Joint Appropriations Committee Minutes

SUMMARY of

P ROCEEDINGS

JOINT APPROPRIATIONS COMMITTEE

COMMITTEE MEETING INFORMATION June 21 and 22, 2016 Jonah Business Center, Room L55 Cheyenne, Wyoming

COMMITTEE MEMBERS PRESENT Senator Tony Ross, Co-Chairman Representative Steve Harshman, Co-Chairman Senator Bruce Burns Senator John Hastert Senator Jeff Wasserburger Representative Donald Burkhart, Jr. Representative Cathy Connolly Representative Mike Greear Representative Glenn Moniz Representative Bob Nicholas

COMMITTEE MEMBERS ABSENT Senator Drew Perkins Representative Tim Stubson

LEGISLATIVE SERVICE OFFICE STAFF Don Richards, Budget & Fiscal Administrator Dawn Williams, Senior Fiscal Analyst Dean Temte, Senior Fiscal Analyst Matt Sackett, Senior Fiscal Analyst Matt Willmarth, School Finance Analyst Dave Gruver, Director Matt Obrecht, Legislative Counsel

OTHERS PRESENT AT MEETING Please refer to Appendix 1A to review the Committee Sign-in Sheets for a list of other individuals who attended the meeting.

The Committee Meeting Summary of Proceedings (meeting minutes) is prepared by the Legislative Service Office (LSO) and is the official record of the proceedings of a legislative committee meeting. This document does not represent a transcript of the meeting; it is a digest of the meeting and provides a record of official actions taken by the Committee. All meeting materials and handouts provided to the Committee by the Legislative Service Office, public officials, lobbyists, and the public are on file at the Legislative Service Office and are part of the official record of the meeting. An index of these materials is provided at the end of this document. For more information or to review meeting materials, please contact the Legislative Service Office at (307) 777-7881 or by e-mail at [email protected] The Summary of Proceedings for each legislative committee meeting can be found on the Wyoming Legislature’s website at http://legisweb.state.wy.us. PAGE 2 OF 9

EXECUTIVE SUMMARY The Joint Appropriations Committee met for two days in Cheyenne. On the first day, the Committee received a summary of the Governor’s budget reductions for the executive branch and heard from the Governor and several affected agencies. On the second day, the Committee received a revenue update and addressed interim topics, including: codification of provisions in the general appropriations bill; state employee health insurance benefits; update of state accounts; severance tax and federal mineral royalty distributions primer; and community college funding. The Committee was also given an explanation of the exercise of the Governor’s budget reduction authority under 2016 Session Laws, Ch. 31, Section 323, 2016 Session Laws, Ch. 118 and other existing law.

CALL TO ORDER (JUNE 21, 2016) Co-Chairman Ross called the meeting to order at 8:00 a.m. The following sections summarize the committee proceedings by topic. Please refer to Appendix 1B to review the committee meeting agenda.

GOVERNOR’S BUDGET REDUCTIONS Governor Mead presented his 2017-2018 biennium budget reductions to the Committee (Appendix 2). Governor Mead explained that the state could face shortfalls of $240 - $510 million for the ensuing biennium; as a result budget reductions of $248 million, or eight and six tenths percent (8.6%) of the total 2017-2018 general fund standard budget, will be implemented effective July 1, 2016, barring a Legislative special session. The bulk of the cuts occur in five agencies that receive 72% of total general fund appropriations: Departments of Health, Family Services and Corrections; the University of Wyoming; and community colleges. Governor Mead stated that the budget reductions are structured to minimize the loss of federal funds that require a general fund match. The eight and six tenths percent (8.6%) cuts were not applied across-the-board to ensure the least interruption of state services. The executive branch estimates that 677 private sector jobs will be lost as a result of Department of Health cuts. Governor Mead also recommended that construction at the Wyoming Medium Correctional Institution in Torrington and the state office building in Casper be suspended and that the Legislature consider more modifications to capital construction appropriations during its 2017 General Session.

DEPARTMENT OF HEALTH Tom Forslund, Director of the Department of Health, addressed the budget reductions to be made by his agency, which total $90 million general funds (9.23%) and result in a loss of $43.4 million in matching federal funds. Approximately ten percent (10%) of the department budget is personnel costs, while the remaining ninety percent (90%) is passed through to providers. The agency eliminated 27 positions and reviewed its proposed cuts with the Joint Labor, Health and Social Services Committee before final decisions were made (Appendix 3).

STATE TREASURER Mark Gordon, State Treasurer and Pat Arp, Deputy State Treasurer, presented their agency budget reductions. Treasurer Gordon stressed staffing concerns and lack of current technology as primary challenges faced by his office. As a result, no reductions were made to the personnel budget. The eight percent (8%) reductions made by the State Treasurer amount to $330,000 and do not apply to the Veterans’ Tax Exemption or the Indian Vehicle Tax Exemption programs because those funds flow to local governments and do not relate to operations of the Treasurer’s office. Cuts were achieved primarily by eliminating temporary staffing and reduced contract services. Statewide revenue enhancements are being garnered from an examination of investment managers resulting in reduced fees by managing some assets in-house and by reassigning assets to companies with strong historic returns and more competitive fees.

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE http://legisweb.state.wy.us PAGE 3 OF 9

UNIVERSITY OF WYOMING Laurie Nichols, President of the University of Wyoming and Bill Mai, Vice-President for Administration guided the Committee through the budget reductions to be imposed at the university (Appendix 4). The university’s reduction target was $35 million. Permanent budget cuts to be enacted in fiscal year 2017 are $19,300,100, while one-time savings will be $6,550,000 for a total of $25,850,100. Fiscal year 2018 reductions will be determined by committee through an academic program review process, and the university will endeavor to create a longer term fiscal plan.

DEPARTMENT OF CORRECTIONS Bob Lampert, Director of the Department of Corrections and Steve Lindley, Deputy Director offered their agency’s proposed reductions and the resulting anticipated consequences to programs. Primarily, the agency will de-fund 125 vacant positions. Substance abuse treatment beds will go from 248 to 174 for males and 55 to 32 for females; 100 outpatient beds in Casper will remain available.

COMMUNITY COLLEGE COMMISSION Dr. Jim Rose, Director of the Wyoming Community College Commission (WCCC) and Matt Petry, Deputy Director reviewed their budget reduction priority list, which is dominated by reductions in the community college state aid line item. It is estimated that more than 174 positions (of which 130 are part- time) across the colleges will be eliminated.

DEPARTMENT OF FAMILY SERVICES Steve Corsi, Director of the Department of Family Services and Nick Baird, Chief Fiscal Officer presented a summary of budget reductions, which will be taken from myriad programs in the agency through a combination of reduced or eliminated services through contract diminutions and additional utilization of federal funds.

GAME AND FISH DEPARTMENT Scott Talbott, Director of the Wyoming Game and Fish Department and John Kennedy, Deputy Director spoke to the reductions to be taken by their agency. There are five generally funded programs in the Game and Fish Department, however, the entire amount of the eight percent (8%) required budget reduction is proposed to be made from the Wolf Management program, which amounts to $902,745.

SECRETARY OF STATE Karen Wheeler, Deputy Secretary of State and Kendra Hererra, Fiscal Officer discussed the budget reductions proposed by the Secretary of State’s Office. The Office budget is chiefly administrative and is driven by statutory obligations. Accordingly, many of the recommendations require statutory change, including certified notice requirements and printing requirements.

STATE AUDITOR Cynthia Cloud, State Auditor and Sandy Urbanek, Deputy State Auditor presented an overview of budget cuts and their anticipated effects on operations of the State Auditor’s office (Appendix 5). The Auditor expressed concerns that the reductions will create shortfalls that will adversely affect her ability to execute the duties of her office.

SUPERINTENDENT OF PUBLIC INSTRUCTION Dicky Shanor, Deputy Director and Trent Carroll, Finance Manager led the committee through the department’s proposed budget decreases for the Department of Education. While some programs and

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

associated positions have been eliminated, existing employees have been reassigned to different positions within the department. The budget reduction plan includes a seventy-four percent (74%) reduction in unit 1302, Outreach for the Deaf and Hard of Hearing, amounting to $745,782. The Committee encouraged the agency to spread the cuts over more programs in the agency to ensure services are maintained, especially those for deaf persons in small communities.

BUDGET OFFICE REVIEW OF AGENCY BUDGET REDUCTIONS Kevin Hibbard, Department of Administration and Information Deputy Director of Budget and Economic Analysis and Joyce Hefenieder, Budget Administrator provided a broad overview of the Statewide Summary and the 2017-2018 Budget Reduction Overview by agency, emphasizing those that did not appear before the Committee (Appendix 6).

PUBLIC COMMENT The Committee heard public comment from: Boyd Brown, Campbell County School District #1 regarding developmental preschools funding; Sven Larson, an economic research consultant, with respect to the severity of Wyoming’s economic situation, urging permanent structural reductions in spending; Angelina Bellamy, a participant in the Outreach Program for the Deaf and Hard of Hearing (Outreach Program), who explained the programs from which she benefited and her concerns about their continuity under proposed budget cuts; Ella Bellamy, advocated for child development centers (CDCs), the Outreach Program and the Natrona school district that all contributed to the success of her child’s well-being; Barb Norris, educational audiologist expressed concern about proposed cuts to the Outreach Program; Kelli Pedersen, educator and parent, touted the successes she experienced by working with CDCs and the Outreach Program and her concerns about the impact of budget cuts.

MEETING RECESS The meeting recessed at 6:35 p.m.

SECOND DAY (JUNE 22, 2016)

REVENUE UPDATE Don Richards, LSO Budget and Fiscal Administrator provided an overview of the current state revenue collections and distributions through May, building upon the formal April 2016 Revenue Update (Appendix 7). Mr. Richards presented a series of graphics intended to provide a visual snapshot of the primary pressures facing Wyoming’s revenue streams: declining coal production, declining sales and use tax collections, the potential for declining investment income, and the overall weaker revenue environment facing the state compared to just one year ago. He noted that the shortfall prediction of $110 million to $130 million for FY 2016 exceeds the statutory reserve amount, or the biennial ending cash balance of the Budget Reserve Account. Responding to questions, Mr. Richards discussed a high and low revenue scenario requested by Senator Phil Nicholas. This informal summary offered the potential fiscal impacts from a range of potential revenue shortfalls in the 2017-2018 biennium and beyond (Appendix 8). The summary includes specific revenue assumptions and the Governor’s recommended 2017-2018 biennial budget reductions, as well as provides a range of potential revenue declines in the 2017-2018 biennium roughly comparable to those suggested by the executive branch during the Governor’s presentation.

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

CODIFICATION OF PROVISIONS IN THE GENERAL APPROPRIATIONS BILL (INTERIM TOPIC #4) Matt Obrecht, LSO Legislative Counsel walked the Committee through proposed legislation 17LSO- 00480.5, Budget bill provisions codification (Appendix 9). The bill draft was proposed to the Committee in an effort to further comply with constitutional requirements concerning content of the budget bill. No substantive changes have been made to language from the budget bill, but in some cases broader language has been added to the bill draft in order to afford the Legislature latitude in future decision making.

Liz Zerga, Wyoming Telecommunications Association provided a handout of 2014 Session Laws, Ch. 26, Section 2, Section 077 (Budget Bill, Department of Enterprise Services) that contained two footnotes limiting use of the unified network and requiring the state to purchase services from commercial communications carriers to the extent feasible (Appendix 10). This provision was not included in 2016 Session Laws, Ch. 31, Section 2, Section 077 (Budget Bill, Department of Enterprise Services) and therefore not included in the bill draft presented to the Committee. Ms. Zerga requested that the language be included in the budget bill codification draft under consideration. Additionally, the Committee received public comment in support of inclusion of these stipulations in statute from the following interested parties: Jeff England, President, Wyoming Telecommunications Association; Kristin Lee, Century Link; Cheryl Riley, AT&T; Jody Levin, Verizon and Charter; Aaron Sopko, Advance Communication Technology; Jason Hendricks, Range Family; Jack Walkenhorst, Allwest Communications; and Merideth Bickell, State of Wyoming Deputy Chief Information Officer.

The Committee directed staff to include the telecommunications footnote language in a future draft. The Committee also asked staff to separate the draft bill according to statutory revisions and include copies of the original footnotes for committee members when JAC works the bill at its next meeting.

EXERCISE OF GOVERNOR’S BUDGET AUTHORITY (INTERIM TOPIC #1) Kevin Hibbard, Department of Administration and Information Deputy Director of Budget and Economic Analysis described the actions taken by the executive branch under 2016 Session Laws, Ch. 31, Section 323. There were five (5) agencies that exercised transfers between divisions and one transfer between agencies to accommodate the austerity budget reductions. Pending approval of the Legislature, these changes will be implemented on July1, 2016 (Appendix 11).

Senate President Nicholas discussed the budget reduction recommendations presented by the Governor and potential next steps by the Committee. He suggested the Committee submit a letter to the Legislative Management Council indicating whether or not it believes a special session is warranted.

Dave Gruver, LSO Director offered a review of relevant statutory language regarding the authority of the Governor to make budget reductions (Appendix 12).

STATE EMPLOYEE HEALTH INSURANCE (INTERIM TOPIC #6) Ralph Hayes, Employees’ Group Insurance Manager reviewed the group insurance program and led the committee through a PowerPoint document summarizing his presentation (Appendix 13). Mr. Hayes discussed topics including eligibility, benefits, programs, rates and employer contributions.

UPDATE ON STATE ACCOUNTS (INTERIM TOPIC #8) Dawn Williams, LSO Senior Fiscal Analyst briefed the Committee on each of the state accounts (Appendix 14). Previous updates that included multiple worksheets have been combined and refined. The new report represents a comprehensive list of fund accounts, balances, statutory references and

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

descriptions. The Committee requested there be an indication of dormant accounts and that a methodology for identifying funds that may be available for appropriation be applied to the summary.

SEVERANCE TAX AND FEDERAL MINERAL ROYALTY DISTRIBUTIONS (INTERIM TOPIC #9) Dean Temte, LSO Senior Fiscal Analyst offered a history and explanation of Wyoming severance taxes and Federal Mineral Royalties collections and distribution formulas (Appendix 15). Mr. Temte’s presentation discussed tax and royalty imposition, rates, history, and distribution methods before and after “de-earmarking” these revenue streams. He also presented the sub-distributions to entities and accounts benefitting from these revenue sources and the magnitude of the annual revenues in recent years.

COMMUNITY COLLEGE FUNDING (INTERIM TOPIC #2) Dr. Jim Rose, Wyoming Community College Commission (WCCC) Director believes the revision to the allocation model that was modified in 2016 HB0080 has been well received by both the WCCC and the colleges. He stated there is a process in place for program review and assessment that continues to be refined and improved and functions well. Regarding facilities, Dr. Rose shared rules for, and a description of, the prioritization model for community college projects (Appendix 16). Dr. Rose also explained the collaboration with the Department of Administration and Information Construction Management section and the WCCC in developing construction projects. Dr. Rose clarified that only credit classes are counted toward enrollment for purposes of budget requests and funding distributions. The Committee requested that enrollment figures be available by actual number of students, rather than a count of full-time equivalent students based on weighted course assessments and that it receive a list of the total course offerings at the colleges. The Committee noted that health insurance stipulations have been added to 17LSO-00480.5 (Budget bill provisions codification). Senator Wasserburger requested the WCCC provide a summary of the amount of estimated state and local revenue that will be reduced from the 2015-2016 biennium to the 2017-2018 biennium for each college.

PUBLIC COMMENT Kathy Vetter, President of Wyoming Education Association, urged the committee to make no further cuts to community colleges and provided a handout (Appendix 17).

COMMITTEE DIRECTIVES Pursuant to 2016 Session Laws, Ch. 31, Section 323 (Section 323), the Committee voted to respond to the Governor regarding his budget reallocations to acknowledge receipt of his report and to recommend that the portion of the authority exercised under Section 323 to restore travel budgets in the Office of the Public Defender not attributable to the “penny plan” (1.5 percent austerity measure) be exercised under separate authority.

Representative Connolly moved that the Committee submit a memo to Management Council rejecting the Governor’s budget reductions and to recommend convention of a special session to consider alternate sources of revenue to the general fund, including Medicaid expansion. Committee discussion ensued concerning the possible timeframe for holding a special session and the necessity of such a session. The motion failed.

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

The Committee voted to send a letter to the Governor regarding his exercise of budget reductions under W.S. 9-2-1002(b) to include the following: 1) JAC supports and appreciates the work of the Governor and the executive branch; 2) Acknowledgment that it is important to implement reductions early in the biennium since the percentage required for reduction only increases with time as the amount of expenditures continues to outpace revenues; 3) The Governor’s cuts reflect the best case scenario in terms of revenues; 4) The potential $110-130 million cash shortfall in FY16 has not been fully resolved. Thus, the Committee supports and encourages efforts currently being made by the executive branch to address this problem; 5) The Committee will not recommend a special session to Management Council; 6) To request the executive branch separately show the 2017-2018 budget reductions from the June 20, 2016 Governor’s recommended actions and from any additional reductions within the 2017 General Session supplemental budget submissions; 7) The Judicial Branch should also plan for budget reductions; and 8) The Committee encourages the executive branch to reconsider reductions to the Outreach for the Deaf and Hard of Hearing program within the Department of Education.

The Committee requested a written summary of Mr. Richards’ revenue presentation, as well as a summary of the long range revenue forecast document prepared for President Nicholas.

ANNOUNCEMENTS The Committee set a future meeting for October 24th in Casper.

MEETING ADJOURNMENT There being no further business, Co-Chair Harshman adjourned the meeting at 4:40 p.m.

Respectfully submitted,

Senator Tony Ross, Co-Chair

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

Committee Meeting

Materials Index

Appendix Appendix Topic Appendix Description Appendix Provider

1A Committee Sign-In Lists meeting attendees Legislative Service Sheet Office

1B Committee Meeting Provides an outline of the topics the Legislative Service Agenda Committee planned to address at the Office meeting

2 Governor’s Presentation Governor’s Letter and 2017-2018 Governor’s Office and of Exec. Branch Budget Agency Budget Reductions A&I Budget Office Reductions

3 Wyoming Department WDH: Budget Reduction Summary Department of Health of Health (WDH)

4 University of Wyoming Plan for Budget Reductions at UW University of Wyoming

5 State Auditor 2017-2018 Budget Reduction State Auditor’s Office spreadsheets

6 Budget Office Review Statewide Summary and 2017-2018 A&I Budget Office of Agency Budget Budget Reduction Overview Reductions

7 Revenue Update FY2016 Revenue Update Summary Legislative Service Office

8 Revenue Update Informal Long-range Revenue Forecast Senator Nicholas

9 Codifications of 17LSO-0048 Working Draft 0.5 Legislative Service Provisions within the Office General Approps Bill

10 Codifications of 2014 Session Laws, Chapter 26, Liz Zerga, Wyoming Provisions within the Section 2, Section 077 Telecommunications General Approps Bill Association

11 Explanation of Exercise Executive Branch Penny Plan A&I Budget Office of Governor’s Budget Summary

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings

12 Explanation of Exercise Excerpts from 2016 Session Laws. Ch. Legislative Service of Governor’s Budget 31; 2016 Session Laws, Ch. 118; and Office Reduction Transfer W.S 9-2-1002. Authority

13 State Employee Health WY Employees’ and Officials Group EGI Insurance Benefits Insurance (EGI) Program PowerPoint

14 Update on State Review of State Accounts for JAC Legislative Service Accounts Office

15 Severance Tax and WY Severance Taxes and Federal Legislative Service Federal Mineral Royalty Mineral Royalties PowerPoint Office Distributions

16 Community College WCCC Rules and CapCon Manual WY Community Funding Excerpt College Commission

17 Public Comment Wyoming Education Association WEA (WEA) Letter to JAC Members

JOINT APPROPRIATIONS COMMITTEE Summary of Proceedings