufacturers average 40% below the southeast manufacturers average. So um, so the theme of what we're trying to do here is is in that tagline and I'll begin with the end in mind, we're trying to reform the marketplace. The question is, and it's a question I think that's conditional is Can Can a marketplace work in healthcare?
I didn't know or well or do you guys know Irene Aguilar senator, former senator.
She's convinced she's an ER doctor. And she said, there's no way that a free market can make healthcare work. And she had like, you know, amendment 69. And, and I don't know, I think it could, I think it could. The question is, will is, the question in my mind is will employers make it work? Because the employers drive 60% of the funding, or 55 to 60% of funding through the system. So if the employers as a group decided they want the market to work, it would work. Okay. And I'll come back and touch on that thing. So that's so that's really kind of the question and forgive this thing to Done. So you've seen this slide. This is what healthcare is doing to the middle class if you're in the 66 decibels of wages. Bottom six, this is this is what it's doing the most households in the country. That's why Willis towers Watson colon health care at cancer on the American Dreams
The next slide shows premiums and deductibles rising faster than any you know anything over the last decade, or actually a couple of decades. The 2019 Kaiser Family Foundation, employer benefits survey that just came out, look at the increase in family premiums
over the last 20 years
and that's, that's for employers the size of same brain and that's for the western region of the country. So it's adjusted. I mean, reasonably adjusted for that makes sense.
You've seen this slide the to industry slide
It we're spending roughly $26 million
saying brain is in addition to being a school district.
In addition to being a school district, you're a $26 million insurance company. That's what you're running. Okay. And and when we first did this 12 years ago or so, you know, Terry Schuler at the time said we wanted to do this to drive the bus. The reason I handed out that balanced scorecard is to say those are the road marks that you need to follow. Okay. And, and we have some of the as you'll see, in a minute, we have some of the most profitable hospitals in the country. Also some of the most expensive despite the fact that we've built 12 new hospitals in the last several years, including one right here in Longmont, and which is attacked on the community. There's just no question about it. This was relatively relatively relative pricing for the nine DUI insurance reasons Okay, we were of 26 states in around analysis and that you may recall this. If we use Medicare as a benchmark as a reference point, okay point of reference. Efficient hospitals can break even on Medicare. By 20% of hospitals breakeven on Medicare in 2017, they lost 2%. But that's pretty close. Okay, average hospitals lost 9%. So if the average hospitals lose nine, you sort of have to ask yourself, why did Colorado hospitals need 270% of Medicare? Now, this was I think before, you'll see the boulder region insurance region is actually the lowest of the nine regions. And that was before the university came in and the average University is about 320% of Medicare and the average security Pricing is around 314% of Medicare. So I would I would love for boulder to start coming up and we're going to do working with the RAND Corporation we're going to do rim 3.0 This is a slide the hospital only done operating expenses. I just got this and I he asked me out distributed I got it from the CFO for hc POF health care policy and finance that the dark dots show you year after year after year each died is a sequential year. Show you how hospitals overall have done on hospital operating costs per death just a discharge which basically means they allow for a certain amount of outpatient value to equal a discharge and and then it shows you their total margins. And so what you see is the margins from oh nine for us hospitals across the board, you know went from around 500 they doubled to about 1000 dollars in 2018 for average hospitals in in in that same period of time. You know, nine Colorado hospitals were believe that about on well nearly three by two and a half times higher margins and look one look forward right now. We have the most profitable hospitals in the country
and it vary significantly by hospital varies by region we have hospitals charging as little as 120% of Medicare and we have hospitals charging as much as 800% of Medicare. Think about that. Thank you The impact in Morgan County, a fort Morgan hospital charging 800% for outpatient services, or the summit. The hospital often summit charging the local school district 1,000% for Edu idealization of Medicare because Medicare is severity adjusted right? severity adjusted. So it's not that there's patients are sicker. This is pretty stunning stuff. This is just the I think you may have seen this over the last number of years in inflated inflation adjusted price per inpatient stay. Medicare, what's what's interesting and nice about measuring yourself rather than Medicare, they adjusted year after year for inflation. So it's relatively flat, right. And you can see what the private sector is doing. And here's the killer slide. Down in this one is the one while the US has similar public spending. So this says public private, but it would be more helpful to look at this as government non government is really what this is. And the green is government spending across all these different countries. And the blue is private sector, non government spending and Other words, if we spend two and a half times the international average of OECD countries, it's not because Medicare and Medicaid, they spend about the same and it little bit more a little bit less than some others. This is school districts. This is settings. This is our manufacturers, we're paying three times three to five times more
than I says your question?
Yeah. Because Germany, for example, in the United Kingdom, those percentages of the GDP that's on the entire population of your country, and we're spending this relatively the same amount only on that's Medicare, Medicaid.
Yeah. So there's
a huge chunk of our population.
That would have to be paid by private money is one of the same.
Well, if well, it does, and, and here's what, here's what, to me. This suggests and I'm not a I'm not an advocate of a single pair. But you could, you could job you could lock this in half. Okay with everybody down here and and you could just raise the difference in taxes and cut what we're paying in half. Yeah, with with a single pair. Yeah. So, you know the idea that we can't afford a single payer I think that's a duplicitous argument Now you may not want to shake up the marketplace you may not want to deal with away with an entire industry and in fact, in the UK and Canada there are private insurers Germany is built on private insurance but but never last so that's kind of interesting. So you know, this was a Reinhart he famously said it's the price is stupid. It's not because of utilization that we generate more, it's really the primary reason are the prices so you've seen that then I share this with you guys. This was I know you can't see this, but I threw it up here only as a point of discussion. We did last summer hospital value report. So I mentioned the variation in price. What I wanted to look at with this slide or with this publication was one of the variations in quality because we have to be concerned about quality and outcomes. And we use a system called care checks from from this company called contrast. And the reason I like it is because there are literally hundreds of property indicators. Okay, hundreds. But what I like about this is that contrast measures outcomes in terms of percentages of like complications, how do you do relative to other hospitals in terms of discharging people without a complication? In other words, what are the odds? So if I go to one of these hospitals, so I Valley View and I, it's hard to I know you can't read it? Basically what it says is the Odds are about, I don't know,
80% for overall 88% that that, then I'll get better care in terms of mortality
89 whatever it is, I can't read it for output, you know, for complications. Here's what's really interesting. If I go to that hospital for cardiac care, they're in the 96th percentile. Okay. 96 percentile, which is pretty good. Yeah, that would not be a bad place to go. The statistical difference between 9694 and 97 is probably irrelevant. Okay. What's not irrelevant is the fact that they're in the 9.9 percentile for orthopedic care. This variation holds true for everybody from the from the Cleveland Clinic, the Longmont united hospital. Okay, what we saw is there is no reliable quality cost relationship you can get for some of these services for the least expect Massive hospitals, you can get some of the highest quality in the United States and hospitals charging 150% of Medicare. And you can get some of the very worst, and hospitals charging for three, four or 500% of Medicare. Does that make sense is that it's kind of stunning, because looking at the relative price for outpatients is almost 500% for 78. And for inpatient services, they're a little over 300. Right, right at 300%. And yet, they're the near the very bottom for outcomes.
And we make no differential in our benefit design.
No differential. In fact, it's a crapshoot. You don't know. employees don't know. So, so that's kind of interesting. In fact, if you go back to these complications, it's been very well documented that between over here use and misuse, we waste anywhere from 25 to 40% of what we spend this is was a stunning analysis that just came out you didn't see this. Even at the low end of quality waste on healthcare, we waste more in healthcare at 25% of the total spending, then we spend on public education.
Do you want to know why we have two hospitals in town when we can't even fill one? That's why? Because that's what we're paying them to do. So let me get to it. Let me get let me get to this. This is what this suggests is 25% of Americans delay treatments due to costs. This could be women that need mammography, this could be diabetics that that aren't in control. You can be all kinds of things. Now, here's an I don't want to call this Fake News. But I completely disagree with this headline. That is in no sense an indictment of the US healthcare system. It is an indictment of the way we purchase health care.
It's an indictment of the employer.
That's the problem because we're paying for all that stuff. So what do you do about it? So, I put this together reasonably to try to identify and map out some of the issues that are in that balanced scorecard that I gave you a little bit ago. Alright, drives a little bit ago. And and what this suggests is if the market places to work, then employers have to address the demand side and the supply side of healthcare and not the demand side there are some significant issues like lifestyle and risk every school We looked at we didn't look at St. Frank, every other employer and school district we've looked at using some fairly sophisticated software that we see it an ever increasing literally quarter by quarter increasing incident rates of diabetes, hypertension, coronary artery disease, and so on. Okay, virtually every employer and then we see a lot of inappropriate demand in use. You may have seen recently that everybody knows that patients come in on antibiotics when it's not appropriate, right. A recent study suggested two thirds of the two thirds of stats, you know, the little tubes, they put an array, two thirds of Mark really indicated by the by evidence, in fact, the majority of those could be avoided. Keep in mind this 150 to $200,000 expense could be avoided through lifestyle change. everybody that wants to bet on Americans making money style changes rather than saying, Give me the step in the morning. So I can go get a cheeseburger this afternoon. Right? You're not going to So, so. So there's there's a significant demand side problem. And my argument would be this. Employers have to address that individually through a combination of education, culture and incentives. Okay. And some, some employers are more successful than others. And that's a tough deal. That is a tough deal. But there are other issues, particularly the pricing issues, and particularly the quality issues that will not be addressed by single employers. You just you don't have any power. And we'll talk more about that. And then there are some issues that are a combination of these two. And that's where, where you really need to engage the medical community in terms of how can primary care deliver more Service, how can we provide like same frame guys with direct primary care to try to get people into use those services? So so that's a combination of supply and demand in the center. And and the way to address these is this is the two hands clapping. You have to have value based benefit designs. If we know that 40% of services don't help or actually harm patients, then we need to discourage their use. And on the other hand, we need to buy health care with the same due diligence, we buy other goods and services. And we don't. So I told you, the governor had asked us to restructure the Colorado business group. So here's what we did. We actually we kept the traditional CBG h membership group, because the idea here is we want to use this organization to support the individual efforts that employers need to make on the demand. side. So we have people like pooter Valley put Valley School System, marvelous job. And one of the best jobs in the state offering an onsite clinic and integrating, they've got one of the best rates for integrating gap and mental health. Okay. And as a result, they've got significantly lower health care costs, okay for the city for Colorado Springs. And so we have our members share those kinds of things. And the idea is we're going to bring in the health plans and the consultants and we want this to be a multi stakeholder group to address this question of how do you engage employees, but we've created incorporated last month and I'm waiting any day now I should get approval from the Department of Insurance for a certificate need to be a purchasing Alliance under Colorado State law. And and these are the goals we want to provide opportunities and incentives for employees to access the top desk up here. That's where any one of us would want our how our family spouse or kids, that's where you want to go, you want to go those high quality facilities. Okay, we want to provide the opportunity for group purchasing to address this affordability, this pricing issue, particularly for hospital and pharmacy pricing.
Okay, again, you can go to a hospital with 150% of Medicare and get some of the best care in Colorado and you go to hospital with 450% and get some of the worst care so so how do we sort through that? And in the hint is we're not going to do a January 1, not only because it's already past but because this will take a while. I want to promote competition. The reason we have seven dominant really two or three dominant systems, seven systems all and all this because the insurers have incentivize being big over being
good. I don't care
if you're good. They just they they they've died emphasizing discounts. Off charges that encourage people to get big. And then we want to implement payment reform so that hospitals and specialists get one single fee. And if they mess up, it's on their dime. They get a fixed payment. And and that's that's the way to make the market work. So this is really one of the smartest guys in healthcare. Dr. David Blumenthal, he's he's done some work with us. Where we've been throwing people under the bus for 20 years, hoping the bus slows down. It's not going to slow down.
It's gaining speed.
We have to really under address it's time to address the underlying causes and that is high prices and health care and efficiency delivery system and efficiency. And employers. This guy laid it out really nicely. It's got three challenges one, nobody in the state of Colorado, the city and county of Denver. You know, none of us are big enough to we lack the sophistication to buy healthcare We've gotten fairly good at buying administrative services, but we've never bought healthcare, or at least we don't typically buy health care. And the third problem is a fear of disruption, which is, which is a genuine problem. Okay. So what do we do about it? Well, this is what the Alliance is intending to do. Historically, all these individual employers have purchased care through this plan administrator and they do the purchasing. And guess what, when these people buy health care, they buy on their terms in ways that benefit them. Okay. What we really need to do is they play a key role the administrator of the health plan or the insurer plays a key role, but they really need to be a floor and not a wall. And we need to purchase directly from these people both in quality and price. Just like you buy anything else. Now what's the promising part of this is generally, almost without exception, you'll get better outcomes in any of the major services
at lower prices,
because the more open hearts and more sense, the more nice, okay, more spinal, whatever people do, generally, the better they get at at doing those things, so we want to purchase based on price, payment methodology and performance and, and to do that, to create that we're going to have to we're going to have to have a value based insurance design. So just to
so this is this is how we've organized this organization. Don, you don't have this slide. It's, I just stuck this in a few minutes ago. I should have sent to you but so we're organizers, a Colorado, not for profit. These are the committee's These will be the people who purchase through this organization. We will have a benefits Advisory Committee, we won't make one decision, but anything that affects employees without taking it through this, and every employer, if we had 300 employers, we'll figure out a way to get every one of them engaged in the benefit design. Okay.
Not quite 300 yet, but I'm working on it.
I will have a nominating committee to make sure that the people on this board are diverse cross section of the organizations that they represent both private and public, co CFOs, CEOs, etc. Chief HR people, etc. And then we have an executive from finance. We're very closely with the Center for improving value in healthcare. We work with the RAND Corporation where we're taking on a couple of projects with the Colorado medical society's probably cost committee because we want to engage the physician community across the state and We're being supported by the National Academy for state health policy. And then we're going to have a health plan committee and I don't know what else and and that they'll be to one, one group that will have a seat at the board of the table that won't have a vote, but will be on the board will be the Colorado consumer health initiative. So my consumers have a significant voice. And we work very closely with the Department of hip hop. So this is what we've done. We incorporated it we submitted a request for a certificate authority where we've been talking to all the major health plans because here's why what what we've we've told them is we really need to work with them because I we won't have it will take us years to build out an adequate network. I mean, it would just take years and I'd be very happy just to have a skeleton hospital network the first year, but what what they've all verbally agreed to do and by all means, mean I've spoken to all five, the for the blues, United singing anthem in Atlanta, and then Kaiser. So we're working with them. They said we were okay if you negotiate the hospital contracts, as long as you don't impose an administrative burden. So we're we're working with another business coalition on the repricing. And we're now sitting down with with an outline agreement to talk about what our mutual responsibilities would be. And this way as as in here's what the state of Colorado did, because the government committed to me to stay we'd be the first employer in and we've got their commandment. Larimer County, we've got the sheet metal workers, local nine. Really trying hard to get some of the unions involved. Okay, and get conversation setup with CPA. We've got
it all set up and you're talking to CF
and a number of others.
What what we've agreed is that as we in the state had this in their, their, their RFP, as we would negotiate contracts, in order to get the state's business, you had to agree to use our contracts. Okay.
And every pair except one, I won't tell you who agreed to that. So that's that's going to be the hardest one.
But we're going to work with them.
And otherwise, you know, anthem and Cigna they've all agreed that is we would negotiate a so if you're with one of the one at all, but one of the insurers that we've been able to reach a verbal agreement with the networks the same, it's just that it's some of these and increasing number of these over a period of time. You'll get better get better pricing. Because I didn't know how else to do it. And so this is really kind of fun because we've we've engaged Maryland Bartlett who was the first person she used to work for the treasure in mind. Canada, she was the first person you may have seen her on NPR or some other things to negotiate hospital contracts based on Medicare. She's working for for this nasty National Academy and for us, and I was telling dick before our meeting, what she's doing for us in northern Colorado, with the four hospitals up there is pulling your Medicare cost reports. She's pulling their 990s. She's getting their Medicare, Medicare accountability or financials from Medicaid, which was from hitbox. She's looking at their supplemental payments, when she walks into when we walk into the hospital with her. Okay, we'll know as much about their finances as they know about their finances, where they're making their money. Okay, and we won't have a discussion. How far below your current charges can we get? We're going to start with how you're doing on Medicare. And if you're losing, let's say 5% how High above 105% do we need to be? How much do you have a surcharge and want to put on in this community and that teachers are the firefighters and the police. That'll be an interesting conversation. So, and we were working with Kim dissever, who you may know, runs the department of health care. She's She's outlined a roadmap that this administration has adopted that I think is the right roadmap involves many of the things we wanted to do many of the things that are in the Colorado commission and affordable health care, will pay doctors and so on. So anyway, we're talking to a bunch of folks. So we've got a timeline, here's why we're long term. Here's what we'd like to do. We'd like to get to a point where we move from from contracting like, like we're doing here to just saying these are the standards of care if you can be in the 90th percentile great and if You can provide healthcare below 200 or 175, or 150, whatever it is, and Medicare, you're in the network. And if you can't perform at that level, at the service line level, for particular procedures, you're not in the network, primarily based on quality. If you can't be at least in the top four tile, we don't want to it doesn't matter what price you charges.
Right? That's where you want to be.
If you can't provide a quality product, we don't care what you're selling it for.
And so over time, we need to move to that because that is not the way the markets working right now. And it will take us time to get to get to that point. So here's what we're asking of employers that gets to the point of tonight's discussion. First, if you don't have a three year plan, you really need a three year plan. Use those balanced scorecard measures. Just very briefly about this was kind of an enlightening for me. You know, we went at St. brain when when self funded and a number of years ago. And we thought we would do better. I looked at, I forget who it was HR, or HR, forget who was 25 years of premiums for fully insured and self funded employers. And believe it or not, over 22 and a half decades self funded employers really didn't do any better. Some years they did better some years they did worse. yada yada yada. But Lofton show in a study they did two years ago was that the plans that were self funded that consistently did better than the market had a three year plan. If you're driving the bus, but you don't know where you're going, or you wait for your consultant to come in in the summer and tell you where you should go into the fall or in the spring you know winner then turn right here and then Next year will turn left there, you don't know what you don't. So that's what you need, you need a three year plan with strong incentive benefit design strong incentives to steer people to high quality. So that's the first thing, just think in terms of the long term because we can't change this January 1 2021. It's not going to change, we may be able to get some difference, particularly, let's say we have totally two systems and a number of the hospitals By the way, while the Community Hospital has been very willing to collaborate very long and they're one of the lowest price, okay? And they have some very, very good outcomes. And what we see when we look at this, that at the 58 hospitals across the state, the top third are dominated almost exclusively in terms of price the most expensive by health systems. Joining us system does not make you less Expensive it makes you price here. Okay, because somebody's paying for that overhead. The lower third was actually dominated by the independence the few remaining independent hospitals, one of which is a border community. And that's why the lady at Larimer County asked me to set up a meeting with Boulder County, or what boulder Community Hospital we went over. We talked to the CFO and the president of the hospital. She said, I'd like to send all my tertiary care here, you know, anything, anything that's really significant. And she's a 40 minute drive, and it's half the price on paying in Fort Collins. I guarantee it. She'll do that three times. And she'll get a call from the hospital administrator in Fort Collins. And that's what it okay. So, so then here's the nitty gritty of it. Notes. Here's the nitty gritty of it, then this is what we're asking. We're asking for this letter of intent. for a couple of reasons I need to be able to show the hospitals when I'm talking with them that we've got XYZ, you know, ABC companies, employer signed up. That's part of it every mistake ups. I've had some very good discussions with the city and county of Denver that would be a big deal.
Larimer County, I mentioned a couple of committed
not unique. You just need the size. It's just all there is to it. And and here's, here's the nitty gritty, this, this is a non binding letter of intent. And all it really does is allow participation in the interim board to adopt the three year budget, multiple year goals and a Participation Agreement. We've set aside we have a code of regulations that we've drafted. But as a draft, we didn't want the CP gh members who are not parties who don't intend to participate and vote on something that those who wouldn't Participate would be stuck with. So we need to finalize bylaws, we need to draft participation agreements, we plan to do that February through June. And then and what what this does signing a letter of intent then puts puts you on the interim board so that we can decide what these participation agreements will look like. Bye, bye. We're going to try to do that by June and July because
for open enrollments in the fall
and, and that's what it does, it allows you and basically, as I, as I said, in that second document, a seat at the table. And in the meantime, these are the things I think it would be very helpful for you to know I don't know if saying brain knows what it's paying as a percent of Medicare or not, but you need to, we've provided the care check scores, we're getting the most recent skin care check scores from collaterals. We're going to distribute those shortly. The two the two school districts are your two school districts that currently buy through, employ yourself save 25 to 32% of their pharmacy pricing. And it's easy to do that repricing and then here's this would be a big deal. I think it would be helpful for every employee to calculate for your average salary employee, what were you paying as a percent of a percent of your salary 10 years ago? And what's the average employee paying as a percent of salary today?
That went from 5% done was 25% for Jefferson County.
And and here's what Jonah is Bill Lindsey and I talked about Don't do this. For the district. Don't do this for employers. Bottom line, do this for the employee. Do this so you put money in the benefit you're saving put money in the salaries Because the employers are paying for this, so at least share it proportionately at least share the savings. That's that's what we're asking for. So then what we intend to do is adopt these participation agreements. And that would be a binding, one to three year agreement will offer one, two or three year agreements for those that want to participate, to cover the cost for operations. I don't know what that'll be. That'll be up to the Benefits Committee to first make some recommendations
and how should we structure this.
Now, if we can do this,
we can do it the difference between what has been done in other states and what we're doing is somewhat different is it is our intent. And this is where I told the the city manager this, the city leaders at Denver yesterday afternoon, I said in part, you want to do this for yourself, but it's also a matter of two purity. It's also we can't do this by ourselves. We need to do this for small groups as well. Now, this this is working reasonably well up in Summit County, they save 20% up there with the stroke of a pen. And what they in this was, this was the only thing that I found aspirational up there. Well, two things, one they were committed to working together to they said the larger employer up there said, we're not going to do this just for ourselves. We want these contracts to be available to the mom and pop businesses in our community. Because this is a community issue. What we see around the country is was when when self funded employers come together, they can reduce the price of healthcare. And then what happens is health care gets disproportionately more expensive for everybody else, because the balloon gets squeezed. So one of the things we're offering to these insurers is as we negotiate these contracts as we get better deals, leveraging the stage and other larger employers They can use these contracts as long as they pass them on to their fully insured book of business without taking anything off the top of a habit of taking things off the top. So that's what we're doing.
Thank you very much.
Too much information. No, never spent
information. I always enjoy listening to you and you're such an expert on healthcare. I do want to just revisit about where you and I landed. And really what's what's before the board and I was I would like done to make any comments that he might have also, as it pertains to the letter of intent is really a commitment on the district's part, Dawn's part to dedicate staff time to helping involve you're going to help me a little bit with terminology that's helping you all crafts, the agreements and the design, everything that it would look like. So really the letter of intent is a seat at the table. It's a commitment of staff time to serve, to put everything together that will lay the foundation and be the basis and all the parts for the finer agreements that you're you intend to allow in 2021.
Yeah. And and so what it would be, as
you saw on the organizational structure will have a benefits Advisory Committee, and we like we would like representative on that. And then we would
like to stipulate to
someone on the track. Someone to be on the board. Okay.
Thank you there would help those agreements.
All right, Don, before I open it up to board members, did you have any comments or questions?
Thanks a lot, Bob. I really appreciated hearing Report.
They have not yet agreed to do this.
No, no, we don't have we don't have any provider agreements at this point Wait, we, we put our emphasis. In fact, I probably won't have provider agreements until the beginning of the second quarter. I've put all the emphasis on on having insurer agreements in place health plan agreements. So we have adequate network coverage.
Okay, and then the other thing is this
little bit about that the quality of the hospital itself, how do they handle situations where someone's doctor doesn't have authorization
to operate in that particular
hospital. And if your employee let's say, in the same way Valley schools, and you've had one you get surgery and you
Yeah, you know, I don't have a really good answer for that. I think
you know, we can get scores by both surgeon and by hospital.
and I don't ever have an answer for that that's something that we're going to have to hash
out at a Benefits Committee and, and talking about what do we
do in that case now,
by the way?
And actually, I do have I do have an answer. The answer is the first, particularly in the first year or the first two years. There's no penalty for going to these other hospitals. The way I would propose you do the benefit design is there's only there's the first year in the benefit. There's only a there's, there's only an upside, if you use one of the hospitals that we have under contract, you get somewhat better, better Benefits either co pays coinsurance premium, whatever. But if you don't, there's no penalty the first year. And you might pay over a period of two or three or four years to a to a design and it revised system that that, that steers everybody to the to the highest value providers.
with that, if we were to establish an incentive, though, that said,
we want you to use a particular hospital, and they wanted to use a different one, the balance of the difference between
Yeah, I mean that that's what you would want to know killing the second year. Yes.
Is with that, you know, I know we're planning quite a bit of
state now. Outside of the state of human resources, you know, they tie in pretty closely to finance and stuff is that
it may not be feasible to have, you know, people to get into it or depending on how much time is that environment of that letter of intent?
you know, I mean,
I hadn't I hadn't thought about that I just assumed on that anybody has signed a letter of intent would want to have input into shaping the thing.
God, no, I would, I would say it's not a requirement per se.
Do you have any thoughts about
what kind of a time commitment that would be then that I promise that's my last question.
Well, I'm looking to have probably five meetings once once a month over the The next five months beginning in February, and it's probably a couple hours a month.
I mean, it's it's really
what, you know, we'll we'll have in a couple of those meetings, several of those meetings we can do but the phone. Yeah.
I do want to just keep everybody on track. It's 10. After seven days, you need to start the budget. By 715, the amended budget to board members have any questions or comments for Bob? While he's here?
Yeah, I do. Um, thank you very much. I mean, this is a lot to get your head around.
I look at the healthcare system. And I think we could all agree that the costs are way out of line. But you opened up with a comment saying that employed He's wanted employers wanting it to work, it would work. So whether it's due to inefficiencies or greed or mismanagement, those costs are way out of line. What I'm looking at, though, it seems like the incentive to coalesce a large group to challenge the hospitals to meet those expectations is the road that's being traveled right now. And I'm just wondering if if we're missing the mark, on incentivizing the hospitals to try to get them to come to terms with what, in their best interest? It always seems to me that maybe I'm reading it wrong, but it seems like it's a challenge to, hey, we're going to be this powerhouse, and you're going to meet our expectations. And you have some companies signing on now. And they're saying as long as you don't interfere with our administrative costs, I mean, as soon as you change the code In healthcare, they're going to say that's administrative costs. So the approach of coalescing a positive statement for them
I see is missing.
Well, we're sitting down with the heart.
know when we sit down with hospitals, as we discuss with Boulder, and we're discussing with one of the larger health systems, we're starting with, with what would a win win look like for you in three years? Okay, how could we get from where you're at a 230 or 240? How can we get down to 180 over a period of time? And part of the answer that john is right now, if they re engineer if they get three orthopedic groups to all use the same thing, and it's a lot cheaper, that cost the hospital money, they lose revenue right now. We don't change the payment system reengineering is a money loser for how Hospitals because they're paid for the most part fee for service. More things they do, the more variation in their physician practices, the more money they make. So now, most of them and so I would suggest you, you're making 450% of revenue, you're not going to be in a big hurry to be talking about 180.
He's just not. And then here's the other thing. Finally, an industry that's made a change before they had a gun put
somebody who, before they were faced with the change.
That's reengineer made a major change. This is an incredibly lucrative
breathing, but it's more than than that.
to talk these hospitals into being competitive at this level, you might as well talk to Henry the Eighth Why the divine right of Kings is an absolute idea. They don't get it.
I mean, if you,
they said, What the hell are you talking about? This is the way it should be. It's perfect.
Right? It's a big old oak tree you're trying to charge.
So thank you for all that information. So a couple things. I kind of see through this is the reason we're kind of stuck in this quagmire. And I'm just going to summarize a little bit just so I can hear myself think out loud. Yeah. businesses in their is in their lane. They're in their business. We're in the education business. And for us to go out and contract directly with providers just really hard. We don't have the resources to do it. And we don't really want to hire the people to do that. We want to spend her money in the classroom. So we're in this little bit of an inertia of just trying to every year look at the best plan that's already been negotiated out there and kind of kind of bring it on board. So the better So this, as I see is that kind of leverage, like we don't have any leverage as an individual business. But your co op does when you've got the state when you kind of get that kind of volume. When you're talking about hundreds of thousands of employees, you can get the hospitals to start to sit up and listen, if you if there's teeth to it, if people are really willing, willing to, to move. The other piece of it I see is the price structure because the ethnicity united and the sickness of the world has been out there for decades, negotiating networks and contracts, but for the large part, it's it's a percentage, it's a discount, so they just keep raising the sticker price, and then giving you a 4050 60% discount, and they're right back where they started. So it has to be teeth in that price structure. And then also the one piece I didn't hear you really touch on, especially when you were talking about getting like pulling in like the top quadrant of the quality measures was access because not only For us, because we're sort of singularly located. But that always has to come into play, like what giving employees access.
I mean, it's a major, you know, major consideration. That's why we're trying to work with our plans to provide a wraparound for wherever. We don't have whatever facilities that are in their
network. So the idea would be, let's say,
you know, let's use
Colorado, Paris. So anthem, we're fairly far along in discussions with them and their senior VP
mockeries. And agreed to, to work on an arrangement.
So if you're an anthem client like pero, if you use these facilities that we've negotiated contract with, you get a better rate and otherwise you have the anthem network
as your fallback, yes. Let me see if you get something
that's it. It's not hard.
The hard part is if you don't create storage to those that you get better deals with. You're not going to change anything. Not
true. No, that's I'm saying there's gotta be there's gotta be teeth in it. And then as businesses, you know, a school district, we have to decide, okay, where's the cheese gonna come we can put in the backs of our employees to pay the difference in a hospital admission? Are we willing to to absorb that risk? You know,
to your point? I mean, I understand it's not a core competency.
District and, and that was the point that Blumenthal made that most employers don't have this sophistication. But you buy school buses by computer you buy all kinds of stuff you need to buy
but we don't build the school bus. I mean, you understand No, that's right.
No, that's right. But
But you do due diligence when you purchase these things and you don't buy them through somebody else's same take the school bus because you get a 40% discount.
The other piece that I was glad to hear you say was that you are working with the Aetna united sickness of the world not because I love those people, but they've they've been trying to do this for decades and decades and decades and and there is some resource involved to them. Load In all those contracts and doing all that claims administration, and so for your group to sort of reinvent that wheel, it really makes sense for us that infrastructure that's in place. Yeah,
we're not looking to duplicate any of that. And what they've all told us to a person is, as long as you're putting administrative burden on us, you have a different pricing that you have to reprice that claim. And so we're working out a deal with a group called the alliance in Wisconsin, they do group purchasing for 240 250 employers,
and so in Wisconsin, northern Ohio, and they pay to 30 different administrators and how plants
and they turn the clamps
around in about 30 minutes. Yeah.
So I mean, if you can take these hundred, this Co Op these hundreds of thousands of of members, get the leverage, get the pricing, whatever, whatever it is per diem or whatever kind of pricing you want to set up competition. Once they loaded, they can go ahead and Minister pretty, pretty quickly, but you're taking that contracting piece out of their hands, which they traditionally, yeah. Yeah. I mean it. I like it. I mean, it's all it's all good. I see as from a business point of view. I see. I see as far as the enforcement, I see the risk conversations around where that risk is placed, is it put on the employee? Do we absorb it as a company that I see those down the road
Yeah. And giving people you know, a blue book kind of thing where people want to go there for the quality reason they're willing to go a little bit farther. If you can make it turn it into kind of a positive kind of a value added for the for the employee, not just because healthcare is a it's not a supply and demand business is not it's life and death.
An increasing number of people are putting up stock characters they can't afford.
Drives cost up,
it's about and
it by the way number one cause of bankruptcy in the United States today.
I appreciate all your work, Bob. It's huge. Its massive. It's huge.
For me, son, I'm saying in 2004, just over $800,000 was the bill 65,000 was my portion.
It's very real. That is very real.
I, just to two comments, first of all, as Bob said, and I would say again, companies don't make changes like this until we are forced to do so if we don't make a choice. If we do not are not proactive. We will be drug kicking and screaming, to making these very decisions. When we don't have the resources we currently have to smooth out the transition. So I'm, I'm very supportive of looking ahead and viewing this as a strategic issue. Not just Sure 123 years but really looking where we want to be in five to 10 years. And allowing, keeping that vision clear and allowing the transitional pieces that will not be where we're going to wind up, but to gently move our both our organization and our employees in in a sustainable direction. And I think this initiative, as we've heard, provides a kernel within which we can kind of join and participate. But I believe it's absolutely essential to take a longer term view and work out the details so you don't tear the organization apart. You move forward to the pace the organization can adapt to, and you're not forced to move so quickly, you tear it apart.
So that's Thank you.
Steve, did you have anything you wanted to I don't want to put you on the spot anything you wanted to contribute?
I know from, you know, the CTA standpoint, we're looking at it in tampering. And I know that they are, you know, highly interested in this. But, you know, one of the things that CAA does is they give a lot of autonomy to their locals when it comes to health insurance. So, you know, it's not going to be some kind of CAA mandate that's going to come down and say, We want you to do this. I know about 2530 years ago, they did. They flirted with something like this, and I don't really know the real history behind it kind of blew up in their face, but they are going to probably embrace this. And from what I understand, they're just being very, very systematic about it, making sure they're looking at the details. Looking you know if there's anything that could be any pitfalls here, but I spoke with Kim Vic and Amy and they're really interested in, you know, trying to sign on
to try and do this as well.
And, you know, again, I think they've recognized too that health insurance is a major issue when it comes to, you know, educators and budgets and everything else.
Great. Thanks, Steve. We do need to move on to the amended budget at this point, so I shouldn't have enough time to cover
your job. Thanks.
Pleasure to have you back
We're excited to hear about the
Let me just get connected up here to the projection on
I just grabbed oh I didn't
pick the ones I wanted.
I got dark chocolate with raspberry.
I had a
let's talk about stuff.
I think he's taking on extending that.
I feel like I'm in a good position because I really do enjoy the work that I do fucking good at it and I get more excited, a little bit sick enough to I think bring you guys along when it's just a little too much for a normal day. So hopefully, I can give you some good information, and then I'll answer any questions that you may have. We wanted to start out just a quick review of the budget document that will send you to the board packet for the board meeting next week. The reason I want to give you just a quick review is that we converted to a new piece of software. And this software automates a lot of the processes but it's also a pretty complicated piece of software that Sandy tanzer budget analyst has really, really helped Develop and work on. So thanks to her efforts, we've been able to get the software up and running. This allows us to make the document more dynamic so that we can make adjustments and have information flow through, you know, in the past, what would happen is, let's say the state's per pupil revenue would get updated. And what we would have to do is we would update the schedule, which would flow through and update the schedule, update the schedule, and then we have to go in and change the narrative over here and here. This helps flow everything through because it's all sort of dynamic and connected with that. There's just a little bit mostly cosmetic changes, we just basically reproduce the old format in the new software to make sure everything had integrity. You'll notice that a lot of the tables look a little bit different. And so I just wanted to bring that to your attention so that when you see it, if there was any jarring or unexpected and unexpected nature of the budget document you'd notice coming so but for the most part, it's mostly cosmetic changes at this point, but our goal is to flush out budget documents for more useful information information
provided by the public and you with some more data and
So the purpose of this session is to provide the board with a little bit more in depth information than what we typically provided during the board meeting. And in that meeting, I'm typically providing high level information pretty quickly for you a bunch of numbers to allow for expediency in the in the meeting. And so we wanted to allow a little bit more time here to get some context, answer questions for the board, make sure you're comfortable with the numbers that are coming next week. So generally, the format that I take is I'll start with the general fund budget that we adopted back in June. And then we start from there as a starting point when we talk about Any changes to the budget as we make these, these adjustments for the current fiscal year of growth and for revenue and expenditure perspective? And then, again, answering questions and talk about
the the name of the game today is context. There's a lot of interesting numbers that's popped up during the adjustments this year. But we wanted to make sure that we began to your question on production information. So let's start off here, apologize at school cut off on the left, I don't think that's going to cause a problem. Let's start out here. So last year, we adopted a general fund budget plan spend down about $12.4 million. And so let's talk about some of the changes that we made as we as we updated those numbers. From a revenue perspective. Let's just start right here is growth. So we start out and we budget for zero growth on both on our revenue and expenditure standpoint, mostly from an exposure standpoint, but excuse me, mostly from a revenue standpoint. Right. But we also recognize that, you know, the projections that we get from the planning office, we don't want to staff and then also expect that hundred percent, we want to use two more conservative estimates. And so when the kids come in and they show up, we get official student counts in October, and they get certified in November, we're going to realize a little bit of increasing revenue. So that's what that $1.7 million is. This is net of the charter portion of our actual increase in front of people count was about
feels when 60 actually, but the charter schools actually over projected their cows just a little bit. And so when their numbers came down, that actually looks like a huge increase on our side. And so the 1.7 million is both our portion as well as the charter portion.
So we don't zero growth. The charters don't zero.
No, we don't just take over the charters. That's that's actually an important point to make is we use their hard investment Wasn't they give us straight out the gate don't use conservative charter estimates. And so we'll just give them what we get what they asked for and presuming that they're doing their projections correctly, and then we'll correct to actually get here. And so that's, that's why a little bit of the flow back to the district because their projections
we're still behind.
The next line is PR people revenue. So this is the state's top program per pupil revenue amount, just tweaked a little bit from what they gave us in June, just went up a little bit about $20 compared to what we had previously, when you multiply that out times the entire funded people can have about 31,000 and that translates to about $600,000. And that's again know the charter question for tonight.
banner year in assessed valuation increase, we had, the only similar increase was in 2015 as a 21% increase in assessed valuation. So we talked about a coordinate in December So that translates to a $7 million increase in our mill levy override, because those Mills float with assessed valuation because they're fixed Mills not fixed dollars. And so that increased the miletti override revenue is flows directly to us, it doesn't get offset or anything by total program. That's, that's for community support and 100% to the to the students of signalize schools. And that is a net of the portion of the show the charters as well so that they get a good day, as well. One thing to notice, I want to go through some of these items is that there's going to be a few things that are more one time based and some are ongoing, and this is going to be mostly ongoing, we would expect. However, we did note that the increase in assessed valuation was due to a lot of increases in oil and gas production. And so we always like to be a little cautious just in case
forever, that pendulum swing back and we
see a decrease in assessed valuation because of A change the oil and gas market, um, that would affect our ability override revenues and that they would swing back down. And hopefully that won't happen. And if the oil and gas industry does ease up a little bit, we're hoping that the decrease would be offset by increasing the residential development. We've done awesome and senior districts. So we expect hopefully that's going to continue
in future years.
This next one is allocations to other funds. So as you know, we allocated amount to risk management cap reserve and our
color preschool program fund
as an outflow from the general fund, it always looks kind of weird because it's a negative revenue. So typically, this number is usually negative, because as growth goes up, and student counts go up the flow more dollars proportionately to those other funds. So this is a positive number, which is unusual. And so I want you to consider this as a one time increase, because what this really reflects is, there would be a normal outflow to the CPP or excuse me, the cap reserve fund but We actually recruit a little bit in the general fund during this budget cycle, due to most of this was the mobile app. When we bought the mobile app, we actually flooded some additional dollars to Congress or to help support the purchase of that mobile app. But since then, our Hilary Sontag and Dawn and our ministration
had some great partnerships with community to
get some donations for that mobile app. So that mobile app is fully paid for by donations to the cap Preserve. And so what we did is we recruit the dollars that can general family originally fronted the campus or fund.
And so you see that
interest our interest returns and our strong fund balance continues to go up. So we've adjusted that budget, it's about two point 27 2.9 million or so. Almost three, but so we saw an increase increase over the
last year about 700,000
increase of interest returns, experts in the general fund.
This next number we talked about in December, this is related to that mortgage abatement reading that we put into place this year to recoup some lost revenue from last year. And by 19, we didn't see all of our tax receipts that we expected due to a large abatement from low county is a Christian peak that hadn't been there. And so what this is, is this recouping it in the basement level. So I would consider this as maybe a one time revenue. Normally, our abatement brings in two to $500,000 a year at most. And so this was over $5 million. This year, the system a very large number. And so we want to, again, you will see this pop up, but when we come forward and bring forward enough white 21 budget, and you'll probably see this refresh to see a decrease in our expected revenues, because we don't expect the same to happen next year. When you said that,
you say heavily weighted by Crestone, you said
devil, the devil recorded their production. So they're assessed valuation is based off the production that occurred 18 months prior. And so they double recorded it so they
they then went back and protested their taxes i think was like $14 million.
Well, county wide. So
we're a big portion of that because we were Christofi grills hardware district to the tune of and whatever $3 million to
recreate the same question. So yeah,
so the way abatements work I mean, you get you get a tax bill, you challenge that comes down. The when the difference is just it doesn't go away. It just gets rolled over into the abatement pocket and then gets redistributed. But in this example, when they actually double reported their production, they didn't. They still kept the tap, they still kept the tax amount based on the over recorded production. They didn't just reduce the tax amount, they rolled it over to abatement.
They rolled it over to a big Yes, because if you think about the impact to a school district and how our total program works, you've got per pupil revenue, taking time funding, people can then tell you how much you're going to receive in total program dollars funding right. Then you take your property tax, and you subtract that out and you take specific ownership and you take that out and then state backfills with equalization. Well, if you certify your mills in December, and your US District are expecting to get this Much in property taxes, and then there's a large abatement if you are allowed to go back and put that abatement and redistributed among all of your taxpayers and your output. And so that's what that abatement mill levy does is it protects school districts in terms of, in this case, they went back two years right. So they overpaid one year. They were starting to overpay the second year. And then they they protested their their taxes and so it came back in the form of a fail because because that should have been a component of our mill levy had a Yeah, right. Because what what then happens is we don't collect $3 million that we should have last year. And if there's no mechanism for dissipate, then we're out.
Yeah, I'm gonna get the progress the process normally but in this one where they reported their Production wrong. They really never should have been taxed in the first place. Yeah.
But again, that determines the assessed valuation. And we're revenue we're going to receive. Steve, based off of that assessment.
Yeah. What's that assessed valuation that's certified all of the taxing districts within that county rely and budget using those numbers. And so if they were to fluctuate like crazy afterward, then it could puts that, you know, we're pretty large district and a strong fund balance between whether that but there's a lot of organizations there, they're running things so thin, that if they had such a large drop subsequent to their original imposters their budget, they've, you know, made made commitments for compensation. they've signed contracts, everything that all of a sudden make those districts bear that burden there the large decrease, which is really causing major problems and so
set them up. Over reporting overvalued the assessment
says expensive mistakes
They didn't end up hanging it right? It just went over to his abatement, but
it's gonna come back to them because their property tax. So when I when I worked with one school
for school district, we had four sons. And they went through that there were 40% of our property tax, right. So they if they went through the abatement process, it could be it could have a fairly significant impact on the small community. But when they went through that abatement process, which they did, they're still responsible for 40% of activate, right? We're gonna pay 40% of it, email, they got a debate it so impressed on people pick up their share of the abatement, distributed
through hours of
curiosity, any idea what percentage of
their revenue that is?
I'm just curious.
It's an expensive mistake, but I'm just They're making
a billion dollars. And they didn't notice it for two years, or they had a bad accountant. But it was, for them, it was $14 million. I don't know what that percentage is as a total, but still
think for any questions before the one.
So this next categories are state categorical. So this is not total program, but it is funding for the state for specific items like GT, special education, transportation, career, technical education, and elka. And so back in June, these, we have no idea really about what they're going to be the following year to get, we'll get information on that early. And so we typically budget conservatively and keep them flat at the time. And so since then, as those numbers and allocations are made to the school districts throughout the year, and we're able to adjust those two actions and so that represents an additional $500,000. So instead categorical funding. This next item is really just an accounting entry. It does not represent true dollars or resources available from the distribution by kids. It's sort of akin to remember that para liability that we have to post in our camper. This is kind of similar in that we have to recognize our proportionate amount of the state's payment into the payer system. The state's making a turn $25 million period due to the payer system, and we recognize our proportion share on behalf they've done enough on behalf of us. And so we have to recognize 4.6 million revenue and you'll see a corresponding talking 6 million increase in expenses
on the bottom.
Those are ongoing. They're just going to sort of sit as light is in our budget, and they make both of our revenues and expenditures just go up by 4.6 million. Again, net zero, no real resources There's a dollars for your bank account for this or anything like that. It's just it's something I needed to reflect charges for services and mostly preschool tuition trip charges, announced that we charge our charters for services to them represents about $577,000. But it also represents an increase in any indirect or overhead costs that we get from brands. So that's all sort of aggregated the charges for services that you mostly consider is ongoing, unless any of those programs
So would we consistently under budget by that amount?
Where we consistently under budget?
Well, instead of that revenue number, this is a change from what we budgeted? Yep, exactly. Yep. So to be consistently under budget by $500,000,
like every year from
the amended to be adopted, firstly, to be fully adopted, be amended, or in terms of an outperform From the adopter?
Well, this looks like an out performance.
Yeah, it's not as much as our performance as really, as we go through and try to identify the true expectations of revenue that we're going to learn from either the, in this situation, the preschool tuition program, compared to what we projected that we might be getting back in June. This corrects that. And so, again, what we typically try to do is stay pretty conservative on the revenue side, way back in June, May and June. So we adopted a certain amount that we expected for the preschool program. And then as we did analysis and work with them, and again, realize that the the number of students that were coming in and the number of students will be paying into the program is higher than what was projected. And that's what this century is.
Yeah. And you said this is an ongoing number.
Yeah, it's an ongoing number again, for instance, we would presume that the preschool student count is going to stay flat or continue to increase. And so when you consider next year that we're not going to see a correction of that to maybe drop back down, we would expect that to continue up based on
our growth projections. And last year, what was that number?
I can look I didn't like I said, drill down into my data that I can definitely pull that up for.
Yeah. So I mean, if last year the numbers also $500,000. That looks in the year before that. It was also 500,000. That's my question. Definitely not
there was definitely not as big of an adjustment from our adopted to our to our amended cycle
for preschool tuition. It really,
I think it probably goes up just a little bit maybe each year compared to because again, we tried to stay conservative, a little bit bigger this year, I think because
also included some adjustments in our trip charges or transportation that gets paid internally for for field trips and such charter service. sense and then also the grant classes that focus
on, we're really talking about this.
The next number of the $2.2 million can mostly be considered as one time revenues. So this is almost all the best grants for the project going mainstream, as well as in one time $700,000 grant startup payment for implementation or full day kindergarten, and so we won't see those next year. And so you'll see that come off from the
gv adopted budget, nature
and there's a pretty similar expense with that.
So some other miscellaneous revenue adjustments and oil and gas leases and payments for kind of grassland, in which our district provides about 490,000 and adds up to $25 million and terms of increasing revenue compared to what we originally adopted. And again, I think that's pretty eyebrow raising when you look at that, on the outset without seeing context, though, and recognizing that 4.6 million of that isn't really true resources for the district is that pair on the half payment. And then there's also some outliers here with a one time abatement increase, and then the best friend and one time, kindergarten, so quite a bit of that is is, again, you would never want to consider his ongoing resources. But still, again, we right on and we know about for the current budget cycle. Under revenues, or excuse me, expenditures, there's not as many here and so I'll kind of go through here and stop for any questions that you have. Insurance time you
pick up too much. Okay.
So, so the first line here is additional personnel. This is additional MTV, it's sort of related to the additional growth yourself top digital activity, terrorism teachers and other personnel retired for support to accommodate growth that we see in
the fall. The
area assistant superintendents and our HR department do a great job at keeping a pulse on the needs of our schools and try to deploy resources as expediently as possible to make sure that
our kids are educated.
That's what that represents ft budget savings this $1.9 million. That is as we go through and true up all of the estimates we made last June, are open positions and in positions that money will authorize the mouthfeel. And we always presume certain amount for our salaries, presumed that they're going to elect a certain amount for insurance, as well as we presume that they're going to be employing a year folks to authorize. And so when the amended cycle we do a much more precise salary analysis based on actually data, who's been here who hasn't and what they elected. And we always see a little bit of a savings in our FTP budget, when you do the little typo based on things that have been coming out since then. And so that's what that
does that reflect the current year or last year.
So in June, we've made an estimate for, you know, this, this vacancy expects us to cost about $83,000. And we're going to have it for four year than it may be what we find out is that they had maybe a teacher or in their career, and it was only $16,000. And or maybe they weren't able to hire the person until October, November, so the film the entire time. And so that position that we originally budgeted at 35 is really only going to cost us 60. And so that's going to be a savings that's going to show up.
So are we going to see some fluctuation as hiring goes on during the year or that's
maybe so maybe again, what I do is I look at All of our positions in detail. And then if there's any current vacancies, I make the same assumptions as I did at the beginning of the year, except now we were only happier. So all you explain to the average salary and I'll still elect the average insurance costs, and I'll load that in our budget, presuming that we're going to fill that position as soon as possible at the average cost. And so if that doesn't happen, which many times it doesn't, then that will result in our performance of our budget at the end of the day.
Can you see a number like that? a certain percentage of total salaries every year? Yes,
yes. Every time because we have just over a year of nature, our way as we approach exactly the nature of our we're going to estimate revenues low and expenditures high and that every time and so I'm not doing my job very well. If there's a surprise increase in salary, mid year, I should definitely see a small decrease in our budget. Near every year
but we do try to get it as accurate as the amended budget right in the adopted it's such a broad stroke once we have our federal data is going into the minute because we're six months in higher the majority people get a lot we get a lot closer. Yeah,
it's a it's a prices right game, you know, this is close, you can without going over and, and so, yeah, I can make this easy and just estimate you know $50 million more than what my expected budget is right? And you say that $50 million a year. But so, we want to stay as close as we can, but definitely it should be going in this direction during it.
So my vision of you guys with a dartboard is
So, this next one is the corresponding pair on behalf expenditure that we have to recognize your account mentary discretionary budget changes so this is building department discretionary budget. A change. So if there's a request, I think like
my on reader budget if we
need to Tobias is in there, or all the buildings as we true up their budgets for student counts, will give them an additional bump if their original estimates were conservative that's in that. So everything that's not FTD that we're going to be deploying additional resources to accommodate legal expenses as user in their core things are in that number. I can I can show them that we can be interested in learning more about that. And that's that
discretionary budget change number
is an additional
Francis tuturro 2.2 million against corresponding to the best and kindergarten grant from above my grade was mentioning so it was one of the expenditure to be expect to spend those dollars right here. So that was written on as well. This little bit Hundred $56,000 decrease in expenditures. Our Energy Office gave us some utility budgets and they were seeing some outperformance there and we thought they'd be able to shrink their budgets a little bit. They still do have some contingencies. So they'll be able to go up without having to come back and request but didn't feel comfortable dropping their toys budgets just a little bit late this summer literacy programming, but they have the extra month in June, really successful and they're putting some additional resources into that to about 20 $20,000.
This is a one time item as a use of some mill levy override reserves dedicated to the preschool program, and then using that to build a preschool Center at Main Street before the system and charge and
add some set of capital.
It is its capital expense that actually flows through the channel. From because they're using mlo dollars and MLM is going by.
And then when you add some of 200, thousands of some other miscellaneous expenditure adjustments, we get an increase in expenditures from our adopted budget of about $8.8 million.
So any questions before summarize?
All right, true.
So as you can imagine, you guys can do the math in your head. But if we have a large increase in expenditures of 25 million, excuse me, large increase in revenues in the 25 million and smaller coincident increase in expenditures of 8.8 million, then we're gonna have a swing in our budget of about 16.3 million. So again, we started with a 12.4 spend down, we plan to spend down from bounds by 12.4 when we started this year, with these adjustments, then that budget of spend down is actually flip flopping up to a an expensive surplus. And so we have a written if everything is spent exactly as we expected to increase in our fund balance at the end of 2020
point $23.8 million
fund balance will increase by $3.8 million. If everything happens exactly as we're seeing here. What we've seen in previous years though, as you know, is we'll see usually a not performance. And so, any outperformance that we'll see will be in addition to the $3.8 million, a little bit fund balance recap. We started the year with general fund reserve $116.3 million, that that was our fund balance. And with this increase of 3.8, that we would see the end of this fiscal year. So June 30 of 2020. This year, have 120,000 excuse me, 20 million in our fund balance reserves.
That's before performance. Sophie had a, say a $10 million outperformance of our budget, then this would actually net 3030 cents.
So just to translate that doubt to the document that you're going to get in,
if you review the general fund budget, and you just go to this table right here, you'll be able to see exactly what we went through today, right here in the summarize In this first column. So in the adopted budget, we've had that $12.4 million spend down in the amended budget proceed to $3.8 million surplus. And so that's summarized here received 350 $4 million of revenues 350 million in expenses, and so the difference between those two is going to be almost 49. Okay.
We have a lot of other funds in our,
in other words, work with the district and I don't want to this is by far a large just received the most attention. But if anyone has any questions on any of you ever funds and we can go into some of those if you'd like,
Where was the bulk of the spend on allocated to?
That's our question that I have to have to drill down on. It really the aggregate
spin down was just here's what we need. Here's what we're what we're doing. I mean, and when part of it was negotiations salaries and benefits, right that we that we did with teachers and staff
Part of a wish project launch. Some of the stuff that we did with
meet elementary is not part of this equation now
who is his best?
So I think that the key here was, you know that a couple things one was the the pavement stuff that we we didn't have an idea we We're starting to notice that if you remember last spring in the May, June timeframe, we did mention there's a potential for larger beta. So we don't know what that's going to be. They didn't make that decision until until the August, early September timeframe, whether or not they were going to allow the abatement to occur or not. So, you know, had we collected that money, and last year, we would have built last year's fund balance, and it wouldn't look like we're like we're having that much more additional revenue this year. Right. So that's an unplanned thing. From the, you know, 2010 through 2014 15, when we had the housing market issue, right, as the housing market was going like this oil and gas was going like this. And so then when it went the opposite way, and oil and gas kind of came back down residential and our assessed valuation for property is going back up. So from the years 2010 to 2014. We stayed fairly level in terms of our assessed valuation. And then like Tony said in 2015, there was some things that I mean, as when Boulder County did a big revisit of the residential. We saw a big jump we saw a lot of growth in, in weld. And then you know, it's kind of continued slightly to increase. But you can see, like Tony's got on the graph up there. If you look at those two years, this year, and 10, four years ago, you see her level for a long time until 2015. And you see that jump and so when we forecast we were forecasting along that line of those three years running a four year
forecast, but 5% in assessed valuation
was well the most proactive in their abatements. Yeah,
well went up 36% in assessed valuation and this particular statement was often almost entirely Well, it was like, I think 4 million well and 2 million folder subfolder did all We'll have some larger payments this year. Thank you. So, so yeah, we project about 5%. And again, for next year, I probably will also project about 5%. I don't think it would be
predicted to have more of a reassessment year every other year, right. And so how do you reassess non-racist and then the three essential oil and gas does its own thing, but in terms of residential, commercial, those types of things. So depending on the year, we may forecast lower if it's a non reassessment year because all that's going to come on board issue, confusion, new faction, and
during these years, we were we were projecting half a percent increases in SAS valuations, however, we do our adopted budget. And then after this happened a couple of years, we increase that to 5%. And so we were seeing, you know, six and seven and whatnot. So we use the 5%. And so this this was pretty unexpected, this large 21% increase again, this red line represents the percent change In assessed valuation, and so you can see, there's a spike here, way back in 2001 spike here in 15, and then spike here in the team. And so they're pretty rare. But so we again, I, unless I received direction from someone else to do something different, I would probably only do about 5% of an increasing in process valuation next year. And then I would, you know, hope that maybe we get six or seven. But so that's where we're at. And again, we do try to look back at what we can do better in terms of budgeting. That's still going to be conservative improvement, but not you know, wildly out of control. This number 25 million does raise my eyebrows and make me look and see okay, what maybe didn't we do? We didn't project correctly. And honestly, none of it really makes us feel like we were caught unawares at the time in June, nothing makes us think oh, We didn't really mess that up in June. We didn't know this this this. Most of it is is pretty reasonable, but just large numbers and all that kind of came together
nothing. We didn't do it
or adjustments for evaluation on their behest or do they do it every three years or
justments? Yeah, we're the assessment. So you said this year was a big event every year,
every every other year.
Thank you. So this was a reassessment here, and the next year won't be so they just sort of continue with new construction.
Over 350 million dollar increase in assessed valuation, oil and gas and weld County.
So that's, that's the majority of that 21% growth
is oil and gas well, County. That's why
we kind of hesitate knowing that it follows follows an 18 month cycle. We think it's We think that's probably ongoing money. But we don't know. We don't know for sure. So we don't want to budget at 21% growth in assessed valuation for next year.
And we know the new wells are the most lucrative,
the highest. Just
want to point out to the board, that we do have this executive budget summary by fund that I created a few years ago, just with you in mind, because I really wanted you to be able to see the comprehensive overview of every fund the spend downs and surpluses and the expected fund balances for each fund. And so please feel free to peruse that. And if you have any questions, you can go and get more detail by going directly to the front page. And then if you have further questions, please reach out to us and be happy to answer your questions. And lastly, as a reminder, this is the spending plan, what we expect roughly that will bring you revenues and spending expenditures. And the first just a little bit from the appropriation resolution. What this is, is a overview of all the resources of the district, both from a beginning fund balance perspective as well as all the revenues. So this really just is it's always kind of fun to point out this number. No, we're, we're pushing a billion dollar shop here with 150 million dollars in terms of full total all in resources of the district. That's not we're going to spend. So this includes our reserves and our building our building funds and stuff like that. And so, but it is kind of when you want to see the biggest number that you know, you could be dealing with this stuff. I think
that's all I have for you today. Again, this will be questions to me any questions or comments?
Yes, Karen, somewhere. Anything you want to share? From from that company.
You know they were good with it. Tony went through the exact same thing as far as the differences from the adopted to amended. They understood everything as far as what was going on the kind of unpredictable factors with the assessed valuation and the abatements. And I think Paul just made a comment about his his point of view was that he thinks it's, maybe he thinks it's conservative that we do the zero growth budgeting and therefore he's a little concerned about how we can fund the staffing, then the actual staffing that we need, but he was saying here that we do make adjustments for it. We do because honestly, because of the fund balance, we can actually go out and do the staffing as we see it as it unfolds in August and then we adjust for it here. So he was kind of pleased with that
multi step approach, zero growth and it stops.
We continue to allocate resources after that.
Yeah, and then we just for it, we desperate here to phrase,
the percentage of that everyone's always asking about every time if we ended the year at 120 million. That is a percentage of our 350 million dollar expenditure budget in
the general fund is about three quarters.
And the guideline was discussed. That's on the high side, for
my share, honest and promote we
have been formally adopted, but we've been comfortable with something closer to
30 genuine than our last time. That's right. There's nothing that we have written down that we follow but in general than in that
25%. And we know we're high.
And, you know, we want about 25% probably be three months. But you don't want to commit resources to ongoing things and drive that into a skin uncontrolled. Right? We
always talk about a controller. So
the question is, do you do spin down that fund balance? Or do you let your expenditures come up to where it It ties out, it gets to 25% as if, if you keep building your expenditures, and then you're spinning, find balance, you could overshoot you can get
past that, and that's something we don't want to do.
It doesn't look like we're in danger of that. Or you
know, I mean, if you look, if you look at the
the adopted budget, we knew that it was there's too conservative stuff in there. And so it wouldn't have and we know we we typically outperform so we knew that we were, you know, if we were going to spend down and it wasn't
it wasn't way over what we wanted
to do. So if we have 2008
again, right in
how much Time just this fun dollars give us to adjust to that number. Yeah.
So there's a couple different ways to look at. I mean, basically what 25% does is give you three months of research
placebo, you're not going to spend, I mean, that's not the way to look at it, right?
I mean, that's, that's one way to look at it is how much how far can your research take? The other one is you don't know what 2008 looks like in terms of per pupil revenue, right? That's what that's what's gonna drive it. We'll see if we have a housing market issue and we see assessed valuation district right go down, we're going to lose money on the on the mill levy override side of it, but we're also going to lose money on the security side is because they're gonna have to reduce their their people revenue, which
as well, because recessions tend to impact employment. So
what I would say is that
We would be far more comfortable than the majority of
30% It's a good place to be due to
the vulnerability of the future. And, and, you know, I'm not I don't have a number in mind, but I think I would be really
interested in kind of your best professional view about, you know, reasonable things, the downturn. That reserved allows us to sustain our commitments that we make to our employees and students and phase into a new reality that that buys us time. So you don't have to do it in six months, right? You don't have to do it in a year. So I think if we, the number that I and I don't know what it is percentage, but the time for the institution to just a reality that I'm more comfortable with
we've got, I would say we have at least two years, if I, if I look back to 2010, which is when the per pupil went down, we went down by about $600 per student. So you multiply that by 33,000 students, you're looking at roughly $20 million, right? And then if you take into account mill levy override decreases. That's not going to be another 20 million, but it might be, it might be 5 million or something along those lines. So you're looking at $25 million
and would be making adjustments to the expenditure side started in that time, exactly. We wouldn't be forced by we would be forced to do take drastic measures to reform us.
We wouldn't be forcing that programs to increase class size to do any of that stuff. As a knee jerk reaction. We will be able to plan and come up with a methodology for how Based on what the economy told us at that time,
how long how long the recession was going to be, how long PPR was going to be down those types of
data 25% of our operating budget in the reserve or SAT 35%.
So I think 25% gives us what we need. If we were to go to 25% of our 350 million, you're talking about roughly 8084 million something in that neighborhood 85 million.
And so 85 million,
we're looking at 120 million, right. So there's Christian there. But even if we were to get down to 25%, I still think that you have a couple years to make
adjustments. Thank you. really is. We had a sort of this discussion is every year, but it's not a major issue, but
just curious if we hadn't had that $25 million boost.
What would have been our balance?
Oh, yeah, sure.
If we had maintain or $12.4 million spent down right, instead of at 120, we'd probably be more like 117 or so. Which is
Turn it down
$25 million is always
turn it down.
Reach out to me to find out whether or not
put an abatement mill levy and place my response to them
Absolutely, because we
always do we do it every year. I mean, that's the money that's supposed to be. That's the sort of money that's generated based off of the school finance act. It's, it's our money. And so I think a lot of those special districts, they didn't they never really put in that abatement.
They just take the loss, they just take the loss. Interesting philosophy just showed up.
pretty small number.
But if you look at our abatements Levy, went up six fold.
But it was less than
less than 2% of our total males.
You know, which is actually a good segue. Were there any other comments? I don't want to cut anybody short.
but it is is a great segue to certainly appreciate Tony and Greg and everyone in finance, and everybody across the district. So that commitment, really, for financial accountability to for to the stakeholders, but also really to the students. And I know Don talks about this, and it's so important that you can't just educate the kids one day and then the following year not having enough money, right. You know, I mean, you're making a commitment to carry kids in perpetuity, really. And so same brain is in a very fortunate position, and I mean, really, you know, across the board, but particularly that foundational level with finances that other school districts
have the luxury of the
Communication Association is a big part
of that. Thank you for pointing that out. And thank you
You know, definitely grateful for that. And, you know, there's a certain certain amount of, you know, we can manage our own way and a lot of a lot of different areas because of that. So, Tony, great, thank you for staying late. I think it was important to listen to that was an important topic in the voter registration also. So we appreciate that. I was thinking motion for adjournment please.
by Dick and a second about john oliver.
You have a great night please stop and have a chocolate