Joint Appropriations Minutes 02/05/2005 9:00 AM

Larry Eliason, Executive Secretary of South Dakota Gaming Commission gave the Committee a brief history of the Gaming Commission and an update on Deadwood gaming. The South Dakota Commission on Gaming, a division of the South Dakota Department of Revenue and Regulation, is responsible for regulating the gaming industry in the City of Deadwood and on the Indian reservations through compacts. The commission also regulates live horse and simulcast racing in the state. Mr. Eliason said the Commission's work is 80% regulating casinos, 10% regulating parimutuel racing and 10% doing background investigations and making recommendations to Tribal casinos.

Mr. Eliason said the Commission on Gaming has two sources of revenue attributable to horse racing, one being the South Dakota bred racing fund (SDCL 42-7-71) and the second is a special racing revolving fund (SDCL 42-7-79.1)

Document No. 1 was distributed - Allocations to Tracks. This document listed the funds allocated to the Fort Pierre and Aberdeen race tracks from 1996 to 2005. Mr. Eliason told the Committee the revenue has been greatly reduced because of the simulcast wagering of horse and dog races.

Document No. 2 was distributed - Appropriations from Racing Funds. Revenue from parimutuel racing is derived from a payment scheduled prescribed by state law. This document lists the funds allocated to state agencies from parimutuel racing. Mr. Eliason said the money allocated to the Department of Social Services is distributed to domestic violence centers across the state; funds to the Department of Agriculture have gone to the State Fair and for the purchase of fire trucks; funds to the Department of Health were used for equipment for EMT's and ambulances; and funds to DECA were used to wire schools in South Dakota.

Document No. 3 was distributed - Simulcast Handle and Revenue. Mr. Eliason said the Handle (total amount bet) and Revenue peaked in FY 01 and has continued to decline since that time. A significant decline is noted in FY 05 because the Sioux Falls webcast site was moved to the Royal River Casino and no longer pays the South Dakota tax. The revenue has been about $19,000 without the Sioux Falls site.

Representative Putnam asked Mr Eliason to provide the Committee with a copy of the Annual Report for the Commission on Gaming.

Representative Hunhoff asked if the numbers of races and participants was staying the same at the race sites. Mr. Eliason said the number of races per day is about the same, generally 9 races a day. An increase in the number of horses was noted in the last year with most of the horses coming from South Dakota, Nebraska and North Dakota.

Document No. 4 was distributed - Deadwood Gross Gaming Revenue for FY 2004. The total revenue collected in FY 2004 was $74,197,382, 90% of which came from slots, 10% from the tables. Mr. Eliason said the Commission collects 2 sources of revenue, 1) a $2,000/year device fee for every slot machine and game table, and 2) an 8% tax on the net win.

Mr. Eliason said city-wide, the gross revenue has increased in most years, and in calendar year 2003 47% of the businesses in Deadwood reported a net profit. Twenty-two operations conducted gaming activities, providing 1,830 jobs and paid a total of $31,647,339 in salaries, wages, benefits and payroll taxes. These gaming operations had total gross revenues of $110,359,413.

In FY04, $1,026,704 was deposited in the State's general fund, $146,672 distributed to other municipalities and $146,672 to school districts.

Representative Hunhoff asked the turnover rate in licenses/operations. Mr. Eliason said that information could be found in the Annual Report and that there were 45 retail locations (casinos) in 1990 and 112 in June of 2004.

Senator Apa explained the disparity between the 8% tax on Deadwood gaming and the 50% tax on video lottery. Senator Apa said in addition to the $2,000 device fee, Deadwood gaming is people intensive.

Representative Hunhoff asked if the gaming license automatically transfers to the new owner when there is a change in casino ownership. Mr. Eliason said no, the gaming license is not transferrable; however the stamp fee on the machines are.

Representative Glenski asked for a breakdown of the revenues paid to Deadwood. Mr. Eliason said since 1989 the school districts, located in Lawrence County have received an allocation, and if that school participates in the state aid program, they have to offset these dollars. Ten percent of the funds that are generated after Deadwood gets to $6.8 M are paid to other municipalities in Lawrence County, and 10% to the city of Deadwood.

Senator Apa reminded the Committee the distribution of gaming revenues was voted on by the people of South Dakota and the money going to Deadwood is for historic preservation of the City Deadwood.

Document No. 5 - Powers of the Commission was distributed for informational purposes only and not discussed.

Presented by Secretary Ellenbecker and Pat Monson.

Pat Monson discussed an outline of the Star Rating program to promote improved quality of child care programs. Document 6 was distributed to committee members.

Ms. Monson stated that 77.5% of women with children under the age of six are working. Forty- seven percent of children under the age of 6 are in paid childcare, which rounds out to around 28,000 children in SD. Some parents spend 15-20% of their income on childcare. There is approximately 44% turnover in childcare providers as it is difficult to retain those individuals. Stability and continuity is very important for the development of children. In 2004 the department received over 3400 requests from parents in how to find quality childcare. The national trend for retaining employee is to use programs such as Star, a rating system much like hotels to establish a clear focus on quality. It is a volunteer program and uses federal funding. There is an array of services and support that would be offered to those that use the program. The department hopes to increase local and faith based involvement as well.

Representative Putnam asked what the expenditure authority is for. Pat Monson replied that the goal is to work with programs to help child care centers with good business practices and to help with staff development; not particularly focused on wage increases. The program total cost is $504,250. This is the total cost and will cover implementation as well as on-going costs. Secretary Ellenbecker stated costs would be capped at this amount. Senator Apa asked for a copy of the budget for this program. The department will provide a budget.

Senator Apa assumed the chair.

Senator Apa asked what the scholarship program was for. Pat Monson replied that it is for people that are going through the child credential program. The scholarship amount is a maximum of $300. Currently there are 5 training sites. These are training hubs for low cost, easy access. Senator Sutton asked how many scholarships are given out each year. The reply was that there are 95 students, but the scholarship amounts depend on income.

Representative Hunhoff asked how many current licensed programs would fall under the STAR program? Pat Monson replied that there is not a way of knowing, that this is why it would help to have the criteria set up and the program in place. The Representative followed up with stating that hypothetically, not all child care centers would be able to meet the 4 STAR program due to different circumstances and asked how would that impact the consumers that use these facilities. Pat Monson responded that the way these accreditations are set up is through national bodies; there are some community groups that would be willing to assist.

Gwen Simmons stated that the fee for national accreditation, self-based program is based on the number of children in the program. The cost of self-study materials is under $200.

Senator Apa asked if this increase in federal funding could be used in other areas of the Child Care Program. Secretary Ellenbecker replied no, the department is currently required to spend $5 million on quality programs. Senator Apa asked for a list of where the $5 million is being spent currently. The department will provide this information to the committee. Representative Hunhoff asked how many daycares are currently participating in other initiatives. Representative Glenski asked for a copy of all current rules for licensed family daycare. The department will provide both of these items.

The Committee recessed at 10:25 a.m.
The Committee reconvened at 10:35 a.m.

Department of Education - ESA and Evaluation Process, presented by Secretary Melmer, Jim Parry and Mr. Pogany

Documents 7 and 8 were distributed to committee members.

The contract with (TIE) Technology and Innovations in Education is for $70,000. It was started in 1986. Black Hills Co-op serves as the fiscal agent for TIE. They handle payroll and pay the bills - basically any kind of cash dispersements. Technically, TIE has it own advisory board of 18 educators. Senator Apa stated that there are some doubts about the ability of TIE to objectivly evaluate ESAs.

Senator Earley asked if due diligence has been done in the area of evaluation. The reply was that the decision was made to choose to use an empowerment evaluation. This decision allows the schools to be more objective. It requires the evaluator and program leadership and the ESA sites and leaders to share the responsibility for the improvement of the program while it is moving forward. Data retreats are performed, which increases quality and communication for the schools. This enhances the capacity.

Representative Hunhoff asked about the allocation of teacher dollars of training. The response was that the schools have provided release time for the teacher to go for training. The school compensates for the teacher.

A discussion evolved over the contract with the Department of Education for consultation services (#2005C-171) The ESAs are a tremendous asset to the schools. TIE provides a service to tell us how we are doing. The best people in the state in the evaluation process would be the TIE people. They are more affordable than others outside the state.

Secretary Melmer said that there are three things that were considered in selection of TIE: SD credibility, expertise in the field, and the cost. If there is concern, we are willing to step away from this.

Senator Smidt asked about the concept of ESAs and if there has there been an assessment done if these people fail to meet the requirements. Secretary Melmer said the ability to quantify the cost of not providing the services is not available.

The work plan becomes the measurement tools from which the program is assessed. The evaluation asks if the plan was accomplished. It looks at inputs and then looks at the customers.

Representative Tidemann asked what the impact has been. The response was that the schools tell us what the impact is. Fruit of the labor should be in the achievement tests, but we will not be able to see improvement in the first year. We have not created a mid-level bureaucracy. We are contracting for people for services. This is one entity doing multiple tasks.

Representative Hunhoff asked if the large schools are benefitting from the ESAs? As budgets get tighter, the districts are going to be more involved. The response was that there are several large schools that are getting services, but it is optional.

Representative Glenski asked what the costs was for the 7 ESAs. Each ESA has a different contract, the average cost is about $300,000.

Representative Putnam assumed the chair.

MOTION:     ADJOURN

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

Barb Bjorneberg and Wendy Weinert

____________________________

Committee Secretary

J.E. “Jim” Putnam, Chair

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