Tightening the Purchasing Process
Over the last 18 months, school district purchasing offices across the country have been tightening the reins like never before while more top-level administrators get involved in the budget process. “When the economy really hit the skids, states got hit hard, so a lot of school districts were forced to make severe budget cuts,” says John Musso, executive director of the Association of School Business Officials International. “They stopped or reduced purchasing as much as they could on those discretionary items. Now high-level administrators are becoming a more integral part of the process.”
Indeed, from his bird’s-eye view, Musso hears top-level administrators asking more questions and demanding to see bids—and before anything makes its way to boards of education or governors for approval, superintendents are working with their budget offices “to ensure all of the i’s are dotted and the t’s are crossed in order to avoid any type of misstep,” says Musso.
With the availability of American Recovery and Reinvestment Act of 2009 funds, Musso sees a bright spot in that as some school systems have drawn one-time monies from the ARRA, they are purchasing more than they normally would. School systems are moving forward to get those dollars spent, Musso says.
District leaders also plan to take advantage of some $4.35 billion in federal Race to the Top funds if their states receive them, and many are actively seeking grants from the $650 million Investing in Innovation (i3) fund, which districts can apply for directly. Applications for i3 funding are due next spring.
Not So Fast
Ron McCulley, director of purchasing for Douglas County (Colo.) School District, oversees a $477 million general fund budget for some 54,000 students in over 70 schools. Douglas County is one of the fastest-growing counties in the nation and enjoys the highest median household income ($82,929) in Colorado. But in the past year, the superintendent, school board members and IT director are asking more pointed questions about what his department is working on, says McCulley. “We’ve always had to do more with less,” he says, “but now it seems to be less and less and less.”
In the past two and a half years, due to budget shortfalls, the district has been forced to remove 290 positions. Interim Superintendent Steve Herzog anticipates further cuts as he awaits the governor’s proposed budget this month. Has he become more involved in the purchasing process? “All of us have. All of our budget people, everyone that’s in the top leadership here,” he says. Cumulatively over the last three years, the growing district has reduced its budget by 13 percent. “We’ve had to tighten our belts, eliminate positions, freeze teacher salaries—all employee salaries actually—and it looks like we’re going to have to cut some more.”
When Herzog took the reins last September (he was previously the district’s chief operating officer), he immediately issued a letter to all principals giving them notice of what essentially amounted to a spending freeze. Any purchase would need to be fully justified against how it was essential for instruction, and all purchases would be subject to public scrutiny through the district’s Web site.
“It’s not just Colorado; it’s across the nation,” says McCulley. “Everybody is just trying to figure it out. Something’s got to give.”
For example, this past year McCulley has had to weigh purchasing a greater number of computers for his normal districtwide computer rotations against purchasing new buses. “We still did our computer rotation, but the number of buses was way down because we just didn’t have the dollars,” he says. McCulley will now intensify bus maintenance schedules in order to keep the buses they have running properly. But regarding budget reductions, he says, “I don’t see any end to that in the near future.”
From McCulley’s experience, administrators want to ensure that purchasing departments are exploring opportunities, looking at cooperative purchasing, and going after the most competitive-priced products that they can. “They’re getting asked those same questions by taxpayers who also want to know what’s going on,” he says. “‘Should we be rolling this bid over in these conditions?’ They want to make sure we’re spending our money wisely. We always have, but it’s become more of a need lately as budgets have been so small and limited. We’re not sure how the state is going to fund us down the road.”
Richard Gay, purchasing manager for the 105,000-student Baltimore County (Md.) Public Schools, is responsible for a massive $1.57 billion total operating budget. “Over the last several years, we’ve seen a shrinkage of revenues coming in from our tax base,” he says. “We’ve been able to hold our own, but the future doesn’t look too good.”
Over the last few years, Joe Hairston, Baltimore County schools superintendent, has given department heads, who oversee the district’s 17,000 employees, notice that there will be no new dollars this year. Anything in a budget request should only be for existing programs. “It’s a maintenance budget more than anything,” Hairston explains. “Those decisions will loom very heavily on the minds of our decision makers within the organization. We’re becoming more introspective with regard to what currently exists. I know now that there isn’t going to be a lot of money in there, so there is no need for me to ask for things that we know are not going to be funded.” Meanwhile, Hairston has requested his resource department to review initiatives and programs yielding few or no results and to redirect their funds. “Last year there was hope we could prioritize. This year there will be no new initiatives—no new dollars whatsoever.”
Prompting this is what Hairston characterizes as “the realization that when your state legislature is looking at the state budget and the governor is anticipating a $2 billion deficit and then you listen to the county budget officials and the county executive, who are very fearful that any state cuts would impact the local government, this would ultimately have a trickle-down effect into the schools.” Nonetheless, Hairston says, district officials continue to monitor the real-estate revenue stream, looking at income tax projections and listening to forecasters and frequently conversing with his funding agency.
Because public schools are often tied to revenues that take two to three years to react to any economic conditions, they are the last ones to really see a downturn in funding and then to see an upturn after the economy recovers, according to Gay. “We’re getting prepared to take a hit next year and the following year. Revenues haven’t been where they have needed to be,” he says. The business office is already looking at cost efficiencies after next year so as to avoid any more financial pain. “If it’s not going to help students, then we don’t need it,” he says.
Riding It Out
Frank Lams, purchasing supervisor for the Troy (Mich.) School District, an affluent 12,000-student district in suburban Detroit, says that with large, high visibility purchases such as SmartBoards, made possible through a $120 million bond passed in 2004, the district’s superintendent, Barbara Fowler, is “extremely involved,” working directly with the technology director and his office of purchasing. But that’s just the latest step in a greater movement toward districtwide cost efficiencies. Lams, working with Fowler and other top-level administrators, in the past year privatized transportation, custodial and food services—saving more than $3 million per year, according to Fowler. “I was involved with all those presentations on the RFPs [request for proposals] to make sure that everything was the way we wanted it,” Fowler says. “We really have no business running these types of services; we are in the education business. If someone’s doing transportation, that’s all they do. And they’re going to do it better.”
Were the voters accepting of that change? “Not a problem,” she says. “People understand that economic conditions were driving the action.”
In other cost-cutting areas, Lams explains that “competition among vendors to schools has really kicked up from around the country,” meaning that all the vendors want a piece of the educational pie. But that pie is shrinking, and many vendors are moving out of their traditional geographic areas. As a result, Lams’ office makes full use of the Web, posting all bids online. “We’ve done some marketing to make people aware of our site,” he says. “In the last couple years, we’ve seen a lot tighter pricing and a dramatic increase in companies bidding from all over,” he says.
As a suburb of Detroit, Troy is also heavily impacted by the auto industry, and any talk of the community passing a bond will be tough. “It’s going to be easily five to seven years before we even talk about another bond, because the community can’t support it financially right now,” Lams says.
Gotta Keep Up
In Port Orford/Langlois Public School District 2CJ, a 300-student rural district comprised of an elementary and high school in southern coastal Oregon, Superintendent Mick Lane says, “I’ve got my fingers in everything.” For example, over the last four years, Lane has pushed for the school board to commit funds to upgrading the district’s technology programs. “We’re a shining star for small districts,” says Lane. Still in the “Commodore Age” just five years ago—a reference to the Commodore 64, the mass-produced home computer from the early 1980s—through leases and creative budgeting the district was able to bring SmartBoards and state-of-the-art computer labs into the schools, as well as a credit recovery program to connect the district’s rural student body with outside academic, postsecondary and career resources. Nonetheless, with the recession and the resulting loss of state funds, Lane has had to close a building and bring all K8 students together under one roof, which required a lot of basic plumbing, heating and electrical upgrades.
“Every year we dip into our reserves a little deeper,” Lane says. “We’re being very careful. We’re very vulnerable. Our declining enrollment is adding to the loss of state funds.” Nonetheless, Lane offers up a bit of advice: “The most important thing is to make sure your ducks are all in a row as far as contractor’s licenses and insurance, and following your RFP process to ensure the district isn’t liable.” Lane personally oversees this process, spending long hours reviewing the paperwork and discussing his options with his staff.
In Greendale (Wis.) School District, the highest-ranking district (based on test scores) in Milwaukee County, Erin Green, director of business services, had instructed her staff as of September that the 2,600-student district will no longer reimburse them when they buy things on their own. Before, staff could buy school-related items and through their purchasing cards obtain reimbursement for small purchases. Now, because of current economic conditions and the implementation of a new financial system, that policy has effectively changed. “We have a lot of national and in-state contracts in place for purchasing,” says Green. “All that can be accessed through our Skyward financial system.”
Skyward features direct links to best-price purchasing contracts and a p-card (similar to a credit card) system, with 1 percent rebates. “We’re pretty aggressively changing things to ensure we’re accessing best pricing and utilizing national buying pools such as US Communities,” Green says. But as she told her staff, “Every bill we pay is being scrutinized by the school board.”
Green adds that she has to answer a lot of questions and is being pressured by her superintendent with the warning that “anything they buy better be directly instructionally related.”
With larger expenses such as million-dollar technology or construction purchases, Green and her colleagues are not afraid to tackle vendors one-on-one to directly negotiate prices, or to ensure they’re in on national buying pools. Green has pushed this idea and has garnered quality support from her superintendent of schools. “Tighter budgets, shrinking resources and a dramatic reduction in our state aid” are among the reasons Green gives as prompting the changes. “Right now we’re able to keep up, but it’s becoming more and more of an issue,” she says.
In Pennsylvania, one district is being more conscientious about all purchases—from $5 to over $1 million and from the top down to the teachers and support staff, says Chuck Linderman, director of business affairs at Great Valley School District in Malvern, Pa., a 4,000-plus student district 25 miles west of Philadelphia. “We need to ensure that any equipment, supply or tool that a teacher may need will have a cost benefit and that there is a genuine need for it,” Linderman says, adding that there is a big difference between wants and needs. “Pennies are harder to find these days,” Linderman adds. “Taxpayers expect accountability.”
Watchdog groups representing both concerned students as well as taxpaying seniors are making sure the district is only purchasing items that enhance the educational process. “There’s a much higher level of accountability for all purchases now,” Linderman says. “Our top-level administrators are much more acutely aware when we send out a purchase order or requisition.”
Because the Great Valley district is primarily locally supported with property taxes, once a year on July 1 property owners get a bill that ranges anywhere from $1,000 to $10,000, which reminds them what the price tag is for education. “Nowadays,” says Linderman, “people think twice about this and are holding school boards, administrators and teachers more accountable.”
Victor Rivero is a freelance writer based in Colorado Springs, Colo.