DATE: September 29, 2004

TO: Winnefox Library System Board

FROM: John V. Nichols

RE: 2005 Proposed Winnefox Library System Budget

As many of you will recall, this second year of the biennium again yields no increase in public library system aids. I’m very pleased to report that the net result of all the following budget changes is that:

the 2005 Winnefox Budget will result in no staff layoffs and
no significant service reductions with the exception of the phasing down of funding for Large Print, books on CD and DVD rotating collections (although those are planned reductions).

The combination of much tighter budgeting in a number of accounts, judicious cutting and the use of some undesignated reserve funds have allowed us to balance the 2005 budget without significant service cuts.

WINNEFOX 2005 BUDGET

REVENUES

State Aids - as you know, our state aids for 2005 show no increase for a second year in a row.

Interest Revenues – We’re projecting no change in any of the Winnefox revenue categories.

Contractual Revenue, Electronic Services – the increases in these accounts are due to the increased salary and benefits for the employees in those programs.

EXPENDITURES

Salaries & Fringe Benefits – we have included an estimated 2.5% salary increase for all salaried staff; a 15% estimated increase in health benefits costs; and the projected increase in state retirement costs.

Community Relations/Marketing – the funds for this position have been moved from the Contractual Services account back to the Salaries & fringe benefits and adjusted for recent changes in salary and fringe benefit rates. That accounts for the large increase in these accounts above the aforementioned increases for employee salaries and health costs. I anticipate recruiting for this position as soon as possible to fill the vacancy.

What follows is the text of an email I sent to the Winnefox member library directors for their comments or concerns. All of the responses I received were understanding and supportive. None were negative.

Due to proposed salary increases of 2.5% and fringe benefit increases including about a 15% increase in health benefit costs and since there are no revenue increases projected (flat state system aids, no interest increases, etc.), the result was $-27,707.69 out of balance. Not good but it could have been worse. I’m planning to recommend the following unless many of you have significant allergic reactions to them, so here are the more significant proposed changes:

· Staff Administrative Travel – increased $1,000 given our recent spending pattern. I probably lowered it too much last year.

· Photocopier Maintenance, Software, Postage Equipment Expense – lowered by $400, $500 and $700 respectively. I think these are more realistic projections based upon expenditure patterns so they shouldn’t have any impact on service.

· Large Print, DVD, Books on CD – lowered these by $500, 2,500 and 1,500 respectively. Mark and I discussed these cuts and found the memo written in March of 2000 when we first launched the DVD and Book on CD collections. They were launched then with WLS Undesignated Reserve funds under a 4-6 year phase-in/phase-out plan as libraries gradually could build up their budgets to accommodate the new formats. 2005 will be the fifth year of the program and the funding levels for the latter two collections, even after the cuts, will come close to matching our actual expenditure levels for 2003. Even if the budget did not need cutting, I would probably recommend these cuts anyway since I have always maintained that System funds should not be used for permanent collection support for libraries. We need to be able to move to newer services and collection formats with at least some of our funds, so I anticipate always recommending that collection development is ultimately a local responsibility and System funds should be bridge funds. The fact that we have made a WCTS grant program available for three years for “new media format collections” also helps ease this transition.

· Intersystem Delivery – from SCLS is increasing $1,043 for 2005.

· E-Books – our share of the WPLC Consortium cost is decreasing by $1,500.

· ILL Net Lending – costs to OPL went up by $1,438 due to increased net lending (as part of the Resource Library Agreement). The unit costs haven’t changed in three years.

· Printing Supplies – I’ve decreased by $8,000 since review of current and past expenditures seems to suggest that will leave an adequate amount. No service reduction is anticipated.

· Color Photocopier Maintenance – is increased by $2,000 based upon the most recent expenditure pattern for the revised maintenance agreement.

· Kay Swan Grants (for Library Director CE) – decreased by $250. We have not had requests/use more than that for three years.

· Byron Olson Grants (for Trustee CE, Legislative Day participation) – add $500 for this new grant program to commemorate Byron’s service to Winnefox.

· Travel Reimbursements – lowered by $1,500 based upon expenditure projections. Shouldn’t result in any service cut.

· Dues – Professional Organizations – lowered by $400. There are fewer professionals working for the System now.

· WALS Membership Fee – Winnefox’s share of Member costs is up $1,996.

The end result of all those changes was to lower the shortfall to $-14,500. Better than before but not zero.

At this point in time, I’m comfortable recommending to the Board that the remainder be taken from Undesignated Reserve funds which are estimated at $201,758 by the end of 2004. This will reduce them to $187,258. I think because we are entering another biennial budget session with the legislature, maybe a miracle will happen and we’ll see some increase in System Aids. If not, we will have to make more cuts in the 2006 budget and will probably have to review some of our programs of service and reduce staffing.

If I’m wrong about the legislative session, all this does is reduce reserves by $14,500 and puts off these cuts for a year. If I’m right, we may not have to make them at all. It seems the right time and amount for this proposal.

WINNEFOX AUTOMATED LIBRARY SERVICES – this budget proposal is being reviewed by the WALS Executive Committee on the day of our meeting. A similar version of the budget was previously approved unanimously by the Committee. This one contains some changes accommodating requests by the members without any significant changes to member fees.

Here are the most significant changes within the 2004 proposed WALS budget.

Personnel & Operations – this line item covers that portion of the WALS staff funded by the members and associates as well as contracted positions at OPL for database maintenance (cataloging) and system support. In general, this item reflects the same 2.5% estimated salary adjustment and 15% estimated health benefit cost increase as in the Winnefox budget. There are no changes in staffing levels.

Maintenance – this item increases due to the addition of some new services to our system and their associated software maintenance contracts. As our Technology Plan indicates, we will be adding EDI electronic ordering services which will permit the direct electronic transfer of orders through the SIRSI system. We also anticipate adding a collection agency service program for more effective recovery of overdue items.

Contractual Services – the primary increase in this line item is due to anticipated increases in OCLC (cataloging consortium) charges due to additional libraries in our shared automation consortium requiring an increase in numbers of items cataloged.

Telecommunications – the increase is due to the addition of a second T-1 circuit for the central site to provide adequate bandwidth for all the member library circuits to the central site computers. Additionally, we are budgeting for an additional T-1 line for Campbellsport.

Capital – the amounts budgeted for shared capital costs (equipment which benefits everyone and for which costs are shared) include $8,000 for server upgrades and two replacement servers (we manage about 12 servers now) as well as $7,000 for associated server software. These server upgrades and replacements will become a regular part of the budget.

We have also estimated $15,400 in startup fees to SIRSI for Oakfield and Brandon for 2005. This is a tentative placeholder figure in case these two libraries decide to begin bar-coding in late 2005 in anticipation of startup sometime in 2006.

Capital Reserve – we have begun budgeting again for a gradual build up of shared capital reserve funds. We provided everyone a “holiday” from this expense in 2003. We need to rebuild our shared reserve since we will be spending it down by over $257,000 during 2003/4 for the SIRSI upgrade. We have included an increase to $46,170 in 2005 and will need to gradually rebuild that amount to about $100,000 a year in order to have enough funds available to upgrade/replace shared equipment in the future. There is also $5,000 budgeted for van replacement.

WINNEFOX COOPERATIVE TECHNICAL SERVICES - this budget proposal was reviewed by the WCTS Executive Committee members and there were no objections to its approval. I will be meeting with them in the near future to discuss adjustments to the budgeting processes to gradually eliminate future shortfalls.

Revenues

County Contracts – in general terms, WCTS is receiving about the same amount of funding as it received this year with slight variations in the amounts from each county..

Expenditures

Personnel – there are no significant changes in the personnel area. The increases are due to the increased costs for existing personnel.

Contractual Services – decreased slightly in the area of WCTS share of WALS costs due to the participation of Fond du Lac PL in the formula.

Rotating Collections – while these are largely rotating collection circuits supported by member library dues, there has been some subsidy by Winnefox. It was always anticipated that the subsidy would gradually decline over several years.

There are no other significant changes in this budget. I estimate using about $4,400 from undesignated reserve funds to balance the WCTS budget for 2005.