House Appropriations Minutes 01/21/1997 8:00 AM

Ms. Dar Baum, South Dakota Housing Development Authority (SDHDA), advised the committee that, in response to FY95 audit findings, an increased training schedule has been implemented to improve execution of federal forms for a rental subsidy program. She noted that the FY96 audit identified $475 in errors for $14 million of subsidies, a .00003 error rate. The Chair requested that the State Electrical Commission and the Board of Medical and Osteopathic Examiners submit written responses to their audit exceptions.

Mr. Mark Lausang, SDHDA director of finance, pointed out that the majority of the budget changes pertain to the Governor's Transitional Housing Program (THP). The two-pronged goal is to provide the elderly with lower maintenance, energy efficient homes, thereby freeing their larger old homes for younger families at an affordable price. Criteria are age 62 or older, or an adult household member who has certifiably been diagnosed with a disability, in towns of 5,000 population or less. Springfield State Prison inmates build the houses and are reimbursed $196 per house, which equates

to $2 per day per prisoner. The Department of Corrections pays for the house and normal costs. Representative Duxbury inquired whether South Dakota suppliers get contracts for the supplies, to which Ms. Baum replied a balance between best price, most efficient delivery, and working with in- state suppliers is sought, but contracts are awarded both in and out of state. The eight additional FTEs include seasonal and full-time employees: two truck drivers, four escort drivers who are on

call, a project supervisor, and three construction supervisors with expertise in HVAC and plumbing, general construction, and electrical areas. One truck driver has been kept busy full time negotiating with private contractors and following up. Two new semi trucks and federal surplus property escort vehicles have been purchased by SDHDA to move houses to the appropriate locations. Because SDHDA is not a state agency, it carries its own insurance. Contracts are in place with private moving companies to set the houses on foundations. Ms. Baum noted that they expect to move houses to Mission and Rapid City this week. The one in Rapid City will be a show house, and plans are to market Rapid City during the stock show. The absolute capacity of around 200 homes a year is budgeted. Ms. Baum said 55 are sold and 32 purchase orders are pending. Of those sold, 54 are the 768 square foot handicap adaptable homes; only one of the 672 square foot homes has been sold. Marketing is done through Councils of Government, and SDHDA has an 800 number. Senator Drake asked whether they have considered building any larger houses. Ms. Baum replied they are again working a balance. Since they do not want to compete with the building industry, she doubts any larger homes will be built for this program. These homes are about the same size as two bedroom apartments.

Mr. David Volk, Secretary, Department of Commerce (DOC), stated that, excluding fleet and movement to midpoint, there is essentially no change in the Division of the Secretariat budget.

Since the state is no longer penalized for lack of a motorcycle helmet law, a substantial block of federal funds has been directed to the Department of Transportation for highway construction, rather than defaulting to the Division of Public Safety. Mr. Volk said the Governor directed a change of focus for the Division, from public information and program delivery to more concrete services such as the Child Safety Seat Program (the number distributed has increased from 300 to almost 4,000), Driving Under the Influence (DUI) enforcement, overtime, and ambulance emergency equipment.
Ms. Jeannette Schipper, head of the division of the Secretariat, interjected that one director and one administrative assistant are shared by two divisions: Public Safety and Human Relations. In the past Public Safety had six FTEs, now there are three. Representative Duxbury observed that last year they wanted to carry $1.4 million into the next fiscal year; Ms. Schipper responded that they never received the $3.3 million which they expected, so the budget authority is being reduced. She stated they now expect close to $900,000, which, with carry over, is close to $1 million. She advised that the Global Positioning System money went to the Department of Transportation.

Representative Putnam asked what was being done with the $3.00 assessment for motorcycle licenses and was told that last year 390 cyclists were trained by the South Dakota Safety Council. The answer to Representative McNenny's question about Law Enforcement Training was that there was a redirection of priorities, and, at the request of the Governor, this is being reconsidered.

One clerical position is being eliminated in the Petroleum Release Compensation Fund (PRCF) according to Mr. Dennis Rounds, who provided Fund Statistics ( Document T). He stated that risk- based corrective action has had a huge impact since it was fully implemented a year ago, and has resulted in a decrease from $55,000 to $43, 000. In response to Senator Drake's question about whether there is a cap per site, Mr. Rounds advised there is $1 million coverage with $10,000 deductible per site. Over 500 sites have been closed, and new sites per year average 125. Mr. Rounds expects that to increase because of federal guidelines for tank upgrade.

The Gaming budget is informational with no significant change, and Securities is essentially a status quo budget. Representative Duxbury recalled last year's discussion about the investigation of brokerage firm compliance, and Ms. Deb Bollinger, Division Director, responded that the inspection program has been running a little over a year. Many senior citizens' questions are being addressed with good results. Secretary Volk added that the mere presence of inspectors in the communities is a deterrent. He said federal legislation with regard to licensing changes the department's role. Ms. Bollinger commented that the state investment advising firms with less than $25 million in managed assets must register with the state, which retains enforcement jurisdiction and the power to fine agents or firms who violate securities laws. The department works closely with the Attorney General's office, she added. In this fast-growing field, she said only about 10 South Dakota investment firms are not linked to a major house. She handed out a breakdown of Division of Securities Performance Indicators and Revenues ( Document U) and advised that next year the line “Blue Chip Exemptions” will be called “Notification Filing Fees.” SB 82 will be revenue neutral but registration fees will be blue chip exempt, she advised.

Mr. Volk commented that SB 81 establishing an insurance fraud unit would utilize three vacant FTEs, including a special assistant or assistant attorney general for prosecution. Division of Insurance Director Darla Lyon amplified that SB 81 has an assessment of up to $250 per company (about 1500 companies) to be placed into a fund to operate the fraud unit. She said 36 states have insurance fraud units because the Insurance Division is essentially a reporting unit. In Nebraska's first year, the 199 cases referred were resolved for $13 million. Ms. Schipper noted this unit was conceptual when the budget was drawn up, and there isn't an offset shown in the requested budget. Representative Munson inferred that if SB 81 does not pass, two FTEs can be cut and the budget accordingly reduced. Cases forwarded to the division by states attorneys are now sent back to them. Secretary Volk said a unit is needed to focus directly on this problem for investors, for prosecution, and for public information. Ms. Lyon noted that the Attorney General is supportive of this bill. Representatives Putnam and Derby questioned the role of private investigators. Ms. Lyon replied that insurance companies will continue to hire private investigators to conduct investigations to determine whether they will pay the claims; the private sector will see no change. The insurance industry is very supportive because it costs them a lot of money to pay fraudulent claims, and they expect to save billions of dollars, according to Ms. Lyon. The Chair requested a bill brief on SB 81.

Representative Munson asked about recent legislation to provide annual reports for workers' compensation. Ms. Lyon replied that data is forwarded to the Department of Labor which compiles a report, and added that the database is too new to be very meaningful.

Mr. Dick Duncan, Division of Banking, said 12 examiners are in the field, and 3.5 FTEs are in the office, including himself. The division is fully funded by the Banking Trust Fund. The 6% franchise tax paid by banks produces $30 million annually; division operating expenses are about $900,000. The assessment is set by the Banking Commission based on the size of assets. For two years assessments grew faster than expenses because of banking growth, but Mr. Duncan advised that has dropped back, and the Commission reduced the assessments. He said five state-chartered banks have switched to national charters. He warned that he expects the Banking Trust Fund to be considerably reduced in the next years; they have about one year's funding in reserve.

Representative Duxbury asked about the effects of the severe winter storms and livestock losses. Mr. Duncan responded that bankers will have to be flexible and imaginative in working with ranchers. It will require more work for everybody, but our banks are strong, competently managed, and well capitalized.

Secretary Volk stated that the biggest change in Commercial Inspection and Licensing is how trucks will be purchased for the Weights and Measures section: replacement costs will be reflected in the mileage rate, so will appear in the budget. The new program for issuing drivers' licenses from county court houses allowed a cut back in FTE; Secretary Volk stated it was costing up to $180 to issue one $8 driver's license when they had to send their teams out. People in the county court house are trained to give the tests, and a temporary license is issued. Not a citizen or a county has complained. Ms. Pam Kusler noted that when examiners traveled to Highmore, 157 licenses were issued in a year; the number now is approximately 350. She said this represents additional revenue for counties, in the fees they retain and in money saved by the Department of Commerce which flows to them in the road and bridge fund. City issuance programs have also been instituted in Faith and Lemmon. Once volume reaches a certain point, however, this is not cost effective.

In response to Representative Duxbury's questions about fire inspections in the schools, Fire Marshal Dan Carlson advised this function has been transferred to the new Department of Inspection. Two years ago the currency rate was 22%; six months after the change it was 42%, and is now nearly 100%. According to statute inspections are required every other year. A report is filed, the inspector conducts an exit interview with the school, which submits a plan for corrective action to be reviewed by the Fire Marshal's office, which offers help or alternatives.

The Highway Patrol has an authorized strength of 239; however Superintendent Gene Abdallah advised that the uniformed force is 14 down from the 157 authorized because of problems in recruiting and four officers on sick leave. At full strength, not counting commanders, there are not over 16 troopers on the highways at any one time, he noted. Speeding isn't the trooper's only job.

The Governor has prioritized DUIs and drug interdiction, and troopers must also be in court and work on accident reconstruction. The nine January recruits won't be on the street until almost August. There is a reduction of one clerical FTE. The Superintendent also stated that from December 1 to last week 14 cars were taken out of commission, two totaled. DUI arrests have increased 22% for the year, but speeding arrests and fines are down, which he does not attribute to the increased speed limit. Chair Putnam requested a clarification on whether the Department of Transportation (DOT) will lose federal funds for noncompliance with speed limits.

The Chair asked about activity on the reservations. Officers do not patrol at all on the Pine Ridge or Rosebud Reservations, according to Major Tom Dravland, and are basically off the new Yankton Reservation. Through verbal agreements, they can patrol on or through the Standing Rock and Cheyenne Reservations, but they generally turn people over to tribal authorities. Troopers are allowed on the Lower Brule and Crow Creek Reservations, but don't patrol except by invitation.

Addressing the recent problem of highway closings, Major Dravland explained that three district commanders discuss the situation with regional DOT engineers, then Major Dravland and DOT's Director of Operations make the decision. He then notifies the Associated Press, the gates are shut, and a final sweep is done if possible to make sure people aren't stranded. Representative Duxbury asked how the changes in State Radio have worked out. Superintendent Abdallah responded that State Radio is antiquated and needs extensive updating. Different entities have different frequencies, and one trooper in Lemmon has communication with nobody.

Superintendent Abdallah informed the committee that the canine unit is doing an outstanding job in the detection of drugs. Property which is seized is turned over to the Attorney General's office and is usually disposed of by auction, with the proceeds going to the Attorney General's drug fund. United States Attorneys can prosecute large or interstate cases on a federal level, in which case the federal government takes 20% of seized assets, and 80% is distributed to local law enforcement according to their participation in the case. Seizures at the Sturgis Rally last year enabled the Highway Patrol to buy a house from the Housing Authority to replace a dilapidated trailer. Major Dravland noted that the $250,000 in the Attorney General's fund can be shared back with local law enforcement.

Discussion ensued on safety in construction zones; Major Dravland said they try to coordinate with DOT and the sites they consider most hazardous. Surveillance is best accomplished with aircraft. Superintendent Abdallah interjected that DOT is considering the purchase of speed bumps.

Ms. Schipper pointed out that fleet consolidation has resulted in a decrease in capital assets and has affected operating expenses. She confirmed that DOC no longer owns the Highway Patrol vehicles.

As previously noted, the Division of Human Rights administrator and clerical support are shared with Highway Safety. Ms. Schipper said they do not have a budget from the Equal Employment

Opportunity Commission yet this year, but there were some cut backs. The backlog in this department has been eliminated, and Secretary Volk said efforts could be redirected to the field away from Washington, which has a backlog of 100,000 cases.

Representative Cerny asked that information be provided about the Plumbing Commission.

A motion for adjournment was made by Representative McNenny, seconded by Senator Benson, and carried on a voice vote. The Chair adjourned the meeting at 11:00 a.m.

Respectfully submitted,
Arlene G. Krueger
Committee Secretary

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J.E. “Jim” Putnam, Chair

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