Committee on Appropriations A/V — 2018

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Meeting called to order / Roll00:00:30
Mr. David Zolnowsky, Commissioner, Bureau of Information and Telecommunications, (BIT), introduced staff and made FY19 Budget Request as recommended by the Governor.00:01:57
Commissioner Zolnowsky reported (BIT) expanded the audio streaming services, SD.Net, for legislative coverage. There were 357,000 accesses to archived legislative meetings last year. There were 65,000 accesses to archived board and commission meetings.00:02:15
Commissioner Zolnowsky informed the committee a replica of The Vietnam Wall was on display at the Chamberlain rest stop in August with the help of South Dakota Public Broadcasting.00:04:16
Locally viewed radio and television events are a service South Dakota Public Broadcasting promotes.00:05:58
The (BIT) agency has used the Lean Methodology to improve efficiencies in the software development life cycle.00:06:34
Commissoner Zolnowsky stated (BIT) works with federal agencies to make sure computers are compliant and safe. Last year 24 I.T. audits were conducted. The federal government is requiring multi-factor authentication.00:08:17
Commissioner Zolnowsky said (BIT) contracted with AT&T to provide FirstNet services. Elk Mountain School District was the last eligible school to be added to the state network (DDN).00:09:56
Commissioner Zolnowsky said (BIT) provides voice-over I.P. phone services and the agency has been rewiring offices to keep up with newer technology.00:11:55
Bi-annually (BIT) works with state agencies to develop a technology roadmap. Sixty meetings were held last year. 00:12:37
The FY19 (BIT) budget request as recommended by the Governor includes $7,221,491 in general funds, $635,236 in federal funds, and $48,552,152 in other funds.00:13:40
Mr. Jeff Mehlhaff, Budget Analyst, Legislative Research Council, indicated the Governor recommends a decrease of $191,410 in other funds in the Data Centers department to align the budget with anticipated expenses. - Page 500:13:42
Senator Partridge - question - how has the Data Center changed over time and will (BIT) continue to make the Data Center more efficient with cost savings.00:15:52
Senator Tidemann - question - is there a way to tell the difference who uses the server to see legislative coverage and Ms. Julie Overgaard, Executive Director, South Dakota Public Broadcasting, will provide additional information.00:19:05
Reversion of Authority - Data Center History - Chart - Page 600:21:40
Budget by Decision Unit - Prior Year One-Time Transfer - Transferred $50,000 in other fund authority from Development to BIT Administration for one-time transfer from personal services to align the budget with anticipated expenses.00:22:06
A. Other Adjustments - Budget by Decision Unit - The Governor recommends a decrease of $121,000 in other funds to align the budget with anticipated expenses. - Page 800:22:25
Reversion of Authority History - Development - Chart - Page 900:23:10
Representative Anderson - question - do you plan to leave Development FTE position opens00:23:23
Representative Hunhoff - question - how many interns do you have and do you work with Dakota State University00:25:52
Representative Lake - question - are the same Development positions open every year and in what other areas do you have turnover00:26:54
Telecommunication Services - The Governor recommends a decrease of $43,000 to other funds to align the budget with anticipated expenses - Pages 10 and 1100:28:17
Windows 10 and Office 365 Migration - The agency requested an increase of $910,744 in other funds to continue the installation of Windows 10 and Office 365 - Page 1200:28:48
South Dakota Public Broadcasting requested 1 FTE and $50,594 in general funds to add a dedicated SD.Net coordinator. The Governor did not recommend this request. - Page 1500:30:29
South Dakota Public Broadcasting - SD.Net Upgrade to Video Streaming - The agency requested an increase of $51,000 in general funds to upgrade video streaming for the public meeting rooms at the Capitol. The Governor did not recommend this request. - Page 1600:30:30
Representative Bartels - question - could the committee receive a balance sheet and cash flow statement that South Dakota Public Broadcasting uses and requested additional information00:30:54
Representative Howard - question - are more people using SD.Net services and what are your usage projections00:31:43
Representative Howard - question - have you been paying overtime to current engineering staff and why do you need an additional FTE to cover SD.Net services00:34:54
Representative Ahlers - question - what are South Dakota Broadcasting funding sources and requested an explanation of federal funding history00:37:13
Major Items Summary: BIT Administration - Prior Year One-Time Transfer $50,000 in other fund authority from Development to BIT Administration for a one-time transfer from personal services to personal services to align the budget. - Page 1900:39:19
A. Other Adjustments - BIT Administration - The Governor recommends a decrease of 2 FTE and a reduction of $188,360 in other funds to align the budget with anticipated expenses.00:39:50
State Radio Engineering - Pages 22 and 2300:40:45
Representative Anderson - question - what is the plan to provide public radio services to all parts of the state00:40:53
Mr. Jeff Pierce, State Radio Engineering, (BIT), spent most of the 2017 year studying how other states manage radio systems and developed a plan when the funding is available.00:43:19
Senator Partridge - question - has AT&T been cooperative with (BIT) in implementing the FirstNet Program00:44:38
Representative Lake - question - what is the time frame to implement public radio services to all areas of the state00:45:56
Representative Anderson - question - is FirstNet a supplement to state radio or would it replace state radio00:47:18
Senator Tidemann - question - does it cost $500,000 to fund each underserved state radio site, is this a priority of the agency, and are there other funding options 00:48:18
Senator Tidemann - question - will you look at other funding opportunities for state radio00:50:04
Senator Cronin - question - what is the life expectancy of the new upgraded radio equipment 00:50:40
Senator Cronin - question - will you require companies to provide adequate notice for mandatory upgrades when negotiating a new contract to replace outdated state radio equipment00:51:40
Senator Nesiba- question - what are the state radio operating expenses between now and the year 202300:53:00
Representative Karr - question - why is there a $185,919 reversion for State Radio and why couldn't (BIT) use this money to purchase needed equipment and Commissioner Zolnowsky would provide additional information00:53:50
BIT Lean Update - Continuous Improvement Program - 2017 Review and 2018 Plan and Metrics - Charts - Pages 25 and 2600:56:48
Representative Howard - question - what specific things is the (BIT) agency has doing to reduce funds and staffing through the Lean process.00:59:15
Representative Hunhoff - question - are unexpected planned projects occupying the Development Team's time01:00:30
Ms. Deanne Booth, Development Director, indicated unplanned work has increased in November 2017 because the Development Department is documenting unplanned work.01:01:43
Representative Anderson - question - should the priority of the Development Department be to complete work projects in a timely manner01:03:13
BIT Billing Rate History - Page 2701:04:15
Senator Partridge - thanked appropriations committee and leadership at BIT to promote the Lean Methodology.01:04:44
Mr. Scott Bollinger, Commissioner, Bureau of Administration, (BOA), introduced staff and made FY19 Budget Request as recommended by the Governor. 01:06:41
The FY19 budget request includes $16,268,629 in general funds, $500,000 in federal funds, and $40,453, 207 in other funds and includes 165.0 FTE.01:07:09
Commissioner Bollinger gave an Obligation Center Recovery update. The first year the Obligation Recover Center collected approximately $1,800,000 of which $618,000 reverted to general funds. As of December 31, 2017, the Obligation Recovery Center has collected approximately $1,700,000 of which $453,000 has reverted to general funds. No additional FTE were assigned to run this project.01:08:40
Commission Bollinger gave an update on statewide maintenance and repair rates and indicated the agency would like to have maintenance and repair rate at 2%. Currently the rate is approximately 1.74% which is recommended by the Governor.01:10:16
Commissioner Bollinger requested an FTE for a Risk Analyst Position to conduct risk audits for technical schools starting in July. The agency would like to assess liability risks at public buildings, parks, campuses, and facilities more often.01:11:06
The (BOA) would like an FTE for the State Engineering Office to plan, design, and maintain Technical Institute Buildings.01:12:34
Commissioner Bollinger indicated the BOA agency is bringing forward Senate Bill 54 to address Obligation Recovery Center litigation.01:13:50
Representative Howard - question - what is included in the maintenance and repair fund for the Department of Agriculture and requested additional information01:14:20
Representative Hunhoff - question - what factors do you use to prioritize maintenance and repair projects01:15:19
Representative Bartels - requested a list of maintenance and repair projects by priority. Additional information was requested.01:16:22
Mr. Lucas Martin, Fiscal Analyst, Legislative Research Council, presented the Bureau of Administration (BOA) Budget Summary. The FY19 Budget Request is $16,268,629 in general funds, $500,000 in federal funds, and $40,453,207 in other funds which totals $57,221,836 and includes 165.0 FTE. - Page 301:17:05
Representative Howard - question - why was there a huge Capital Outlay Budget increase from FY16 to FY1701:17:49
Administrative Services Budget - Page 501:18:24
Sales Leaseback Budget and History of Program - Pages 7 and 801:18:37
Central Services - Budget Request - The agency requested $436,886 in other fund expenditure authority for capital lease payments for the State Fleet vehicles. - Page 1001:19:05
Representative Hunhoff - question - will Central Services do cooperative purchasing agreements with state agencies and what process is used 01:20:30
Representative Carson - question - why is the South Dakota auto leasing rate the best in the country01:22:23
Representative Howard - question - why did the Central Duplicating Budget increase 90% between FY17 and FY18 - Page 901:23:30
State Engineer - The agency requested $75,117 in other fund expenditure authority to fund 1.0 FTE and this engineer will be responsible for overseeing construction and maintenance projects.01:24:30
Representative Hunhoff - question - how do you determine state engineering FTE needs and does the agency contract with consulting engineers01:25:02
Representative Howard - question - how many projects do state engineers manage, how do the number of projects compare with the private sector, and are state engineers stationed all over the state01:26:22
The (BOA) agency requested an increase of $2,945,505 in General Funds. An increase of $2,093,102 would add back the amount that was cut last year from the maintenance and repair fund and the remaining $852,403 is based on changes in building values.01:27:57
Senator Cronin - question - what is the cost for state health lab repairs due to the recent water break01:28:20
Representative Anderson - question - is the agency using consistent methods to evaluate captive insurance and maintenance and repair values01:29:03
Representative Anderson - question - what are the two different methods to determine maintenance and repair needs and captive insurance needs01:31:33
Obligation Recovery Center - The agency requested an increase of $270,000 in General Funds. There is an increase in estimated collections within the Obligation Recovery Center. - Page 2301:33:30
Senator White - question - what is the turnaround time to collect funds for the state at the Obligation Recovery Center01:34:55
FY2017 Obligation Recovery Center Collection Activity - Page 2401:35:40
Analyst for Technical Institutes and Increased Work Load - Risk Management Administration - The agency requested an increase in Other Fund expenditure authority of $67,553 and includes one FTE. - Page 2701:36:25
Senator White - question - does the Bureau of Administration manage the Extraordinary Litigation Fund, do we renew the fund annually, and how does it compare historically01:37:40
Senator Cronin - question - wanted a list of the $36.8M in Obligation Recovery Center debt by age and requested additional information.01:39:58
Representative Hunhoff - question - Risk Management Administration FTE historical trend - Page 2601:40:45
Ms. Laurie Gill, Commissioner, Bureau of Humans Resources, (BHR), made staff introductions, gave overview, and made FY19 Budget request as recommended by the Governor.01:43:10
Commissioner Gill, (BHR), indicated the lack of workforce, inability to retain the current workforce, and lack of funding are challenges. 01:46:35
Bureau of Human Resources (BHR) programs include Personnel Management/Employee Benefits and the South Dakota Risk Pool. The South Dakota Risk Pool was phased out in FY16.01:49:31
Budget Request: Personnel Management/Employee Benefits by Fund Category - Page 401:50:09
Mr. Jason Simmons, Principal Fiscal Budget Analyst, Legislative Research Council, indicated that the Bureau of Human Resources FY19 Budget Request includes $282,029 in General Funds, $0 in Federal Funds, and $6,792,617 in Other Funds and totals $7,074,646 that includes 73.5 FTE. - Page 201:50:10
Personal Management Employee Benefits - There are no changes from the FY18 budget, no interim budget requests, and no budget transfers within departments. In FY17 there were 3.7 underutilized FTE, $387 in general funds, $0 in federal funds, and $280,027 in other funds, totaling $280,414 that were reverted. - Pages 3 - 501:50:45
Representative Howard - question - what is the Budgeted Insurance Cost per Benefitted Employee hasn't increased from last year and why hasn't the agency made a budget request01:51:37
Representative Hunhoff - question - why were 3.7 (BHR) FTE not utilized01:53:15
Representative Hunhoff - question - why weren't 3.7 FTE's decreased for (BHR) in FY1901:54:25
Summary Total Remuneration Results - Ms. Ellen Zeller, Director, Classification and Compensation, reported the remuneration study results for Years 2013 and 2017 and Commissioner Gill distributed the (BHR) Workforce Brochure.01:57:55
Original Remuneration Study was conducted in the Year 2013 and an update was conducted in the Year 2017.01:58:43
(BHR) have several different salary structures which include General, Medical, Law Enforcement, and six occupation based market structures called Career Bands.01:58:55
Ms. Zeller indicated it is a common practice to set salary structure at 50% of the market place. The market place includes six surrounding state governments and in-state public and private employers. 01:59:29
Ms. Zeller stated the Remuneration Studies includes all forms of compensation which includes medical and retirement benefits, and any other type of insurance and pay.02:00:15
The State of South Dakota salaries and benefits are (10.9%) below the market 50th percentile which is considered potentially misaligned and is an improvement from the Year 2013 when the State of South Dakota was (17.3%) below the market 50th percentile, which is considered significantly misaligned. 02:01:40
One-third of all jobs are paid competitively to highly competitively and two-thirds are potentially misaligned.02:02:05
The consulting group,Gallagher Benefits Services, made recommendations to the Bureau of Human Resources as follows: Salary structures and base salaries be reviewed seperately every 3 to 5 years. Move structure minimums closer to market minimums. The agency's goal is to make entry level positions more competitive and salary changes would affect 1,500 employees. The consulting group also recommended the state contribute more to family health insurance plans similar to the market place.02:03:20
Adjustments to Artificial Minimums - Pay Grades and Numbers of Employee Affected - Chart - Page 202:05:15
Ms. Zeller reported the goal of (BHR) is to increase certain jobs to be 86% of the market minimums. - Chart - Page 202:06:00
Representative Howard - question - does (BHR) compare the state salary structure just to the private sector02:06:54
Representative Ahlers - question - do you have a list of actual minimums for actual job descriptions and requested additional information02:08:39
Representative Ahlers - question are the minimums for employees that are promoted also have their salary structure artificially set02:09:28
Senator Peters - question - why were Technicians in the Department of Transportation overlooked and requested an update to address workforce shortage02:11:20
Senator Peters - question - has there been an increase in base pay in the Department of Transportation technician pay and expressed concern keeping experienced and educated technician employees that earn low pay02:12:50
Senator Peters - question - what time frame will (BHR) process Department of Transportation surveys and address low technician pay02:13:40
Commissioner Gill, (BHR), indicated the agency would process the (DOT) surveys and have their part completed within the next quarter02:15:40
Representative Hunhoff - question are additional funds available for the Department of Transportation technicians salary dilemma02:15:50
Commissioner Gill, BHR, reported on the South Dakota Employee Health Benefits Program. The plan is self-funded and Dakota Care processes claims. There are approximately 27,000 members which include 12,640 employees. The rest are spouses and dependents.02:16:20
Ms. Mary Keeler, Accounting Manager, Bureau of Finance and Management, indicated the State Employee Health Plan is on the full accrual basis of accounting - FY17, Estimated FY18, and Estimated FY19 Chart - Page 302:17:40
State Employee Health Plan Full Accrual Financial Statement - Revenue and Expenses - FY17, FY18 Estimated, and FY19 Estimated - Page 302:17:51
Cumulative Over/Underrecovery - $12,047,140 in FY17, and was depleted to $5,098,474 in FY18, and will be $0 in FY19. 02:19:08
Representative Howard - question - what are the health care plan design changes for FY1902:22:15
Representative Hunhoff - question - what are the claims over the past five years and by percentage claim increase, what are the high-risk claims by category, what is the COBRA and dependent pay and how many people fall into this category. Additional information was requested.02:22:39
Representative Ahlers- question - what happens if the reserve level ends with a negative balance, what is the current trend, and how long will it be before the reserve level is a concern02:23:44
Commissioner Gill reported the health plan reserve was established a few years ago and designed to get through two bad years. The agency is making health care plan changes to address anticipated expenses.02:27:00
Representative Anderson - question - why are the operating costs of the health plan high and the operating costs of workers compensation program so much lower - Page 63 - State Employee Benefits Plan Fund - GOAC Blue Book02:28:50
Senator Peters - question - how many people have health care benefits, how many people are the low deductible plan, and what are the benefit changes, and requested additional information02:32:30
Senator White - provided a historical perspective of the challenges of the State Health Plan and indicated the State Employee Health Plan has been well managed over the past few years 02:33:04
Ms. Keeler indicated the trend of claims reported over the past five years have been consistent. No double-digit percentage increase in claims have occurred changes and would forward information to Mr. Jason Simmons, Principal Budget Analyst, Legislative Research Council.02:36:34
Representative Hunhoff - requested benchmark metrics versus other states, what are current incentives, wanted to know how to monitor claim trends, and requested additional information02:38:25
Mr. Tom Steckel, Director, Division of Employee Benefits, (BHR), stated the FY18 state health care benefits provide two options. One is an $850 low deductible plan and the other is an $1,800 high deductible plan for a single person. Sixty-eight percent of the state employees are enrolled in the high deductible plan and 32% are enrolled in the low deductible plan.02:39:45
The low deductible plan requires a health screening, online health assessment, and requires employees to earn 100 wellness points and must be completed by January 31st of each year. 02:40:45
In FY18, 11,769 members have completed the health screening and an additional 532 have requested to go to a clinic health screening. 02:42:25
There is a $300 annual opt out option if employees elect not to participate in the health care benefits plan. 02:45:57
Representative Lake - question - what was the total prescription deductible change per person in FY1802:46:05
FY19 Proposed Health Care Design Changes - Spouses will pay an additional $100 per month surcharge in FY19 if a spouse has another health care option through employment. This applies to both plans. 02:46:45
Senator Cronin - question - how many spouses are on current state employee health plan and how will (BHR) track this information02:48:25
Senator Partridge - question - commented the high deductible plan seems low and what would be the savings if this deductible would be raised02:48:41
Senator Cronin question - how many employees, spouses, and dependents are on the state employee health plan and requested information. Senator Cronin - question - how will the agency monitor the optional health insurance company and requested additional information about the proposed changes for FY19.02:49:23
Representative Howard - question - how long has the state government given the $300 annual opt out plan for state employees02:49:30
Mr. Steckel, (BHR), said FY19 health care plan changes include raising the high deductible $300 to $1,950 per year and raising the low deductible plan $300 to $1,150 per year02:50:30
Senator Partridge - question - what type of savings would the state of South Dakota have if state employees and their families raised their deductible. Mr. Steckel reported the savings to the State of South Dakota would be $3.1M in the FY19 plan.02:51:00
Senator Nesiba - question - what percentage of state employees will be affected by no salary increase and an increase in health care plan premiums02:53:55
Senator Nesiba - question - what would it cost to keep state employees whole without raising deductibles02:55:40
Commissioner Gill reported it would take $7.5M to $8.0M in general, federal, and other funds to keep the State Employee Health Benefits Plan at the FY18 level.02:56:50
Senator Cronin - question - what is the cost to the State of South Dakota for the premium increase for FY1902:57:45
Senator Peters - question - what is the cost of the family health care premiums changes in proposed FY19 changes02:59:50
Senator Peters - question - how much money will state employee families pay additionally to participate in the state health plan in FY19 03:00:00
Mr. Steckel replied that families would be paying 23% more in dependent premiums in FY19 which would provide a $438,897 savings to the state.03:01:00
Representative Bartels - requested additional information about the state employee health insurance plan03:03:50
Ms. Keeler reported health insurance costs are rising and the FY19 shortfall will come from $5,098,474 in health reserve funds and plan design changes.03:05:50
Representative Hunhoff - requested an additional hearing and requested additional information from the Bureau Human Resources to have a better understanding on agency budget needs.03:06:10
Representative Anderson - requested information similiar the agency will give to the state employee when they choose a health insurance plan.03:07:21
Representative Lake - question - is the $7.5M needed in addition to the $5M reserve to cover rising health insurance costs03:07:42
Senator Nesiba - question - what is the salary impact on state employees in addition to increased health care costs. Additional information was requested.03:08:49
Senator Tidemann - question - what percentage of state employees make less than $50,000 and how do we compare to surrounding states. What do other states offer for state employee health care plans and how much does it cost. Additional information was requested.03:09:25
Adjourn Peters/Bartels03:11:40