ADMINISTRATIVE SERVICES

The division provides administrative, personnel, financial, and legal services to the entire bureau. It also provides services to the rest of state government that are necessary to provide a good working environment. Administrative Services works to minimize the adverse effects of accidental losses on state government.

The Bureau of Administration's budget request is mostly a request for “Other Fund” authority. The authority is for the various internal service funds. The expenses the department incur as it delivers support services to state agencies are billed back to the respective user agencies.

SALE /LEASEBACK

The FY2003 Governor's total recommended budget is $897,663. The funding source from the general fund is $897,663.

Senator Putnam asked if there were two parts to the leaseback in that a smaller piece was in the Bureau of Administration's budget.

The sale/ leaseback program makes payments pursuit to Exhibit B of the lease between the bureaus of Administration and Finance and Management and the Building Authority date December 1, 1986. This project was begun under Governor Janklow's administration to take advantage of a tax opportunity and provide a large sum of money up front for the capital improvements. The tax advantage is known as arbitrage. The state issues bonds at an interest rate that is lower than the rate the Investment Council can earn. The IRS proceeded to close the loophole prior to completion of the transaction. Since the state began the transaction prior to closing the loophole, it was allowed to complete the transaction. The funds for the capital projects were the result of the present value of the interest to be earned over the life of the annuities. The funds budgeted are receipted and paid out the same day. There is no impact to the State General Fund.

The Corrections and Human Services institutions were in need of a large capital investment to improve their physical facilities to prevent further deterioration. Appropriating a large sum of money from the General Fund was not feasible. A sale/leaseback proposal was presented to the state utilizing the Springfield Correctional Facility since it was not included in the 1986 sale/leaseback. Since the IRS closed the loophole, the revenue stream to pay back the Certificates of Participation (COPs) is made through the appropriation of general funds over the life of the COPs.

CENTRAL SERVICES

The FY2003 Governor's total recommendation budget is $22,104,403. The funding sources include: general funds is $365,130 and other funds is $21,739,273. The FY2003 total FTEs is 152.5.

Representative Klaudt asked what caused the decrease in the Central Services budget. Mr. Geraets said the fleet consolidation in 1996. It is recommended that the Department of Transportation directly purchase their vehicles.

Senator Putnam asked why the highway patrol and the heavy DOT equipment are not affected and who changes the financing. Mr. Geraets told the committee that the Bureau of Administration still can authorize and can tell them what to purchases. The payment has changed to simplify matters.

Senator Duxbury asked if other departments needed the BOA's approval to purchase vehicles. Mr. Geraets said that all of the departments go through the BOA.

STATE ENGINEER

The state engineer advises the state on the planning, design, construction, maintenance, operation, and use of state-owned buildings.

The FY2003 Governor's total recommended budget is $952,445. The funding sources include: general fund is $4,950 and other funds is $947,495. The FY2003 total FTEs is 15.0.

Senator Duxbury asked if the FTEs were filled. Mr. Geraets said that the department was at 12.4 FTEs after reorganization.

STATEWIDE MAINTENANCE AND REPAIR

State agencies have many projects that they submit to the state engineer. The projects are then ranked with those with a higher ranking receiving priority.

Senator Cradduck asked about the use of Title XIX funding for maintenance and repair. Mr. Geraets told the committee that Title XIX money is used for the Developmental Center in Redfield and the Human Services Center in Yankton.

Senator Putnam asked for additional information about the maintenance and repair prioritization process. Mr. Geraets said that projects under $250,000 will be financed through an agency budget. The BOA does not cover the capital improvements for buildings that can generate revenue.

OFFICE OF HEARING EXAMINERS

The Office of Hearing Examiners is responsible for impartial administrative hearings. Mr. Geraets said there is no back log of hearings at the present. Most of the hearings are in Pierre.

The FY2003 Governor's total recommended budget is $425,122. The funding source is $425,122 from the general fund. The FY2003 total FTEs is 6.0.

PEPL FUND ADMINISTRATION

The Public Entity Pool for Liability (PEPL) Fund provides tort claims coverage for state employees and loss control services. The FY2003 Governor's total recommended budget is $1,346,378. The funding source is $1,346,378 from other funds. The Governor recommends $750,000 from the PEPL Fund for insurance and surety bonds.

Senator Duxbury asked about the insurance coverage. Mr. Geraets told the committee that there is an increase in the costs of reinsurance. The reserve has $5,000,000.

Representative Lange asked why there is such a large increase of $750,000. Mr. Geraets said that the state had a reinsurance coverage for three years. Mr. Neiles said the company rewrote the policy of $1,000,000 for one year, and the new rate is $750,000.

Senator Cradduck asked if this is a three year contract. Mr. Geraets said that it is a one year contract.

Senator Putnam asked for a copy of the explanation of the standards of criteria for unfunded project list.

The meeting ended at 9:15AM.

The meeting reconvened at 10:34AM.

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

Mr. David Becker, LRC, provided budget information to the committee (Document #1).

Mr. Steve Pirner, Secretary, Department of Environment and Natural Resources (Document #2 and #3) presented a no growth budget despite growing workloads and issues. He said that this is the fifth consecutive year that DENR has requested no expansions. Mr. Pirner said that DENR is committed to get the job done using existing resources.

Mr. Pirner said that Jay Tutchton with Earthlaw, an environmental law organization out of Colorado, filed two lawsuits and one notice of intent to sue on different water quality issues during 1998. All three lawsuits filed by Earthlaw have been settled for now. South Dakota is well known to these environmental law groups and the threat of more lawsuits remains.

Waters on Total Maximum Daily Loads (TMDLs) list in South Dakota are due to high nutrients in lakes, high amounts of sediment in streams, high levels of fecal coliform and high levels of ammonia in wastewater. The DENR staff is hard at work doing TMDLs. The DENR promotes locally led, voluntary watershed projects to reduce pollutant loadings.

After the Brohm Mining Company filed for bankruptcy in 1999, the state used the Regulated Substance Response fund to keep water treatment plant operating and protected the environment for about a year. At Homestake, the mining has stopped and lab discussions continue. Mining continues at the Wharf mine, and it is making money. Wharf posted an additional $9,000,000 to its reclamation bond following a bond recalculation by DENR staff. The Golden Reward is owned by Wharf and has been in temporary cessation for about five years. The Richmond Hill mine is in its final stages of closure. Post-closure monitoring indicates reclamation so far is a world class success story.

Senator Apa asked what is the Environmental Protection Act (EPA) time line for completing Brohm's clean up and reclamation. Mr. Pirner said that if the funds come, it could be the year 2006. The state pays 10 percent of the cost.

Senator Duxbury asked what is the cost of the clean-up for Brohm. Mr. Pirner said that it will cost $1,400,000 to clean up water treatment. There is a $6,500,000 bond that will pay for on-going maintenance for some type of water treatment.

Senator Apa asked if this is a different water treatment. Mr. Pirner said that it could be something different.

Representative Klaudt asked about Governor Janklow's Spruce Up South Dakota Project using the $1,500,000 appropriation to clean up tires. Mr. Pirner said that the tires are ground up and mixed with coal for fuel. The department pays for the transportation and shredding of the tires.
Representative Klaudt asked about the balance in the tire fund.

Representative Lange asked what is being done with the petroleum waste. Mr. Pirner said that it is extracted and the contaminated water is spread over a designated area of land.

Senator Putnam stated a pending concern in resolving the sedimentation problem in Springfield. He asked if the DENR would help with the water request. Mr. Pirner said that the sedimentation and water flow issues are important. Senator Putnam asked if the US Fish and Wildlife Service is involved. Mr. Pirner said that the biological material was written a year ago.

Mr. Pirner told the committee about the upcoming priority projects of the DENR. The department needs to do 105 TMDLs that are on 1998 TMDL list. The largest project under development is a joint South Dakota/Iowa TMDL for lower Big Sioux River, and they need to submit 2002 TMDL list to EPA by October 1, 2002. The old standard for arsenic in drinking water was 50 parts per billion (ppb). After much national controversy, EPA lowered standard to 10 ppb. The department is working to find solutions for water systems in South Dakota that are above 10 ppb.

Senator Duxbury asked what is the treatment to reduce arsenic levels in the drinking water. Mr. Pirner replied that the treatment is very costly in the many smaller systems.

Senator Apa asked how many deaths are attributed to arsenic levels. Mr. Pirner said there were zero deaths.

Representative Adelstein said that last year the House Appropriations Committee saw a detailed map of ground water contamination. He asked if there are any analysis of risk of the eastern watershed of the Black Hills. Mr. Pirner said that the geological survey is interested in this question and discussions are continuing.

Representative Klaudt asked about a private well that tested positive for bacteria. The DENR sent a letter to the owner stating the presence of bacteria. He asked what would the DENR do to make the well usable. Mr. Pirner said that they would encourage the owner to drill a new well, test the water and encourage them to retest the water.

Mr. Pirner told the committee about the new ethanol plants. The DENR has issued environmental permits to 4 new ethanol plants. He said the department is permitting new economic development projects. These permits include water rights, air quality, water pollution control, industrial pretreatment, etc.

Mr. Pirner said that the EPA has published a proposal to revise its federal water pollution contol requirements for feedlots. He told the committee that currently there is no standard for radon in drinking water. The EPA is proposing 300 pc/l standard or 4,000 pc/l standard if state regulates

indoor air radon. He said that at 300 pc/l, 115 or 33 percent of community drinking water systems will be in violation. Mr. Pirner said that the EPA has a proposal to improve bacterial quality of drinking water. The proposed rules may require many systems that already chlorinate to upgrade. He said that about 250 or our 740 public drinking water systems provide no disinfection and proposed rules may require most of these 250 systems to install disinfection.

Mr. Pirner told the committee that the Water Funding Omnibus bill has been introduced on behalf of Governor Janklow.

Representative Lange asked about the DENR control over feedlots and the water quality control problems. Mr. Pirner said the existing problems are reported to the department from public complaint.

Representative Lange asked what happens to the ethanol spills and are there any contingency plans in place.

Senator Putnam asked about the Regulated Response Fund balance to clean up or regulate substance during emergencies or when necessary.

Mr. David Templeton, Director, Financial and Technical Assistance Division and Mr. Tim Tollefsrud, Director, Environmental Services Division, were introduced.

Senator Putnam asked about the Livestock Clean-up Fund. Mr. Tollefsrud said that the revenues for livestock clean up fund are from penalties from noncompliance of large scale livestock owners.

Representative Sutton asked how many requests have there been for new feedlots and have there been feedlot applications turned down. Mr. Tollefsrud said that there had been one application turned down, but the owner refined the plan.

Senator Duxbury made a motion to approve the 1-14-02 minutes. Senator Putnam seconded and it passed on a voice vote.

Senator Cradduck made a motion to approve the 1-11-02 minutes. Representative Klaudt seconded and it passed on a voice vote.

Representative Adelstein made a motion to approve the 1-15-02 minutes. Representative Klaudt seconded and it passed on a voice vote.