NORTH DAKOTA LEGISLATIVE COUNCIL
Minutes of the
BUDGET SECTION
Thursday, September 25, 2008
Senate Chamber, State Capitol
Bismarck, North Dakota
Senator Ray Holmberg, Chairman, called the
meeting to order at 9:00 a.m.
Members present: Senators Ray Holmberg, Bill
Bowman, Randel Christmann, Tony Grindberg,
Ralph L. Kilzer, Aaron Krauter, Elroy N. Lindaas, Tim
Mathern, Carolyn Nelson, David O'Connell, Larry J.
Robinson, Tom Seymour, Harvey D. Tallackson;
Representatives Ole Aarsvold, Larry Bellew, Rick
Berg, Ron Carlisle, Al Carlson, Jeff Delzer, Mary
Ekstrom, Eliot Glassheim, Pam Gulleson, James
Kerzman, Matthew M. Klein, Gary Kreidt, Joe
Kroeber, Ralph Metcalf, David Monson, Jon Nelson,
Kenton Onstad, Chet Pollert, Bob Skarphol, Blair
Thoreson, Alon Wieland, Clark Williams
Members absent: Senators Tom Fischer,
Karen K. Krebsbach, Bob Stenehjem, Rich Wardner;
Representatives Merle Boucher, Kathy Hawken, Keith
Kempenich, Bob Martinson, Ken Svedjan, Francis J.
Wald
Others present: Jim W. Smith, Legislative
Council, Bismarck
See Appendix A for additional persons present.
It was moved by Senator Robinson, seconded
by Senator Seymour, and carried on a voice vote
that the minutes of the June 18, 2008, meeting be
approved as distributed.
STATUS OF THE STATE GENERAL FUND
Chairman Holmberg called on Ms. Pam Sharp,
Director, Office of Management and Budget, to
present a report on the status of the general fund.
Ms. Sharp said the consumer price index is
expected to average 4.4 percent during 2008. She
said North Dakota's unemployment rate for August
2008 was 3.3 percent, considerably lower than the
national rate of 6.1 percent in August 2008. She said
North Dakota oil production increased to 172,000
barrels per day in July 2008. She said the average
price for North Dakota crude oil was $117 per barrel in
May 2008, $126 per barrel in June 2008, and $125
per barrel in July 2008. She said the current oil price
is approximately $111 per barrel and the rig count is
89, 43 more rigs than were operating in the state one
year ago.
In response to a question from Senator Krauter,
Ms. Sharp said oil pipeline volume constraints were
considered when preparing the revised forecast.
Ms. Sharp presented the following information on
the status of the state general fund for the 2007-09
biennium based on revenue collections through
August 2008:
Unobligated general
fund balance - July 1,
2007
$295,541,176
Add
General fund
collections through
August 2008
$1,535,043,766
Forecasted general
fund revenue for the
remainder of the
2007-09 biennium
(based on the July
2008 revised forecast)
1,077,697,548
Total estimated general
fund revenue for the
2007-09 biennium
$2,612,741,314
Total available $2,908,282,490
Less
2007-09 biennium
general fund ongoing
appropriations
$2,317,447,307
2007-09 biennium
general fund one-time
appropriations
139,526,649
Contingent
appropriation
(Section 50 of 2007
Senate Bill No. 2200)
5,000,000
Total appropriations $2,461,973,956
Estimated general fund
balance - June 30,
2009
$446,308,534
A copy of the information presented is on file in the
Legislative Council office.
Ms. Sharp presented the following information on
the status of the permanent oil tax trust fund for the
2007-09 biennium:
Budget Section 2 September 25, 2008
Beginning permanent oil tax trust fund
balance - July 1, 2007
$143,270,662
Add
Revenue collections through August 2008 275,158,783
Forecasted revenues for the remainder of
the 2007-09 biennium (based on revised
forecast assumptions for oil price and
production)
358,871,552
Total estimated permanent oil tax trust
funds available for the 2007-09 biennium
Less expenditures and transfers
$777,300,997
145,716,541
Estimated permanent oil tax trust fund
balance - June 30, 2009
$631,584,456
A copy of the information presented is on file in the
Legislative Council office.
Ms. Sharp presented information on general fund
revenue collections for August 2008 and the 2007-09
biennium to date. She said individual income tax
collections were less than estimated for the month
because the Tax Department determined it was
necessary to transfer an additional $6 million to the
refund reserve account to provide adequate funds for
property tax income tax credit claims. She said
revenues collected for the biennium to date are
16.6 percent more than the legislative forecast. She
said the increase is primarily due to biennium to date
increases in sales tax and individual and corporate
income tax collections. She said sales tax and
individual income tax collections exceed the forecast
for the biennium to date by 13.1 percent and
18.6 percent, respectively. She said corporate
income tax collections exceed the biennium to date
forecast by $63.4 million or approximately
81.4 percent. A copy of the report is on file in the
Legislative Council office.
PRELIMINARY 2009-11
REVENUE FORECAST
Ms. Sharp presented information regarding the
revised 2007-09 biennium revenue forecast and the
preliminary 2009-11 biennium revenue forecast. She
said it is estimated that 2007-09 biennium revenue will
total $2.5 billion, $363 million more than the April 2007
legislative forecast. She said it is estimated that
2009-11 biennium revenue will total $2.7 billion,
$202 million more than the 2007-09 biennium revised
forecast. She said it is anticipated that transfers to the
permanent oil tax trust fund will total $625 million
during the 2007-09 biennium and $666 million during
the 2009-11 biennium. A copy of the report is on file
in the Legislative Council office.
TOBACCO SETTLEMENT PROCEEDS
Ms. Sharp presented information on the status of
tobacco settlement proceeds received by North
Dakota. She said the tobacco settlement payment
received in April 2008 was approximately $36.5 million
and the next payment will be received in April 2009.
She provided information regarding revenues and
expenditures for the community health trust fund and
the water development trust fund since inception of
the funds. She said total revenues deposited in the
community health trust fund and the water
development trust fund since inception totaled
$23 million and $105 million, respectively. A copy of
the report is on file in the Legislative Council office.
FISCAL IRREGULARITIES
Pursuant to North Dakota Century Code (NDCC)
Section 54-14-03.1, Ms. Sharp presented information
on irregularities in the fiscal practices of the state.
She said the following state agencies are reported as
having fiscal irregularities:
Agency Amount Reason
North Dakota Vision
Services - School
for the Blind
$3,726 Additional work in June for
four teachers outside of
their nine-month teaching
contract
State Fair
Association
$8,764 Additional work for three
individuals during
transition to new State Fair
Association manager
Department of
Commerce
$1,625 Temporary additional work
for a special project
Department of
Corrections and
Rehabilitation -
Youth Correctional
Center
$750 Additional work in August
for one teacher at the
Youth Correctional Center
outside of her teaching
contract
State Auditor's
office
$14,000 Performance bonuses are
limited by statute to 13, but
14 individuals received
performance bonuses in
fiscal year 2008.
A copy of the information presented is on file in the
Legislative Council office.
ANNUAL AUDITS OF RENAISSANCE
FUND ORGANIZATIONS
Mr. Gordon La France, Manager, Renaissance
Zone Program, Division of Community Services,
Department of Commerce, presented information
regarding annual audits of renaissance fund
organizations pursuant to NDCC Section 40-63-07(9).
He said there are 43 renaissance zone cities, of which
seven have renaissance fund organizations. He said
$591,250 of the $2.5 million in renaissance credits
approved by the 1999 Legislative Assembly remain
but are unavailable because of pending investments.
He said $682,500 of the $2.5 million in renaissance
credits approved by the 2003 Legislative Assembly
remain available. He said independent auditor's
reports of the renaissance fund organizations
examined contain no exceptions. A copy of the report
is on file in the Legislative Council office.
Budget Section 3 September 25, 2008
2007-09 CENTERS OF EXCELLENCE
APPLICATIONS
Chairman Holmberg called on Ms. Roxanne
Woeste, Assistant Legislative Budget Analyst and
Auditor, Legislative Council, to present a
memorandum entitled Summary of 2007-09 Centers
of Excellence Applications - Round 2 (Appendix B).
Ms. Woeste said the 2007 Legislative Assembly
appropriated $15 million from the permanent oil tax
trust fund to the Office of Management and Budget for
centers of excellence grants and authorized the Office
of Management and Budget, as directed by the
Centers of Excellence Commission and with
Emergency Commission and Budget Section
approval, to borrow up to $5 million from the Bank of
North Dakota for providing additional funding for
centers of excellence, if the $15 million is committed.
She said centers of excellence projects totaling
$10 million were approved in Round 1 of the
application process in October 2007. She said of the
six centers of excellence applications approved in
Round 1, two have been discontinued. As a result,
she said the Centers of Excellence Commission will
not be distributing $4.6 million of the $10 million
approved for Round 1 projects; therefore,
$14.6 million is available for Round 2 applications.
She said Round 2 of the 2007-09 centers of
excellence applications includes seven projects
totaling $14,050,000 and, if all are approved,
$550,000 of the total $20 million appropriated for
centers of excellence grants for the 2007-09 biennium
would remain unawarded. She presented statutory
provisions and summary information for each of the
seven Round 2 centers of excellence applications and
a brief summary of the centers of excellence approval
process.
Mr. Mark Nisbet, Chairman, Centers of Excellence
Commission, presented the centers of excellence
projects for consideration by the Budget Section.
North Dakota State University - Center for
Integrated Electronic Systems
Mr. Nisbet presented information on the North
Dakota State University Center of Excellence for
Integrated Electronic Systems. He said the Centers of
Excellence Commission recommends $2,050,000 for
the center. He said the private sector partners are
Bobcat, Pedigree Technologies, Intelligent InSites,
Inc., and Datacom International, Inc. He said the
center will perform market-driven research and
development involving systems integration of
electronic hardware and software and anticipates the
project will create 60 new jobs.
Dr. Philip Boudjouk, Vice President for Research,
Creative Activities, and Technology Transfer, North
Dakota State University, said software embedded in
machines will allow for more efficient machine control.
Mr. Tom Sagasser, Director of Technology,
Bobcat, said his company anticipates the industry will
change substantially in the next 10 years and Bobcat
would benefit from working with North Dakota State
University to be a leader in the development of
electronic-embedded controllers.
In response to a question from Senator Bowman,
Dr. Boudjouk said there is no commitment by the state
beyond the original project cost for any of the centers
of excellence projects.
North Dakota State University - Center for
Biopharmaceutical Research and Production
Mr. Nisbet presented information on the North
Dakota State University Center for Biopharmaceutical
Research and Production. He said the Centers of
Excellence Commission recommends $2,000,000 for
the center. He said the private sector partners are
Aldevron, Clinical Supplies Management, Paraclin,
PRACS Institute, Ltd., and MeritCare. He said the
project will review experimentation and processing
technologies for vaccines and anticipates the project
will create 40 new professional and technical jobs.
Dr. Charles Peterson, Dean of the College of
Pharmacy, Nursing, and Allied Sciences, North
Dakota State University, said the project proposes to
create a basic science research laboratory at North
Dakota State University, hire a high-profile
vaccinologist, and build a foundation for vaccine
research and development for participating private
sector partners.
Mr. Michael Chambers, President and CEO,
Aldevron, said this project will support the research
and development of vaccines. He said the center of
excellence allows businesses like Aldevon to be
involved with the university researchers to complete
necessary research to expand business opportunities.
University of North Dakota -
Passive Therapeutics
Mr. Nisbet presented information on the University
of North Dakota Center of Excellence for Passive
Therapeutics. He said the Centers of Excellence
Commission recommends $2,650,000 for the center.
He said the private sector partners are Aldevron,
Avianax, Mayo Clinic, NovaDigm Therapeutic,
Cangene, Schiltz Goose Farms, North, and Schiltz
Goose R&D. He said the project's goals include
advancing the development of therapeutic antibodies
as effective treatment for West Nile virus and avian
influenza. He said the project anticipates providing
new training and job opportunities for students
enrolled in the life sciences, developing and producing
high-value products utilizing raw agricultural materials,
and creating 40 to 50 jobs over the next three to five
years.
Dr. James Petell, Associate Vice President for
Intellectual Property Commercialization and Economic
Development, University of North Dakota, said the
project has been extensively developed and
therapeutic antibodies have been demonstrated to be
highly effective against West Nile virus in animals.
Budget Section 4 September 25, 2008
Mr. Rich Glynn, Special Projects Coordinator and
Administrative Assistant to the Vice President, Schiltz
Goose Farms, said Schiltz Goose Farms is the largest
producer and processor of geese in North America
and has developed a cure for West Nile virus in geese
that has been approved by the University of North
Dakota. He said Schiltz Goose Farms is working with
the University of North Dakota and Mayo Clinic to
develop the vaccine for use in mammals and humans.
He said Schiltz Goose Farms has moved a portion of
its operation from South Dakota to North Dakota to
have a supply of geese closer to the research.
University of North Dakota - SUNRISE
BioProducts: A Center of Excellence for
Chemicals, Polymers, and Composites From
Crop Oils
Mr. Nisbet presented information on the University
of North Dakota SUNRISE BioProducts: A Center of
Excellence for Chemicals, Polymers, and Composites
From Crop Oils. He said the Centers of Excellence
Commission recommends $2,950,000 for the center.
He said the private sector partners are SUNRISE
Renewables, Bayer CropScience, Northwood Mills,
Kadrmas, Lee and Jackson, Global Agricultural
Solutions, LM Glasfiber, Integrity/Marvin Windows,
Tecton Products, Composite Innovations, PPG
Industries, Ashland, and Rohm and Haas. He said
the purpose of the project is to invent, develop, and
commercialize green industrial chemicals, polymers,
and fiber composites utilizing crop oils as the primary
raw material feedstock. He said the project is
anticipated to create 15 new technology-related
private sector jobs with the potential of 50 jobs within
four years.
Dr. Wayne Seames, Associate Professor,
Department of Chemical Engineering, University of
North Dakota, and Director of North Dakota
SUNRISE, said the chemicals and polymers produced
from petroleum products can be produced from crop
oils which will result in a higher profit potential.
Mr. Clarence Leschied, General Manager,
Northwood Mills, said his facility anticipates using the
research conducted by the University of North Dakota
to convert the crude oil feedstock it produces into
high-value bio-based products.
Mr. Dave Blair, Business Development and
Community Relations, Kadrmas, Lee and Jackson,
said a 10 million gallon operation could generate 35 to
50 new jobs in a community.
University of North Dakota - Center of
Excellence in Space Technology and
Operations
Mr. Nisbet presented information on the University
of North Dakota Center of Excellence in Space
Technology and Operations. He said the Centers of
Excellence Commission recommends $1,000,000 for
the center. He said the private sector partners are
GeoOptics LLC and Broad Reach Engineering, Inc.
He said the project, if approved, will bring GeoOptics
LLC's CICERO Mission Operations and Analysis
Center to Grand Forks, with the University of North
Dakota as its academic partner. The CICERO project
is a constellation of earth-orbiting spacecraft that will
commence operation in 2011 and which will
continually take atmospheric measurements in
hundreds of locations simultaneously around the
globe. He said the aerospace company will create
25 new jobs in the first five years and up to 40 jobs in
eight years.
Mr. Doug Olsen, Project Manager, Upper Midwest
Aerospace Consortium, said the project would allow
GeoOptics LLC to locate the mission control center for
its fleet of satellites in North Dakota. He said the
satellites will measure temperature and pressure
profiles. He said GeoOptics LLC will sell the
information to subscribers such as the National
Oceanic and Atmospheric Administration and the
National Weather Service.
Mr. Tom Yunck, President, GeoOptics LLC, said
the center will provide an ideal source of trained
scientific talent, experienced in climate research, and
a source of students to be employed. He said the
project is comprised of two parts. He said the first
part of the project, a space operations center funded
by GeoOptics LLC, will operate the spacecraft,
receive the data, and process and distribute the data.
He said the second part of the project will be the
potential for data research that will attract federal
research funds from agencies such as the National
Aeronautics and Space Administration, the National
Oceanic and Atmospheric Administration, the National
Science Foundation, the Department of Energy, and
others.
University of North Dakota - Petroleum
Research, Education, and Entrepreneurship
Center of Excellence
Mr. Nisbet presented information on the University
of North Dakota Petroleum Research, Education, and
Entrepreneurship Center of Excellence. He said the
Centers of Excellence Commission recommends
$3,000,000 for the center. He said the private sector
partners are Schlumberger Information Solutions, IHS,
Inc., American Petroleum Institute, Encore Acquisition
Company, Hess Corporation, Marathon Oil
Corporation, St. Mary Land and Exploration Company,
and Whiting Petroleum Corporation. He said the
project seeks to improve understanding of the
geology, geophysics, and petroleum engineering
characteristics of the Williston Basin, especially the
Bakken formation; develop enhanced oil recovery
techniques; develop techniques for carbon dioxide
sequestration; develop engineering enhanced
geothermal systems; address environmental and
policy issues; and help entrepreneurs develop new
businesses and industry.
Mr. William Gosnold, Chairman, Department of
Geology and Geological Engineering, University of
North Dakota, said the project seeks to improve oil
Budget Section 5 September 25, 2008
production, particularly from the Bakken formation
through geomechanical analysis.
Mr. James Crohn, Chief Petroleum Engineer, Ward
Williston Oil Company, said access to technical
professionals such as those available through the
center will help companies identify additional reserves
and more effectively recover oil from existing
reserves.
Minot State University - Bottineau -
Entrepreneurial Center for Horticulture
Mr. Nisbet presented information on the Minot
State University - Bottineau Entrepreneurial Center for
Horticulture. He said the Centers of Excellence
Commission recommends $400,000 for the center.
He said the private sector partners are North Star
Farms and the North Dakota Farmers Market and
Growers Association. He said the center will provide
research and demonstration of high-skill production
methods, expand and provide new opportunities for
product commercialization and distribution, and
provide the technology transfer necessary to make
business opportunities grow.
Ms. Holly Rose Mawby, Director, Entrepreneurial
Center for Horticulture, Minot State University -
Bottineau, said the project will result in over one
hundred jobs, hundreds of entrepreneurs, and
valuable spinoff companies.
Ms. Pattie Patrie, Chair, North Dakota Farmers
Market and Growers Association, said the association
supports the Entrepreneurial Center for Horticulture
and is providing center participants with the North
Dakota Farmers Market and Growers Association
logo. She said growers have had marketing help in
the past, but the center will provide much needed
research regarding production. She said the
association will be surveying markets and
encouraging organizations such as hospitals and
schools to purchase local foods.
Ms. Ilene Baker, Owner, North Star Farms, said
commercialization of the local fruit and vegetable
industry is a goal North Star Farms shares with the
Entrepreneurial Center for Horticulture. She said
North Star Farms will provide research, education,
and assistance to establish a distribution center.
In response to a question from Senator
Christmann, Mr. Nisbet said the Centers of Excellence
Commission rejected two proposals in this round of
applicants.
Representative Berg expressed concern that many
centers of excellence proposals contain a minimal
amount of private sector cash.
It was moved by Representative Berg,
seconded by Senator O'Connell, and carried on a
roll call vote that pursuant to NDCC Section
15-69-02 and Section 14, 2007 House Bill No. 1018
the Budget Section approve the following center
of excellence funding award requests, which have
been recommended by the Centers of Excellence
Commission and considered by the Emergency
Commission:
• Centers of Excellence Commission (Request
#1669) - North Dakota State University -
Center for Integrated Electronic Systems -
$2,050,000.
• Centers of Excellence Commission (Request
#1670) - North Dakota State University -
Center for Biopharmaceutical Research and
Production - $2,000,000.
• Centers of Excellence Commission (Request
#1671) - University of North Dakota - Passive
Therapeutics - $2,650,000.
• Centers of Excellence Commission (Request
#1672) - University of North Dakota -
SUNRISE BioProducts: A Center of
Excellence for Chemicals, Polymers, and
Composites From Crop Oils - $2,950,000.
• Centers of Excellence Commission (Request
#1673) - University of North Dakota -
Petroleum Research, Education, and
Entrepreneurship Center of Excellence -
$3,000,000.
• Centers of Excellence Commission (Request
#1674) - University of North Dakota - Center
of Excellence in Space Technology and
Operations - $1,000,000.
• Centers of Excellence Commission (Request
#1675) - Minot State University - Bottineau -
Entrepreneurial Center for Horticulture -
$400,000.
Senators Holmberg, Bowman, Christmann,
Grindberg, Kilzer, Krauter, Lindaas, Mathern, Nelson,
O'Connell, Robinson, Seymour, and Tallackson and
Representatives Aarsvold, Bellew, Berg, Carlisle,
Ekstrom, Glassheim, Gulleson, Kerzman, Klein,
Kreidt, Kroeber, Metcalf, Monson, Nelson, Onstad,
Pollert, Thoreson, Wieland, and Williams voted "aye."
No negative votes were cast.
AGENCY REQUEST AUTHORIZED BY
THE EMERGENCY COMMISSION
Ms. Sharp presented information regarding a
request by the Office of Management and Budget to
borrow $5 million from the Bank of North Dakota for
centers of excellence grants pursuant to 2007 House
Bill No. 1018 (Request #1685).
It was moved by Senator Robinson, seconded
by Senator Grindberg, and carried on a roll call
vote that pursuant to Section 15 of 2007 House Bill
No. 1018 the Budget Section approve the request
which has been approved by the Emergency
Commission for the Office of Management and
Budget to borrow $5 million from the Bank of
North Dakota for centers of excellence grants
pursuant to 2007 House Bill No. 1018 (Request
#1685). Senators Holmberg, Bowman, Christmann,
Grindberg, Kilzer, Lindaas, Mathern, Nelson,
Robinson, and Seymour and Representatives
Aarsvold, Bellew, Berg, Ekstrom, Glassheim,
Gulleson, Klein, Kreidt, Kroeber, Metcalf, Monson,
Budget Section 6 September 25, 2008
Onstad, Pollert, Skarphol, Wieland, and Williams
voted "aye." No negative votes were cast.
RECOMMENDATION FROM THE BUDGET
AND FINANCE COMMITTEE RELATING
TO THE FORM OF THE APPROPRIATION
BILLS FOR THE 2009 LEGISLATIVE
SESSION
Mr. Allen H. Knudson, Legislative Budget Analyst
and Auditor, Legislative Council, presented a
memorandum entitled Authorized Number of Full-
Time Equivalent Positions - Consideration of Inclusion
in Appropriation Bills (Appendix C) which provides
information regarding the current process of
authorizing the number of full-time equivalent (FTE)
positions and proposed changes to the appropriation
bill format for the 2009 legislative session as
recommended by the Budget and Finance Committee.
He said, if adopted, the proposed changes would
identify the number of authorized FTE positions for
each agency in appropriation bills and provide for the
use a three-column format identifying base level of
funding, adjustments or enhancements, and the
appropriation for each agency within one section of
the bill. He said the Emergency Commission may
currently authorize additional FTE positions during the
interim, but these positions are only authorized for the
current biennium. He said to continue the position,
the agency must request the position as a new FTE
from the next Legislative Assembly. He said if the
Legislative Assembly includes the number of
authorized FTE positions for an agency in the
appropriation bill, the Emergency Commission would
need specific authority to approve additional FTE
positions.
It was moved by Representative Thoreson,
seconded by Representative Aarsvold, and carried
on a roll call vote that pursuant to NDCC Section
54-44.1-07 the Budget Section approve changes to
the budget data as recommended by the Budget
and Finance Committee to provide that the Office
of Management and Budget prepare the
appropriation bills for introduction to the
Legislative Assembly in a format that provides:
• Base level funding, adjustments or
enhancements, and the appropriation for
each agency in a single section using a
three-column format; and
• The number of full-time equivalent positions
in total for each agency shown for the base
level, adjustments or enhancements, and
the authorized (appropriation) level.
Senators Holmberg, Bowman, Christmann,
Grindberg, Kilzer, Krauter, Lindaas, Mathern, Nelson,
Robinson, and Seymour and Representatives
Aarsvold, Bellew, Berg, Carlisle, Delzer, Ekstrom,
Glassheim, Gulleson, Kerzman, Klein, Kreidt, Metcalf,
Monson, Nelson, Onstad, Pollert, Skarphol, Thoreson,
Wieland, and Williams voted "aye." No negative votes
were cast.
Representative Skarphol suggested agencies
monitor and report on expenditures made for deferred
maintenance and extraordinary repairs projects to
assist the Legislative Assembly in identifying
outstanding deferred maintenance.
Representative Aarsvold said special assessments
should be included in the definition of extraordinary
repairs.
In response to a question from Representative
Skarphol, Ms. Sharp said it would be important to
provide agencies a definition of deferred maintenance
and extraordinary repairs.
It was moved by Representative Skarphol,
seconded by Representative Klein, and carried on
a roll call vote that pursuant to NDCC Section
54-44.1-07 the Budget Section request the Office
of Management and Budget to prepare the
appropriation bills for introduction to the 2009
Legislative Assembly by including a separate line
item for deferred maintenance funding, and that
each agency maintain detailed records of amounts
spent from this line item for deferred maintenance
and for any extraordinary repairs or other
purposes. Senators Holmberg, Bowman,
Christmann, Grindberg, Krauter, Lindaas, Mathern,
Nelson, O'Connell, Robinson, Seymour, and
Tallackson and Representatives Aarsvold, Bellew,
Berg, Carlisle, Delzer, Ekstrom, Glassheim, Gulleson,
Kerzman, Klein, Kreidt, Metcalf, Monson, Nelson,
Onstad, Pollert, Skarphol, Thoreson, Wieland, and
Williams voted "aye." No negative votes were cast.
MEMORANDUM ON OTHER STATES'
METHODS OF EVALUATING THE FUTURE
COSTS OF DONATED FACILITIES AND
ANY SUBSEQUENT MONITORING OF
ACTUAL COSTS
The Legislative Council staff presented a
memorandum entitled Approval and Evaluation of
Donated Assets - Other States (Appendix D) which
provides information on other states' methods of
evaluating the future costs of donated facilities and
any subsequent monitoring of actual costs. The
Legislative Council staff said of the 12 states
reviewed, 5 did not require legislative approval of
donated assets and 7 states require varying levels of
approval to accept donated assets. The Legislative
Council staff said most legislatures that require
legislative approval to accept donated assets meet
annually.
WORKFORCE SAFETY AND
INSURANCE - STATUS OF
PERFORMANCE AUDIT
RECOMMENDATIONS
Ms. Michele Blumhagen, Director, Quality
Assurance Division, Workforce Safety and Insurance,
presented information regarding the status of the
State Auditor's office performance audit
Budget Section 7 September 25, 2008
recommendations pursuant to Section 5 of 2007
Senate Bill No. 2021. She provided information
regarding the audit recommendation implementation
and validation process of Workforce Safety and
Insurance. She said the performance audit contained
56 formal recommendations on which the department
concurred or partially concurred. She said the
department has implemented 48 recommendations
and partially implemented 8 recommendations for an
implementation rate of 86 percent. She said the State
Auditor's office is currently performing followup
analysis with regard to the implementation of the audit
recommendations. A copy of the report is on file in
the Legislative Council office.
REPORT ON FEDERAL FUNDS
The Legislative Council staff presented a
memorandum entitled Analysis of Federal Funds for
Bienniums Ending June 30, 2009, and June 30, 2011
(Appendix E) which provides information regarding
federal funds to be received by state agencies during
the 2007-09 and 2009-11 bienniums. The Legislative
Council staff said agencies estimate $2.5 billion of
federal funds will be received during the 2007-09
biennium, $11.6 million less than appropriated. The
Legislative Council staff said agencies estimate
$2.6 billion of federal funds will be received for the
2009-11 biennium, $187.1 million more than is
estimated to be received during the 2007-09
biennium. The Legislative Council staff said the
estimated 2009-11 federal funds will require $497
million in general fund matching funds, $42 million
more than the 2007-09 biennium.
The Legislative Council staff presented a
memorandum entitled Ten Largest Variances by
Agency - 2007-09 Biennium - Federal Funds
Appropriated and Federal Funds Estimated To Be
Received and Ten Largest Variances by Agency -
Federal Funds Estimated To Be Received for the
2007-09 and 2009-11 Bienniums (Appendix F). The
memorandum provides information regarding the
major variances experienced by agencies during the
2007-09 biennium relating to federal funds
appropriated and federal funds estimated to be
received and by the agencies with major variances in
federal funds estimated to be received for the 2009-11
biennium compared to the 2007-09 biennium.
LEGISLATIVE HEARING FOR FEDERAL
BLOCK GRANTS
The Legislative Council staff distributed a
memorandum entitled Federal Block Grants -
Legislative Hearings (Appendix G) which provides
information regarding block grant hearings required
during the 2009 legislative session. The Legislative
Council staff distributed a resolution draft
[93009.0100] (Appendix H) authorizing the Budget
Section to hold any legislative block grant hearings
required during the 2009-10 interim. The Legislative
Council staff contacted state agencies receiving
federal funds to determine which agencies receive
block grants that require legislative hearings. The
survey revealed only one block grant with that
requirement, the community services block grant
administered by the Department of Commerce
Division of Community Services. A summary of the
proposed use and distribution plan for the block grant
will be provided by the Department of Commerce as
part of the agency's appropriations hearing during the
2007 legislative session. The required public hearing
will be held as part of the appropriations hearing for
the Department of Commerce during the 2009
legislative session.
It was moved by Senator Robinson, seconded
by Representative Berg, and carried on a roll call
vote that the resolution draft providing Budget
Section authority to hold public legislative
hearings required for receipt of federal block grant
funds during the period from the recess or
adjournment of the 61st Legislative Assembly
through September 30, 2011, be approved and
recommended to the Legislative Council. Senators
Holmberg, Bowman, Christmann, Grindberg, Mathern,
Nelson, O'Connell, Robinson, Seymour, and
Tallackson and Representatives Aarsvold, Bellew,
Berg, Carlisle, Delzer, Ekstrom, Glassheim, Kerzman,
Klein, Kreidt, Metcalf, Monson, Nelson, Onstad,
Pollert, Skarphol, Thoreson, Wieland, and Williams
voted "aye." No negative votes were cast.
RISK MANAGEMENT WORKERS'
COMPENSATION PROGRAM
Mr. Tag Anderson, Risk Management Director,
Office of Management and Budget, presented
information regarding the status of the risk
management workers' compensation program
pursuant to NDCC Section 65-04-03.1(5). He said the
2001 Legislative Assembly established a single
workers' compensation account for all state entities.
He said the Risk Management Division of the Office of
Management and Budget administers the program.
He said for coverage periods beginning July 1, 2001,
the Risk Management Division entered into deductible
contracts with Workforce Safety and Insurance for 143
consolidated accounts. He said the deductible
amount selected was $100,000 per claim with a
$5 million aggregate stop. He provided the following
results for the seven coverage years beginning July 1,
2001, through September 15, 2008:
Budget Section 8 September 25, 2008
Nonconsolidated
guaranteed cost
program premium and
assessments
$29,782,116
Risk Management
Division deductible
premium paid to
Workforce Safety and
Insurance
$10,872,313
Risk Management
Division-paid losses
through September 15,
2008
8,973,278
Risk Management
Division pending losses
(reserves)
1,723,469
Risk Management
Division combined
deductible premium and
losses
$21,569,060
Estimated savings for a
seven-year period
$8,213,056
Mr. Anderson said the Risk Management Division
has implemented programs to pass the savings on to
agencies with effective risk management strategies.
He said the discount dollars returned to agencies as a
result of the implementation of safety programs
totaled $2 million and the dividend dollar program,
which returns money to agencies based on their loss
history, has returned $684,000 to agencies. A copy of
the report is on file in the Legislative Council office.
In response to a question from Representative
Berg, Mr. Anderson said the savings not returned to
agencies remain in the risk management workers'
compensation fund to be used, if necessary, to offset
any future deficits.
The committee recessed for lunch at 12:00 noon
and reconvened at 1:00 p.m.
DEPARTMENT OF HUMAN SERVICES
Appropriation Transfers
Ms. Brenda Wiesz, Chief Financial Officer,
Department of Human Services, provided information
regarding transfers between line items and between
subdivisions in excess of $50,000 pursuant to 2007
Senate Bill No. 2012. She said the department has
made four line item transfers through June 30, 2008.
She said the transfers were to:
• Realign the distribution of the social service
block grant funding to provide more efficient
reporting to the grantor agency;
• Move Projects for Assistance in Transition from
Homelessness grant funding from the
Northwest Human Service Center to the
Southeast Human Service Center to address
changes in need;
• Realign information technology staff to ensure
technology remains centralized; and
• Realign the records management function
within the technology division because the work
performed supported the entire department.
A copy of the report is on file in the Legislative
Council office.
In response to a question from Senator Bowman,
Ms. Wiesz said the transfers are determined by the
department's management team and the human
service center directors are involved in the decision.
Status of Medicaid Management
Information System
Ms. Jennifer Witham, Director, Information
Technology Services, Department of Human Services,
presented information regarding the status of the
Medicaid management information system project
pursuant to Section 3 of 2007 Senate Bill No. 2024.
She said the department has expressed its concern
regarding delays in the product development to the
developer, ACS State Healthcare, LLC (ACS). She
said while the department has been negotiating a
revised schedule with ACS, the project team has
continued to move forward on system design
specifications. She said negotiations with ACS are
primarily focused on the postdesign phases of the
project which are highly dependent on the timely
delivery of an ACS product that meets North Dakota
requirements. She provided the following project
funding summary:
Description Budget
Spent
Through
April 2008 Remaining
General fund $3,643,133 $1,055,855 $2,587,278
Federal funds 55,218,418 15,897,673 39,320,745
Other funds 3,667,820 1,007,597 2,660,223
Total project $62,529,371 $17,961,125 $44,568,246
A copy of the report is on file in the Legislative
Council office.
In response to a question from Senator Mathern,
Ms. Witham said any changes to the project must be
approved by the federal Centers for Medicare and
Medicaid Services.
State Hospital - Change in Scope of Project
Mr. Alex Schweitzer, Superintendent, State
Hospital, provided information regarding the status of
the State Hospital capital improvements budget and a
request for Budget Section approval to change the
scope of the State Hospital sexual offender unit
addition project. He said the 2007 Legislative
Assembly provided $3.1 million from the state's
general fund for the construction of a high-security
addition to the GM Building to expand the hospital's
sexual offender unit. He said since the project was
approved, the hospital has seen a decrease in the
number of sexual offender admissions and additional
capacity of the sexual offender unit is no longer
needed. He said State Hospital administration, the
Department of Human Services, and the Office of
Budget Section 9 September 25, 2008
Management and Budget is requesting to use the
$3.1 million for other capital projects on the hospital
campus. He provided the following list of capital
improvements the State Hospital is planning to
address with the funds:
Additional funds required to
complete electrical distribution
project
$1,211,504
New security fence 307,042
16 West Building repairs 326,420
Employee Building repairs 675,000
Architect and engineer fees 233,427
Total miscellaneous other items 136,206
Total project change $2,889,599
A copy of the report is on file in the Legislative
Council office.
In response to a question from Senator Krauter
regarding the 16 West Building repairs,
Mr. Schweitzer said the 16 West Building has not
been used for a number of years and is currently used
for maintenance storage. He said the repairs are
needed to provide for future expansion of patient
services.
In response to a question from Representative
Pollert, Mr. Schweitzer said of the projects listed, the
only one that has been considered by the Legislative
Assembly is the electrical distribution system.
In response to a question from Representative
Pollert, Mr. Schweitzer said the State Hospital has
committed to pay for approximately $500,000 relating
to these projects, including the architect and
engineering fees and the new security fence.
In response to a question from Senator Mathern,
Mr. Schweitzer said the improvements to the 16 West
Building are to maintain the asset, but would allow the
hospital to increase patient beds in the future, if
needed.
In response to a question from Representative
Skarphol, Mr. Schweitzer said the 2007 Legislative
Assembly has previously approved $2.4 million for the
electrical distribution project. He said costs are
significantly more than anticipated. He said the
amount requested of $1,211,504 represents the
increased cost of the project.
In response to a question from Representative
Skarphol, Mr. Schweitzer said the architect and
engineering fees relate to charges from a private firm
for work on various projects, including work on the
State Hospital sexual offender unit addition they later
decided was not needed.
It was moved by Senator Mathern and
seconded by Senator Seymour that the Budget
Section pursuant to NDCC Section 48-01.2-25
approve the State Hospital request to use
$2,889,599 of the $3,100,000 authorized for the
State Hospital sexual offender unit addition for
other improvement projects, including the
electrical distribution project, a security fence,
16 West Building repairs, Employee Building
repairs, and architectural and engineering fees.
A substitute motion was moved by
Representative Skarphol, seconded by
Representative Delzer, and carried on a roll call
vote that the Budget Section pursuant to NDCC
Section 48-01.2-25 approve the State Hospital's
request to use $1,751,973 of the $3,100,000
authorized by the 2007 Legislative Assembly for
the State Hospital sexual offender unit addition for
the electrical distribution project, a security fence,
and architectural and engineering fees. Senators
Holmberg, Bowman, and Christmann and
Representatives Bellew, Berg, Carlisle, Carlson,
Delzer, Klein, Kreidt, Monson, Nelson, Pollert,
Skarphol, Thoreson, Wieland, and Williams voted
"aye." Senators Krauter, Lindaas, Mathern, Nelson,
O'Connell, Robinson, Seymour, and Tallackson and
Representatives Aarsvold, Ekstrom, Glassheim,
Kerzman, Metcalf, and Onstad voted "nay."
Representative Skarphol asked the Legislative
Council to provide information to the Budget Section
regarding possible Budget Section action that could
be taken as a result of an agency's noncompliance
with legislative intent.
VETERANS HOME
Mr. Mark B. Johnson, Administrator, Veterans
Home, presented information regarding the status of
the Veterans Home construction project pursuant to
Section 4 of 2007 Senate Bill No. 2418. He said since
his presentation to the Budget Section at its meeting
in June 2008, the National Guard has finished the
base of the building and a firm has been hired to
prepare the site. He said the federal Department of
Veterans Affairs has granted the Veterans Home
project conditional approval for 180 days, through
March 16, 2009, to allow the 2007 Legislative
Assembly to address project financing. He said the
Veterans Home will open bids next week and plans to
begin construction in March 2009.
AGENCY REQUESTS AUTHORIZED BY
THE EMERGENCY COMMISSION
Chairman Holmberg directed the committee to
consider agency requests which have been
authorized by the Emergency Commission and
forwarded to the Budget Section pursuant to NDCC
Sections 54-16-04, 54-16-04.1, 54-16-04.2, and
54-16-09. The information relating to the requests
was provided to the Budget Section members prior to
the meeting and is on file in the Legislative Council
office.
It was moved by Representative Carlisle,
seconded by Representative Skarphol, and carried
on a roll call vote that pursuant to NDCC Sections
54-16-04, 54-16-04.1, 54-16-04.2, and 54-16-09 the
Budget Section approve the following requests,
which have been approved by the Emergency
Commission:
Budget Section 10 September 25, 2008
• Industrial Commission (Request #1676) - To
amend Request #1653, which was approved
by the Emergency Commission on March
14, 2008, and to approve a line item transfer
of $285,000 from the Oil and Gas Division
contingency line item to the salaries line
item ($254,750) and the operating line item
($30,250) for employee equity and retention
adjustments and to hire two new FTE
positions.
• Attorney General (Request #1679) - For
$84,000 from the state contingencies
appropriation for the operating line item
($84,000) to reimburse city and county
governments for prosecution witness fees
and expenses.
• Department of Public Instruction (Request
#1680) - To increase federal funds spending
authority by $1,921,812 for salaries and
wages ($88,651), operating expenses
($313,545), and grants--other grants
($1,519,616).
• Office of Management and Budget (Request
#1681) - To transfer $300,000 from the
capital assets line item to the operating
expenses line item to provide additional
funding for utility expenses.
• Department of Transportation (Request
#1684) - To increase special funds spending
authority by $4,800,000 for the operating
expenses line item ($2,800,000) and capital
assets line item ($2,000,000) to receive
additional funds from charges to state
agencies for State Fleet Services usage.
Senators Holmberg, Bowman, Christmann,
Krauter, Lindaas, Mathern, Nelson, O'Connell,
Robinson, and Seymour and Representatives
Aarsvold, Bellew, Berg, Carlisle, Ekstrom, Glassheim,
Kerzman, Klein, Kreidt, Metcalf, Nelson, Onstad,
Pollert, Skarphol, Thoreson, Wieland, and Williams
voted "aye." No negative votes were cast.
ATTORNEY GENERAL - STATUS OF NEW
CRIME LABORATORY BUILDING
Chairman Holmberg called on Mr. Thomas L.
Trenbeath, Chief Deputy Attorney General, to present
information regarding the status of the new Crime
Laboratory building pursuant to Section 13 of 2007
Senate Bill No. 2003. He said the project is
anticipated to be completed in October 2008. He said
the Attorney General has scheduled a "ribbon-cutting"
ceremony for October 21, 2008. He said although the
building is complete, a few items remain unfinished,
including the relocation of the State Department of
Health's garage elsewhere on the property and the
extension of the State Water Commission's gravel
surface lot. He said the garage will be demolished
once the new garage is completed and, weather
permitting, the relocation will be completed this fall.
He said it is unlikely the parking lot extension will be
completed before spring 2009.
Mr. Trenbeath said the Attorney General is
confident the new Crime Laboratory will be completed
within the $4,790,162 budget. He said $3,847,009
has been spent to date.
INFORMATION TECHNOLOGY
DEPARTMENT ANNUAL REPORT
Mr. Mike Ressler, Deputy Chief Information Officer,
Information Technology Department, presented
information regarding the annual report of the
Information Technology Department pursuant to
NDCC Section 54-59-19. He said the Information
Technology Department has been concentrating on
customer service for the last three years and the focus
of this report is on measuring outcomes. He said
based on customer surveys, the department is a
trusted business partner 94.9 percent of the time and
the preferred information technology provider
86.2 percent of the time. He said the Information
Technology Department logged 53,738 incidents over
the last year and users indicated that in 99.8 percent
of these incidents, the department provided a positive
customer experience. He said Information
Technology Department billing for fiscal year 2008
totaled $41.8 million. He said the majority of revenue
is generated from computer hosting and software
development service fees. He said the Information
Technology Department has experienced challenges
in recruiting and retaining employees. He said
department turnover rate is 6.8 percent. He said its
goal is a 4 percent to 6 percent turnover rate. He said
the majority of Information Technology Department
service rates are competitive with surrounding states.
A copy of the report is on file in the Legislative Council
office.
AGRICULTURE COMMISSIONER
State Meat Inspection Program
Mr. Roger Johnson, Commissioner, Department of
Agriculture, presented information regarding the
status of the state meat inspection program pursuant
to 2007 Senate Bill No. 2009. He said the 2007
Legislative Assembly approved four additional FTE
positions. He said to date all but one of the positions
have been filled and it is anticipated the vacant
position, which will be filled based on demand for
services, will be filled by the end of the biennium. He
said the 2007 Legislative Assembly provided a
deficiency appropriation of $58,130 for the 2005-07
biennium, of which the department spent $45,528. He
said total state meat and poultry inspection program
expenditures through August 2008 were $813,720, of
which $414, 247 was from the general fund. He said
reimbursements for grading services through June
2008 total $5,488. He said total revenue for the
country of origin labeling program to date is $3,139
compared to total expenditures of $3,948. A copy of
the report is on file in the Legislative Council office.
Budget Section 11 September 25, 2008
Endangered Species Program
Commissioner Johnson presented information
regarding the status of the endangered species
program pursuant to 2007 Senate Bill No. 2009. He
said the 2007 Legislative Assembly provided one and
one-half FTE positions and $250,000 for the
Department of Agriculture to expand its endangered
species program. He said the endangered species
program provides the United States Environmental
Protection Agency with data and recommendations to
assist the agency in evaluating pesticides for potential
effects that threaten and endanger species, as well as
assistance with developing pesticide use restrictions.
He said the major component of the Environmental
Protection Agency's Endangered Species Protection
Program is the use of Endangered Species Protection
Bulletins, which add use restrictions above and
beyond those on the pesticide label. The bulletins,
issued on a county-by-county basis, are enforceable
documents under both state and federal law. He said
the program was established to help define more
specific areas in which pesticides are restricted,
resulting in smaller restricted areas rather than larger
default restricted areas. He said the authorized
positions have been filled and in June 2008 the
department submitted to the Environmental Protection
Agency, for its approval, a formal plan. He said the
department has received Environmental Protection
Agency comments on the plan and anticipates making
the necessary changes and resubmitting the plan for
final approval this fall. He said the program is also
responsible for performing risk assessments for
Section 18 emergency exemptions and Section 24(c)
special local needs registrations under the Federal
Insecticide, Fungicide, and Rodenticide Act, and
providing education and outreach. A copy of the
report is on file in the Legislative Council office.
In response to a question from Representative
Nelson, Mr. Jim Gray, Pesticide Registration
Coordinator, Department of Agriculture, said North
Dakota is the second state to prepare a state plan.
COMMITTEE DISCUSSION AND STAFF
DIRECTIVES
Chairman Holmberg announced the next meeting
of the Budget Section will be Wednesday,
December 3, 2008.
It was moved by Senator Robinson, seconded
by Senator Seymour, and carried on a voice vote
that the chairman and the staff of the Legislative
Council be requested to prepare a report and the
resolution draft recommended by the Budget
Section and to present the report and
recommended resolution draft to the Legislative
Council.
It was moved by Senator Nelson, seconded by
Senator Robinson, and carried on a voice vote
that the Budget Section meeting be adjourned
subject to the call of the chair.
The meeting adjourned subject to the call of the
chair at 2:25 p.m.
___________________________________________
Sheila M. Sandness
Fiscal Analyst
___________________________________________
Allen H. Knudson
Legislative Budget Analyst and Auditor
ATTACH:8
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