STATE BOARD OF EXAMINERS
August 12, 1997 - 8:55 a.m.
JRW East Conference Room
The regular meeting of the State Board of Examiners was held August 12, 1997 at 8:55 a.m. in the JRW East Conference Room.
Governor Philip E. Batt, Chairman of the Board
Secretary of State Pete T. Cenarrusa
State Controller of Secretary of the Board J. D. Williams
Attorney General Alan G. Lance
Sub-Committee members present:
Mike Brassey, Office of Governor
David High, Office of Attorney General
Ben Ysursa, Office of Secretary of State
H. W. Turner, Office of State Controller
Laura Steffler, Fiscal Officer, Office of State Treasurer
1. DEPARTMENT OF CORRECTION
Request for authorization to adjust the base salary for the following employees because the salary policy was drafted stating “a minimum base salary of $27,000 for the first 12 months” instead of “a minimum base salary with commission of $27,000 in the first 12 months of service.” When sales staff were hired, they were informed their base pay for the first 12 months would be $27,000, but payrolls were calculated using a base pay of $21,000 to $22,000.
Ralph Mortenson $3,397.45
Kelly Way $5,250.24
2. DIVISION OF ENVIRONMENTAL QUALITY
Request for authorization to pay overtime to salaried employees that have worked overtime relative to the recent flooding in eastern Idaho. This will expedite the processing of the overtime to provide timely cost recovery documentation to FEMA and the EPA and to provide consistent treatment to all DEQ staff that have incurred overtime for flood work.
3. MILITARY DIVISION
Request for authorization to remove the annual leave cap for Sidney B. Call because the division has been in an emergency situation since prior to the first of the year and some employees are unable to take annual leave. Mr. Call is about to reach his maximum annual leave accrual of 240 hours and it is anticipated he will not be able to take annual leave in the next few weeks.
4. STATE TRANSPORTATION DEPARTMENT
Request for authorization to add Steve Hunt to the list of employees accruing vacation leave beyond the allowable limit through December 31, 1997 while working extensively with Oracle during the final phases of implementation of the new Integrated Financial Management System. The excess leave accrued would be liquidated before September 30, 1998. His name was left off the list of employees approved by the Board of Examiners on July 8, 1997.
DEPARTMENT OF HEALTH AND WELFARE
5. Request for authorization to pay overtime for the following employees currently working on the Medicaid Management Information System (MMIS) Implementation Project. Permission to pay overtime to these individuals was granted by Board of Examiners on January 14, 1997 and April 8, 1997 but will expire September 30, 1997. Request is to extend the period through March 31, 1998.
Paul Combs Billie Schell-Ruby
Shirley Gardner Myrna Stobaugh
Julie Grunder Eileen Wheeler
6. Request for authorization to remove vacation caps for the following individuals while they are working on the MMIS Project, until a reasonable period following the completion of the project.
Paul Combs Billie Schell-Ruby
7. Request for authorization to pay overtime for the following employees while completing User Acceptance Testing (UAT) phase (one week for training and eight weeks of concentrated testing) beginning August 25, 1997 through October 24, 1997.
Genette Christensen, Region I Darleen Brown, Region VI
Marsha Wilson, Region II Maggie Croft, Region VII
Arla Farmer, Region III David Baker, Central Office
Barbara Moore, Region IV Mary Lou Walcroft, Central Office
Barbara Eisenhart, Region v
8. Request for authorization to remove the vacation cap for Eugene Fish, State Hospital North, through June 30, 1998. Mr. Fish was set up initially for retirement deductions and it was later determined that he was qualified to receive benefits. In addition to paying into PERSI, he should have also been receiving vacation leave, which exceeds over 100 hours above his allowable cap. At this time, he is crucial to the program at State Hospital North and cannot take vacation leave. Leave accrual would be calculated for state service only.
9. UNIVERSITY OF IDAHO
Request for authorization to reimburse moving expenses in the amount of $5,000 partial reimbursement for Mr. Phil Earley for the position of assistant football coach.
BUREAU OF HAZARDOUS MATERIALS
10. Incident 970407 Request for authorization to issue deficiency warrants in the amount of $244.80 for reimbursement of response costs incurred in a hazardous substance incident in Post Falls on April 18, 1997, pursuant to Idaho Code 39-7110.
11. Incident 970513 Request for authorization to issue deficiency warrants in the amount of $15,924.41, for reimbursement of response costs incurred in a hazardous substance incident in Harrison, Idaho on May 15, 1997, pursuant to Idaho Code 39-7110.
12. STATE CONTROLLER’S OFFICE
Request for approval of financial transaction fee rates for Divisions of Statewide Accounting and Statewide Payroll for Fiscal Year 1999 in the following amounts:
Statewide Accounting $ .31 per accounting transaction
Statewide Payroll $3.29 per employee per payroll
13. DEPARTMENT OF TRANSPORTATION
Request for approval of Recognition of Assignment as executed by Assignor David P. Evans & Associates and Assignee Panhandle State Bank, both of Sandpoint, Idaho, for land surveying services for District One.
14. BOISE STATE UNIVERSITY
Request for authorization to reimburse moving expenses in excess of the established policy for the following assistant research professor moving from Edinburgh, Scotland.
Stephen A. Horn $10,000 $4,000 $6,000
Total Cost Allowable Cost Difference
15. STATE BOARD OF EDUCATION
Moving Expense reimbursement reports from Boise State University, Idaho State University, Lewis-Clark State College, and the University of Idaho for April 1, 1997 through June 30, 1997.
16. MILITARY DIVISION
Monthly report from Military Division on overtime hours during the 1997 flood disaster for June, 1997.
Governor: I will call the State Board of Examiners to order. I understand Attorney General Lance will not be here. We have a Consent Agenda.
State Controller: Governor, there is one item on the Consent Agenda, number 12, relating to the fees of the State Controller’s Office, that a representative of the State Treasurer’s Office would like to speak to for a moment.
Governor: I wonder why that is on the Consent Agenda. We do have a strong dissent that has been lodged about it.
Ben Ysursa: That should be taken off the Consent Agenda.
Mike Brassey: At the time we did the Consent Agenda we didn’t know of the objection. Subsequently we found out, so it really ought not to be on the Consent Agenda.
Ben Ysursa: It should be on the regular agenda. The information came In after we had our meeting.
Secretary of State: Governor, I will move approval of the Consent Agenda with the exception of Item #12.
Governor: Is there a second? I guess I am the second. I second the motion. All in favor say aye:
Secretary of State
Opposed, nay. The ayes have it.
Now we have Item 12.
State Controller: I might be able to make a preliminary presentation and then have her response. In Fiscal Year 1993 a decision was made jointly with the Governor’s Office, DFM, the legislature, and my office to look at more of a fee structure for generating income for the various internal service funds that we have in our office, rather than the general fund. At that time we were receiving over $4 million from the general fund. After a study it appeared that about 55% of the revenue sources that we could obtain would come from federal dollars, or from dedicated dollars if we charged fees. We went to fees and we are receiving less than $2 million from the general fund, which frees up $2 million for education and other critical functions of government. The legislation, when it was passed, provided that the fees that we charge for accounting and payroll services would be determined by the Board of Examiners. There would be an advisory committee that would review those, and that Advisory Committee would be composed of the Governor’s Office, JFAC, Treasurer’s Office, and our office. We have set the fees every year. The fees that are being complained of by the Treasurer are fees that we reviewed very carefully last legislative session with JFAC members, all the legislative leadership, Governor’s Office. In fact, the maximum fees for Fiscal Years set in 97 and 98 were set by our appropriation bill, and we are within those parameters.
As we looked at the Year 2000 conversion, the increases are for three things. Disaster recovery to provide that the computer center continues to function if, in fact, there is a disaster. This was an insurance policy that the Governor’s Office, in conjunction with the legislature and my office, decided that we needed in our funding. It is not cheap - it is expensive, but it is an insurance policy and because of that we have to have part of our fees to cover that. The Year 2000 conversion - trying to compare one computer system to another computer system - in this particular case is like trying to compare a Piper Cub with a space shuttle. We have a very complicated computer operation up stairs. When these systems were put in place it was not anticipated that some of them would be in operation in the Year 2000. Others, we knew, would have to be changed but we anticipated technology would make it a lot less expensive, and in fact, that has happened. What we have found in mainframe legacy systems is that these imbedded 2-digit date codes are still very efficient, very reliable, and still work. In fact, there are more mainframe operating systems right now in the United States than there were ten years ago when they thought they were dinosaurs on their way out. So we anticipate we are going to have these systems for awhile longer and they need to be updated to the Year 2000. There is absolutely no ifs, ands, buts about it - they have to be done. They have to be changed. In fact, right now we are in the process of doing that because of a supplemental received in FY 97. The request you have in front of you was based to a large extent upon the proposal we gave to the legislature about how we would do that by fiscal year. But because we are ahead of schedule, we are actually asking for $270,000 less from $870,000 to $600,000 in the payroll area to try to keep the fees as low as we possibly can and spread that out over more years.
There is a reference in here to 26% increase in administration costs. When you look at what the increases are for - disaster recovery, Y2K and to upgrade the computer center - last year we had a 25% reduction in our fees we charge agencies for processing on the computer center. Every year there has been a reduction in fees because the workload in the computer center is going up about 30% a year. With those kind of increases we periodically have to increase the physical plant to have the capacity to do that, and that is built in here. Again, it is all generated by those who use the computer center. Those rates are going down every year. So I don’t think it is a fair representation of what is actually happening in the office. These fees were prepared in conjunction with very, very lengthy discussions with Division of Financial Management, taking into account impact on state agencies. Also, the fees for 1997 and 1998 were worked closely with the legislature and that is why we are doing it. Thank you.
Governor: We will hear from a representative of the Treasurer’s Office.
Laura Steffler: Good morning, my name is Laura Steffler. I am the Fiscal Officer with the State Treasurer’s Office. I just want to take a minute of your time to pass on what the Treasurer’s recommendations are regarding the Controller’s billing rates for Fiscal Year 1999. The first recommendation is that the Year 2000 conversion costs not be passed onto other agencies. We do agree that it is a necessary thing to do and that it must be done. We also feel that those programming issues should have been anticipated and incorporated into the original costs of programming, and that the oversight is the Controller’s responsibility and the associated costs should be paid from an appropriation that comes from the Controller’s budget and isn’t passed onto other agencies. The next recommendation is that carryover spending authority should be limited to the cash balances available to carry over to the next fiscal year. It is our thought that if revenue is not able to be collected during the period that the expenditures were approved, that the expenditures should not be made. Another suggestion is that the Controller’s Office change the basis of their billing structure to something that is more closely indexed to their actual costs. The reason that we say that is that we noted that the volume of STARS transactions and the number of employees are decreasing and the Controller’s operational costs continue to increase. So there seems to be an inverse relationship there between what they are using to base their billing on. Our last recommendation is that the Fiscal Policy Committee be disbanded. We think that the committee is not serving any useful purpose and is often interpreting Idaho Code, which is a function that we think should better be served by the Attorney General’s Office. That is it. Thank you for taking the time to listen to me. If you have any questions, I will be happy to answer them.
Governor: J. D., do you have anything.
State Controller: Just briefly, Mr. Chairman. First, the last comment about the Fiscal Policy Committee - that committee is chaired by Mr. Dave Tolman of your office, and was chaired by an individual in my office. Unfortunately he passed away yesterday. The head of my accounting division, the one I have talked to you about before. We feel that the State of Idaho is a very big business and we need certain fiscal policies. This is a committee that is comprised of fiscal people from major state agencies that set those policies, and we feel it is necessary to do it. We don’t have any additional costs incurred because everybody is already paid that is on the committee. Regarding the fees again, first of all, in accounting it is true the transactions are going down but the accounting transaction fee stays exactly the same as last year - $.31. Regarding payroll - payroll is a very dynamic system and even though the number of employees has gone down a few hundred every year, there are new federal statutes, new guidelines from the legislature and all these things have to be programmed into the system that pays and keeps financial records on 25,000 state employees, commission members, different folks, every two weeks. That is not an easy task to do. Because it is so dynamic, there has to be changes in that system. So even though the number of employees are going down, there are still additional costs every year that have to be incurred to comply with all applicable laws and regulations.
Governor: I visited with my representative about this. We think that your explanation of the Year 2000 conversion is probably legitimate. That is, it is easy for a person with a few computers to say it is a simple task, but you do have some extreme problems there and I don’t know if you spend too much money on them or not, but I would have to say probably that kind of criticism is not warranted. I am concerned about growth and overhead. As you know, state government under my administration has been leaned down a lot. We have, I think, twenty three departments who are operating on a lesser budget this next year than they did the year before. So I am very concerned that we would increase overhead to that extent. I am not saying it is not explainable but most big businesses, even though they get more complex computer problems all the time continue to reduce their staff. How is your staff, is it staying the same?
State Controller: Since Fiscal Year 1995 we have gone up one and a half positions. And one of those positions is for disaster recovery.
Governor: Do we have any further comments, Mike?
Mike Brassey: No, Governor. I think there is a philosophical difference over whether the operation of constitutional officers ought to be paid out of the general fund or whether they ought to be paid out of fees. The legislature has enacted a statute that says fees will be spread, and the effect of shifting to the general fund will, as J.D. said, shift money away from education and other things because by billing the way we bill, the only way you can pick up those costs from the programs, whether they are funded out of dedicated fund or federal funds, still use the Controller’s services, so I am not sure at this moment if that is a practical shift.
Governor: I think the Controller is right on that. We need to tap all those funds that we wouldn’t if he did it all out of the general fund. I think that would be a real mistake.
Mike Brassey: As to the overhead issue and that sort of thing, we have taken the position that constitutional officers can make their budget requests, which essentially is what this is, and that will be dealt with in the legislature as they did last time. And this fee fits within the guidelines the legislature established with legislative intent for this time. But the issue on administrative costs will be dealt with, but not probably in this form.
Secretary of State: J. D., do you build up any surplus at all?
State Controller: We do because internal service funds generate fees and income, and we need a certain cash balance to carry us in that. Also, when we acquire a new computer system we lease purchase that over about three years, so we need to accumulate the payments. Normally we pay them off well in advance. But we do reduce the fees charged for the computer center. Last year we reduced them 25%. There will be another reduction this year. We are not sure how much yet because we haven’t seen the price of the new computer system we are going to put in, because the prices are going down dramatically. We are waiting until the very last moment we can to acquire a new system. Even though we are really bumping our resource limits right now, the prices are dropping so we are waiting and pushing the envelope as much as we can. So there is a cash balance in there but that cash balance is reviewed every year by the Legislative Auditor and there are federal cost allocation guidelines, SWCAP (Statewide Cost Allocation Plan), and various things that are administered by the Division of Financial Management that we also have to meet when we look at those cash balances. But there is basically enough in there for cash flow purposes plus to make the payments on the computer system.
Governor: The chair will entertain a motion.
Secretary of State: Governor, now there are four entities on this committee. The Controller’s Office, JFAC, Division of Financial Management and Treasurer. Can we hear from the legislature, from JFAC, the other entity.
Jeff Youtz: Governor, I am Jeff Youtz for the record. The immediate issue at hand that we are talking about is Fiscal Year 1999 rate. And that is largely going to be a budget decision that will be made in the next legislative session. Just like state agencies are submitting a 5% CEC request in their budget, an inflationary increase, those are preliminary decisions until JFAC actually sets the budget. That will be the same situation with this proposed rate of the Controller. We don’t even have Mr. Williams’ budget request in yet, and what he is asking for is a transaction rate that will support that budget. So right now it is just advisory. When the Joint Finance Appropriation Committee formally sets J.D.’s budget we will then back into a rate to support that budget and we will put that budget ceiling right in that appropriation, just like we did for 1997 and 1998.
Governor: Why are we being asked at this time to support a rate?
State Controller: It is the statute.
Jeff Youtz: Governor, I think the reason that statute was drafted was to let agencies know and allow them to budget for a rate increase, if it happens. Now if JFAC, when they set the Controller’s budget, cut something out of his budget - which we have done from time to time - that rate may not be necessary. We will determine what that rate should be after we set the Controller’s budget in the upcoming legislative session. Your decision at this point would more or less be advisory and allow state agencies to budget for the rate increase that has only been requested at this point. But it will be largely a budget decision that we will make during the legislative session and make that final call. I think the reason the Board of Examiners has been involved early in making a transaction rate increase was to inform state agencies that one may be coming and they can put that in their budget request. In the past we will had great increases that have come midway through the fiscal year that have surprised everybody, for which we have not provided any money in state budgets. That statute was enacted to involve you to make a preliminary rate decision so that everyone can at least prepare for it until such time as the final budgets are set.
Secretary of State: Governor, in our action whatever we do we wouldn’t be setting any budgets.
Jeff Youtz: You won’t, in fact, be making that final decision. The Joint Finance Appropriation Committee will set the Controller’s budget and then we will decide what transaction rates will be required to support the Controller’s budget. And we will put that right in the appropriation bill. The motion could be subject to JFAC’s appropriation. Your decision is such and such.
Secretary of State: In other words, we are just handing it over to JFAC?
Jeff Youtz: This won’t be a final rate that is set in stone. Just like the CEC decision is yet to be made. This is largely a decision made early to enable agencies to at least get it in their budget. Then if JFAC changes, makes cuts in the Controller’s budget, we in fact, back that rate down to match his budget.
Governor: Any further questions for Jeff? Thanks, Jeff.
Secretary of State: Governor, with that explanation I think we have no choice but to approve this and hand it over to the legislature to act upon, so I will move the approval.
Governor: Okay, I will second the motion. I would like you to know, J.D., I am not trying to pick on your budget.
State Controller: Governor, I understand completely.
Governor: I believe you are correct that we should put this preliminary figure in. All in favor will say aye.
Secretary of State
Opposed, nay. Chair votes aye. Motion is carried and the committee is adjourned.
WHEREUPON THE MEETING OF THE STATE BOARD OF EXAMINERS was adjourned, subject to the call of the Chairman.
Governor Philip E. Batt
Chairman of the Board
J. D. Williams, Secretary to the Board
and State Controller