Joint Appropriations Minutes 01/19/2005 8:00 AM

Commissioner Paul Kinsman and Finance Officer Jim Neiles presented the Bureau of Administration (BOA) budget. In response to questions from the Joint Committee, Commissioner Kinsman presented the Bureau of Administration budget request summary and Statewide Maintenance and Repair Report (Document 1).

The Bureau's budget request is $34,455,415, a $61,869 decrease. Major changes include the movement of Capital Security to Public Safety, transferring the Collections Office operations to a private collections agency, operation of the new Governors residence, and the new DCI building maintenance. The Bureau reallocated FTE to cover the FY 06 increased demand.

Commissioner Kinsman presented an overview of the agency. The BOA is an administrative agency that provides purchasing, printing, mailing, risk management, space, records, property, fleet, engineering and support services for state government agencies; and maintains the buildings and grounds.

Purchasing - The bureau purchases and bids out items to meet the needs of state government. They administer 333 annual contracts, in addition to special bid lettings for items to meet specific needs. Schools and local governments are able to purchase off state contracts without going through the bid process. BOA has a central supply warehouse that saves an average of 50% from retail costs.
The Central Mail Service is the 7^th largest post office in the state with an average of 8 million pieces of mail each year.
Central Duplicating copies and make impressions for all of state government. Approximately 50 million copies were made for state government and 15 million for other agencies, all at a cost of 2 cents per copy.
Records management - In addition to storage, records are destroyed in the time frame defined in law. Ten million documents are received in storage each year with the same number destroyed. Forty-one million items are stored through out the year, many on microfilm.
Property Management Program - Fixed assets are recorded in an inventory system, and the disposal system is by state law. BOA held 7 auctions in 2004 for a total of $1.7 million. These funds were returned to the General Fund or to the agency from where the property came.
Space Management is responsible for investigating lease space around the state. This one person office inspects property for ADA requirements, wiring and etc. to make sure the state gets the best deal when purchasing or renting property across the state.
Surplus Property is a program authorized to acquire surplus federal property for state use.

Representative Putnam assumed the chair.

Senator Apa asked if BOA purchases vehicles for the Department of Game, Fish & Parks. Commission Kinsman said the BOA bids the vehicles, the Department pays for them. Senator Apa asked how fleet rotation was handled. Commissioner Kinsman said fleet rotation is done in consultation with the BOA Fleet Manager. Representative Putnam asked Commissioner Kinsman to send the Committee a report on the procedure agencies follow for the procurement of vehicles.

Representative Klaudt asked if BOA was involved in Homeland Security funds. Commissioner Kinsman said BOA doesn't get the money; however, they procure the items or services purchased with the money. BOA has spent approximately $180,000 in Homeland Security fund in the last 2 years on security around the capitol and governor's residence.

Fleet and Travel Service - Commissioner Kinsman explained when employees need to travel they enter their trip into a journey system, this system then matches people and vehicles going to a certain location. Travel coordinators encourage car pooling and will contact agencies when they see more than one vehicle going to the same location. Representative Hunhoff asked if the journey system applied to state agencies outside of Pierre. Commissioner Kinsman said yes, everyone who drives a state vehicle is required to use the journey system. In addition to the 60 vehicles in Pierre, BOA has a car pool in Spearfish, Vermillion, Aberdeen, at SDSU, and the Rapid City, Sioux Falls, and Yankton airports. The journey system applies to the airplanes as well. Representative Hunhoff asked if the BOA had seen changes in travel expenditures. Commissioner Kinsman said they do not track expenses; however employees are not driving any more miles than last year and rates are less. Mr. Neiles said the BOA has maintained the same rates since February 2003. Representative Putnam asked which agency has control of the state airplanes. Commissioner Kinsman told the Committee the airplanes are under the jurisdiction of the Department of Transportation and the BOA coordinates scheduling. Representative Putnam asked if the BOA had the same authority over the university aircraft, Commissioner Kinsman said no.

Representative Glenski asked why state agencies request funds for increased fleet rates if BOA's rates haven't gone up since 2003. Mr. Neiles said there are 11 different rates, that vary by class of vehicle. A copy of the Billing Rates by Combined Classes (Document 2) was distributed. Discussion followed on the various classes of vehicles and the corresponding rates charged by BOA. Mr. Neiles said the fleet operates with its own fund, bears all costs for operating a vehicle, purchasing, maintenance and scheduling. The BOA reports to the federal government, as part of the State's A-87 Cost Allocation Plan, one over and under recovery for the whole fleet. These figures are analyzed on a quarterly basis, adjustments are made based on costs like insurance, gas prices, etc. The BOA works with the federal government to get the costs as close as possible. Mr. Neiles said when state agencies request money for their fleet it may be for projected travel increases (miles) or larger vehicles. The agencies chose to change the type of vehicle and they may be using old rates.
Representative Hunhoff asked if BOA came with proposed rate changes, would this affect the fleet rate change. Mr. Kinsman said no, the fleet rate is charged for using a state vehicle, the rate changes are if an employee drives their own vehicle when a state vehicle is available, or they drive a more expensive vehicle than is budgeted or drive more miles.

Senator Apa said there was $500,000 in federal funds in the $34.5 million budget. Does the BOA report to the federal government because of the other funds coming in and co-mingling with the federal dollars. Mr. Neiles said yes. BOA captures all costs for everyone and then distributes the cost as equitably as possible. The goal is to have other funds and federal funds participate in the cost of providing the central services which would otherwise be borne by the General Fund.

Senator Earley asked Mr. Kinsman to provide staff with a copy of the federal Cost Allocation report.

Buildings and Grounds Program - responsible for 220 acres of grounds, 6500 trees, 8200 acres of grass, 14 acres of parking lots, 810,000 square feet of building space. They perform snow removal, planting, mowing, custodial services, paper recycling, remodeling, and repairs. Staff includes plumbers, electricians, carpenters. BOA received 12,000 work orders in the past year.

State Engineer's Office - Loren Schaeffer, acting Director, told the Committee the office operates in an advisory capacity to state agencies on the planning and design of state buildings. The office contracts with outside agencies to do most of the engineering work. Representative Putnam asked what happens when a change occurs after the contract has been signed. Mr. Schaeffer said when an agency wants something changed and the cost is within the budget that's fine; however there is a building committee that reviews certain changes. The committee will either approve the change or direct the office to go back and take something out. Representative Putnam asked what authority the office has when the project exceeds the budgeted amount and additional money is requested. Mr. Schaeffer responded the office works for the agency and the Legislature, they have no monetary directive, they do not obligate money that is not appropriated. Mr. Schaeffer said the office may go to the Building Committee and voice their concerns over a change request. Projects under $1.5 million don't have a committee. Commissioner Kinsman said when it is clear the agency is spending more than appropriated the State Engineer's Office ceases signing changes and goes to the Committee.

Representative Tidemann asked if the State Engineer's Office participates in a walk through on completed projects and was there a protective mechanism for problems that occur later. Mr. Schaeffer said yes the office does a walk through and if a problem does occur the office is the contact agency for remediation, whether under warranty or legal action. Representative Tidemann asked if there was a time limit on remedial action. Mr. Schaeffer said yes, there is a statute of limitations and if it gets that far they engage legal action.

Senator Earley asked how the state ensures the work is being done the way it was requested. Mr. Schaeffer said there was no 100% guarantee and because of limited staff, they are not out on the projects full-time. Project follow-up is on a 2 week basis. The architects and engineers are on the project as an agent of the State Engineer's Office. Each campus has a campus director that sees the project every day. The office relies on the integrity of the contractor. Commissioner Kinsman said BOA deals with architects and engineering firms in South Dakota, people they have dealt with in the past.

Senator Earley voiced concern that the state spends money to build buildings and relies on the contractors to be their own police. Discussion followed on problems with previous construction projects. Mr. Schaeffer told the Committee the State Engineer's Office hired construction managers in the past and still had serious problems, the office rarely has full time construction managers because the money isn't there. Mr. Schaeffer said the office is doing the best they can with the resources available. Representative Putnam asked for a breakdown of the last 5 years projects where the State Engineer's Office had oversight, to see if the project came in over budget, under budget, did the project go to the Building Committee, were there things removed from the plan, and problems that occurred later. Representative Putnam asked that the report include on-going projects. Representative Putnam explained the Committee was trying to measure the success of the projects with the current FTE.

Senator Apa asked who did the cost estimates on the DCI building prior to it going out to bid. Mr. Schaeffer answered Banner Associates. Senator Apa asked if full-time oversight would be provided on the DCI project. Mr. Schaeffer said yes. Senator Apa asked if an engineer had to sign off before re-bar is covered. Mr. Schaeffer said architects or engineers don't actually sign off, however, they come to the project weekly, do an inspection and certify, that to the best of their ability, the project is being built according to specs. The contract says the inspector will come to the project every other week or whatever is appropriate for the portion of work being performed.

Energy Management - This program has one FTE who looks for energy savings on the campuses. Commissioner Kinsman said BOA plans to come back to the Committee to discuss a project at the Human Services Center identified by the energy manager as a project where the state could potentially save $300,000-500,000/year in fuel bills. Commissioner Kinsman said federal funds are available for energy saving projects; however, because the project could cost over $1 million, the BOA needs to decide if it is economical to do the project or set up a revolving loan account to use on smaller projects. Representative Putnam asked staff to include the Human Services Center on the east river tour list.

Senator Earley asked about the statewide maintenance repair figures, Actual 2004 was $2,092,373, Approved FY 05 and Requested FY 06 was $3 million, how much will BOA spend in FY 05. Mr. Neiles said the BOA annually requests $3 million, $500,000 goes into capitol complex repair and matched with $650,000 space billing. The other $2.5 million goes into statewide maintenance repair, a 2 year appropriation and other funds from sale/leaseback. These funds are worked together for projects on the Statewide Maintenance and Repair list. The funds are not tied to a specific project, the list is prioritized annually. Representative Putnam told the Committee there is a numerical ranking system, and asked that the explanation of the system be provided to the Committee.

Senator Earley asked if there were any costs for the new mansion included in the budget. Commissioner Kinsman said no, the only money expended from BOA was for replacement of the driveways at the residence. The BOA viewed the driveways as a state responsibility. Commissioner Kinsman said BOA will, at some time, do landscaping at the new residence; however, this would not be a diversion from any other activity. BOA has always done the landscaping at the Governor's residence. Senator Earley asked for the total amount spent. Commissioner Kinsman said the driveways were approximately $80,000, plus the emergency generator and security work paid for with Homeland Security funds. The mansion costs are paid for with community funds, the Governor has indicated no state dollars would be spent on the project. Senator Earley asked for a dollar amount for the landscaping work and Commissioner Kinsman said without a plan he couldn't provide that information; however, he estimated it would be less than $100,000.

Representative Glenski asked for information on the transfer of the collections office operations to a private agency. Commissioner Kinsman said because of the nature of the work done in the Department of Revenue, it was necessary to go to a national agency, state government did not have the resources/FTE available to track down debt owed to Revenue. Fifty percent of the debt worked on in the state Collections Office was for the Department of Revenue; without the fee assessed Revenue, the office was no longer self-sufficient. The new collection agency has also taken on small debt collections for other agencies.

Representative Glenski asked what would happen to the space where DCI is currently located. Commissioner Kinsman said the old DCI office space will be remodeled and BOA will look for agencies to move into the space. BOA currently has staff working on a master space plan.

Representative Klaudt asked about the budgeted $212,000 designated for the Governor's Mansion. Commissioner Kinsman said the same FTE that were assigned to the mansion before are still there, working for the Governor in a different location. BOA does not control that portion of the budget. Representative Klaudt asked if BOA was requesting 3 new FTE and Mr. Neiles said no.

Commissioner Kinsman discussed the transfer of Capital Security to the Department of Public Safety, a reduction of $227,134 in other funds and 5 FTE. Capital Security is a 24/7 function and at times hard to keep positions filled, costing the office overtime. Commissioner Kinsman isn't sure yet if the operating budget will follow the FTE or if only the management will be transferred to Public Safety. It may be that Public Safety will bill BOA for security.

Representative Haverly asked for an explanation of the differences between Actual 2004 FTE at 165.4 and Budgeted 2004 FTE at 182.5. Mr. Neiles said in FY 05 BOA was authorized 178 FTE. Commissioner Kinsman said there are always vacancies, they have been trying to hire a plumber for a year, and custodial staff turnover is high. Commissioner Kinsman said there may be 2 or 3 openings on an average weekly/monthly basis, BOA is very seldom at full staff. The BOA is unable to attract and keep staff at the salaries they offer. Representative Haverly asked about the difference in Actual FY 04 of $35,213,000 and the budgeted amount of $33,454,000. Commissioner Kinsman said the budgeted amount is what BOA has the authority to spend and a vast portion of the money is other funds, BOA only bills for actual costs. Representative Haverly said it appears BOA over spent. Commissioner Kinsman said they would check the figures and report back to the Committee. Representative Haverly asked the history of the vacant FTEs. Mr. Neiles said that will be partially addressed in this years budget request, the FTE will come from internal shifts.

Representative Peters asked about the absorption of 3 FTE for the new DCI building, are those from vacant FTE? Mr. Neiles said BOA has vacancies in custodial staff . BOA uses inmates when possible, when that option doesn't work BOA hires. Mr. Neiles said BOA currently takes care of 680,000 square feet of space and bills on occupied space which is 470,000 square feet. The new facility will be 150,000 square feet and a big addition to the workload. Commissioner Kinsman said the BOA will not be able to use inmates in the DCI facility. The average is 23,000 square feet and 4-5 restrooms per custodian. The new facility will have a dorm and a rest room for each room. BOA requested additional FTE for the building and was denied.

Representative Hunhoff asked if when the building was in the planning stages, did BOA plan for additional FTE. Commissioner Kinsman said yes, they planned for 10.5.

Representative Klaudt asked what capital security personnel were paid. Commissioner Kinsman said between $10 and $11/hour.

In response to questions from the Committee BOA provided copies of the food service contracts. BOA did an RFP, selected a vendor and the agencies are happy with the service. Commissioner Kinsman said the problems experienced prior to re-bidding have not resurfaced. Representative Hunhoff asked if when BOA switched from CBM to Aviands, did employee benefits transfer. Commissioner Kinsman said the benefits were very similar and the transition was smooth.

Representative Glenski asked if anything had happened with the $3 million markup for the DCI building since Senator Daschle left the Senate. Commissioner Kinsman said nothing that he was aware of.

Committee recessed at 10:00 a.m.
Committee reconvened at 10:15 a.m.

Secretary Steve Pirner introduced his staff and in response to the Committee's questions presented Document 3.

The department is responsible for providing environmental and natural resources assessment, financial assistance, and regulation in a customer service-oriented manner that provides protection of public health, conservation of natural resources, preservation of the environment, and promotes economic development. DENR is requesting no expansion in money or FTE for FY 2006. The recommended budget consists of $5,799,543 from the General Fund, $5,320,077 from federal funds, and $5,091,122 from other funds, for a total budget of $16,210,742 and 173.5 FTE.
    1 *      The Financial and Technical Assistance budget consists of $2,072,163 from the General Fund, $1,533,735 from federal funds and $767,961 from other funds for a total budget of $4,373,859 and 58.0 FTE.
    2 *      The Environmental Services budget consists of $3,727,380 from the General Fund, $3,786,342 from federal funds, and $1,808,161 from other funds, for a total of $9,321,883 and 115.5 FTE
    3 *      The Regulated Response Funds budget consists of $1,750,000 from other funds and no FTE.

4 * The Livestock Cleanup Fund budget consists of $765,000 from other funds and no FTE.

Senator Apa asked who is paying for the waste water treatment at the Brohm mine site. Secretary Pirner said EPA pays and the state provides a 10% match while the work is in progress. Once the EPA leaves, the state will be responsible.

Senator Apa asked if there is any discussion on a match for the Superfund. Those funds are drawing down. Secretary Pirner said no, the tax ran out and Congress hasn't instituted a new tax. The total dollar amount has stayed the same over the years; however, EPA has added new superfund sites making more sites to be cleanup up.

Representative Dennert asked if there was any action on increasing fees. Secretary Pirner said no, state law requires sand and gravel pit operators to put up a $500/acre bond or a $20,000 bond for statewide activity. The question has come up if DENR should increase this bond amount because reclamation projects cost more than $20,000. Secretary Pirner said it is a problem because the small operators are not able to pay the bond fees. In cases where operators haven't reclaimed the site DENR goes after the bond. Secretary Pirner said these problems are small in relation to the total number of operators.

Representative Hunhoff asked what kinds of costs the state will incur if it becomes responsible for the Brohm project. Secretary Pirner said those are not nailed down but will include site maintenance, erosion control, ongoing water treatment. To cover the costs DENR maintained that when Brohm went bankrupt they had a bond and DENR has it and has spent $2 million of the bond plus $1 million out of the response fund to help pay for the reclamation activities. Today there is approximately $5.8 million remaining in the Brohm bond. Secretary Pirner said that money is invested.

As part of the 2010 Initiative the Governor wants to increase oil and gas production in South Dakota. Secretary Pirner said DENR has produced new maps and made them available on the internet to encourage industries to look to South Dakota for production.

Senator Apa asked if St. Peter & Paul Church had contacted DENR's tank program when they found tanks in their construction project and what was the dollar amount. Secretary Pirner said yes, DENR was contacted and made arrangements to use the contractor on site to remove the tank. Secretary Pirner will provide the dollar amount. Senator Apa asked the maximum a person can receive. Secretary Pirner said there are two different tank programs. The Petroleum Release Compensation Fund where the program will reimburse for costs over $10,000; currently there is enough money in this fund. The Abandoned Tank Program (Question 1) started in 2000 under authorization of the legislature. The program was to help remove older tanks (back to 1988) from abandoned gas stations, at no cost to property owner. Secretary Pirner said to date 3860 tanks have been removed from 2757 sites. Secretary Pirner said there is no dollar limit per site, DENR just removes the tank.

Secretary Klaudt asked for a status report on the tire recycling program and the Spruce Up South Dakota program. Secretary Pirner told the Joint Committee 4.6 million tires have been collected. Each county had a free drop-off weekend. Secretary Pirner said DENR is offering 50% matching grants to counties who want to continue the free tire cleanup days. Tank removal and tire cleanup is still going on but at a reduced level. Pesticide cleanup is still active in the Department of Agriculture. DENR still assists communities in metal and automobile recycling.

Representative Glenski asked for a history of budgeted FTE's, it appears to have dropped between FY 2002 and FY 2005. Secretary Pirner said most state agencies had an FTE drop during that time period to comply with Governor Janklow's 30% property tax reduction. Representative Glenski asked if it was a case of converting to contract employees and Secretary Pirner said no.

Senator Smidt asked if DENR had any ideas or initiatives on the oil and gas expansion, any projections to the future. Secretary Pirner said no. Projections will depend on the market.

Question No. 2 - What was the Whitewood Creek settlement amount and how is it being used.
Secretary Pirner told the Joint Committee the amount was $4 million to be shared between 3 entities, the United States, the state of South Dakota and the Cheyenne River Sioux Tribe. The decree requires the money be used to restore, replace, and/or acquire the equivalent of natural resources and services alleged to have been lost. Two-thirds of the money is in a fund managed by the Department of Game, Fish & Parks to be used jointly by the state and the United States.

Question No. 3 - What is your definition of a mandatory FTE and identify the number of mandatory FTE. Secretary Pirner told the Joint Committee DENR is not requesting any FTE. The department doesn't do anything the Legislature doesn't authorize; therefore all FTE in DENR are mandatory.

Senator Earley asked where the Regulated Response Funds come from. Secretary Pirner when the fund was established there was an original appropriation. The fund balance today is approximately $1.8 million with revenue coming from penalties for violations, reimbursements to the fund and interest. Senator Earley asked if DENR has been able to project expenses or been close to what is needed. Secretary Pirner said the money coming in each year varies. This is a continually appropriated fund and historically the spending authority has been $1.7 million. The most DENR has spent in any one year was $1.4 million.

Representative Glenski asked why the Actual FY 04 budget numbers and FTE were less than the figures for FY 05 and FY 06. What was done with the additional 7.0 FTE and $3 million? Secretary Pirner said the funds budgeted in the Regulated Response Fund and Livestock Cleanup Fund are now included in the Contractual Services figure. These funds had limited activity last year. Secretary Pirner said the FTE count moving from 166.8 to 173.5 represents the FTE actually used. DENR tries to keep fully staffed, however, because the positions at DENR are highly technical, i.e. scientists, geologists, and engineers, it can take up to 3 months or more to rehire. Secretary Pirner said turnover runs 4 to 6 percent per year.

Representative Hunhoff asked if the dollars in the informational budgets reflect cleanups. Secretary Pirner said probably not. Last year DENR performed 5 cleanups for $25,512. Representative Hunhoff asked how much has been expended in the past 5 years from these two funds. Secretary Pirner said the Regulated Response fund was established in 1990 and to date $3,001,667 has been spent from the fund, half of that amount in one year. The department tries not to spend any of the funds but bill the responsible party. In those cases where there is no other option, the department utilizes these funds and seeks reimbursement. Representative Klaudt asked for a chart listing expenses for these funds by year.

Representative Dennert said he wanted to know how many projects and how much money was spent from the Livestock Cleanup Fund, and asked staff to put these figures under the Performance Indicators. Secretary Pirner told the Joint Committee that this is hard to project, the department never knows how many or how much. The Livestock Cleanup fund was established by the legislature to cleanup livestock facilities. Secretary Pirner said it has been suggested these facilities be bonded. The legislature established the fund for cleaning up the areas when necessary and then seek reimbursement from the property owner. The fund balance today is about $800,000.

Representative Tidemann said his constituents are concerned about confined feeding operations. With DENR responsible for the cleanup what process does the department go through and does the department have adequate staff. Secretary Pirner said if these operations are over a certain number of animals they must comply with a permit, regulations on how to collect and store manure, and requirements that pertain to disposal of waste. If the operator follows the plan things are O.K. Oversight is an issue, DENR has a number of people who watch over construction, there is an annual inspection if over 2000 head, and under 2000 head once every 3 years. The department has adequate staffing.

Senator Apa asked if large dairy farms pay into the livestock fund. Secretary Pirner said only if there is a violation, permit fees go into the General Budget. To date DENR has fined 3 dairies.

Meeting recessed at 11:30 a.m.

The committee reconvened at 3:04 p.m. in the Kneip Building Conference Room to hear the budget of the Department of Game Fish and Parks. Documents 5 and 6 were distributed to the committee members.

Secretary John Cooper introduced members of the Game, Fish, and Parks Commission and department staff as follows: Mert Clarkson, Spencer Hawley, Randy Kemink, Christine Hamilton, Doug Hanson, Doug Hofer, Wayne Winter. Documents 5 and 6 were distributed.

Secretary Cooper began the hearing by giving the committee a brief overview of the department. Secretary Cooper said the basic health of wildlife in South Dakota is good. The state is experiencing all time record highs in deer, turkey, and elk populations, with continued good fishing. The Missouri river water level is down but with continued quality spawn, the fishing should remain good. License sales have increased for both fishing and hunting, and 2003 set a non-resident record in license sales as a result of the high pheasant population in the state.

The Department of Game, Fish, and Parks convened a West River working group this past summer to discuss controversial issues. Senator Hanson and Representative Dennert were members of the working group. The increased amount of commercialization of hunting has the capacity to freeze out hunting to South Dakota residents, which in turn puts pressure on the department. Much time is spent improving the walk-in program with over 9 million acres available to the public.

The main problem area for the department is in communication. The department agrees that better communication is needed with land owners, sportsmen, and with the Legislature. The problem with communication has been taken very seriously and some ways to address these issues are to get out and talk with landowners more, place the Wildlife Division budget on the internet, and to meet with the Interim Appropriations Committee on a more frequent basis.

Visitation to our State parks started slow but set another record for camping with a substantial number of repeat customers. $3.2 million was spent on lengthening the boat docks on the Missouri River due to the low water levels. Custer State Park combined with the Parks and Recreation division and this transition has been done seamlessly.

Division of Wildlife, Doug Hanson - Division Director

Mr. Hanson made opening remarks about the Division of Wildlife and discussed with the Joint Committee the following bullet points.
5 *      The Division of Wildlife is supported entirely by other funds, primarily license fees and federal funds. The sale of license fees can be volatile depending on weather. The Division of Wildlife receives no General Funds.
6 *      User-pay license fees are statutorily dedicated to wildlife purposes as a condition of receiving funds from two major federal programs. Diversion of license fees from their dedicated purpose makes a state ineligible to receive the federal funds until the diverted amount has been replaced with non-license fee revenue.
7 *      License sales and revenue are historically volatile and subject to sever declines from year to year.
8 *      The GFP Commission has been delegated by the legislature to manage the Game and Fish Fund consisting of the dedicated license fees and other revenue that support the Division of Wildlife.

Representative Putnam inquired if expenditure authority of the Game and Fish fund comes from the Legislature. Mr. Hanson responded that this is not a question of the authority; the department has ten annual meetings with the commission - both the department and the commission take their responsibilities very seriously. Representative Putnam said that the appropriations committee authorizes the expenditures of these funds no matter where they come from.

Representative Rausch asked what the expected cash balance in the Game and Fish fund was going to be. The GF&P commission has given guidelines to have no more than 50% of annual operating budget on reserve, but no less than 25%.
Wildlife informational budget:
The original budget recommended by the Governor for FY 2006 includes an increase in Personal Services of $595,728 and 12.3 FTE. The Governor also recommends an increase of $44,300 in travel, $1,272,833 in Contractual Services, and $512,903 in Grants and Subsidies.

Mr. Hanson explained that in a subsequent analysis of long-term revenue growth potential in relation to long-term funding needs suggested that it was necessary to amend the budget recommended by the Governor to include an annual bond payment of $800,000 for major fish hatchery renovation and office/education facility improvements in Rapid City.

Representative Putnam explained that there will be an FTE sub-group and a Game, Fish and Parks sub-group that will look into the increase in FTE in more detail.

Representative Putnam asked about the increase in fleet and travel. The answer was that fleet rates are higher and the department is underbudgeted for fleet and they anticipate an increase in travel costs.
Senator Earley asked why the proposal of FY05 and FY06 is a difference of four million dollars different? Mr. Hanson's reply was that the budget document doesn't include the transfers out, meaning certain expenses that are automatically transferred for various overhead and administrative costs are not shown in the submitted budget.
Senator Apa inquired about the over population of elk in the Black Hills? Mr. Hanson replied that there are approximately over 8,000 elk in the Black Hills and that the criteria used to decide if the elk population is too much is by looking at harvest information and the licenses. The department is serious about reducing the elk heard in the black hills. The department has to be very innovative to get antlerless elk licenses sold, as people want to harvest a bull elk.
Senator Apa said that it seams like the pick up time of dead animals along South Dakota roads is extending and wanted to know if there is a proposed amount of time that they are to picked up. The department works with DOT very closely, and this process has worked well. There are performance standards to get the animal picked up within a reasonable period of time.

Representative Putnam said that car crashes happen often with deer and that the best program would be to keep the level of harvest at an adequate level.
Senator Napoli said that GF&P claims that wildlife belongs to the state of South Dakota. If I hit a deer while driving and I can't take that deer unless someone gives me permission, then why can't I have the state pay the damages to my car, if in fact it is the state's deer? The response was that wildlife does not belong to the state, so when it comes to who should pay, we have to accept that it is part of the risk of driving. It is an act of nature so to speak.
Representative Hunhoff noted that if 25% harvest is good, is 25% the target you are aiming for or is the target higher. The answer was, generally, if you are not harvesting 25% of natural wildlife, there will be a problem. There needs to be an increase in harvesting of antler-less deer to really reduce the population.
Senator Smidt asked if data was gathered on the extended deer hunting season. The reply was that the department is in the process of collecting this data and the survey forms have been sent out to hunters.

Representative Tidemann said as we see the demographics changing with height powered rifles, do you see a restriction with these rifles around more urban areas. The department has actually started taking steps do this near higher populated areas but it would be on a unit by unit basis.
Fishing is popular in South Dakota and is critical to the economy of the state. Stocking fish in our South Dakota lakes, streams, and rivers is critical. Our hatchery system consists of three hatcheries. The department has looked at operating only two hatcheries but the recommendation from the study was that it was not wise to consolidate the hatcheries. The technologies have surpassed the existing facilities. A major renovation project is required at the hatcheries. The necessary renovation project total is approximately $9 million with the majority being at Cleghorn Springs. The department would bond for $10 million and have an $800,000 annual payment to pay off the bond which could take 20-25 years.

Representative Klaudt asked what are the operational costs at the fish hatcheries? The reply was that it varies a lot per hatchery but is roughly between $500,000 and $600,000 for operation per hatchery.

Representative Putnam asked if extensive improvements meant enhancing, or expanding production at the hatchery? Mr. Hanson explained that the consequence of improvements would be better, healthier fish. The department realizes some benefits from a quality standpoint as well. It wasn't the departments intent to expand production.

Senator Apa asked if we close our fisheries down and bought fish privately, what would be the pros and cons. Mr. Hanson said that he doesn't think it would be fair to compare both public and privately raised fish. It would not be wise to strictly buy from private due to dependability, quality, health, and size, of the fish. The state of Wyoming has purchased privately raised fish and had a major disease problems that has cost the state much more money.

Representative Haverly asked if South Dakota sells any hatchery fish out of state. Mr. Hanson responded no, but the department does trade hatchery fish with other neighboring states if either state has a need for a certain species.

Senator Apa asked what assurances do we have that the fish coming in from surrounding states hatcheries are disease free. The department has a disease specialist and this person makes sure that the fish come from a disease free hatchery.

Senator Apa asked if we had a market for our hatchery fish out of state. The department responded that they have not marketed the hatchery fish and the primary use is in South Dakota.

Senator Apa asked if there has been problems with water rights at Cleghorn Springs. The answer was that Cleghorn Springs has had water right problems in the past, but those problems have been fixed.

Wildlife Development and Improvement, presented by Doug Hanson.
The Governor recommends an increase of $327,285 in Contractual Services for development and improvement. The total recommended budget for development and improvement is $1,132,285. Since the time the budget was recommended, the department has decided not to do the office expansion at the Missouri River Fisheries Center, so the total amount for Contractual Services will be reduced to approximately $800,000.
Committee recessed at 5:11.
Committee reconvened at 5:32.

Division of Parks and Recreation, presented by Doug Hofer
The state park system includes 12 state parks, 41 recreation areas, 5 nature areas, 1 historic prairie, 70 lakeside use areas, and 10 marina/resorts. In addition, the Division of Parks and Recreation manages the 114-mile Mickelson Trail, South Dakota's Snowmobile Trail Program and maintains 220 public water access areas. In 2004 SD Parks hosted over 9,000,000 visitors, excluding the Mickelson trail.

Senator Apa asked how many permits sold for the Mickelson trail. In 2004 there were 3,072 annual and 10,182 daily passes. Custer State Park is the #1 park for visitors, with the majority being non- resident visitors. Custer State Park is the largest state park at 71,000 acres but the average state park is just over 2,000 acres in size. State Parks benefit the economy, the people, and the environment.

Mr. Hofer explained the Parks and Recreation budget with 21% of operating budget coming from General Fund. The division is requesting no increase in FTE and a $12,000 reduction in General Funds.

In November of 2004, the Game, Fish and Parks Department entered into a consultant contract with Pricewaterhouse Coopers to conduct a feasibility study for the proposed retreat center to be located within Custer State Park. In addition to determining the financial feasibility of the proposed retreat center, the study will also serve to thoroughly evaluate the market, financial and investment feasibility of a proposed new lease for the Custer State Park concession operations. The schedule is that the study should be done in April. If the results are favorable, the department would devise a public meeting, and put together a bonding proposal to bring before Legislature next year. The cost of the study is $58,000.

A study by CSP park staff and the GFP Engineering Section indicates that 317 of the parks 353 campsites can be electrified. The total estimated cost for installing electricity to the 317 sites is $401,154 or $1,265 per site. Average campsite occupancy in Custer State Park is currently 100 nights per year. Based on this usage and assuming a $3 fee for electricity (consistent with the fee in other SD state park areas), the additional revenue generated will pay back the construction cost, cover the cost of electricity used and provide additional revenue.

Representative Putnam asked if the thinking has been that the rustic nature of CSP is the draw that we have not looked at this option before. The department has looked at doing this before. The issue is the competition with the private camp grounds. The department operates at almost 100% occupancy during summer, so we would not be adding additional people, but would be adding to the satisfaction of the camper. Mr. Hofer said that electricity in a today's campgrounds is a standard not an amenity.

Mr. Hofer responded with questions regarding the acquisition of Roughlock Falls and other areas within Spearfish Canyon. He said Homestake mining companies owns a lot of these nature areas and are liquidating much of the Rapid City area. The departments plan is to provide platforms at these nature areas to take pictures. In order to do the annual maintenance and operation and to make some improvements, the department would be looking at a $1 daily park entrance fee at Roughlock Falls and will honor any current state park sticker. This modest user fee might be an appropriate way to pay for the cost of maintenance to the nature area.

Representative Haverly asked how much land the department would acquire by adding Roughlock Falls. Mr. Hofer responded that this nature area is 129 acres. The legislature has to authorize which areas the commission can consider charging a fee. The control of revenue would be through the Parks and Recreation revolving fund and ultimately the Legislature would approve the spending of these funds.

Senator Apa asked how a fee station would work because of the narrow roads. Mr. Hofer responded that it would be an unmanned booth, an honor system, with a possible spot check by an employee. It is not the intent to make this a cash cow.

A viewing platform at Spearfish Falls, would need a support system such as a deck would have.
Representative Tidemann asked if Spearfish canyon is ADA accessible? It is not today but it would be.

State Parks and Recreation Development and Improvement, presented by Mr. Hofer

Development and Improvement Program
The development and improvement program is made up of 4 activities. The activities include the waterbased improvement budget, preventative maintenance budget, other capital development budget, and federal aid.

In the development and improvement budget, $800,000 in federal Land and Water Conservation funds is available for distribution to local governments through a matching grant program. The preferred development and improvement program budget totals $6.5 million, of which $4.1 million of this is federal funds, $2.2 million is park generated other funds, and $202,175 from General Funds. The federal grant and cost share funds come from the National Park Service, Bureau of Reclamation, Fish and Wildlife Service, Coast Guard, Federal Highway Administration, and Corps of Engineers. There is no requested increase in General Funds for FY 2006.

The only Personal Services included in the program is 1.3 FTE in the federal aid activity.

Mr. Hofer outlined some of the major development and improvement projects scheduled for FY 2006. The significant capital development projects included in the FY06 budget include:
9 *      $940,000 in preventative maintenance and utility systems upgrade work at Custer State Park
10 *      $677,000 to maintain boating access sites on Lake Oahe if the reservoir drops even further in 2005.
11 *      A major campground expansion at Oakwood Lakes State Park near Brookings.
12 *      A sewer lagoon upgrade at the Chief Whit Crane Recreation Area near Yankton.
13 *      $500,000 for enhancement, improvement and repair of formerly owned Homestake land and facilities in Spearfish Canyon ( including Roughlock Falls, Spearfish Falls and Savoy Dam)

Mr. Hofer also pointed out that half of the general funds in this budget will be used in Custer State Park.

Senator Apa asked what the cash balance was in the Custer State Park reserve fund. The balance has not changed except for the $200,000 for improvements that the legislature approved last year. The account is somewhat larger than it was last year and it is between $600,000 and $800,000. The department will get the exact dollar amount.

Representative Dennert asked if the water in the Missouri River comes up, will there be a cost to refurbish the existing boat ramps. The only expense will be removing the silt that has built up on the ramps.

Snowmobile Trails
Mr. Hofer gave the Joint Committee a brief overview of the Snowmobile Trails budget for FY 2006. There are over 1,000 miles of snowmobile trails in South Dakota. The Black Hills trails are intensely groomed, about five times a week. Funding comes through the users, license fees, motor fuel tax, and tax on the purchase of snowmobiles. One of the biggest challenges in the Black Hills is the housing developments because it is difficult to find corridors through private land in the area.

Division of Administration, presented by Ken Anderson
Mr. Anderson briefed the committee on the Division of Administration budget and answered questions regarding the new automated license system.

Mr. Anderson explained that the automated license system has some growing pains as of yet partially due to a change in ownership of the call center portion of this system. The department is less than pleased with the existing company and is looking at alternatives with the call center.

Representative Putnam asked what Mr. Anderson's thoughts were regarding the retailers and the automated license system. Mr. Anderson responded that the department is working with the Retailers Association and also looking at a survey that was sent out to retailers that will tell them what the retailers think of the system. South Dakota is one of the last states in the nation to use an automated licensing system.

Senator Greenfield asked if there has been problems with the call in center in California and what do you project the time and cost savings to be. Mr. Anderson explained that the benefits for the agents are on the back side. The department currently spends significant amount of time clearing agents every year. The automated system will help the retail agents track and audit their licenses sales. Mr. Anderson said that hopefully as we work through these issues, the front end will get better. The savings in the automated system will include approximately $80,000 in printing costs and several dollars in shipping. At some point Mr. Anderson hopes to eventually eliminate staff in the licensing division.

Mr. Anderson said that the department cannot design a system that will handle the spikes in licenses sales such as around the pheasant opener. The department is in the process of looking at what other states are doing to make the most cost effective systems. Mr. Cooper said that the department is looking at breaking the contract with the current call center company which is step one and step two is trying to connect the individuals who purchase a license online to go to the retail stores to buy shells, gas, etc. The department is looking at putting the links of the retail stores on the GF&P licensing website.

Senator Apa made the statement that streamline sales tax was for the purposes of equaling out the brick and mortar retail stores in South Dakota and to level the playing field for internet sales. We have really hurt our retail trade all across South Dakota. With which Mr. Cooper replied that there is no solution, it depends on what side of the fence you are on. SD is one of forty-two states that offer licenses this way. We have designed a state map on the website, that will have a lists of brick and mortar store information, to patronize the local businesses.

Conservation Reserve Enhancement, presented by Ken Anderson
The Conservation Reserve Enhancement Program was created by the Legislature in 1988 to allow landowners who had enrolled in the Conservation Reserve Program to sell their contracts to the state for a lump sum payment. This budget represents the bond payments necessary to retire the debt incurred to buy the contracts. The state in exchange for buying the CRP contract receives the federal payments. For FY 2006 the Governor recommends an increase of $22,303 from other funds to meet the FY 2006 bond payment.

MOTION:     ADJOURN

Moved by:    Dennert
Second by:    Bartling
Action:    Prevailed by voice vote.

Barb Bjorneberg and Wendy Weinert

____________________________

Committee Secretary

J.E. “Jim” Putnam, Chair

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