Committee: Appropriations--Subcommittee #2
LRC staff members present during the meeting included Dale Bertsch, Chief Analyst for Fiscal
Research and Budget Analysis; Annie Mertz, Fiscal Analyst; and Rhonda Purkapile, Senior
Legislative Secretary.
A list of guests attending the meeting and all documents presented are filed with the original
minutes. For the purpose of continuity, these minutes are not necessarily in chronological order.
Bureau of Administration
Ms. Mertz, LRC, presented the committee with budget information (Document #1).
Mr. Tom Geraets, Commissioner, Bureau of Administration, testified that the bureau is funded
by internal service funds. The bureau bills state agencies for almost everything. The bureau is
not supposed to make money nor is it supposed to lose money.
In response to questions on the two audit exceptions for FY95, Commissioner Geraets noted that
they need to require bonds on bids coming in over $100,000. Also, the bureau changed its
advertising procedures on special bid lettings.
Senator Kleven requested a list of the sale lease-back buildings.
Chair Frederick noted the LRC staff has been having difficulty obtaining information from the bureau on FTE numbers. Commissioner Geraets responded that FTE numbers are constantly
fluctuating within the bureau. Ms. Mertz noted that it would be helpful to receive an FTE
deployment sheet, which lists what every position in the department currently receives in salary
and benefits. Commissioner Geraets responded that this information could be obtained through
the Bureau of Personnel.
Mr. Jim Neiles, Bureau of Administration, noted a decrease of $81,000 in general funds in the
Administrative Services program, which is a funding flip to other funds, plus a $29,000 increase
in risk management. The net decrease of $20,711 in operating expenses is comprised of a
decrease in travel based on actual usage and a funding switch for the Springfield sale lease-back
payment.
Responding to questions on the square footage lease rate, Commissioner Geraets noted that this
is a continually changing process. If the buildings are state-owned facilities, the lease rate is the
same for all buildings. If the building is leased from a private entity, this lease rate is negotiated,
which will vary depending upon the local market. The current lease rate for state-owned
buildings is $7.60 per square foot.
Representative Sokolow asked if it is beneficial to bill the commissioner's salary to other state
agencies. Mr. Neiles responded that billing the commissioner's salary to other state agencies
allows the bureau to free general funds and replace them with other funds. This becomes part
of the square footage charged for office space.
Mr. Neiles reported that the Sale Lease-back program contains all general funds. In response
to committee questions, Mr. Neiles indicated that he would provide the committee with a history
of the sale lease-back issue.
Mr. Neiles testified that the bulk of the bureau's programs are located within the budget for
Central Services. The increase in personal services is for the 2.5 percent movement to midpoint.
The changes in contractual services, supplies and materials, and capital assets deal with the fleet
and travel program. This funding was impacted into contractual services last year and the
changes to the budget this year more accurately reflect what is happening. Mr. Neiles noted an
overall increase in operating expenses of $705,000, primarily in other funds. The major
increases are the women's prison in Pierre ($254,000), the Kanner Building in Yankton
($150,000), and bringing the new Health Lab into the system.
In response to committee questions, Commissioner Geraets noted that the state was paying
$148,000 to lease office space in Yankton. Chair Frederick asked how it will save money by
paying $150,000 to bring state offices in Yankton back on campus rather than paying $148,000
for leased space. Commissioner Geraets replied that there are some front-end costs for
remodeling the Kanner Building, but over time, this should save money.
Representative Richter asked why the bureau is requesting an increase of $55,000 in personal
services when the bureau reverted personal services in FY96. Commissioner Geraets replied that
these dollars were reverted because the positions were not filled, and inmate labor was utilized.
Senator Frederick requested a condition statement on the funds operated and maintained by the bureau.
Commissioner Geraets reported that they had planned to sell 600 vehicles last year but then
decided to keep the vehicles and run them for a longer period of time. Mr. Russell added that
they have currently identified 188 vehicles that are surplus, underutilized, or with low mileage
that will be used to replace vehicles with high mileage.
Senator Frederick asked if a cost savings will be realized by not purchasing new vehicles. Mr.
Neiles responded that the cost savings will occur in that the bureau will not be expending other
fund authority. Senator Frederick asked for a general fund breakdown of vehicle purchases.
Senator Frederick asked why the committee does not see a reduction in FTE when inmate labor
is utilized. Commissioner Geraets replied that inmate labor was utilized for seasonal FTE, which
will also be done for the women's prison. He stated that he would provide the committee with
a breakdown of the utilization of inmate labor.
Mr. Neiles noted little or no changes in the budget for the State Engineer. He stated that the
budget for statewide maintenance and repair is divided into three categories: 1) Capitol Complex
($1 million); 2) Facilities ($800,000 for Title XIX facilities); and 3) Statewide M&R ($3.6
million). Senator Frederick requested a breakdown of the three M&R categories, plus an updated
M&R list.
Senator Frederick asked if there is a plan for M&R when the current $9.1 million is exhausted.
Commissioner Geraets responded negatively.
Finally, Mr. Neiles reported that the Office of Hearing Examiners is requesting an increase for
the 2.5 percent movement to midpoint.
Chair Frederick recessed the committee at 10:00 a.m. Vice-chair Richter reconvened the
committee at 10:30 a.m.
Bureau of Personnel
Ms. Mertz provided the committee with budget information (Document #2).
Ms. Sandy Zinter, Commissioner, Bureau of Personnel, presented the committee with a budget
summary (Document #3). She noted that the requested increase of 4 FTE and dollars associated
with them are related to the consolidation of the training program into the Bureau of Personnel.
Representative Richter requested that the bureau provide the committee with a state-government
FTE staffing report as per SDCL 3-8-6.3.
(At this point Senator Frederick assumed the chair.)
Representative Richter requested that the bureau provide the committee with an example of how
this salary plan would work for an average state employee. Representative Sokolow requested
a list of the pay grades and corresponding salary ranges, and the number of employees in those
pay grades.
S.D. Lottery
Mr. Bertsch, LRC, provided the committee with budget information (Documents #4 and #5).
Mr. Rodger Leonard, Executive Director, S.D. Lottery, presented the committee with a budget
summary (Document #6). Mr. Leonard stated that the Instant and On-Line budget is
informational only. The video lottery budget requires an annual appropriation from the
Legislature. He noted that the Lottery Operating Fund receives funds from On-line and Instant
Ticket proceeds. The Lottery is allowed to retain $1.5 million, with the remainder going to the
state general fund. Beginning in FY97, the cash carried forward is to be split between the capital
construction fund (on-line proceeds) and the general fund (instant ticket proceeds).
Mr. Leonard reported that the high point in Lotto sales was 1994. Powerball is still the number
one seller and the biggest draw. The larger the jackpot, the larger the sales.
Mr. Leonard reported that there is no information to indicate that the state's share of net
machine income being set at 50 percent had a negative impact on establishments.
Mr. Leonard reported a status quo budget, with an increase of $60,000 for changing the 800
number to a 900 number. They also increased the number of instant games, which resulted in
some increased costs in ticket printing, etc.
In response to committee questions, Mr. Leonard indicated that he has eliminated 10 FTE over
the last two years.
A motion was made by Representative Richter, seconded by Representative Kredit, that the
meeting adjourn. The motion carried on a voice vote.
Chair Frederick adjourned the meeting at 12:05 p.m.
Rhonda Purkapile