Committee Meeting Information

June 18 and 19, 2009

Capitol Building Room 204

Cheyenne, Wyoming

 

Committee Members Present

Senator Phil Nicholas, Co-Chairman

Representative Rosie Berger, Co-Chairman

Senator Mike Massie

Senator Curt Meier

Senator Ray Peterson

Senator Chuck Townsend

Representative Debbie Hammons

Representative Steve Harshman

Representative Pete Jorgensen

Representative Bryan Pedersen

Representative Frank Philp

Representative Jeb Steward

 

 

Legislative Service Office Staff

Bill Mai, Budget and Fiscal Section Manager
Dawn Agar, Senior Legislative Analyst

Dean Temte, Senior Legislative Analyst

Alex Kean, Associate Fiscal Analyst

 

Others Present at Meeting

Please refer to Appendix 1A to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

Executive Summary

The Joint Appropriations Committee met for two days in Cheyenne.  On the first day the Committee heard testimony from LSO staff regarding revenue projections. The Governor, along with the State Budget Office, presented information regarding budget reductions for all state agencies for fiscal year 2010 and beyond.  President Hines addressed the Committee concerning a reduction in the LSO budget.  The Committee received presentations from the Department of Environmental Quality on Abandoned Mine Lands (AML) funding issues and from Lynne Boomgaarden on the American Recovery and Reinvestment Act (ARRA.)  Judge Hartman addressed the Committee regarding juvenile justice issues.  On the second day of the meeting the Committee received testimony from the Department of Health regarding budget reductions, as well as ARRA funding.  LSO staff and Brent Levinson of Affinity Global Solutions addressed the Committee regarding a budget database system conversion for the LSO budget fiscal division.  LSO staff also addressed the committee regarding the fiscal note process and criminal history record information availability.  The Committee was provided information regarding school district employees’ insurance issues by LSO staff and A&I Employees’ Group Insurance. 

 

The Committee recommended to Management Council that LSO use appropriated funds to contract with Affinity Global Solutions.  The Committee tentatively scheduled its next meeting on November 2, 2009 in Cheyenne.

 

 

Call To Order (June 18, 2009)

Co-Chairman Nicholas called the meeting to order at 9:07 A.M.  The following sections summarize the Committee proceedings by topic.  Please refer to Appendix 1B to review the Committee Meeting Agenda.

 

CREG Revenue Projections Update, Fiscal Profile Explanation

Bill Mai and Dean Temte, LSO, addressed the Committee and provided an overview of the CREG revisions prepared on May 22, 2009, as well as the associated Fiscal Profile for 2009–2010 (Appendices 2A and 2B).

 

In summary, Mr. Mai noted the following:

·         CREG members remain concerned about future prices.  Prices are holding and continue to be in line with projections. 

·         Natural gas contributes the largest share of severance tax and federal mineral royalty revenue to the General Fund, and it comprises the largest individual mineral category of assessed valuation.

·         Nationally, the number of natural gas drilling rigs taken out of service is proportionally higher than what has so far occurred in Wyoming; however, Wyoming is also laying down rigs.

·         Shale plays in the east and southeast areas of the country are a major concern for natural gas production. 

·         Demand for coal has declined, but contract prices have held higher than recent spot prices due primarily to the length of coal contracts. 

 

Representative Jorgenson asked for a schedule of historical coal lease bonus payments along with the corresponding timeline of coal spot prices. 

 

Co-Chair Nicholas asked what effect these future revenue concerns have on the School Foundation Program (SFP) as they pertain to the community colleges’ abilities to budget. 

 

Co-Chair Nicholas also noted that the FY09 actual returns are better than projected but wondered what the 2008 surpluses looked like.  Mr. Mai explained that the carryover of reduced forecasted numbers is reflected in the Legislative Stabilization Reserve Account (LSRA).

 

Co-Chair Nicholas also inquired about well permit numbers and actual applications, in particular how production levels through 2010-2011 will be maintained if no new wells are drilled.  Mr. Mai explained that over time a lack of new wells will no doubt have an impact on production levels, but it is unclear how long it will take for this lack of new activity to be reflected in production numbers.

 

Mr. Mai explained that the State Treasurer’s Office implemented an accounting change for FY09 retroactive to July 1, 2008.  Under the change the Treasurer’s Office will distribute interest and dividend income as in the past; however, capital gains and losses will be held until the end of the fiscal year (Attachment 2A).  Mr. Mai then noted the investment income projected in the CREG report is consequently showing interest and dividend income but is not accounting for any capital gains or losses.  The result of this accounting change is a net swing of approximately $231 million over the biennium (projected increase of $148 million dividends and interest plus $83 million capital losses that would have been counted under the old method).     

 

Representative Hammons stated that she is very conservative about the investment of public funds and suggested that since the State has never met the 5% spending policy level that perhaps a 2% level should be considered.

 

The Committee briefly discussed FY11-12 school foundation program (SFP) profile concerns and noted that current funding levels would result in a $270 million shortfall, which largely relates to capital construction transfer language and the annual external cost adjustments.  Mr. Mai explained the reason the FY09-10 profile for the SFP went down by only $100,000 is because of record high valuations in 2008.  The 2008 positive impact is still being felt through FY09-10, but in 2009 valuations may go down by more than half.  Mr. Mai noted that when making projections for the SFP, LSO factors down to the taxing district level.  Senator Massie pointed out that if necessary the Legislature could stop the diversion to the common school permanent land fund before the end of the current biennium.   

 

Co-chair Nicholas requested a spreadsheet and graph depicting declining revenues, as well as discretionary spending over the last biennium.  

 

Budget Reduction Plan

Mike McVay, Director of Administration and Information, Richard Cox, administrator of the Budget Division of Administration and Information, and Chief of Staff Chris Boswell addressed the Committee and explained the gubernatorial budget reduction directive assigned to all state agencies.   

 

Mr. McVay noted that effective July 1, 2009 the Budget Office will take the appropriations documented in the Governor’s reductions off the books with several safeguards in place.  The state accounting system (WOLFS) is designed to notify agencies that attempt to overspend and prevent that from occurring.  Mr. McVay explained that each agency’s fiscal personnel provide monthly reports showing the biennial appropriation broken down by what has been spent compared to what should have been spent and the corresponding difference.  This can be reviewed at the program level for each agency on a daily basis.  Mr. McVay also informed the Committee that the Budget Office will include the reductions in the standard budget.  Responding to a question about tracking positions that were frozen under the reductions, Mr. McVay explained that typically the Committee is given an overview of all the positions an agency has available.  Using this same information the Budget Office will know the length of time these vacancies have existed.   

 

Co-chair Nicholas stated that it is possible the Committee will eliminate some positions, allow some positions to continue without funding, or approve positions with funding but require the Governor to approve the position prior to it being filled.  He further explained that there is a difference between not filling a position because an agency is attempting to save dollars and not filling a position because there is no funding available. 

 

Mr. Boswell noted that the Governor would prefer position restrictions instead of freezing positions and further explained that it is rare for an agency to give up funding for a position without giving up the position.

 

Mr. Boswell explained that ARRA dollars will not become part of agency budgets.  He also noted that stimulus dollars will not be used to supplant reductions to the department’s budget in FY10.

 

Mr. McVay explained that the state currently has an approximate 15% vacancy rate and that the average age of state employees 47 years old.

 

Governor Freudenthal addressed the Committee regarding budget reductions:

 

The Committee further discussed the impact of reduced assessed valuation on the School Foundation Program.  Mr. Mai noted that if production year 2008 is factored out (due to the local resource effects of the record-high valuation) the reality is the SFP is faced with a serious decrease in revenue between FY 08 and FY 10.  The situation is manageable, however, due to the smoothing effect of FY09.  Governor Freudenthal then suggested there is too much uncertainty to be comfortable with current projections and that straight-line projections discount inflationary pressures. 

 

Governor Freudenthal explained that the 4% pay increase for state employees would be applied across the board with the exception of x-band employees, who are evaluated at the agency level.  He also stated that no employees lost their jobs due to budget reductions.  Senator Massie noted that 45 people at the University of Wyoming did lose their jobs.

 

Co-chair Nicholas stated the Committee has never seen anything from the community colleges regarding reductions and that the Committee would like the information some time over the summer.  Governor Freudenthal explained that his office can get a report of reductions based on the distribution formula, but his office did not request the specific reductions made at each college.

 

President Hines

President Hines addressed the Committee regarding a ten percent, or approximately $800,000 reduction to the LSO budget.  President Hines noted that seven to eight percent can be cut through vacancies, which equates to about $300,000, and by eliminating the proposal for new committee room furniture, which is also about $300,000.  He suggested discontinuing the use of the state plane, reducing the number of and costs associated with out-of-state meetings, and asking interim committee chairmen to consider costs when scheduling meetings.  President Hines also noted that he would be discussing these ideas with Management Council later this summer, along with the idea of reducing the pay members get for meeting preparation and travel. 

 

Abandoned Mine Lands Funding Issues

John Corra, Director of the Department of Environmental Quality (DEQ), Rick Chancellor, DEQ Abandoned Mine Lands Division Administrator and Jim Uzzel, DEQ Services Administrator presented the Committee an overview of abandoned mine lands (AML) funding (Appendix 3).  Mr. Chancellor discussed current AML projects, how much federal money is left for coal reclamation, planned AML projects, and that the President’s proposed budget intends to reduce Wyoming’s share of future distributions.  Mr. Chancellor explained that Wyoming is scheduled to receive a substantial share of AML funding and that redirection of those funds would require substantive law changes at the federal level.  It would be difficult to amend federal law before FY10, in which case Wyoming would still receive funds in the 2010 grant.  Mr. Chancellor also noted; however, that DEQ has not tied its operations to any of this money.

 

Mr. Corra noted that DEQ traveled to Washington D.C. to argue that the work being done with the state’s AML funding is completely consistent with the goals of the President.  Since this money is going toward the general goals of the administration, it is illogical to divert it to other purposes (states). 

 

Mr. Chancellor stated that DEQ has not applied for AML funds to support the UW reclamation ecology project endowment grant because the federal rules do not have provisions for endowment funding.

 

The Committee also discussed how the workload for DEQ has changed as a result of the decrease in permitting work.  Mr. Corra said that the agency has given up some vacant positions, but it is still seeing a lot of new permitting work, as well as permit renewals. 

 

American Recovery & Reinvestment Act

Ms. Boomgaarden, Director of the Office of State Lands and Investments, presented Wyoming’s Recovery and Reinvestment Act plan (Appendix 4A - 4F).  Ms. Boomgaarden provided information about the purposes of the act, state planning and implementation, reporting and accountability, and instruction for access to the state ARRA website to find the most current information.  

 

Ms. Boomgaarden noted that of the $600 million Wyoming-eligible funds, the state has so far applied for $400 million.  ARRA dollars will affect numerous funding formulas, discretionary grants and existing programs.

 

Juvenile Justice Issues

Judge Hartman presented the Governor’s proposal to use $15 million of ARRA funding for statewide juvenile detention facilities (Appendix 5A).  He said the juvenile detention facility situation in Casper is probably the most pressing need but recognizes there are competing demands for that funding.  Judge Harman provided the Committee a handout detailing typical crimes that require detention.   

 

Judge Hartman noted that Natrona County originally requested $13 million to build a 32 to 36 bed facility.  Under the Governor’s proposal, Casper is slated to receive $8 million understanding that limiting the number of beds available will result in moving juveniles between counties in order to find an open bed.  Counties that take ARRA funding must agree to use these facilities for detention purposes.  The judge also explained that many communities don’t want facilities and are willing to pay other counties for use of their facilities.  Currently only five counties have facilities and those are the only counties that want them.  Judge Hartman stated that 2,700 juveniles were held in detention at these five facilities for an average of seven days per stay last year. 

 

Meeting Recess

The Committee recessed at 5:15 p.m.

 

 

Second Day (June 19, 2009)

 

Department of Health

Dr. Sherard, Director of the Department of Health and Bob Peck, Chief Financial Officer for the Department of Health discussed their $43 million agency budget reductions and their intended use of ARRA funding with the Committee.  Dr. Sherard indicated that the majority of the reduction will come by way of reduced out-of-state provider reimbursement for direct patient care; however, the department will sustain reimbursement for primary care.  Mr. Peck explained that the department has been seeing increased enrollments in Medicaid since December, 2008. 

 

The Committee discussed Developmental Disability waiver slots.  Current slots will be maintained and emergency cases will be addressed, per CMS standards.  Dr. Sherard stated there will be a reduction in provider reimbursement.  For most DD providers Medicaid is the sole revenue source. 

 

The Committee also discussed community health centers and their role in the future of healthcare in Wyoming.  The state currently has six qualified clinics.

 

Representative Hammons briefly addressed the Committee and provided a handout detailing various economic assistance programs available through the Wyoming Department of Family Services (Appendix 6).

 

Budget Database System Conversion

Bill Mai and Dawn Agar, LSO and Trish and Brent Levinson, Affinity Global Solutions addressed the committee about integrating LSO into the same system that the State Budget Office currently uses.  This partnership would allow the LSO to track budget information more systematically as well as streamline the process of budget reconciliation between the LSO and the Budget Office.  Brent Levinson addressed the Committee about approximate costs of developing the system, as well as the costs associated with hosting the data.

 

Co-Chair Nicholas made a motion that the Joint Appropriations Committee recommend to Management Council that LSO be authorized to spend up to $125,000 on developing and supporting a new module for automating and integrating the budget process. Motion carried.  

 

Fiscal Note Process

Dean Temte, LSO, presented the Committee a memo outlining the fiscal note process for bills with appropriations and possible changes for the 2010 Session (Appendix 7).  The Committee discussed the issue and the potential benefits of having additional information provided.    

 

Co-Chair Nicholas directed staff to develop a fiscal note template designed for agencies to provide additional detail regarding the expenditure of appropriations, as well as explanatory narrative.

 

The Committee discussed the issue of whether agencies should be required to supply additional information for bills with appropriations or if this should be optional.  It was suggested that agencies should be required to provide this additional information.

 

Criminal History Record Information Availability

Dave Gruver, LSO, addressed the committee and provided a handout detailing criminal history record information availability (Appendix 8).  Mr. Gruver noted that this process can be made more uniform but pointed out that if everyone is already getting the records they want and new legislation is brought forward to make the process more uniform there might be a situation where something goes wrong.  Additionally, Mr. Gruver noted that these types of statutes must be approved by the Federal Bureau of Investigation and the Department of Justice and that process does not always go smoothly. 

 

School District Employees Insurance Issues

Ralph Hayes, Department of Administration and Information Employees’ Group Insurance (EGI) Division addressed the Committee and provided a handout detailing the pros and cons of allowing Wyoming school districts to join the state’s employee group insurance benefits program (Appendix 9). 

 

Mr. Hayes discussed the concept of adverse selection as it relates to allowing districts to voluntarily enter the program.  Should the Legislature decide to combine insurance plans, EGI recommends that school districts that elect to join not be allowed to withdraw. 

 

Dave Nelson and Brenda Long addressed the Committee and provided handouts detailing how the funding flows through the model for healthcare costs (Appendix 10A, 10B). 

 

Co-Chair Nicholas asked the Department of Education to provide the Committee a report showing the actual amount of money being generated in the model for insurance by district and each district’s actual cost for providing insurance. 

 

Senator Massie asked Mr. Hayes to provide the Committee with an analysis of what it would cost the state to bring all districts into the state system and then pull out the cost associated with all part-time employees. 

 

Co-Chair Nicholas made a motion to direct staff to draft two bills, seconded by Hammons, motion carried: 1) Draft legislation making it mandatory for all school districts to enter into the State group insurance system; and 2) Draft legislation to provide an annual option to all districts to enter into the state group insurance system with the understanding that once they enter the system they cannot move out.  This draft legislation would also remove the health insurance component from the funding model.  Instead it would only fund districts for the actual cost of their employees receiving coverage not to exceed the cost per person under the state system.    

 

School Foundation Program

Dave Nelson and Bill Mai addressed the Committee and provided a handout detailing the projected School Foundation Program data for FY11 and FY12 (Appendices 11A - 11C).  Mr. Mai explained the net changes from the January CREG projections to the May CREG projections, which do include the external cost adjustments for each year.  The Committee discussed the lag effect associated with funding for the SFP and how the record assessed valuations in 2008 will help smooth out the significant decreases in projected revenue through the next three years.  Mr. Mai noted that the May CREG projections show the SFP funding bottoming out in the FY11/12 biennium; however, he strongly cautioned that just as the SFP is insulated from rapid decreases due to the lag effect there is an equally lagged recovery.

 

Meeting Adjournment

There being no further business, Co-Chairman Berger adjourned the meeting at 1:30 p.m.

 

Respectfully submitted,

 

 

 

Senator Phil Nicholas, Co-Chairman                             Representative Rosie Berger, Co-Chairman          

 

 

 

 

 

 

 

 

 


Appendix

 

Appendix Topic

 

Appendix Description

 

Appendix Provider

1A

 

Committee Sign-In Sheet

 

Lists meeting attendees

 

Legislative Service Office

1B

 

Committee Meeting Agenda

 

Provides an outline of the topics the Committee planned to address at meeting

 

Legislative Service Office

2

 

Wyoming State Government Revenue Forecast

 

CREG forecast and associated Fiscal Profile

 

Legislative Service Office

3

 

Abandoned Mine Lands Funding

 

PowerPoint presentation of AML funding in Wyoming

 

Department of Environmental Quality

4

 

American Recovery and Reinvestment Act

 

PowerPoint presentation of Wyoming ARRA.

 

Lynne Boomgaarden, State ARRA Coordinator

5

 

Juvenile Justice

 

List of Governor’s proposed detention facility funding

 

Governor’s Office

6

 

Department of Family Services Economic Assistance Programs

 

List of Department of Family Services Economic Assistance Programs

 

Department of Family Services

7

 

Fiscal Note Process

 

Draft Template

 

Legislative Service Office

8

 

Criminal History Record Information

 

 

 

Legislative Service Office

9

 

School District Employee Health Insurance

 

Pros and Cons of school districts joining State insurance program

 

Department of Administration and Information, Employees Group Insurance Division

10

 

School District Employee Health Insurance

 

Current funding of school district health insurance

 

Legislative Service Office

11

 

School Foundation Program

 

FY11/12 projected income and expenditure data

 

Legislative Service Office

 

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