Draft Only – Approval Pending

 

 

M I N U T E S

 

Joint Appropriations Committee

 

Room 204                                                                                            August 24-25, 2006

Capitol Building                                                                                   Cheyenne, Wyoming

 

 

PRESENT:       Senator John Hines and Representative Frank Philp, CoChairmen;

                       

Senators:   Jim Anderson, Cale Case, Rae Lynn Job, and Phil Nicholas;

 

Representatives:  Alan Jones, Pete Jorgensen, Larry Meuli, and Colin Simpson.

 

Legislative Service Office:  Joy Hill, Bill Mai, Steve Sommers, and Dean Temte.

 

Others:  See Attachment A.

 

ABSENT:       Representatives Rosie Berger, Owen Petersen, and Jane Warren.

 

Supporting documents on file with Legislative Service Office

 

Thursday, August 24, 2006

 

CoChairman Hines convened the meeting at 8:00AM and reviewed the agenda, see Attachment B.

 

K-12 Health Insurance Coverage

 

Mr. Steve Sommers, Legislative Service Office Budget/Fiscal Manager, presented an overview of health insurance coverage funding in K-12 public school districts (see Attachment C).  He pointed out that a component of the current funding model is designed to provide an amount of funding equivalent to $8,169 per full-time equivalent employee for health insurance needs.  The total amount provided across all school districts statewide amounts to $33 million.  On a per employee basis, this roughly approximates the amounts provided for insurance coverage for employees of the university, community colleges, and the state’s executive branch under the Employees’ Group Insurance Plan (EGI).

 

In total, actual expenditures by school districts for employee health insurance are lower than the amounts modeled.   Mr. Sommers explained that districts individually contract for their employee health insurance plans, and that there is wide variation in both cost and coverage levels.  Currently, decisions regarding health insurance plans are strictly the province of local school boards.  Senator Job stated that insurance is used as an incentive in school districts for hiring and employee retention.

 

The idea of incorporating all school districts into a single plan similar to the EGI is worthy of consideration for some important reasons, as outlined in the Buck Consultants, LLC “Report on the State of Wyoming Cost Comparison Study for Wyoming School Districts and the State Employees’ Group Insurance Plan.”  Equity issues and appropriate funding levels are discussed at length in that report.

 

Senator Nicholas made a motion directing staff to draft a committee-sponsored bill formulating a unified statewide plan for school district insurance, similar to the employees’ group insurance plan, to be administered by the Department of Administration and Information.  Representative Jorgensen seconded the motion, and it passed on a vote of six to four.

 

 

Retiree Health Insurance Coverage

 

Mr. Sommers discussed State employee retiree insurance issues with the committee.  During this discussion, Mr. Sommers referenced materials sent to the committee for review prior to the meeting (Attachment D), which draws upon information in the Buck Consultants, LLC “Report on the State of Wyoming Retiree Health Insurance Study and GASB 45 Liability,”

 

Mr. Sommers pointed to the Buck et al report, wherein the issue of providing funding for retired state employees insurance needs is discussed.  That study consists of two components:  first, the issue of insurance cost assistance for current retirees; and second, a pre-funding system for current employees, to be utilized upon their retirement.

 

Senator Nicholas stated that he believes a pre-funding system is necessary in order to avoid the problem the state currently faces with its retirees being unable to afford the state’s retiree insurance premiums.  Senator Hines agreed that some effort in the area of pre-funding would help pre-empt the sort of problem current retirees are facing in paying for their insurance.  He asked Mr. Mike McVay, Department of Administration and Information Budget Division Administrator, if such a system had been studied in the executive branch in prior years.  Mr. McVay responded that back in the early 1980’s a pre-funded approach had been studied wherein one half of one percent of payroll with matching funds from employees would have been set aside for their insurance expenses in retirement.  He noted that the proposal was never implemented.

 

Representative Philp asked Mr. Ralph Hayes, Department of Administration and Information Employees’ Group Insurance Administrator, if it would be possible to produce the information necessary to determine required levels of funding for both the pre-funding and current retiree programs.  Mr. Hayes responded that the information could be produced in a few months, in his estimation.  Mr. Hayes also stated that funding is available for this kind of study via appropriations already made to the department.

 

Senator Nicholas made a motion to direct the group insurance program to proceed with a study of pre-funding alternatives, including all affected entities (State, University of Wyoming, Community College, and K-12 employees).  The motion was seconded by Representative Simpson and adopted by the committee.

 

Senator Nicholas stated that he sees the retiree insurance funding issue as having three components that may or may not require similar treatment.  Retirees who have been retired several years, retirees who have recently retired, and prospective retirees have different levels of resources available to pay for their insurance needs.  Those who retired long ago had much lower salaries, and therefore receive much lower retirement benefits when compared to those employees who have recently retired, or those about to retire.  Nevertheless, the insurance premiums are the same for all groups, depending on the age of the retiree.

 

Senator Job asked Mr. McVay if the retiree insurance funding proposed by the governor in the last budget cycle took into account the various levels of retiree benefits, or if that proposal included any kind of a reverse tiered system.  Mr. McVay said it did not include such provisions.

 

Senator Nicholas made a motion to have Mr. McVay and Mr. Sommers examine retiree benefit levels.  The committee adopted the motion.

 

Game and Fish Capital Construction Expenditures

 

Mr. Terry Cleveland, Wyoming Game and Fish Department Director, along with Mr. Gary Amerine, Mr. John Emmerich, Mr. Mark Fowden, and Ms. Kathy Frank, also representing the Wyoming Game & Fish Department, discussed with the committee the progress of general fund capital construction appropriations.  They presented a video and provided a handout (see Attachment E) with information detailing the construction and improvement of fish hatcheries and water projects for which the legislature appropriated general fund monies during the 2004 budget session.

 

Senator Hines asked Mr. Cleveland what impact having general fund monies appropriated for those capital construction projects had on other departmental budgets.  Mr. Cleveland responded that it was possible to complete the projects in a more timely manner than if the department had funded them within its normal resource allocation, and that other areas of the budget were able to be properly funded.  Ms. Frank told the committee that inflation, rising fuel costs, and increased insurance costs had required agency funding in amounts comparable to those appropriated for capital projects. 

 

Senator Hines asked Mr. Cleveland if the agency’s overall budget is holding steady.  Mr. Cleveland stated that, adjusting for inflation and fuel prices, the budget has been held flat.

 

 

University of Wyoming, Community College, and Judicial Classified Staff Salary Comparators

 

Dr. Jim Rose, Wyoming Community College Commission Director, and Ms. Joanne Stockdale, Wyoming Supreme Court Services Officer, discussed employee salary comparators used by their respective agencies in determining market pay.  An overview of this information was distributed to the committee in Attachment F.

 

Ms. Stockdale told the committee that the website www.ncsconline.org has abundant information pertaining to judicial staff salaries.  She stated that the judicial branch attempts to maintain parity with executive branch salary structures.

 

Dr. Rose discussed the implications of higher public school teacher salaries on community college recruitment and retention efforts.  The salary increases recently seen in local school districts have exceeded by wide margins salary increases at the community college level.  As a result, parity among these two groups is out of balance, and the community college funding model is in need of adjustment.

 

Fire Suppression Accounts – Fire Updates

 

Mr. Bill Crapser, State Forester, discussed the 2006 fire season and presented budget information regarding costs to date of firefighting efforts (see Attachments G and H).  Mr. McVay provided additional details as to budgetary demands resulting from larger and more numerous than anticipated fire events over the course of the summer.

 

Mr. McVay informed the committee of the emergency funding decisions taken by the governor’s office in dealing with the unexpected demands in fighting this summer’s fires.  The Tracer Fire at Camp Guernsey required the transfer of $2.2 million from employee compensation reversions, flex equity, and the governor’s contingency funding.  He pointed out that approximately $3.2 million had been transferred from the state’s major maintenance project funding to the fire suppression account in the State Forester’s budget, in order to pay for expenses already incurred in other firefighting efforts so far this summer.  He also stated that additional demands may arise, and that the 2007 supplemental budget request will include replacement of these transferred funds.

 

Since costs of firefighting are split between the state and federal governments based on land ownership in the affected areas, costs this year have been disproportionately born by the state due simply to the fact that a greater amount of state lands have been involved versus federal lands, than has historically been the case, according to Mr. Crapser.

 

Budget Process Changes

 

Mr. Sommers discussed with the committee potential changes to the budget process that could make for a more cohesive approach to determining an overall state financial plan (see Attachment J).  Currently, bills with appropriations or fiscal impacts can exist in various stages of the legislative process, and determining a financial bottom line can be extraordinarily difficult.  Additionally, the level of comprehension of the content of the general government appropriations bill sponsored by the appropriations committee during budget sessions, and supplemental appropriations during the general session, is not adequate in the opinions of many legislators.

 

Committee discussion centered on the possibility of limiting amendments to the budget bill with a definite cutoff time, and limitations on the numbers of introduced bills.  Additionally, members discussed the possibilities of assignment of agencies and other components in the budget bill in advance of budget hearings, in order to make it easier for committee members to provide pertinent background information to the remainder of the legislative body.

 

 

Recess

 

At 4:50 p.m., CoChairman Hines recessed the Committee until 8:00 a.m., August 24.

 

Friday, August 25, 2006

 

CoChairman Philp reconvened the meeting at 8:00AM.

 

 

Federal Poverty Level

 

Ms. Joy Hill, Associate Research Analyst, Legislative Service Office, presented information to the committee regarding federal poverty level guidelines for various social programs (see Attachment I).  Ms. Hill noted that there is great variation in qualification guidelines between programs.  Examples of this variability include the state children’s health insurance program’s 200% of federal poverty level, and the 100% of federal poverty level income qualifications used in the prescription drug assistance program.

 

State Capital Construction Project Issues

 

Mr. Rich Cathcart, Department of Administration and Information Construction Management Division Administrator, and Mr. Bob Lampert, Department of Corrections Director, discussed the progress of the new correctional facility construction project.  Mr. Cathcart told the committee that only one company submitted a bid to construct the facility, and that the bid amounted to $125 million.  That significantly exceeded the amount budgeted for the project.  Mr. Cathcart stated that upon further review, the bidder reduced that bid to $105 million.  That still exceeds the budgeted amount of $70 million, and the division is currently trying to redesign the project to get within the budgeted amount.

 

In addition to the construction cost concerns, Mr. Cathcart told the committee about contractual work done by Gordon Marlatt, PhD. in mapping a subterranean lateral shear zone that happens to run through the proposed construction zone.  Mr. Cathcart submitted this information to the construction bidders, who were in agreement that it should not be an issue in the construction of the facility.

 

Mr. Lampert discussed the re-design of the prison project and the value engineering that is currently in process as the bids are re-worked.  He stated he believes that the state’s requirements for the facility can be met nearer the original budgeted amount than the first received bid of $125 million.  Mr. Lampert told the committee he believes it is important to keep those features that will lead to the greatest flexibility in the long-term.  Those considerations will be held in mind as the value engineering progresses.

 

Representative Simpson asked how much inflation has impacted this project since the original appropriation was made two years ago.  Mr. Cathcart responded that nationally, costs have increased about 14.5% since that time.  Mr. Lampert added that Wyoming is seeing a particularly amplified construction cost increase.  Mr. Cathcart stated that projects in Wyoming currently cost 40-50% more than in surrounding states.

 

Representative Simpson asked what housing prisoners out of state is currently costing Wyoming.  Mr. Lampert responded that there are currently between 400 and 450 prisoners housed out of state at a cost of $65/day per prisoner.  Representative Philp asked if that figure includes medical costs.  According to Mr. Lampert, all medical costs are in addition to that figure.

 

Senator Anderson requested information from the Department of Corrections regarding costs vs. benefits of the planned construction design, regarding recidivism, energy conservation, and other operations cost savings, and in particular, what the benefit of spending an additional $30 million for construction costs would be.

 

Mr. Cathcart informed the committee that site work has not actually begun for the prison.  Ground compacting needs to be undertaken before construction can begin, but road work has been bid and let.

 

Senator Hines requested information regarding recidivism rates over the last 20 to 30 years.  Mr. Lampert agreed to provide the information, but qualified his response by saying that rates have been measured against differing standards over that timeframe.

 

Mr. Cathcart discussed other capital construction projects the state is currently undertaking.  The Supreme Court renovation is underway, and the overall costs are now estimated to exceed the budgeted amounts.  He told the committee that the cost savings measures his office has considered have not been palatable to the justices of the Supreme Court.  It will cost approximately $750,000 for a security addition to the front of the building. 

 

The state has purchased the Laramie County Library building, and the state library will eventually be relocated to that building.  The old Safeway building on the south side of the city of Cheyenne has been renovated to house the library collections in the interim, and that space will be suitable for other state agencies once the state library relocation is complete.

 

Mr. Cathcart pointed out that if other state agencies end up using that leased space in the Safeway building, it would be most appropriate to lease it for non-generally funded agencies.  Because that building is occupied under a lease agreement, and is not a state-owned building, some of the lease costs can be shared from agencies’ other funding sources.  Typically, those agencies cannot use non-general fund monies to reimburse space costs in buildings owned by the state.

 

State Retiree Insurance

 

Mr. Sommers again discussed the retiree insurance issue with the committee.  He told the committee that he discussed the issue with Mr. McVay and Mr. Hayes upon adjournment of the prior day’s meeting.  They discussed the feasibility of funding additional contributions to the state retirement system to help retirees with their insurance premiums.  This approach to funding, he said, would avoid some of the foreseeable Internal Revenue Service compliance problems associated with direct insurance subsidies to retirees by the state.  Additionally, it could make pre-funding insurance assistance for current employees in their retirement more feasible.

 

Senator Nicholas stated his concern about just adding funding into the retirement system without some sort of designation of the amount to be used for insurance.  Mr. Sommers replied that this amount might be shown as a separate amount having been contributed specifically for health insurance, and be further broken down by the amount contributed by the employee and the amount contributed by the employer, in the case of current employees.

 

Senator Nicholas made a motion to proceed with studying a proposal to fund retiree insurance through the retirement system, as previously explained by Mr. Sommers.  Senator Hines asked for clarification in the request that it include separate identification of the funding for retiree insurance.  Representative Jones asked if this motion would include current retirees in the study.  Mr. Sommers responded that it would include an estimate of the funding required for that purpose.  The committee adopted the motion to proceed with the analysis.

 

 

Discussion of Further Committee Business and Future Meetings

 

Senator Nicholas made a motion to have Mr. Sommers develop a recommendation to set a cut off date for bills with appropriations sometime in December or sometime prior to budget hearings, followed by a scheduling by the committee chairmen of the bill sponsors to testify in the budget hearings as to the content of their bills and the amount of appropriation required for their enactment.  Additionally, Senator Nicholas requested that guidelines be drafted regarding the budget bill schedule modifications discussed by the committee in the prior day’s meeting.  The committee voted in favor of directing staff to develop the new budget process and other bills with appropriations submittal guidelines.

 

Mr. Sommers discussed the need for the committee to make a recommendation regarding the external cost adjustment for the K-12 funding model by November 1.  December 1 is the date on which the Governor’s budget is required to be submitted to the legislature.  After discussing dates, the committee decided on the week of December 4^th for budget hearings, and a November meeting, at a date to be determined, for the external cost adjustment issue.  After additional discussion, the committee decided to consider meeting via video conference in November.  A meeting notice will be sent when that date is finalized.

 

Mr. Sommers reminded the committee about the need to address the police officer retirement bill.  Cochairman Philp told the committee the purpose of the bill is to change the enrollment period to have a sunset date, and that he would sponsor it and have the committee review it before the next legislative session.

 

Having completed all agenda items, Cochairman Philp adjourned the meeting.

 

 

Respectfully submitted,

 

 

 

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John Hines, Cochairman                                          Frank Philp, Cochairman