Senator Duxbury asked how the Lewis and Clark promotion is going. Ms. Van Gerpen said that it is a good program. Tour guides travel with groups on the Lewis and Clark Expedition Trail. More advertising is being done for this program. Senator Duxbury asked about tracking advertising in the department. Ms. Van Gerpen said that all advertising is being tracked by telephone or electronically.

Mr. Gary Brown, Department of Tourism, Rapid City informed the committee about the Pine Ridge Chamber of Commerce. They will provide a consistent contact for promoting Native American tourism. The Native American tribes need to understand that bathrooms and restaurants are needed to get visitors to come back.

DEPARTMENT OF TRANSPORTATION

Mr. David Becker, LRC provided budget information for the committee (Document #3).

Mr. Ron Wheeler, Secretary, Department of Transportation introduced members of the department.
Mr. Wheeler presented an overview of the department (Documents #4 and #5). There was a significant downsizing of FTEs in 1996. There has been some increase in FTEs since 1996.

Information of the federal highway acts was shared with the committee. The percentage of contracts let to bid as of April letting includes: STURAA(1987-91) - $115 Million Average/Year; ISTEA (1992-97) - $147 Million Average/Year; TEA 21 (1998-2003)- $220 Million Average/Year.

Mr. Wheeler presented the state highway fund revenues. Revenue is obtained from motor fuel, vehicle excise taxes and miscellaneous revenue. The 2002 projected revenue was a total of $190,000,000. The 2002 projected actual revenue is a total $174,300,000. Mr. Wheeler informed the committee of the highway projects deferred in STIP due to a $16,000,000 shortfall. The projects deferred from state funds is $14,000,000 and those deferred from federal funds is $41,000,000. The total projects deferred out of 2002-2003 totals is $55,000,000.

Mr. Wheeler told the committee that the department could lose federal funding if there aren't matching funds available.

Senator Apa said that we allocate funds for federal dollars. Mr. Wheeler responded that the department has monies to be used on a time line.

Representative Richter asked how the counties get their money. Mr. Wheeler said that a formula is used.

Mr. Leon Schochenmaier told the committee that the federal funds are divided into different pots. For example, there is one for interstate highways. There are categories and federal standards.

Senator Apa asked for clarification about the federal and state monies provided to local governments. Mr. Wheeler responded that it is more of a savings account rather than a checking account.

Mr. Wheeler presented information about the current ethanol subsidy in fuel tax. The state subsidy is 2.0 cents per gallon, the federal share is 5.4 cents per gallon for a total of 7.4 cents per gallon.

A chart was presented showing the percentage of gasohol usage from 1979 to present. The chart shows a significant increase in usage since 1991. The lost revenue from the subsidy is $4,146,812.

Representative Adelstein asked if there is a cap on the state subsidy for ethanol. Mr. Wheeler said, “No”. He said that if we have a market for ethanol, we don't need a subsidy.

The South Dakota Department of Transportation 2002 Legislation includes: HB 1034 - an act to reduce the legal blood alcohol limits for motor vehicle drivers, HB 1035 - an act to increase the gross receipts tax on certain vehicle rentals, SB 32 - an act to increase the pilot registration fee and to declare an emergency, and SB 33 - an act to revise the state trunk highway system.

Mr. Wheeler told the committee that the department could receive incentive funds by the passing of HB 1034. Representative Klaudt said that failure to pass HB 1034 could result in a loss of $750,000 in incentive funds.

Representative Richter asked about the general rule used for matching funds. Mr.Wheeler said that it is usually 80/20. The interstate funds match is 90/10.

Representative Richter asked for more information about the miscellaneous revenue found in the state highway fund revenues. Ms. Roxanne Rice said that this revenue comes from interest, money from rental property, billboards, signs and damage fees.

Representative Richter asked about the maintenance of the rest areas. Mr. Wheeler told the

committee that the maintenance is contracted through the department, and the advertising aspects are responsibilities of the Department of Tourism.

Representative Klaudt asked about the cleanup of road kill. Mr. Mike Durick, Department of Transportation said that the department contracts for pickup on major routes.

Senator Duxbury asked about the number of rendering plants available. Mr. Durick said that the few plants available continue to decline to pick up road kill. There is a joint effort for cleanup of road kill by the department and the Department of Game, Fish, and Parks.

The Governor's FY2003 total recommendation is $393,178,357 which includes: general fund is $461,807, federal fund is $250,352,191, and other fund is $142,364,359. The total decrease in funds is $35,662,286.

The FY2003 general operations budget includes four individual divisions: the secretariat, fiscal and public assistance, planning and engineering, and operations.

The general funds in this budget are used entirely for state aviation services (pilot down time that is not billed to federal or other funds), and loan payments to the aeronautics fund for the King Air.
The budget shows $169,000 increase in personal services for longevity payments and for moving 2.0 FTE (seasonals) to full time - (higher wages for full-time compared to seasonal). Operating expenses have increased by $10,900,000.

The money in the contract construction budget is continuously appropriated in statute (SDCL 31-2- 14) and the Transportation Commission has final authority over the expenditures from this budget. The increase in federal authority is $1,150,000, the decrease in other fund authority is $47,880,000, for a total decrease of $46,730,000. The major contribution to this reduction is slower than anticipated growth of the highway fund revenues and a reprioritization of the highway construction and maintenance contracts (Governor's Budget for FY2003).

The meeting recessed at 10:35AM and reconvened at 11:05AM.

STATE TREASURER

Mr. Dale Bertsch, LRC provided budget information for the committee (Document #6).

Mr. Richard Butler, South Dakota State Treasury Department presented an overview of the department (Document #7) assisted by Sandy Tillman, Cash Management Advisor, and Karen Lester, Treasury Management Consultant.

Mr. Butler informed the committee that the State Treasurer is a statewide elected official and a

Constitutional Officer. The treasurer is a member of the Board of Finance and Investment Council, and is the receiver general and custodian for all state monies and investment securities.

Ms. Tillman told the committee about the cash management duties of the office. There is constant review of the state's funds with the goal of increasing interest earnings to the taxpayer. The office manages the state's primary bank account, takes in deposits and pays out warrants. It prepares and analyzes requests for proposals for bank services.

Mr. Butler informed the committee that the state treasury provides the State Investment Office with the total daily investable funds and monitors and confirms investment transactions. The office allocates monies to state agencies and local government entities as directed by statute and as prescribed by Legislature.

Mr. Butler explained that the treasury accounts for REDI fund loan balances, administers the CD Program, manages the repayment of veterinary student grants, administers South Dakota Public Deposit Protection Commission, and oversees the administration of unclaimed property.

Ms. Tillman continued to explain cash management practices which continue monitoring of bank cash balances and encourage growth in ACH volumes.

Ms.Lester talked about the continuing review of existing agency local bank accounts in effort to address concerns of legislative audit and to improve cash concentration practices.

Ms. Tillman talked about converting existing agency credit card programs to the state-wide credit card merchant agreement to take advantage of volume discount and increased service.

Representative Adelstein asked about the percent the treasury is getting. Ms. Tillman responded 1.57 on the base and a transaction fee of 20 to 30 cents.

Ms. Tillman told the committee that the office is studying bank service enhancements.

Ms.Lester said the treasury is working towards a state-wide standard for using credit cards for electronic transactions.

Ms. Tillman said the office is evaluating proposed and pledged collateral on an ongoing basis and monitoring custodians.

Ms. Lester informed the committee of the veterinary loan repayments. There are twenty-four students; in school and four students are repaying their loans. In order to receive a grant to have monies forgiven, an individual must reside and work in South Dakota.

Senator Apa asked Ms. Lester if there were any delinquencies in the veterinary program. She said

that four students are repaying their loans through monthly payments. Mr. Butler said that it is hard to carry out the veterinary program. After receiving monies, individuals are asking for loan forgiveness when they are living across the border servicing South Dakota communities. Mr. Butler said we want the veterinarians to live in South Dakota and set up their clinics in South Dakota communities.

Ms. Tillman informed the committee about the CD program. CY2001 chart shows over $30,000,000 in the CD program.

Mr. Butler told the committee of the total disbursement items for FY2001. The main checking account is $2,856,826,430. The warrants paid is $1,492,310,319 (52.2 percent), wires is $40,034,171 (1.4 percent), and electronic ACH is $1,324,481,940 (46.4 percent).

Mr. Warren Foss, Administrator for Unclaimed Property Division, South Dakota State Treasury Department presented an overview fo the division. The Unclaimed Property Division will carry out duties and responsibilities of the South Dakota Uniform Unclaimed Property Act, has custodial responsibility of unclaimed property remitted to the State of South Dakota, publishes names of unclaimed property owners, returns unclaimed property to the rightful owners, keeps accurate record of the accounts and disbursements of the fund, continues vigorous efforts to return unclaimed property to the rightful owners, performs outreach community functions, is responsible for publishing and inquiring via the INTERNET and participates in a national database, and reviews non-reporters and under reporters.

The South Dakota State Treasurer Unclaimed Property total cash receipts for FY2001 is $3,027,154. The total claims paid is $1,101,198 (37 percent), total administrative expenses is $374,397 (12 percent), and total receipts after claims paid and expenses is $1,551,559 (51 percent)

The treasury program is funded with general funds. The increases include: $2,145 ($114 longevity, $2,021 retirement contribution increase), $16,800 increase for bank contract (bringing the total contract to $140,424), and $10,800 increase in bank contract due to bringing Game, Fish, and Parks local accounts into the state treasury.

The Unclaimed Property Program remitted just over $1,500,000 to the general fund. The increases include: $1,233 ($115 longevity, $1,118 retirement contribution increase) and $50,000 to pay additional unclaimed property claims.

Carol Carney