North Dakota Legislative Budget Section Meeting in Bismarck on March 11

NORTH DAKOTA LEGISLATIVE MANAGEMENT
Minutes of the
BUDGET SECTION
Thursday, March 11, 2010
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, Tom Fischer, Tony S. Grindberg, Ralph L.
Kilzer, Elroy N. Lindaas, Tim Mathern, Carolyn
Nelson, David O'Connell, Larry J. Robinson, Tom
Seymour, Bob Stenehjem, Rich Wardner, John
Warner; Representatives Larry Bellew, Merle
Boucher, Al Carlson, Jeff Delzer, Mark A. Dosch,
Kathy Hawken, Lee Kaldor, James Kerzman,
Matthew M. Klein, Gary Kreidt, Joe Kroeber, Ralph
Metcalf, Shirley Meyer, David Monson, Kenton
Onstad, Chet Pollert, Ken Svedjan, Blair Thoreson,
Don Vigesaa, Francis J. Wald, Alon C. Wieland, Clark
Williams
Members absent: Senators Randel Christmann,
Karen K. Krebsbach; Representatives Rick Berg,
Mary Ekstrom, Eliot Glassheim, Keith Kempenich,
Bob Martinson, Jon Nelson, Bob Skarphol
Others present: Jim W. Smith, Legislative
Council, Bismarck
Representative Lisa Wolf, member of the
Legislative Management, was also in attendance.
See Appendix A for additional persons present.
It was moved by Senator Robinson, seconded
by Representative Thoreson, and carried on a
voice vote that the minutes of the December 15,
2009, meeting be approved as distributed.
STATUS OF THE STATE GENERAL FUND
Chairman Holmberg called on Ms. Pam Sharp,
Director, Office of Management and Budget (OMB), to
present a report on the status of the general fund. A
copy of the information presented is on file in the
Legislative Council office.
Ms. Sharp said the 12-month percentage change
in the nonseasonally adjusted consumer price index
was 2.6 percent in January 2010. She said for
calendar year 2009, the consumer price index
declined by .4 percent, but normal growth is expected
long term in the consumer price index. She said it is
expected to increase by 2.1 percent during 2010,
followed by increases between 2.1 percent and
2.8 percent through 2014. She said the average yield
on a three-month Treasury bill during the fourth
quarter of 2009 was .06 percent, 10 basis points lower
than the previous quarter, bringing the 2009 average
to .15 percent. She said Ecomony.com predicts that
three-month Treasury bill rates will begin to increase,
averaging .38 percent in 2010, 2 percent in 2011, and
approximately 4 percent from 2012 through 2014.
She said personal income, as reported by
Economy.com in inflation-adjusted 2005 dollars, fell
1.6 percent during 2009, following a decline of
.4 percent during calendar year 2008. She said the
forecast shows personal income remaining stable
through 2010 with growth predicted to average
approximately 3 percent in 2011 and 4 percent in
2012 through 2014. She said North Dakota's
unemployment rate for December 2009 was
4.3 percent, compared to the national rate of
9.7 percent. She said North Dakota oil production
continued to set new records as it increased to
245,500 barrels per day in November 2009 before
decreasing to 241,500 barrels per day in
December 2009 because of snow and cold weather.
She said the average price for North Dakota crude oil
was $66 per barrel in October 2009, $67 per barrel in
November 2009, and $64 per barrel in
December 2009. She said the current oil price is
$72 per barrel and the rig count is 100.
Ms. Sharp presented the following information on
the status of the state general fund for the 2009-11
biennium based on revenue collections through
January 2010:
Unobligated general fund
balance - July 1, 2009
$361,843,514
Add
General fund collections
through January 2010
$1,004,383,968
Forecasted general fund
revenue for the remainder of
the 2009-11 biennium
1,936,506,102
Total estimated general fund
revenue for the 2009-11
biennium
$2,940,890,070
Estimated general fund
turnback
2,263,883
Balance obligated for
authorized carryover from the
2007-09 biennium
76,383,530
Estimated total available $3,381,380,997
Less
2009-11 biennium general
fund ongoing appropriations
($2,970,380,754)
2009-11 biennium general
fund one-time appropriations
(278,984,727)
Contingent appropriation to
the centers of excellence
fund (2009 SB 2018)
(5,000,000)
Budget Section 2 March 11, 2010
Balance obligated for
authorized carryover from the
2007-09 biennium
(76,383,530)
Estimated deficiency
requests
(3,823,000)
Total appropriations and
estimated deficiency requests
($3,334,572,011)
Estimated general fund
balance - June 30, 2011
$46,808,986
Ms. Sharp said general fund revenues for the
period beginning July 1, 2009, and ending
December 1, 2009, exceeded legislative estimates by
at least $5 million meeting the contingency conditions
identified in Section 22 of 2009 Senate Bill No. 2018
and triggering a $5 million appropriation from the
general fund to the centers of excellence fund. She
said the $5 million has been transferred to the centers
of excellence fund.
Ms. Sharp presented the following information on
the status of the permanent oil tax trust fund for the
2009-11 biennium:
Beginning permanent oil tax trust fund balance -
July 1, 2009
$489,727,017
Add
Revenue collections through January 2010 79,640,382
Forecasted revenues for the 2009-11 biennium
(based on 2009 legislative forecast assumptions
for oil price and production)
323,092,000
Total estimated funds available for the 2009-11
biennium
$892,459,399
Less expenditures and transfers
Transfer to the general fund pursuant to
2009 HB 1015
($140,000,000)
Transfer to the general fund for the mill levy
reduction program pursuant to 2009 SB 2199
(295,000,000)
Transfer to the property tax relief sustainability
fund pursuant to 2009 SB 2199
(295,000,000)
Appropriations pursuant to 2009 HB 1015, 1305,
and 1394 and SB 2003 and 2020
(16,175,100)
Estimated permanent oil tax trust fund balance -
June 30, 2011
$146,284,299
Ms. Sharp said $71 million in oil and gas tax
revenue has been deposited in the general fund and
currently all oil and gas tax collections allocated to the
state for the 2009-11 biennium are being deposited in
the permanent oil tax trust fund. She said these
deposits have been approximately $30 million per
month and if the deposits remain at that level for the
remainder of the biennium, the ending balance in the
permanent oil tax trust fund could be nearly
$300 million.
Ms. Sharp presented information on general fund
revenue collections for January 2010 and the 2009-11
biennium to date. She said general fund revenues
collected, biennium to date, are .4 percent more than
the legislative forecast. She said sales tax collections
for January were $8 million less than projected. She
said the variance was likely due to the month ending
on a weekend leaving businesses until Monday to
make their payments. She said biennium-to-date
sales tax collections were $17.7 million, or 5.2 percent
less than the legislative forecast, but exceed 2007-09
biennium-to-date collections by $31.9 million, or
10.9 percent. She said oil tax collections through
January have exceeded the biennium-to-date
legislative forecast of $49 million by approximately
$100 million, with $71 million deposited in the general
fund and $80 million deposited in the permanent oil
tax trust fund. She said biennium-to-date motor
vehicle excise tax collections have also exceeded
estimates by $8.7 million, or 40.6 percent.
In response to a question from Representative
Carlson, Ms. Sharp said based on revenues collected
and remaining revenues forecast, it appears ongoing
appropriations for the 2009-11 biennium exceed
ongoing revenues by approximately $30 million.
IRREGULARITIES IN THE FISCAL
PRACTICES OF THE STATE
Pursuant to North Dakota Century Code Section
54-14-03.1, Ms. Sharp presented information on
irregularities in the fiscal practices of the state. A
copy of the information presented is on file in the
Legislative Council office. She said the state
agencies with fiscal irregularities include:
Agency Amount Reason
Department of Public
Instruction
$826 Temporary pay adjustment
for increased responsibility
Department of Commerce $1,625 Temporary additional
workload for internship
program
Department of Commerce $8,092 Settlement agreement due
to reduction in workforce
ACCURACY OF THE COST ESTIMATES
OF PROJECTS THAT RECEIVED
FUNDING FROM THE CAPITAL
IMPROVEMENTS PRELIMINARY
PLANNING REVOLVING FUND
Ms. Sharp presented information regarding the
accuracy of the cost estimates of projects that have
received funding from the capital improvements
preliminary planning revolving fund, including
information regarding whether any of these projects
have required additional funding after the projects
were approved. A copy of the information presented
is on file in the Legislative Council office.
Ms. Sharp provided summary information for
12 projects that received funding from the capital
improvements preliminary planning revolving fund,
including three projects that required an appropriation
that exceeded the study estimate, four projects that
were within the study estimates, two projects that
were less than the study estimates, and three projects
for which actual funding is inconclusive because the
project was either not approved or not approved
individually. She said the increases in the cost of two
of the projects that required appropriations in excess
of the estimates were due to inflation from the time of
the estimates until the time the projects were
Budget Section 3 March 11, 2010
approved. She said the third project that required an
appropriation in excess of the estimate cost more
because of a change in architect and an increase in
the scope of the work. A copy of the summary is
attached as Appendix B.
AMERICAN RECOVERY AND
REINVESTMENT ACT OF 2009
Ms. Sheila Peterson, Director of Fiscal
Management, Office of Management and Budget,
presented information regarding the American
Recovery and Reinvestment Act of 2009 (ARRA),
including an update of funding information and the
number of state employees who have been employed
using federal stimulus funding.
ARRA Funding Update
Ms. Peterson provided a listing of ARRA funding to
political subdivisions, including airports, cities,
counties, fire districts, housing authorities, nonprofit
organizations, private entities, school districts, state
agencies, tribes, and water districts. A copy of the
information presented is on file in the Legislative
Council office. She said awards total $601.8 million,
of which $265.8 million has been received through
December 2009. She said a total of 2,418 jobs were
reported as having been created or retained by the
recipients of the funding. She said the significant
increase in the jobs created or retained resulted from
a federal Office of Management and Budget revision
to the method of determining which jobs are
calculated and reported. She said previously, the
number of jobs was estimated, but now the number of
jobs is computed by dividing the number of hours paid
with ARRA funds by the total number of hours in the
quarter. She said the jobs calculated relate only to
the quarter and are not cumulative.
State Employees Employed Using
Federal Stimulus Funding
Ms. Peterson provided a listing of the number of
state employees who have been employed using
federal stimulus funding. A copy of the information
presented is on file in the Legislative Council office.
She said approximately 42 full-time equivalent (FTE)
state employees were paid from ARRA funding. She
said the Department of Transportation and Job
Service North Dakota each received funding for
approximately 13.5 FTE positions. She said the
Department of Transportation FTE positions existed
prior to the availability of ARRA funding and will revert
to their original sources of funding when ARRA
projects are completed and the stimulus funding is
exhausted. She said the majority of the Job Service
North Dakota FTE positions were temporary new
positions added to assist with the additional workload
relating to ARRA funds. She said all but 1.5 FTE
positions of the Job Service North Dakota positions
will no longer exist after the stimulus funding is
exhausted. She said the remaining 1.5 FTE positions
would revert to the original source of funding. She
said the Attorney General's office has indicated it
wishes to continue its 3.78 FTE ARRA-related
positions and will seek other funding sources or
request funding from the general fund to continue
them.
In response to a question from Representative
Carlson, Ms. Peterson said the major ARRA funding
included in the 2009-11 biennium budgets that will
have to be replaced with funding from the general
fund is $67 million in stimulus funding provided for the
enhanced federal medical assistance percentage
(FMAP).
Representative Carlson requested OMB include in
its next report on federal stimulus funding information
regarding how many of the nonstate FTE positions
reported are in the private sector.
In response to a question from Representative
Carlson, Ms. Peterson said with the exception of
some of the weatherization programs, most of the
ARRA funding available to the state will be spent by
September 30, 2011.
In response to a question from Representative
Boucher regarding the eligibility of projects,
Ms. Peterson said because the Department of
Transportation and the State Department of Health
anticipated stimulus funding, the departments
identified highway and clean and drinking water
projects that would meet stimulus eligibility criteria.
She said these projects were ready when funding
became available.
ADJUTANT GENERAL -
DISASTER-RELATED EXPENDITURES
AND STATE DISASTER RELIEF
FUND REQUESTS
Chairman Holmberg called on Major General David
Sprynczynatyk, Adjutant General, to provide
information regarding a report on 2009 flood disasterrelated
expenditures, transfers, reimbursements, and
general fund deposits pursuant to 2009 Senate Bill
No. 2444, an update on the cost of the January 2010
winter storm disaster, and a request for Budget
Section approval to use money in the state disaster
relief fund to pay the state's match relating to damage
caused by a severe winter storm during January 2010
as provided for in Section 8 of 2009 Senate Bill
No. 2012. A copy of the report is on file in the
Legislative Council office.
Major General Sprynczynatyk said the potential for
a 2010 flood event nearly as large as 2009 exists in
many areas of the state. He said it is too early to
determine the magnitude of possible flooding. He
said the National Guard has begun preparing in
anticipation of flooding. He said the Governor has
requested a presidential disaster declaration and he
anticipates it will be approved. He said the
declaration, if approved, will aid the state in the
recovery of costs incurred in the flood fight.
Budget Section 4 March 11, 2010
Major General Sprynczynatyk provided a summary
of funds appropriated for the 2009 flood disaster
totaling $105.5 million, including $70 million in federal
funds, $23 million from the state disaster relief fund,
and $12.5 million from the general fund. He said
funds expended through February 22, 2010, total
$104.5 million. He said of the $12.5 million provided
from the general fund, $5 million was transferred to
the National Guard emergency fund to pay for the
National Guard response costs during the flood and
he anticipates approximately $2.5 million will be
returned to the general fund. In addition, he said,
another deposit of approximately $2.9 million resulting
from an increase in the federal reimbursement from
75 percent to 90 percent will be made to the general
fund in March 2010. He said it is anticipated a total of
$5.4 million will be returned to the general fund by the
end of the biennium.
Major General Sprynczynatyk provided a summary
of the current status of the state disaster relief fund.
He said a total of $43 million was appropriated from
the fund, of which up to $20 million was for
emergency snow removal grants to counties, cities,
and townships and up to $23 million was for paying
costs relating to the 2009 flood disaster, snow
removal damage to roads, and other disasters in
accordance with Section 8 of 2009 Senate Bill
No. 2012. He said through February 22, 2010, grants
provided from the state disaster relief fund for
emergency snow removal totaled $5.4 million and for
2009 flood disaster relief totaled approximately
$.6 million. He said interest accrued in the fund has
totaled approximately $45,000 through January 2010
bringing the balance in the fund to approximately
$37 million as of February 22, 2010. He said the
grants for 2009 flood disaster relief were to provide
50 percent of the local match or 3 percent of the
qualified projects and it is anticipated an additional
$2.3 million in grants will be provided during the
remainder of the biennium. In addition, he said, it is
anticipated flood mitigation assistance and hazard
mitigation grants will total another $1.5 million. He
said the estimated balance remaining at the end of the
biennium in the state disaster relief fund after these
anticipated grants is $33 million.
Major General Sprynczynatyk requested Budget
Section approval pursuant to Section 8 of 2009
Senate Bill No. 2012 for the following expenditures
from the state disaster relief fund:
Funding Request Amount
1. Request for funding to provide 10 percent
match for the costs associated with the
January 2010 ice storm
$2,336,250
2. Request for 97 percent of the cost of repairing
a parking lot damaged during staging for the
2009 flood event that did not qualify for
Federal Emergency Management Assistance
(FEMA) reimbursement
21,909
3. Request for 97 percent of the cost of raising
the grade level of a county road to protect the
road from rising flood waters and ensure
continued public use. The expenditure did not
qualify for FEMA reimbursement.
180,420
4. Request for funding to provide the state match
for costs associated with disasters prior to
2009 for which the department is still making
payments
2,718,952
5. Request for funding to repay the federal share
of home buyouts made through the hazard
mitigation grant program in 1998 that were
later deemed ineligible by FEMA inspectors
192,486
6. Request for funding to purchase flood
materials in anticipation of a 2010 flood event
and a presidential disaster declaration
500,000
Total $5,950,017
In response to a question from Representative
Delzer, Major General Sprynczynatyk said if the state
disaster relief fund had not been created by the 2009
Legislative Assembly, the agency would have had to
borrow the funding for these expenditures from the
Bank of North Dakota and seek a deficiency
appropriation from the 2011 Legislative Assembly to
repay the loan. He said the department is seeking
approval to pay for these expenditures from the state
disaster relief fund pursuant to Section 8 of
2009 Senate Bill No. 2012 to avoid borrowing money
from the Bank.
Representative Delzer asked the legislative budget
analyst and auditor to review the authority of the
Budget Section to approve the expenditures from the
state disaster relief fund as requested by Major
General Sprynczynatyk.
In response to a question from Representative
Delzer, Major General Sprynczynatyk said regarding
the request to repay the federal share of the home
buyouts, if the Budget Section does not approve the
repayment, the Department of Emergency Services
will continue to pursue repayment from the county.
Later in the meeting, Chairman Holmberg called on
the legislative budget analyst and auditor to provide
information regarding Budget Section authority to
approve the use of money in the state disaster relief
fund as provided for in Section 8 of 2009 Senate Bill
No. 2012. The legislative budget analyst and auditor
provided information regarding the state disaster relief
fund and the requests for funding from the state
disaster relief fund submitted for Budget Section
approval by the Adjutant General. The legislative
budget analyst and auditor said the requests are for
funding from the $23 million deposited into the fund to
pay costs relating to the 2009 flood disaster, snow
removal damage to roads, and other disasters in
accordance with Section 8 of 2009 Senate Bill
No. 2012. He said the section provides that funds not
distributed to political subdivisions may be used to
match federal disaster relief funds received for state
purposes subject to Budget Section approval. He said
the requests for state funds to match federal disaster
relief associated with the January 2010 ice storm and
disasters prior to 2009 meet the criteria for Budget
Section consideration. He said since the other
requests are not for state funds to match federal
disaster relief funds, the Budget Section may not be
authorized to approve these. The legislative budget
Budget Section 5 March 11, 2010
analyst and auditor said Legislative Council staff
would further review the Budget Section's authority to
approve the requests for reimbursement of parking lot
repairs, the raising of a county road, the federal share
of home buyouts, and 2010 flood materials prior to the
next meeting of the Budget Section.
It was moved by Representative Delzer,
seconded by Senator Mathern, and carried on a
roll call vote that the Budget Section pursuant to
Section 8 of 2009 Senate Bill No. 2012 approve the
Adjutant General request to use $2,336,250 from
the state disaster relief fund to pay the state's
match relating to damage caused by a severe
winter storm during January 2010 and $2,718,952
from the state disaster relief fund to pay the
state's match relating to damage caused by
disasters prior to 2009. Senators Holmberg,
Bowman, Fischer, Grindberg, Kilzer, Lindaas,
Mathern, Nelson, O'Connell, Robinson, Seymour,
Stenehjem, Wardner, and Warner and
Representatives Bellew, Boucher, Carlson, Delzer,
Dosch, Hawken, Kaldor, Kerzman, Klein, Kreidt,
Kroeber, Metcalf, Meyer, Monson, Onstad, Pollert,
Svedjan, Thoreson, Vigesaa, Wald, Wieland, and
Williams voted "aye." No negative votes were cast.
PROPOSED CHANGES TO THE
2011-13 BIENNIUM BUDGET DATA
Chairman Holmberg called on Ms. Sharp to
present proposed changes to the 2011-13 biennium
budget data pursuant to Section 54-44.1-07, including
anticipated activities and timeline, budget system
changes, and a plan for addressing one-time and
federal stimulus funding changes. She said OMB
anticipates releasing budget guidelines to the
agencies for the 2011-13 biennium in early April. She
said the guidelines are released at a meeting that
includes the Governor, OMB staff, agency directors
and fiscal staff, and any other interested persons.
She said OMB will work with Economy.com and the
Tax Department to complete a preliminary revenue
forecast in June or July 2010. She said the forecast
will include updated revenue information for the
2009-11 biennium and a preliminary estimate of
2011-13 revenues. She said agency budgets must be
submitted to OMB by July 15, 2010. She said from
August through mid-October, OMB will conduct
agency budget hearings. She said an updated
revenue forecast will be completed in November, and
the executive budget will be delivered to the
Legislative Assembly during its organizational session
in December.
Chairman Holmberg asked OMB to notify the
Legislative Council when budget guidelines become
available so the information can be provided to the
Budget Section members.
Representative Carlson suggested the summary of
the budget guidelines presented to the agencies in
April be provided to legislators.
Ms. Sharp said the current budget system has
been upgraded to an Internet-based version, allowing
agencies web access to the system. She said budget
reports will look the same and will be available on the
OMB website.
Ms. Sharp said the ARRA funding included in the
Department of Human Services 2009-11 biennium
budget relating to FMAP will need to be replaced with
funding from the general fund for the 2011-13
biennium and will be included in the Department of
Human Services' base budget. She said other
agencies wishing to use any funding from the general
fund to continue federal stimulus programs in the
2011-13 biennium must request the additional
funding. She said the funding will not be included in
their base budgets.
Ms. Sharp said there are no proposed changes to
the 2011-13 biennium budget data pursuant to
Section 54-44.1-07.
SALES TAX COLLECTIONS RESULTING
FROM OIL-RELATED ACTIVITIES
Mr. Ryan Rauschenberger, Deputy State Tax
Commissioner, Tax Department, presented
information regarding the estimated amount of sales
tax collections resulting from oil-related activities. A
copy of the report is on file in the Legislative Council
office. He said total taxable sales and purchases
related to oil and gas exploration and production
increased from $265.9 million in 2006 to
$950.4 million in 2008. He said total taxable sales
and purchases related to oil and gas exploration and
production in 2009 was approximately $704.1 million;
however, fourth quarter 2009 information is not
complete. He said approximate sales tax revenue
from taxable sales and purchases related to oil and
gas exploration and production increased from
$13.3 million in 2006 to $47.5 million in 2008. He said
sales tax revenue from taxable sales and purchases
related to oil and gas exploration and production
increased 100.5 percent from 2007 to 2008. In
addition, he provided information regarding total
taxable sales and purchases reported by all
businesses within selected oil-producing counties,
including Bowman, Dunn, McKenzie, Mountrail, and
Williams. He said the counties showing the largest
increase in taxable sales and purchases from 2007 to
2008 were Mountrail and Williams with increases of
87.9 percent and 78.4 percent, respectively. He said
the report summarizes taxable sales but does not
include services which are not taxed and therefore not
reflected in the totals.
In response to a question from Representative
Wald, Mr. Rauschenberger said the sales tax revenue
information provided is from taxable sales and
purchases related to oil and gas exploration and
production and does not include motor vehicle excise
tax collections.
In response to a question from Representative
Wald, Mr. Rauschenberger said the information
Budget Section 6 March 11, 2010
provided in the report is based on the department's
North Dakota Sales and Use Tax Statistical Report
which summarizes data from sales and use tax
returns businesses are required to file.
Representative Wald expressed concern that the
proximity of some oil-producing counties to larger
retail markets may result in sales increases to the
larger counties and those increases are not reflected
in the report.
NORTH DAKOTA UNIVERSITY
SYSTEM PROJECT UPDATE
Chairman Holmberg called on Ms. Cathy
McDonald, Director of Finance, North Dakota
University System, to present information regarding
an update of the status of major higher education
construction projects. A copy of the report is on file in
the Legislative Council office. Ms. McDonald said the
University System office asked the campuses to
provide updates to the information presented to the
Budget Section at the September 2009 meeting. She
said the report provides total expenditures to date for
each project. She said the only project reporting a
change in authorization was the science laboratory at
Williston State College. She said at its
September 2009 meeting, the Budget Section
authorized a change in the scope of the project from a
renovation to an addition and increased the
authorization from $1.61 million to $2.2 million.
Ms. McDonald provided information regarding the
collapse of the northwest section of Minard Hall at
North Dakota State University. She said the cost of
repairs through January 2010 have totaled $504,000.
She said the full cost of repairing the building is not
yet known.
Chairman Holmberg called on Mr. Rick Tonder,
Director of Campus Capital Projects and Planning,
University of North Dakota, Grand Forks, to present
information regarding the anticipated use of space
that would be vacated if the information technology
facility project at the University of North Dakota is
approved. A copy of the report is on file in the
Legislative Council office. Mr. Tonder said the
university has been focusing its efforts on planning for
a new information technology facility and has not yet
developed a plan for use of the vacated space. He
said when complete, the plan will be presented to the
State Board of Higher Education and the Budget
Section.
UNIVERSITY FOUNDATION FUNDS
Chairman Holmberg announced that
representatives of the University of North Dakota and
North Dakota State University foundations were
unable to travel to the meeting due to inclement
weather in the eastern part of the state.
Chairman Holmberg called on Mr. Tonder to
present information on behalf of the University of
North Dakota Foundation. Mr. Tonder distributed to
each member written reports regarding the use of
University of North Dakota Foundation funds. A copy
of the report is on file in the Legislative Council office.
The reports distributed include an executive summary,
audited financial statements for the period ended
June 30, 2009, and a summary of University of North
Dakota Foundation support for university educators,
facilities, programs, and student scholarships. The
report indicated during fiscal year 2009 the alumni
association of the University of North Dakota and the
University of North Dakota Foundation provided
$11.5 million in support to the University of North
Dakota, of which $5.2 million was program support,
$4.3 million was student scholarships, $1.6 million
was facilities, and $.4 million was to educators.
Chairman Holmberg called on Mr. William G.
Goetz, Chancellor, North Dakota University System,
to discuss a written report distributed by the University
System office on behalf of the North Dakota State
University Foundation regarding the use of foundation
funds. A copy of the report is on file in the Legislative
Council office. The report indicated during fiscal year
2009, the North Dakota State University Foundation
provided $8.5 million in support to North Dakota State
University, of which $4.7 million was for student
scholarships and fellowships; $1 million was for
building projects; $.4 million was for salary
enhancements; and $2.4 million was for other
purposes, including $1.9 million for North Dakota
State University and department discretionary
spending.
NORTH DAKOTA UNIVERSITY SYSTEM -
CHANGE IN SCOPE OF PROJECTS
Minot State University -
Health and Wellness Center
Mr. Ron Dorn, Vice President for Administration
and Finance, Minot State University, Minot, presented
information regarding a request for Budget Section
approval to increase the project authorization for the
Health and Wellness Center from $10 million to
$12.77 million and change the scope of Phase 1 of
the Health and Wellness Center project pursuant to
Section 48-01.2-25. He said the increase in project
authorization and change in scope relate to the
addition of a skywalk, a climbing wall, equipment, and
a 13,850-square-foot basement. He said the project
originally did not include a basement. He said the
additional funding will be provided by local funds,
including online program revenue.
In response to a question from Senator Stenehjem,
Mr. Dorn said the additional funds would not come
from a student fee increase, but from local fund
revenues, including online courses. He said the
university expects additional funds will be generated
by an increase in the number of students taking online
classes.
In response to a question from Senator Stenehjem,
Mr. Dorn said the university has not collaborated with
any other community organizations on the project.
Budget Section 7 March 11, 2010
In response to a question from Senator Stenehjem,
Mr. Dorn said a $10 million, 30-year bond issue will
finance the project as originally approved. He said the
university has funding available to pay for the increase
in the square footage of the project and anticipates
revenues generated during the 18-month construction
of the facility would provide the remaining portion of
the $2.77 million increase in authorization being
requested. He said the university would not begin the
additional work until the funding is available.
In response to a question from Senator Holmberg,
Mr. Dorn said the increase in student fees to finance
the $10 million bond issue was approved by the
student senate before being submitted to the
University System office. He said the increased fees
began in July 2009.
In response to a question from Representative
Dosch, Mr. Dorn said Swain Hall was the last major
deferred maintenance project on campus. He said
completion of the Swain Hall project reduces deferred
maintenance to less than $4 million.
Representative Dosch expressed concern
regarding the expansion of square footage on
campuses when the Higher Education Committee
recently learned that only 10 percent of deferred
maintenance is being funded on campuses.
In response to a question from Representative
Svedjan, Mr. Dorn said the $2.77 million increase
includes a skywalk ($400,000), climbing wall
($450,000), fitness equipment and office furniture
($500,000), basement ($840,000), architecture fees
($170,000), and a contingency ($410,000).
In response to a question from Representative
Svedjan, Mr. Roger Kluck, Director of Facilities, Minot
State University, Minot, said the facility is being built
on the side of a hill and the additional space could not
be added later. He said because of the proximity to
the Dome, the university anticipates the space to be
used primarily for athletics.
It was moved by Senator Mathern and
seconded by Senator Nelson that the Budget
Section pursuant to Section 48-01.2-25 approve
the Minot State University request to increase the
Health and Wellness Center project authorization
from $10 million to $12.77 million and to change
the scope of the Health and Wellness Center
project. Senators Holmberg, Lindaas, Mathern,
Nelson, Robinson, Seymour, and Warner and
Representatives Kaldor, Kerzman, Klein, and Metcalf
voted "aye." Senators Bowman, Fischer, Grindberg,
Kilzer, Stenehjem, and Wardner and Representatives
Bellew, Boucher, Carlson, Delzer, Dosch, Hawken,
Kreidt, Kroeber, Meyer, Monson, Onstad, Pollert,
Svedjan, Thoreson, Vigesaa, Wald, Wieland, and
Williams voted "nay." The motion failed.
Later in the meeting, Representative Bellew
suggested the Budget Section reconsider its action
regarding the request of Minot State University.
It was moved by Representative Bellew,
seconded by Representative Hawken, and carried
on a voice vote that the Budget Section reconsider
its action regarding the Minot State University
request to increase the Health and Wellness
Center project authorization from $10 million to
$12.77 million and to change the scope of the
Health and Wellness Center project.
Representative Bellew said he would be in favor of
limiting the project expansion to include only the
addition of a basement at an estimated cost of
$840,000 and any related architecture fees of
$84,000, to provide a total increase in project scope of
$924,000.
It was moved by Representative Bellew,
seconded by Senator Seymour, and carried on a
roll call vote that the Budget Section pursuant to
Section 48-01.2-25 approve the Minot State
University request to add a basement to the scope
of the Health and Wellness Center project at an
estimated cost of $924,000. Senators Holmberg,
Bowman, Grindberg, Lindaas, Mathern, Nelson,
O'Connell, Robinson, Seymour, Wardner, and Warner
and Representatives Bellew, Boucher, Hawken,
Kaldor, Kerzman, Klein, Kroeber, Metcalf, Meyer,
Monson, Onstad, Pollert, Svedjan, and Wald voted
"aye." Senators Fischer, Kilzer, and Stenehjem and
Representatives Carlson, Delzer, Dosch, Kreidt,
Thoreson, Vigesaa, Wieland, and Williams voted
"nay."
Langdon Research Extension Center
Mr. Randy Mehlhoff, Director, Langdon Research
Extension Center, Langdon, presented information
regarding a request for Budget Section approval to
increase the project authorization and amend the
project scope and the funding sources of the
headquarters building heating and cooling system
project at the Langdon Research Extension Center
from $144,000 to $200,000. A copy of the report is on
file in the Legislative Council office. He said the
request is for an additional $56,000 in authorization to
replace the current heating and cooling system at the
Langdon Research Extension Center headquarters
building with a geothermal system during its
renovation. He said the additional funding would be
generated from multiple sources, including seed stock
sales and variety testing fees.
In response to a question from Representative
Bellew, Mr. Mehlhoff said the project is not eligible for
ARRA funding, but the agency is researching the
possibility that the project may qualify for a
Department of Energy state energy program grant
through the North Dakota Department of Commerce.
In response to a question from Representative
Monson, Mr. Mehlhoff said the facility currently pays
an average of $15,000 per year for heating and
cooling and estimates the savings if the geothermal
system is installed could total $8,000 per year.
It was moved by Representative Klein,
seconded by Representative Monson, and carried
on a roll call vote that the Budget Section
pursuant to Section 48-01.2-25 approve the North
Dakota State University request to increase the
Budget Section 8 March 11, 2010
project authorization from $144,000 to $200,000
and change the project scope to include a
geothermal system for the headquarters building
heating and cooling system project at the
Langdon Research Extension Center. Senators
Holmberg, Bowman, Fischer, Grindberg, Kilzer,
Lindaas, Mathern, Nelson, Robinson, Seymour,
Stenehjem, Wardner, and Warner and
Representatives Bellew, Boucher, Carlson, Dosch,
Hawken, Kaldor, Kerzman, Klein, Kreidt, Kroeber,
Metcalf, Meyer, Monson, Onstad, Pollert, Svedjan,
Thoreson, Vigesaa, Wald, Wieland, and Williams
voted "aye." No negative votes were cast.
University of North Dakota
Mr. Tonder presented information regarding a
request for Budget Section approval to increase the
project authorization for the renovation/addition to the
Education Building project from $11.2 million to
$12.6 million. A copy of the report is on file in the
Legislative Council office. He said funding for the
project consists of ARRA funds which may not be
used to purchase furniture, fixtures, and equipment.
He said the original project budget did not include all
costs which are now required by the State Board of
Higher Education. He said the university is requesting
approval to increase authorization by $1.4 million of
local funds to purchase new furniture and equipment
and to update existing faculty offices, student spaces,
and administrative areas in the newly remodeled
facility. He said he anticipates a majority of the
additional funds to be from private donations, but
institutional funds may also be used if available.
It was moved by Representative Wald,
seconded by Representative Svedjan, and carried
on a roll call vote that the Budget Section
pursuant to Section 48-01.2-25 approve the
University of North Dakota request to increase the
project authorization for the renovation/addition to
the Education Building project from $11.2 million
to $12.6 million. Senators Holmberg, Bowman,
Fischer, Grindberg, Kilzer, Lindaas, Mathern, Nelson,
Robinson, Seymour, Stenehjem, Wardner, and
Warner and Representatives Boucher, Carlson,
Hawken, Kaldor, Kerzman, Klein, Kreidt, Kroeber,
Metcalf, Meyer, Monson, Onstad, Pollert, Svedjan,
Thoreson, Vigesaa, Wald, Wieland, and Williams
voted "aye." Representatives Bellew and Dosch voted
"nay."
State College of Science
Mr. Mike Renk, Vice President, Business Affairs,
State College of Science, Wahpeton, presented
information regarding a request for Budget Section
approval to increase the project authorization for the
renovation of Horton Hall from $5.7 million to
$6.375 million. A copy of the report is on file in the
Legislative Council office. He said the increase in
authorization is for furniture and equipment not
included in the original project total. He said up to
$610,000 of the increase will be provided from
operations, including tuition income. He said the
remaining balance will be from local funds generated
from extended learning and print services and copy
center operations.
In response to a question from Representative
Dosch, Mr. Renk said the original request for
$5.7 million was only for the renovation of Horton Hall.
He said the college had always planned to purchase
the furniture and equipment separately.
In response to a question from Representative
Kaldor, Mr. Renk said a recent change in State Board
of Higher Education policy requires the college to
include all costs in the project, including furniture and
equipment, which makes it necessary for the college
to request an increase in authorization.
In response to a question from Representative
Kaldor, Mr. Goetz said projects approved prior to the
board policy change did not include furniture and
equipment costs and are part of a transition to the
new policy. He said this change results in these
projects seeking increases in authorization to include
these costs.
It was moved by Senator Mathern, seconded by
Senator Robinson, and carried on a roll call vote
that the Budget Section pursuant to Section
48-01.2-25 approve the State College of Science
request to increase the project authorization for
the renovation of Horton Hall from $5.7 million to
$6.375 million. Senators Holmberg, Bowman,
Fischer, Grindberg, Kilzer, Lindaas, Mathern, Nelson,
Robinson, Seymour, Wardner, and Warner and
Representatives Boucher, Hawken, Kaldor, Kerzman,
Klein, Kroeber, Metcalf, Meyer, Monson, Onstad,
Pollert, Svedjan, Wald, Wieland, and Williams voted
"aye." Senator Stenehjem and Representatives
Bellew, Delzer, Dosch, Kreidt, Thoreson, and Vigesaa
voted "nay."
UNIVERSITY OF NORTH DAKOTA -
ACCEPTANCE OF DONATED ASSET
Chairman Holmberg called on Mr. Tonder to
present information regarding a request to accept and
spend a gift of $500,000 for the renovation of existing
classroom space within the University of North Dakota
School of Law pursuant to Section 15-10-12.1. A
copy of the report is on file in the Legislative Council
office. Mr. Tonder said all funds for the project are
from private donations and the renovation will include
all construction, furniture, and technology to complete
the space. He said the project will be managed by the
state and competitively bid. He said the university
does not anticipate the renovation will increase utility
or maintenance costs.
It was moved by Representative Wald,
seconded by Senator Robinson, and carried on a
roll call vote that the Budget Section pursuant to
Section 15-10-12.1 approve the University of North
Dakota request to accept and spend a gift of
$500,000 for the renovation of existing classroom
space within the University of North Dakota
Budget Section 9 March 11, 2010
School of Law. Senators Holmberg, Bowman,
Fischer, Grindberg, Kilzer, Lindaas, Mathern, Nelson,
Robinson, Seymour, Stenehjem, Wardner, and
Warner and Representatives Bellew, Boucher, Delzer,
Dosch, Hawken, Kaldor, Kerzman, Klein, Kreidt,
Kroeber, Metcalf, Meyer, Monson, Onstad, Pollert,
Svedjan, Thoreson, Vigesaa, Wald, and Wieland
voted "aye." No negative votes were cast.
NORTH DAKOTA STATE UNIVERSITY -
ACCEPTANCE OF FEDERAL
AND SPECIAL FUNDS
Chairman Holmberg called Mr. Bernhardt Saini-
Eidukat, Chair, Department of Geosciences, North
Dakota State University, Fargo, to present information
regarding a request to accept and spend $720,000 of
federal funds and $30,000 of special funds for the first
floor renovation of the Geosciences Hall at North
Dakota State University pursuant to Section
15-10-12.1. A copy of the report is on file in the
Legislative Council office. Mr. Saini-Eidukat said the
renovation would upgrade two laboratories and
include asbestos removal. He said the cost of
remodeling an office and piping water into the
laboratories is not included in the federal grant. He
said funding for the project is provided by a National
Science Foundation grant ($720,000) and North
Dakota State University appropriated and local funds
($30,000).
It was moved by Senator Robinson, seconded
by Representative Thoreson, and carried on a roll
call vote that the Budget Section pursuant to
Section 15-10-12.1 approve the North Dakota State
University request to accept and spend $720,000
of federal funds and $30,000 of special funds for
the first floor renovation of the Geosciences Hall
at North Dakota State University. Senators
Holmberg, Bowman, Fischer, Grindberg, Kilzer,
Lindaas, Mathern, Nelson, Robinson, Seymour,
Stenehjem, Wardner, and Warner and
Representatives Bellew, Boucher, Delzer, Dosch,
Hawken, Kaldor, Kerzman, Klein, Kreidt, Kroeber,
Metcalf, Meyer, Monson, Onstad, Pollert, Svedjan,
Thoreson, Vigesaa, Wald, Wieland, and Williams
voted "aye." No negative votes were cast.
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 Sections
54-16-04.1 and 54-16-04.2. The information relating
to the requests was provided to Budget Section
members prior to the meeting and is on file in the
Legislative Council office.
It was moved by Senator Robinson, seconded
by Senator Lindaas, and carried on a roll call vote
that pursuant to Section 54-16-04.1 the Budget
Section approve the following requests, which
have been approved by the Emergency
Commission:
• Job Service North Dakota (Request #1721) -
The request is to increase spending
authority by $87,087 of federal funds from
the American Recovery and Reinvestment
Act of 2009 for administration of the
emergency unemployment compensation
program, which provides additional weeks
of compensation to the unemployed.
• State Library (Request #1722) - The request
is to increase spending authority by
$200,000 of federal funds from the Institute
of Museum and Library Services in the
grants line item to provide grants to public
and school libraries.
• Department of Transportation (Request
#1723) - The request is to increase spending
authority by $660,000 of federal funds from
the federal Department of Homeland
Security for the operating expenses line
item ($250,000) and the capital assets line
item ($410,000) to implement security
enhancements at eight driver's license
testing sites.
• Department of Transportation (Request
#1724) - The request is to increase spending
authority by $170,600 of federal funds from
the federal Department of Homeland
Security made available to the Department
of Emergency Services for the capital assets
line item to assist in paying costs to
upgrade the State Radio network from
analog to digital service.
• Department of Transportation (Request
#1726) - The request is to increase spending
authority by $160,000 of federal funds from
the American Recovery and Reinvestment
Act of 2009 for a highway project in Slope
County on forest Highway 5.
• State Department of Health (Request
#1727) - The request is to increase spending
authority by $364,148 of federal funds
available from the American Recovery and
Reinvestment Act of 2009 for the salaries
and wages line item ($75,744) and the
operating expenses line item ($288,404).
The funding will be used to reduce the
negative health and economic
consequences of tobacco use and promote
nutrition and physical activity.
• Adjutant General (Request #1728) - The
request is to increase special funds
spending authority by $63 million of federal
funds from the Federal Emergency
Management Agency for the 2009 flood
disaster.
• Adjutant General (Request #1729) - The
request is to increase spending authority by
$17,521,875 of federal funds from the
Budget Section 10 March 11, 2010
Federal Emergency Management Agency for
the grants line item ($17,451,875), the
salaries and wages line item ($45,000), and
the operating expenses line item ($25,000)
relating to damage caused in 25 counties
and one tribal jurisdiction by a severe winter
storm during January 2010.
• Secretary of State (Request #1730) - The
request is to increase spending authority by
$350,000 to accept federal funds from the
United States Election Assistance
Commission for the Help America Vote Act
election reform fund.
Senators Holmberg, Bowman, Fischer, Grindberg,
Kilzer, Lindaas, Mathern, Nelson, O'Connell,
Robinson, Seymour, Stenehjem, Wardner, and
Warner and Representatives Bellew, Boucher,
Carlson, Delzer, Dosch, Hawken, Kaldor, Kerzman,
Klein, Kreidt, Kroeber, Metcalf, Meyer, Monson,
Onstad, Pollert, Svedjan, Thoreson, Vigesaa, Wald,
Wieland, and Williams voted "aye." No negative votes
were cast.
Ms. Peterson presented information regarding an
Emergency Commission request to increase spending
authority by $81.75 million to accept Federal Highway
Administration emergency relief funds of $75.5 million
and provide matching funds from the state highway
fund of $6.25 million for roadway projects in the Devils
Lake area. She said the additional $3 million of
funding in the salaries line item is for Department of
Transportation employees to design projects, prepare
requests for proposal, evaluate proposals, award
contracts, and monitor projects.
In response to a question from Representative
Delzer, Ms. Peterson said the Department of
Transportation anticipates the $6.25 million in
matching funds will be available within in the
department's 2009-11 budget.
It was moved by Senator Mathern, seconded by
Representative Boucher, and carried on a roll call
vote that pursuant to Sections 54-16-04.1 and
54-16-04.2 the Budget Section approve the
following request, which has been approved by
the Emergency Commission:
• Department of Transportation (Request
#1725) - The request is to increase spending
authority by $81.75 million to accept Federal
Highway Administration emergency relief
funds of $75.5 million and provide matching
funds from the state highway fund of
$6.25 million for roadway projects in the
Devils Lake area. The funds are to be used
for the salaries and wages line item
($3 million), the operating expenses line
item ($10 million), the capital assets line
item ($64.25 million), and the grants line
item ($4.5 million).
Senators Holmberg, Bowman, Fischer, Kilzer,
Lindaas, Mathern, O'Connell, Robinson, Seymour,
Stenehjem, Wardner, and Warner and
Representatives Bellew, Boucher, Carlson, Delzer,
Dosch, Hawken, Kerzman, Klein, Kreidt, Kroeber,
Metcalf, Meyer, Monson, Onstad, Pollert, Svedjan,
Thoreson, Vigesaa, Wald, Wieland, and Williams
voted "aye." No negative votes were cast.
State Board of Agricultural
Research and Education
Chairman Holmberg called on Mr. Rodney Howe,
Chairman, State Board of Agricultural Research and
Education, Hettinger, to provide information regarding
the status of its activities pursuant to Section
4-05.1-19(10). Mr. Howe distributed a publication
regarding the 2009 highlights of the North Dakota
Agricultural Experiment Station and the North Dakota
State University Extension Service. A copy of the
report is on file in the Legislative Council office. He
said the board receives information from commodity
groups, producers, and researchers. He said the
information is summarized into areas, such as soil
health, crop quality, improved livestock production,
and organic and sustainable agriculture. He said the
board prioritizes needs without knowledge of the cost.
He said the state is in need of research technicians
and facility updates.
Dr. D. C. Coston, Vice President for Agriculture
and University Extension, North Dakota State
University, Fargo, provided information regarding an
update of initiatives approved by the 2009 Legislative
Assembly. A copy of the report is on file in the
Legislative Council office. He said nearly all of the
FTE positions provided to the agricultural experiment
stations and the Extension Service have been filled.
He said the Main Research Center at North Dakota
State University has begun the foundation
construction of the research greenhouse complex and
remaining contracts will be awarded in the spring of
2010.
DEPARTMENT OF HUMAN SERVICES
Status of Medicaid Management
Information System
Mr. Mark Boxer, Group President, Affiliated
Computer Services Government Healthcare Solutions
(ACS), presented information regarding the status of
the Medicaid management information system project.
A copy of the information presented is on file in the
Legislative Council office. He said ACS has merged
with Xerox and is now a Xerox company. He said the
change will have no negative impact on the Medicaid
management information system project. He said
ACS acknowledged it needed to strengthen its focus
on staffing and project management and reporting.
He said ACS has added health care systems depth to
both project leadership and its project teams. He said
ACS has increased the transparency of its progress
through regular updates and the Department of
Human Services has access to defect resolution
rates, testing results, and resource planning. He said
ACS has completed the development of the core
application and is now in defect correction mode and
Budget Section 11 March 11, 2010
performance tuning. He said due to project
complexity and adding work to the plan, the project is
approximately 45 days behind the revised schedule.
He said during the next month, the team will begin
migrating core product code to the North Dakota
project and making specific North Dakota
modifications. He said ACS still plans to implement
the system in April 2011.
In response to a question from Senator Mathern,
Mr. Boxer said ACS has access to Xerox resources
and as the resources apply, they will be added to the
project.
In response to a question from Representative
Pollert, Mr. Greg Bryant, Regional Vice President,
Government Health Care Services, ACS, said the plan
is a full transition from the current system to the new
Medicaid management information system. He said
there is no plan to operate parallel systems.
In response to a question from Representative
Pollert, Mr. Boxer said ACS intends to eliminate the
current 45-day delay and deliver the project on budget
and on schedule.
Ms. Jennifer Witham, Director, Information
Technology Services, Department of Human Services,
presented information regarding the status of the
Medicaid management information system project and
the status of Medicaid claims processing. A copy of
the information presented is on file in the Legislative
Council office. She said the ACS team has assured
the Department of Human Services that its objective is
to meet the April 2011 implementation date. She said
the department believes there is risk, but ACS has
made a commitment to absorb the compression
resulting from the delay without impacting project
activities, staff, or resources. She said the initial
system components that incorporate the state's
customizations are scheduled to be delivered in June.
Ms. Witham provided the following project funding
summary through January 2010:
Description Budget
Spent
Through
January 2010 Remaining
General fund $3,643,133 $2,647,829 $995,304
Federal funds 55,218,418 31,519,216 23,699,202
Other funds 3,667,820 1,555,112 2,112,708
Total $62,529,371 $35,722,157 $26,807,214
In response to a question from Representative
Boucher, Ms. Witham said the contract provides for a
warranty period that begins with the implementation
date and final payment will not be made until the
warranty period is completed.
In response to a question from Representative
Delzer, Ms. Witham said when the Department of
Human Services presented this project to the 2007
Legislative Assembly, the implementation date was
July 2009.
Ms. Witham said the number of Medicaid claims in
suspense has decreased by an average of 6 percent
per week over the past 10 weeks. She said as of
March 9, 2010, there were 32,700 suspended claims.
JOB SERVICE NORTH DAKOTA -
JOB INSURANCE TRUST FUND
At the request of Chairman Holmberg, Ms. Maren
Daley, Executive Director, Job Service North Dakota,
presented information regarding the status of the job
insurance trust fund pursuant to Section 52-02-17. A
copy of the information presented is on file in the
Legislative Council office. She said the trust fund
balance as of December 31, 2009, was $85.5 million,
exceeding the projected trust fund balance of
$76.9 million. She said the target for reserve
adequacy was $81.2 million.
Ms. Daley said Job Service North Dakota has seen
a dramatic increase in claims during 2009 and is
anticipating increased claims in 2010 as layoffs
continue. She said the trust fund target is expected to
increase over the next few years as the recent
increase in claims affects the target formula provided
in statute. She said the increase in the trust fund
target will be implemented incrementally as outlined in
statute.
Ms. Daley said the targeted modified average highcost
multiplier is currently .9 percent.
STATUS OF THE GREAT PLAINS
APPLIED ENERGY RESEARCH CENTER
Mr. Bill Wocken, City Administrator, City of
Bismarck, presented information regarding the status
of the construction of the Great Plains Applied Energy
Research Center, including the extent to which
nonstate matching funds have been made available
for the project pursuant to 2009 House Bill No. 1350.
A copy of the information presented is on file in the
Legislative Council office. He said the Great Plains
Applied Energy Research Center will test energy
technology applications on a small scale so they may
be more reliably implemented in the field. He said the
City of Bismarck and project partners received a grant
from the federal Economic Development
Administration to complete a feasibility study. He said
the study will address the feasibility and financial
sustainability of the project concept and if the project
is deemed feasible, prepare a long-term business
plan. He said the grant provides $100,000 in federal
funds to be matched by $100,000 from the City of
Bismarck and six North Dakota energy companies.
He said Deloitte Consulting was awarded the contract
for the feasibility study. He anticipates the feasibility
study will require seven weeks to complete. He said
no state funds will be spent until the feasibility study
and business plan are completed indicating the proof
of concept and long-term sustainability of the
proposed center.
INDIAN OIL COMPACTS
At the request of Chairman Holmberg, the
Legislative Council staff presented information
regarding Indian oil compacts, including related
revenues. Mr. John Walstad, Code Revisor,
presented a memorandum entitled Fort Berthold
Budget Section 12 March 11, 2010
Reservation Oil Development Under 2007 Senate Bill
No. 2419 and Subsequent State-Tribal Agreements.
Mr. Walstad said 2007 Senate Bill No. 2419
authorized the Governor to enter an agreement with
the Three Affiliated Tribes to establish certainty in
regulation and taxation of oil and gas exploration and
development within the Fort Berthold Reservation. He
said the agreement was signed and from the effective
date of the agreement on July 1, 2008, to the
beginning of February 2010, 160 new wells were
completed within the Fort Berthold Reservation,
including 40 new wells on trust lands. He said at the
beginning of February 2010, new wells on trust lands
were producing approximately 6,200 barrels of oil per
day and 19 drilling rigs were operating within the Fort
Berthold Reservation, including 9 drilling on trust
lands.
Mr. Walstad said the Governor entered a new
agreement with the tribes effective January 13, 2010,
which replaces the previous agreement that had a
two-year expiration date. He said the new agreement
has no expiration date.
Mr. Walstad said regarding the allocation of
revenue, 2007 Senate Bill No. 2419 provided that
taxes from production on trust lands would be evenly
divided between the tribes and the state and
production from nontrust lands would be allocated
20 percent to the tribes and 80 percent to the state.
He said the allocation of revenue as contained in
Section 57-51.2-02(5) provides the distributions to
political subdivisions be made from the state's share
of revenue not total revenue. He said this is
significant because distributions to political
subdivisions based on total revenue would be greater
than those based on the state's share of revenue as is
currently provided.
Mr. Walstad said 2007 Senate Bill No. 2419 also
provided the Three Affiliated Tribes must agree not to
impose a tribal tax or any fee on future production of
oil and gas on the Fort Berthold Reservation during
the term of the agreement. He said under the
agreement entered by the Governor and the Three
Affiliated Tribes in 2008 and renewed in 2010, the
tribes are allowed to impose one-time fees totaling
$100,000 per well relating to the siting of the well and
use of the land. He said the Governor interprets these
fees as being not based on oil production and
therefore in compliance with the statutory limitation on
tribal taxes and fees. He said the agreement
describes the taxes and fees imposed by the tribes as
a "one-time $60,000 Tribal Employment Rights Office
("TERO") fee on wells on Trust Land and a one-time
Tribal Application Fee of $40,000 on wells on Trust
Land." He said the state has no information on the
fee revenue collected by the tribes but the fee applies
to wells with a trust interest of greater than 50 percent.
He said 62 wells are in that category. He said at
$100,000 in fees for each qualifying well, the total fee
receipts to the tribes would be $6.2 million.
Mr. Walstad provided information regarding
approximate distributions of tribal production-related
oil taxes. He said since the effective date of the first
agreement and through December 2009, total gross
production and oil extraction tax revenue from oil
production within the Fort Berthold Reservation
distributed was $18.2 million, of which $4.9 million
was distributed to the tribes.
Mr. Walstad said the Legislative Assembly could
establish a "hold harmless" provision for political
subdivisions without changing the agreement with the
Three Affiliated Tribes. He said the agreement is
silent regarding distributions to political subdivisions.
He said a change in the distribution of the state's
share of the revenue would not affect the tribes.
Representative Onstad expressed concern that the
tribes' share of gross production and oil extraction tax
revenue was to be in lieu of the TERO fee, but this
one-time fee has been allowed based on the
Governor's interpretation that the fee is not based on
oil production and therefore in compliance with the
statute.
Representative Meyer requested information from
the Tax Department regarding an estimate of
distributions to political subdivisions under the
agreement if the "hold harmless" provision would have
been enacted.
Senator Stenehjem requested the information
include distributions to political subdivisions resulting
from the tribal oil agreement.
DEPARTMENT OF TRANSPORTATION
Mr. Grant Levi, Deputy Director for Engineering,
Department of Transportation, presented information
regarding the anticipated use of state, federal,
emergency, and other highway funding during the
2010 construction season pursuant to 2009 Senate
Bill No. 2012. A copy of the information presented is
on file in the Legislative Council office. He said
federal carryover apportionment and recently received
apportionment of approximately $77 million provide a
total of $139 million in federal apportionment available
to spend on the department's regular 2010
construction program. He said the size of the 2010
construction program is uncertain until Congress
either replaces or extends the federal transportation
bill. He said the delay in funding will delay bidding
and make it difficult for the department to complete
some projects this season.
Mr. Levi said the ARRA allocation provided
approximately $170 million, of which $90 million was
used for projects in 2009 and $80 million will be used
for projects in 2010. He said 2010 ARRA projects
include:
• 23 state projects totaling $64 million;
• 20 urban projects totaling $7 million;
• 7 county projects totaling $4 million; and
• 20 transportation enhancement projects totaling
$5 million.
Mr. Levi said the department will also contract for
emergency relief projects totaling $158 million, of
which $154 million is in the Devils Lake Basin.
Budget Section 13 March 11, 2010
HEALTH INFORMATION TECHNOLOGY
ADVISORY COMMITTEE
Mr. Sheldon Wolf, North Dakota Health Information
Director, Information Technology Department,
presented information regarding the status of health
information technology activities pursuant to 2009
Senate Bill No. 2332. A copy of the information
presented is on file in the Legislative Council office.
He said a health information technology summit in
2006 resulted in the Health Information Technology
(HIT) Steering Committee. He said the committee
identified the following four recommendations, which
were the basis for 2009 Senate Bill No. 2332:
• Establish a HIT office;
• Continue the HIT Steering Committee in statute
as the HIT Advisory Committee;
• Make available state funds to be used for the
required match to compete for federal stimulus
HIT grant opportunities; and
• Establish a grant or loan program unrelated to
federal stimulus funds to assist providers with
startup costs for electronic health record
implementation in order to qualify for federal
Medicare and Medicaid meaningful use
incentives.
Mr. Wolf said 2009 Senate Bill No. 2332
established a health information technology planning
revolving loan fund to receive federal funds and
provide loans to health care providers to purchase
and upgrade electronic health record technology, train
personnel, and improve security. He said no federal
funds have been available and he is uncertain when
the funding will be released.
Mr. Wolf said 2009 Senate Bill No. 2332
established a health information technology planning
revolving loan fund to provide low-interest loans to
health care entities to assist in improving health
information technology infrastructure. He said the bill
also provided for a $5 million contingency
appropriation from the earnings and accumulated
undivided profits of the Bank of North Dakota to the
fund. He said the contingency was met when actual
general fund revenues for the period July 1, 2009,
through September 30, 2009, exceeded the estimated
general fund revenues for the period by at least
$22.5 million. He said when the $5 million became
available, loan criteria was established for loans to
providers, hospitals, and multiprofessional entities.
Mr. Wolf said the HIT Advisory Committee has
been formed and meets on a regular basis.
Mr. Wolf said the state was not successful in the
first round of federal grants available to support states
in establishing health information exchange capacity
among health care providers and hospitals in their
jurisdictions. He said approximately $5.34 million is
available to the state and he anticipates the state will
be approved in the next round. He said as part of the
agreement, a strategic and operational plan must be
completed and submitted for approval. He said even
though the grant has not been awarded, the advisory
committee workgroups continue to meet and plan for
the health information exchange. He said it is
anticipated implementation of the statewide health
information exchange will begin in early 2011 once the
strategic and operational plan are approved. He said
there has been no activity in the electronic health
information exchange fund, established to handle
federal and other funds used to facilitate and expand
electronic health information exchange.
Mr. Wolf said up to $8 million is available for
transfer from the Bank of North Dakota to the health
information technology planning revolving loan fund or
the electronic health information exchange loan fund
to provide the required match for federal funds, but no
federal funds have been made available for these
loans.
Mr. Wolf said the 2009 Legislative Assembly
provided $350,000 from the general fund to defray the
costs of the HIT Advisory Committee and the HIT
office. He said expenditures through January 2010
totaled $71,356.
In response to a question from Senator Mathern,
Mr. Wolf said the strategic and operational plan will
address the ability of the Medicaid management
information system to communicate with other health
information technology systems.
In response to a question from Representative
Meyer, Mr. Wolf said the HIT Advisory Committee is
responsible for health information technology in North
Dakota, but the system will be designed to connect to
the national health information network so medical
records will be available across in the country.
TOBACCO PREVENTION AND
CONTROL COMMITTEE
Chairman Holmberg called on Ms. Jeanne Prom,
Executive Director, Center for Tobacco Prevention
and Control Policy, to present information regarding
the implementation of the comprehensive tobacco
prevention and control plan pursuant to 2009 House
Bill No. 1015. A copy of the information is on file in
the Legislative Council office. Ms. Prom said the
2009-11 biennium appropriation for the Tobacco
Prevention and Control Committee is $12.9 million.
She said through February 2010 the Tobacco
Prevention and Control Committee spent $1.6 million
of its appropriation, including $1.5 million for grants to
local public health units. She said two types of grants
were awarded, including $470,000 for tobacco state
aid grants and $1.1 million for tobacco prevention
grants. She said $352,500 of the $470,000 available
for tobacco state aid grants for the fiscal year has
been distributed. In addition, she said, tobacco
prevention grants totaling $1.1 million have been sent
to local agencies to fund local tobacco prevention and
control activities. She said all 28 local public health
units have developed policies and submitted
implementation plans to include public health service
guidelines relating to tobacco use in their client-based
programs. She said the executive committee has
Budget Section 14 March 11, 2010
hired an administrative assistant. She said the
executive committee will complete the hiring and
orientation of staff, complete the health
communication plan, develop the evaluation plan, and
continue to work with the State Department of Health
and local public health units and other partners to
implement the work plans.
In response to a question from Representative
Carlson, Ms. Prom said the first few months of the
biennium were spent securing space and hiring staff.
She said the executive committee anticipates
spending its entire appropriation by the end of the
biennium.
In response to a question from Representative
Carlson, Ms. Prom said the committee collaborates
with the State Department of Health. She said the
executive committee and the State Department of
Health each have their distinct roles and
responsibilities to meet the goals of the
comprehensive program.
In response to a question from Senator Kilzer,
Ms. Prom said the Emergency Commission request
approved by the Budget Section earlier to increase
federal fund authority for the State Department of
Health includes funding for a survey, the results of
which will be shared with the executive committee.
In response to a question from Senator Kilzer,
Ms. Prom said the executive committee expects to
see tangible results of its program within five years.
VETERANS' HOME REPORT
Chairman Holmberg announced that the
Legislative Council staff distributed to each member a
written summary report from the Veterans' Home
project manager regarding the status of the Veterans'
Home construction project pursuant to 2009 Senate
Bill No. 2007. A copy of the report is on file in the
Legislative Council office.
COMMITTEE DISCUSSION AND
STAFF DIRECTIVES
Chairman Holmberg announced the next meeting
of the Budget Section is tentatively scheduled for
Tuesday, June 22, 2010.
Representative Boucher requested that the North
Dakota State University Foundation present
information at the next meeting of the Budget Section
regarding the written report distributed by the
University System office on behalf of the foundation
regarding the use of foundation funds.
It was moved by Senator Grindberg, seconded
by Representative Kroeber, and carried on a voice
vote that the Budget Section meeting be
adjourned subject to the call of the chair.
Chairman Holmberg adjourned the meeting at
3:10 p.m.
___________________________________________
Sheila M. Sandness
Fiscal Analyst
___________________________________________
Allen H. Knudson
Legislative Budget Analyst and Auditor
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