Select Committee on Local Government Financing Minutes

Committee Meeting Information

October 28, 2008

Wyoming Oil and Gas Conservation Commission

Room 129

Casper, Wyoming

Committee Members Present

Representative Roy Cohee, Chairman

Senator John Schiffer, Vice Chairman

Senator Ken Decaria

Senator Kit Jennings

Senator Phil Nicholas

Representative Rosie Berger

Representative Debbie Hammons

Representative Marty Martin

Representative Mark Semlek

Committee Members Absent

Senator Bill Vasey

Legislative Service Office Staff

Dave Gruver, Bill Mai and Dean Temte

Others Present at Meeting

Please refer to Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

Executive Summary

The Select Committee on Local Government Financing met for one day in Casper. The Committee received additional information from state agencies and LSO staff in response to requests made at its July meeting. The Department of Audit presented information on local government expenditure and revenue reporting. The Committee reviewed and discussed its assigned duties and invited public comment on the execution of those duties. The Committee also reviewed a bill draft for a single fiscal year for governmental entities and requested additional bill drafts on other issues. The Committee voted to sponsor the single fiscal year bill draft, as amended, and voted to have two additional bills drafted for potential Committee sponsorship pending a mail ballot. The Committee plans no additional meetings this interim but, if reconstituted as proposed in a requested bill draft, will meet again next interim to consider a workable revenue distribution formula for counties and a revenue distribution formula for cities, with the Committee’s recommendations to be finalized for consideration in the recommended budget for the 2010 budget session.

Call To Order and Opening Remarks

Chairman Cohee called the meeting to order at 9:00 a.m. Please refer to Appendix 2 to review the Committee meeting agenda. Approval of the minutes from the July 7 and 8 meeting was moved by Senator Nicholas and passed.

Audit issues - Training program

Mike Geesey, Director, and Pam Robinson, Administrator, Department of Audit, addressed audit issues beginning with the training program for local governments. Ms. Robinson provided a written summary outlining training issues. (Appendix 3) Her presentation addressed what the Department has done at the local government level to date and its plans for future training programs to address uniformity of reporting. It was suggested that the Department might contract with community colleges to provide training to small town employees. The Committee discussed the requirements for record keeping and assuring the public that funds are appropriately being spent and accounted for. Mr. Geesey noted there are provisions for enforcing reporting requirements: for cities and towns, the State Treasurer can withhold state funds upon certification of the Department of Audit of failure to report. For special districts, the Department can certify the requirements to county commissioners and the county commissioners are to dissolve the district if it fails to report as required. According to Mr. Geesey compliance has been much better since the enforcement mechanisms have been in place.

On uniformity of reporting, Mr. Geesey stated there are standard definitions and reporting forms the Department can refer to in order to promote uniformity. The Committee discussed the problems of special district turnover which makes uniform reporting difficult to achieve. Ms. Robinson noted the proposed program is structured within the current budget of the Department. Mr. Geesey stated the Department is working with LSO on providing access to Department records of filings by local governments for revenues and expenditures.

Uniform fiscal year – 09 LSO 105.W2

The Committee next turned to the uniform fiscal year bill draft. (Appendix 4) Mr. Geesey explained the bill would require a single fiscal year for all state and local governmental entities with limited exceptions. He provided a survey of surrounding states’ agencies and the fiscal years they operate on. (Appendix 5)

Kevin Hibbard, Wyoming Department of Transportation (WYDOT) budget officer spoke in opposition to the bill as far as requiring WYDOT to operate on the state’s fiscal year. A written summary of his comments is appendix 6. Historically WYDOT operates on a federal fiscal year. Approximately 47% of WYDOT funds are federal funds. WYDOT dovetails with the federal fiscal year in order to make accounting easier. Mr. Hibbard stated there are other federal programs WYDOT works with and closing books in July would be at the peak of construction seasons for WYDOT, which would require moving persons from their normal work to address requirements for closing out the fiscal year. In his view WYDOT would have to comply with both federal and state fiscal year closings should the Department not be exempted from the bill. In reply to Committee questions, Mr. Hibbard noted that for reporting to JAC and budget preparation, WYDOT acts as if they operate on a state fiscal year period. The Department attempts to encumber or spend funds before the end of the State fiscal year in order to avoid reversions under the general statutes. Vice chairman Schiffer noted that with the federal funds proportion declining, this might be a proper time to move WYDOT to a state funding cycle. Senator Nicholas suggested that WYDOT could be exempted from the bill or perhaps exempted through the budget bill process biennially. Mr. Hibbard stated that about 1/3 of the other states’ Departments of Transportation are on a federal fiscal year and 2/3 on a state fiscal year. As to Committee questions concerning costs, Mr. Hibbard replied that there would be an unidentified one time turn over and an ongoing costs for dual budget keeping. There would also be costs associated with moving people for inventory and associated other costs in using a state fiscal year. Mr. Hibbard noted there could be accounting accommodations to meet the accounting requirements. The Committee discussed the amount of State funds which flow to local entities through WYDOT and how that impacts the determination of the charge of the Committee. Mr. Hibbard noted that there is a substantial amount of funds that flow through the Department to local entities, but at the same time, some of those funds are federal funds tied to the federal fiscal year.

Harry Wales, Deputy Director, and Timonii Coppinger, internal auditor, of the Wyoming retirement system addressed the Committee and asked to be exempted from the change to a state fiscal year. The system operates eight retirement systems on a calendar year basis. There would be ongoing operating costs associated with moving from the calendar year to a state fiscal year, as well as one time operational costs. There would also be actuarial valuation changes that would be required. Written testimony provided by representatives of the retirement system is attached as appendix 7. Senator Nicholas noted the agency budgets on a biennial basis that begins July 1. Mr. Wales responded that the agency operating budget of the system is on state fiscal year, but the investments and actuarial calculations are on a calendar year basis. He stated that the system staff is busier earlier in the year and the change of a fiscal year would coincide with the heavier workload for staff. The Committee discussed the provisions of the bill which address the retirement system and whether the bill actually requires the system (as opposed to the agency budget process) to be on a state fiscal year. LSO staff noted that the intent was to do so as the bill was drafted and if the Committee chooses to exempt the retirement system or others that should be made explicit, as the current law is silent on the issue for the state retirement system as a whole. Committee members questioned if there are potential benefits to a switch such as COLAs coinciding with the state fiscal year, or whether there were any compelling reasons to include the state retirement system.

Senator Nicholas moved, and vice chairman Schiffer seconded, that the bill be sponsored as a Committee bill in the upcoming session. The Committee proceeded to take the following actions:

Senator Nicholas moved to exempt the state retirement system including all systems operated by the state retirement system, but keeping the agency budget on the state fiscal year basis. Passed.

Senator Nicholas moved to change the state bar to the state fiscal year, inserting “July” in place “October” on page 11, lines 11 and 22 and “June” in place of “September” on line 22. Passed.

Senator Nicholas moved to exempt WYDOT with a sunset for two years in statute; thereafter the Department would be on the state fiscal year unless the statute is amended. Passed.

The main motion to sponsor the bill as amended as a committee bill originating in the House passed 9-0.

State Loan and Investment Board (SLIB) grant and loan program

Lynne Boomgaarden, Director, and Rob Tompkins, grants manager, addressed the Committee regarding the SLIB grant and loan program and the past 10 years of funding local governments through the SLIB. They provided a written report, attached as appendix 8. In reply to Committee questions Ms. Boomgaarden stated there is no match requirement under the consensus process in the last budget bill. Some counties used a pure population basis for the consensus process, others a project basis. Currently the only match requirement is for the $32.4 million for partially funded or unfunded large projects. While the presumptive match begins at 50%, statute allows the SLIB to lower the match to 0 on a case by case basis.

In reviewing the reports the Committee discussed trends shown by the graphs. Ms. Boomgaarden noted that the trends are difficult to discern, first because the amounts over the past ten years have varied greatly and trends are distorted by individual project funding. She noted that it was important to view the graphs in concert with the LSO provided information on appropriations for local governments over the past 10 years, as the fiscal 99-00 biennium contained appropriations of $37.3 million and the 09-10 biennium contained $477.6 million in appropriations. (See appendices 9a and 9b). The Committee asked if the Office had the ability to follow the funds for types of projects for future grants. Ms. Boomgaarden replied there is some detail for the initial grants but the use can change over the year.

Ms. Boomgaarden stated that in discussions with the Governor, it appeared there would be additional requests for SLIB funding in the neighborhood of $2 million for emergency grants over the next year; $30 to $35 million for large, partially funded projects and an additional $35 million for the consensus process over the next year. She noted that did not include the business ready community program which she understood would be requesting an additional $8 to $10 million.

Senator Nicholas asked for a list of the $73 million in requests at the last SLIB meeting, the amounts approved and expectations for timing of expenditures. He noted his point is to compare when the funds are approved, disbursed and actually expended. The Committee discussed whether the grant program is supplementing or supplanting local government fees and assessments. Ms. Boomgaarden stated she was unaware of a policy decision or philosophy in any county in which local assessments are being kept low in response to the grants available. Mr. Tompkins stated that he reviews information on local government assessments and rates for water and sewer and compares that to statewide averages as part of the discussion in grant program recommendations.

The Committee discussed whether the SLIB funding in the last budget was intended to be for one year or two. Ms. Boomgaarden noted there was no requirement for the funds flowing through SLIB to be distributed equally over the biennium.

Special district participation in SLIB grant and loan program

Dan Perdue and Steve Bahmer, Wyoming Hospital Association, addressed the Committee. Mr. Perdue noted that previously he asked to have the SLIB grant and loan program returned to its original format, to set aside funds for hospital districts, or to change the loan program to a fixed rate program, dropping the interest rate to 3% and eliminating the 1% origination fee. He also referred to the graphs discussed earlier and noted that health care funding has declined over the past five years as noted in the SLIB report. He reiterated that the health care category included ambulances, nursing homes and hospitals. Overall a number of hospitals feel left out of the consensus process in his view. Mr. Bahmer addressed a survey conducted by the WHA. They received 15 responses from the 26 acute care facilities. The survey showed the average age of the hospital facilities: 1/3 were over 50 years old, 1/3 were from 25 to 50 years old and 1/3 were less than 25 years old. Hospital’s forecasted construction costs over the next 10 years were also surveyed. Committee members questioned how much of the costs were for critical care construction versus competitive care (i.e., attempting to be a magnet for a certain type of care). Mr. Perdue did not have a breakdown, but noted that hospitals do compete with those in other states. Senator Nicholas requested that the capacity for revenue raising of the various health care entities, including bonding capacities, be provided to the Committee. The Committee discussed profit margins of hospitals with Mr. Perdue stating that hospital margins are generally thin, but there is a difference in rural hospitals and nonrural hospitals. Senator Jennings noted that maintenance costs will be incurred if additional construction is undertaken, and questioned where additional funding for maintenance would come from if margins are thin. Vice chairman Schiffer questioned whether any hospitals had applied for loans under the grant/loan program. Mr. Perdue stated they had been, as part of a grant application package. Ms. Boomgaarden stated the joint powers board loan program had been used for loans. While there is a loan provision under the traditional FMR program, the SLIB has never promulgated rules for loans under the program. Committee members noted that the joint powers act loan program had been increased as far as available funding in the last session and the interest rate had been lowered. Vice chairman Schiffer questioned what changes needed to be made to the program if it’s not being used. Mr. Perdue stated that the larger, more financially stable hospitals can take advantage of the program but they would like a lower interest rate, such as 3% as suggested at the last meeting by Mr. Perry.

The Committee discussed the capital needs of hospitals necessary to provide adequate health care and the ability and requirements to form special hospital districts. Mr. Perdue stated that capital needs is a difficult question to answer, there is an ability to “limp along,” but that means the needs will be continually building. As to whether 35% of the landowners being able to stop the creation of a special district is a statewide issue, Mr. Perdue suggested it is more than an isolated incident, but could not say whether it is a statewide problem. Chairman Cohee inquired whether use of state funding would equate to lower health care costs or the same costs and better care. Mr. Perdue was uncertain, but anticipated that if hospitals can cut costs, those reduced costs could be passed on. He noted that uncompensated health care costs have increased dramatically.

The Committee discussed earmarking a portion of any additional consensus funding for health care issues. No motions were made on the issue.

Use of census in statute

Wenlin Liu, Department of Administration and Information, addressed the use of “census” in the statutes and noted that most are references to the decennial census. For state sales use tax distribution (31% is distributed to local governments), the census only applies for distributions between cities within the counties, as the initial distribution is based upon point of sale. Representative Hammons asked whether the reference to decennial census should include boundary changes. Mr. Liu stated the current references should include boundary changes, but not population changes.

In discussing annual estimates for the census, Senator Nicholas noted different methodologies are used for annual estimates and the methodology used changes the results. Mr. Liu confirmed there were different methodologies used for the 2006 and 2007 estimates. Mr. Liu stated the tax return match has been the best methodology found thus far. For cities and towns housing units are used for update estimates. The Committee discussed whether the census updates are detailed enough to show in and out migrations and whether there was still room for error even in the decennial census. Mr. Liu confirmed there was and stated that he thought the 1990 census had a bad count.

The Committee discussed preparation for the next census and requested that Mr. Liu speak with the director of A&I to determine if budget adjustments were required to help ensure everyone is counted. Joe Evans, county commissioners association noted that A&I has been meeting with the county commissioners to work on the process over the past year.

The Committee discussed the various definitions of census and the choices of using only the decennial numbers, the decennial as updated with special census numbers, or estimated annual updates. The Committee was supplied with a definition drafted by the LSO in conjunction with the Department of A&I (if the Committee wished to use the decennial numbers as modified for boundary changes). It was also supplied with a definition suggested by Crook County and Prosecuting Attorney Joe Barron (which would use annual estimates). (Appendices 10 and 11)

Senator Nicholas moved that a bill be drafted which would contain three alternative definitions of federal census in title 8 which could be applied to different uses in the statutes depending upon choices the Legislature makes. All three could be used or the Legislature could select only one for all applications. For the current draft the reference to the existing application of the statute would be inserted in each pertinent statute. The Committee discussed the motion but there was no second.

Vice chairman Schiffer moved that a bill be drafted containing one definition as provided in the LSO version (appendix 10) and that it be applied throughout the statutes. Senator Nicholas seconded the motion. LSO staff received clarification that the motion was to use the single definition throughout the statutes for both distribution of revenues and nondistribution issues. The Committee directed that the bill should be drafted and voted on by mail ballot if the Committee did not meet again this interim, which would be determined later in the meeting. The motion passed 9-0.

Duties of the Committee reviewed

Chairman Cohee reviewed each committee duty specified in its authorizing legislation. (Appendix 12). As each was read he asked the audience and committee members to discuss any duty which had not been adequately addressed in their view. Joe Evans questioned whether the Committee was going to continue to discuss the issues brought before the Committee or continue to meet to discuss the issues. He stated that he was not suggesting there were issues that had not been reviewed, but sought clarification as to whether the Committee was planning on addressing the items beyond what had been done to date. The Committee discussed its intended approach and discussed its responsibilities as to recommendations; whether further work would be required was dependent upon input received during the review of each of its duties.

Funding formulae

Representative Hammons noted her view that the Committee had not completed its discussion in regards to discretionary spending being distributed to local governments. She sought additional discussion on the proportionate share of funds “with no strings attached” and the amounts for those distributions. The Committee discussed the issue of operational funding being provided. The Committee discussed the issues of “hardship or revenue challenged funding” and funding for impacted communities including distribution formulae and the transparency of various formulae. Representative Martin suggested that issues might be addressed by the census population selected for a particular distribution. In regards to revenue challenged funding, Senator Decaria questioned how long revenue challenged entities are going to be revenue challenged. If those at the bottom of a listing are “revenue challenged” there will always be “revenue challenged” entities. In his view the question is the basic per capita amount that needs to be generated to provide adequate services. The Committee discussed how to identify and achieve basic services and fund those and whether those can be identified. The Committee discussed the current formula and whether changes should be made or whether some other distribution formula should be used. Chairman Cohee concluded the discussion by noting the issue can be considered as to “where does the fairness lie” – is it in ensuring equal distribution of mineral wealth or in ensuring that every entity has the capacity to deliver adequate services?

Senator Nicholas suggested the next step is to review the power equalization model spreadsheets provided to the Committee (appendix 13), and the two models in the current budget and look at possible melding of the models. He suggested that the JAC or the Select Committee could continue to review the issue. The Committee discussed its next meeting and whether it should meet again to attempt to develop a model for adoption in the next session and application in the next budget biennium.

Vice chairman Schiffer moved LSO draft a bill to continue the Select Committee as currently constituted and appointed with House and Senate membership (recognizing membership of the Committee will be dependent upon the appointments made by the President and Speaker of the next Legislature) to investigate a workable formula to be placed in statute for distributions of revenues to counties and a workable formula for distributions of revenues to cities. The Select Committee work on the formula is to be completed by November 1, 2009. Representative Berger seconded the motion. The Committee discussed the breadth of the motion and whether it included consideration of other items under the current Committee’s charge. LSO staff noted it understood the motion to be limited and covered only distribution formulae. Noting that limitation, the Committee then discussed whether determination of distribution formulae would be broad enough to cover all the “silos” under the current budget funding formula and the consensus was that it would be. The main motion passed 9-0 with the vote on sponsorship to be by mail ballot if the Committee did not hold another meeting.

Representative Hammons discussed whether the Committee should review the issue of special district budget oversight. She made no motion to do so but thought the topic should not be dropped. The Committee consensus was that the issue should be assigned by Management Council as it determines appropriate. The Committee discussed the earmarking of funds by local governments for capital purposes. Ms. Robinson noted that beginning with the current fiscal year there would be a provision for segregating such earmarked funds.

Barb Peryam, Natrona county commissioner asked for clarification of the motion on continuation of the Committee. Chairman Cohee stated the motion was for a formula or formulas to be recommended prior to submission of the budget for the next fiscal biennia. Ms. Peryam asked for clarification of the process for special districts to receive SLIB funding under the last budget bill. Senator Nicholas stated special districts were to take part in the county consensus process as determined by each county; there was no segregated “pot” of money solely for special districts.

Future Meetings

After discussion it was determined that the Committee would not set a future meeting date.

Meeting Adjournment

There being no further business, Chairman Cohee adjourned the meeting at 5:45 p.m.

Respectfully submitted,

Representative Roy Cohee, Chairman

Appendix	Appendix Topic	Appendix Description	Appendix Provider
1	Committee Sign-In Sheet	Lists meeting attendees	Legislative Service Office
2	Committee Meeting Agenda	Provides an outline of the topics the Committee planned to address at meeting	Legislative Service Office
3	Audit issues – training program	Summary of department of audit actions and plans for training local entities.	Mike Geese, Department of Audit
4	Uniform fiscal year	Draft bill 09 LSO 105.W2 providing a single fiscal year for most governmental entities.	Legislative Service Office
5	Uniform fiscal year	Survey of surrounding states and fiscal years used by various entities	Mike Geese, Department of Audit
6	Uniform fiscal year	Summary of department of transportation comments on proposed bill.	Kevin Hibbard, Wyoming department of transportation
7	Uniform fiscal year	Wyoming retirement system’s testimony concerning proposed bill.	Harry Wales, Wyoming retirement system
8	SLIB grant and loan program	Report on local government funding through the state loan and investment board from 1999 to 2009.	Office of State Lands and Investments
9a	SLIB grant and loan program.	Direct distributions to local governments and appropriations to grant and loan programs from 1999 to 2009 - spreadsheet	Legislative Service Office
9b	SLIB grant and loan program	Direct distributions to local governments and appropriations to grant and loan programs from 1999 to 2009 - graph	Legislative Service Office
10	Use of census in statutes	Definition of federal decennial census	Legislative Service Office
11	Use of census in statutes	Suggested definition of federal decennial census.	Joe Barron, Crook County and Prosecuting Attorney
12	Committee duties	Excerpt from 2008 budget bill listing committee duties	Legislative Service Office
13	Distribution formula	“Power equalization” formula spreadsheets	Legislative Service Office