Texas Parks and Wildlife Commission
Finance Committee
Budget Workshop

July 15, 2004

Commission Hearing Room
Texas Parks & Wildlife Department Headquarters Complex
4200 Smith School Road
Austin, TX 78744

BE IT REMEMBERED that heretofore on the 15^th day of July 2004, there came to be heard matters under the regulatory authority of the Parks and Wildlife Commission of Texas, in the Commission Hearing Room of Texas Parks and Wildlife Headquarters Complex, Austin, Travis County, Texas, beginning at 1: 03 p.m., to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION
Ned S. Holmes, Committee Chairman
Joseph B.C. Fitzsimons, Chairman
Philip Montgomery
John D. Parker
J. Robert Brown (Absent)
Al Henry (Absent)
Peter M. Holt (Absent)
Donato D. Ramos (Absent)
Mark E. Watson, Jr. (Absent)

O R I G I N A L

THE TEXAS PARKS AND WILDLIFE DEPARTMENT
Robert L. Cook, Executive Director
Other personnel of the Texas Parks and Wildlife Department

FINANCE COMMITTEE
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BUDGET WORKSHOP
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JULY 15, 2004
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1: 03 P.M.
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CHAIRMAN FITZSIMONS: This meeting is called to order. Before proceeding with any business, Mr. Cook has a statement to make.

MR. COOK: Mr. Chairman, thank you. A public notice of this meeting containing all items on the proposed agenda has been filed in the office of the Secretary of State as required by Chapter 551 of the Government Code referred to as the Open Meetings Law. I would like for this action to be noted in the official record of this meeting.

CHAIRMAN FITZSIMONS: Thank you Mr. Cook. Please pass the gavel to our Finance Committee Chair, Commissioner Holmes.

COMMISSIONER HOLMES: Thank you Mr. Chairman. We will convene the Finance Committee. Today we are going to review the agency's FY05 Operating Budget and the FY 06-07 Legislative Appropriations Request. Mary Fields and Drew will make the presentation. Mary, are you going first?

MS. FIELDS: I don't know if Mr. Cook has any opening comments.

COMMISSIONER HOLMES: Mr. Cook?

MR. COOK: I would like to make the observation that this is a public meeting. We have specifically invited others to visit the meeting if they can — members from each of the divisions — division directors, if they are in town, otherwise represented by their able assistants and I appreciate them being here. With this being an open meeting we may have members of the press join us, we may not. That is why we are here and we will hopefully have a better understanding of where we are in this process and get your recommendations and input as to how to proceed, if you would like us to adjust accordingly.

COMMISSIONER HOLMES: Thank you.

MS. FIELDS: Well good afternoon commissioners. For the record, my name is Mary Fields. I'm the Chief Financial Officer for Parks and Wildlife. It's my pleasure today to present to you with Drew the budget workshop presentation. As Commissioner Holmes mentioned, today we are going to review the FY 2005 Operating Budget. Within that process we will discuss the operating budget process, how the operating budget was financed, some of the summaries of the budget — just taking a look at three different ways: by strategy, by object of expense and by division. Also, we will discuss the full-time equivalents that are budgeted, as well as a few key points and then I will pass it to Drew who will discuss future plans for preparing our budget.

The second part of the agenda will be to review the 2006-2007 Legislative Appropriations Request. Again, Drew will discuss the process, the revenue estimates, and fund balances associated with the request. I will discuss the base budget, reductions that are necessary to achieve 95% of the budget — General Revenue and General Revenue Dedicated — that is, key impacts, proposed exceptional items that staff are proposing in a certain priority, the total request, and then key points of the administrator's statement.

So, let's get started with the operating budget. In recapping our process, we used 100% of our 2004 base budget as our starting point. Divisions were asked to justify and prioritize their programs as their 2005 budget was built. Divisions also were allowed to request additional budget only if it came with additional funding and additional appropriation authority. For example, federal funds and donations would fit into that category. Allocations to the divisions included this year 100% of the fee increase. In 2004 we did reserve a portion of the fee increase. This year there is no reserve held in the 2005 budget. Also, to fulfill this budget, we had to include an estimated salary lapse of 2.9% to meet our budget demand. That lapse will actually accumulate through our unfilled positions that occur throughout the year.

In financing the budget we start out with our General Appropriations Act. That is the appropriation bill that is passed by the legislature. For 2005 the authority to spend is actually laid out by strategy and by fund and we had $210.7 million for fiscal year 2005 that we started out with. There are several limits on capital budget items within the bill. Just to mention a few of them: we got land acquisition which is at $5 million which is basically the same as 2004, construction of building and facilities — now again, we didn't get any new bonds so what we will do is carry forward any unexpended balances from 2004, and we will talk about that in a little more detail in a few minutes. Information technology is at $750,000 roughly and vehicles and capital equipment are the other two categories. At this point, replacement vehicles are at $1.7 million, which is the same amount as they were in 2004. That is 82 vehicles.

As far as FTE, we are capped at 3,038.5 FTEs. That is one increase since 2004. In highlighting the appropriations, I just want to remind you guys that there really isn't a lot of change between 2004 and 2005, but over the biennium we did take some pretty significant reductions and I want to remind you of those. We had the Proposition 8 funds at $17.9 million. The Local Park Grant Program was reduced by $7.7 million for this fiscal year, minor repair funds were $1.5 million, Outreach and Public Awareness $1.4 million, and information technology at over $900,000. So we had some pretty significant reductions that we continue to feel the pain on in 2005. The good news is the additions. We have that fee increase rider at $15.7 million and our Freshwater Fishing Stamp revenue at $4.3 million.

In cross-walking from our General Appropriations Act to our operating budget, we do make adjustments and those are outlined here. We start out with what is in the Appropriations Act, which is $210.7 million. We did have a reduction in appropriated receipts of $1.1 million that does relate to the magazine. We have had decreased circulation and some decreased advertising revenue in that area and that is shown as an adjustment here. Federal funds of $5.5 million — that represents some of the contracts that we have not signed. You'll recall throughout the year as contracts get signed for the federal funds that we will add them to the budget. Our Benefit Replacement Pay is at $1.4 million with benefits overall at $29.3 million. Again, if you'll recall this is about the same amount that we adjusted to our 2004 budget. This just represents a transfer of funds for the benefits. It isn't included in our appropriation. So our budget that we will be talking about today is at $234.7 million.

In financing that, just to show you, we have about 40% or $91.5 million of the budget is our Fund 9, Game, Fish and Water Safety Fund. The next largest piece is our federal funds at close to 20%, state parks at roughly 18-19% there at $44.1 million and you can see the other pieces. General Revenue is almost 15% of our budget.

So now that we have talked about how it is financed and we came to the bottom line, let's take a look at some different summaries of the budget. This is a summary by strategy. When the budget is discussed at the legislature and our oversight agencies, they do think of our agency in terms of these strategies. As you can see, our largest piece is operating state parks at 22%. If you looked at our Public Hunting and Fishing and our Manage Fish and Wildlife strategies that represents about 23% of the agency. That is where our inland, coastal and wildlife activities occur. Law enforcement is at 16%. You can see the various percentages there, but I thought I would highlight a few of the larger pieces of the strategies.

In looking at our budget by object of expense, in comparing it to fiscal year 2004, you can see that our salaries have increased by a couple of million. Operating is reduced by roughly $10 million. Some of this relates to our federal funds that we will bring in, as I mentioned, throughout the year. There is a pretty good reduction in the grants, and actually a big piece of the difference there between the $30.1 and the $18.8 million is we had an $8 million dollar grant in 2004 that you'll recall for land acquisition in Travis County, so that was a one-time thing that showed up in 2004. Our benefits, as you can see, are running pretty close. That is an estimate. In our capital expenditures there is a pretty big difference there, and let me just remind you, that any unexpended balances we have from 2004 will rollover into 2005. As of the end of May we had about $50 million of funds available there, so we will have a substantial amount that we will carry over from 2004 to 2005.

In looking at 2005 budgets by divisions, I wanted to highlight a couple there. This first slide — actually the divisions range from less than 1% of the overall budget, which would be human resources and legal are roughly at 1%, and they range all the way up to about 7% here. Department wide is a category that I just wanted to remind you what is there. We have our debt service for our revenue bonds, $3.5 million to fund our license system, our State Office of Risk Management, our assessment for workers compensation; those types of items are included in department wide. On the next slide here we can see law enforcement is about 18% of our budget and state parks is at about 34% of our budget. Again, you'll recall that over one-third of our FTEs are in the state parks program. So a lot of these budgets are driven fairly closely to the number of FTEs that are in that division.

We will recap that right now — our full-time equivalents. We do have about 24% of our staff at headquarters while 76% are field staff. We have 3,061 FTEs that are funded in this budget. You will recall that I said our cap was at 3,038.5. We do have some additional positions funded because they're never all filled at one time. Showing how the FTEs are funded by division, again I have already kind of mentioned a couple of those, but state parks has 38.5% of the FTEs, 20% of our FTEs are in the Law Enforcement division — there at 626 FTEs roughly, and 11% of them are in wildlife. You can see the distribution of the FTEs in the various divisions.

In pulling together a few key points about this budget, again I have discussed it in depth earlier, but the biennial reductions continue to impact us in 2005. Again, we did base our budget on 100% of the 2004 base budget. We have incurred increased fuel prices and our vehicles are aging, so there is increased maintenance there that we have had to absorb in our operations. We've got a $15.7 million fee increase that is included in the budget. The full increase, as well as the $3.2 million salary lapse that is in there to meet budget demand and we have included the Freshwater Fish Stamp revenue at approximately $4.3 million.

At this point I will hand it over to Drew to talk about our future plans.

DREW: Well good afternoon. My name is Drew Thigpen. I'm the Deputy Executive Director of Administration. I appreciate the opportunity to be here with you this afternoon to cover some of these topics. I thought it would be appropriate at this point to just talk for a second on where we are right now and where we would like to go. For the current year, when we prepared the operating budget we focused a lot on priorities within the divisions, but we did it in a very informal manner so that the divisions came in and made presentations to the executive staff on exactly what their priorities were. For the next year, we are planning to move toward preparing operating budgets where we include operating plans as a part of that process so that we go into some level of detail as to what's going to be accomplished within each division and the resources that are associated with that. It will be along a major program area. We would also like to reflect our links to the Land and Water Conservation Plan and also to other specific objectives or measures that we may have that relate to those specific programs. I think the idea behind this is: we would like, as we come forward and give you the opportunity as commissioners, to have some sense of what it takes to accomplish the various things within our programs. Obviously, we have limited time and there are lots and lots of things that this agency does, so we will try to keep it at an appropriate level, but at the same time, we think that it will be good information that will be available for us internally as decision makers as well as for you as policy makers.

I guess with that I will move right into a review of the legislative appropriations process.

COMMISSIONER MONTGOMERY: Can I say one thing before you — I just appreciate the direction because it ties back to Scott's tactical plan and where we are trying to land.

CHAIRMAN FITZSIMONS: Land and Water Conservation Plan.

COMMISSIONER MONTGOMERY: Land and Water Conservation Plan. This next year we have the Tactical Operating Plan, the Strategic Plan, and the budget all converging so that we can see how they all fit together. So I appreciate the effort and direction there.

MR. THIGPEN: Thank you. I appreciate it. I thought it would be appropriate because we have some new members who have various experience operating and dealing with the legislative appropriations process, so we thought it would be appropriate to spend just a minute talking about the process itself. We put in this flowchart, just to give you some sense of the flow of how things come together with our Legislative Appropriations Request which we will submit August 20^th. Then that goes to the Legislative Budget Board and also to the Governor's Office of Budget, Policy and Planning. Once those two bodies make their deliberations and come up with some recommendations they will go to the Governor's Office, and the Governor will issue a budget recommendation. At the same time, the Legislative Budget Board which are the 10 members — the Lieutenant Governor, the Speaker, the Chairmen of House Appropriations and Senate Finance and three other members from each side will then make a base recommendation for a base bill that starts out as the Appropriations Bill that is filed in both the House and the Senate. The committees' will hold hearings both on the House side and the Senate side. They will pass an Appropriations Bill to the full Senate and the full House which will then pass to the other side and get rejected. They will appoint a conference committee to work out the differences. From that point it will go to the Comptroller for certification once it is finally passed and then to the Governor for veto or signing it.

I thought it would also be appropriate just to talk very briefly about some of the key dates. These next two slides, I guess, will walk you through some of the timeframes to give you a sense of what to expect from a timing perspective. August 20^th, as I said earlier, is the due date for our Legislative Appropriations Request. In September we will have the first and typically the only public hearing where the public has an opportunity to go in and comment specifically on the agency's budget. So there will be invited public testimony at that hearing. It is mainly a presentation where the staff of the LBB, the Governor's Office, and other oversight offices will sit and ask questions. Bob will typically make a presentation and certainly if the chairman or any of the other commissioners would want to attend, they are certainly welcome to do so.

Then in November/December timeframe, as I mentioned earlier, the Legislative Budget Board and staff will actually be working on their draft of the appropriations bill. They will get some policy directive. For example, it's entirely possible that they could, as part of that review, say maybe we're not going to need the full five percent reduction from each agency so they may strategically restore some of those. More likely they will go in agencies budgets and find a few more things to cut, but it could go the other way.

Then in January the legislative session begins and the committees are named. The Comptroller will submit a document called the Biennial Revenue Estimate which is a very critical document because it dictates the amount of funds that are available. As you recall last session the Comptroller kind of dropped a bomb on the legislature that we were short $10 billion going into the session, so the legislature had to recover from that and pass a bill with no new taxes which happened. The Governor will also present his budget typically in January to the legislature and the chair of the House Appropriations Committee and the Senate Finance will file their bills which are typically the same. The House and Senate will start with the same bill.

In February, the House Appropriations Committee and the Senate Finance Committee will start conducting their hearings on the appropriations bills and invite testimony from individual agencies. Typically, they will divide up. On the House side they will appoint a subcommittee. In the last session we reported to the General Government Subcommittee chaired by Representative Pickett. They will conduct detailed hearings and make some recommendations. Last session they had targets they had to hit and they were very diligent about hitting those reduction targets. As you recall, when we left that subcommittee on the House side, they did their regular consideration of the cuts and consideration of what they thought we should have and then they cut another $11 million just because our fund balances were declining and they did not want us to — because that would be an impact to the appropriations bill, they did not want to allow that to happen. So we had a lot to recover from on the house side.

On the senate side, it's a much smaller committee. It's a much smaller body. So the House Appropriations Committee typically is comprised of 29 members where as the entire senate only has 31 members. So when we were on the senate side last session we worked primarily with Senator Averitt — was the lead senator that worked with us. Senator Staples, I believe, was also pretty heavily involved as was Chairman Bivins.

Going into March the committees will be hearing their bills. Halfway through the session, the session is 120 days long, and halfway through — the 60^th day from the beginning of the session they can not file any additional bills, so that is the key point in the session. And from that point on it is just kind of mending, and adding, and moving things to their bills.

In April, the Conference Committee typically begins their hearings because both the House and Senate Finance Committee will have wrapped up their bills and gotten their houses to pass it with whatever floor amendments they want to add. And it goes to the committee and the committee chairman will primarily be driving this process. This is a key time because we will have tried to have gotten some provisions. If there are some things that we don't get in the first house that we go through, we will work awfully hard trying to get them added to the second house so that they can be considered. It's also a great time to get a rider added during Conference Committee, because for the dollars they can typically only work with what the difference is. If they are both in agreement it's typically not at issue so they can not give you more money. I guess by rule they could take money away, but as a general rule they don't. It's only the items that are at issue and they can go with the lowest or they can go with the highest for whatever the particular item is.

In May the Conference Committee will finalize the appropriations bill and the session will typically come to an end at about the 120^th day. Sometimes it's the first day of June, which it was last session. I don't know what it is this coming year.

And then the Comptroller must certify that there is sufficient funding for the bill that is passed before it can go to the Governor. This last session there was some concern about that at the last minute and the Comptroller finally signed off. Then the Governor will have the opportunity to review and veto specific items, years, or the entire bill if he chooses to do so.

As we mentioned before, we have a new budget structure that is going to be more detailed that it has been in the past. Most agencies have that same kind of a more detailed structure. What this is going to do is give the Governor significantly more power to veto specific programs throughout all the agencies in the Appropriations Act.

Also, I would like to move into the revenue estimates and fund balances that we expect to have available for our two primary dedicated funds which we call Fund 9, Game, Fish and Water Safety fund and then also Fund 64 which is for state parks. As you know, over the last couple of years we have had some — in 2003 we were asked to take a seven percent reduction. In 2004-05 we have about another seven percent reduction in our General Revenue and General Revenue Dedicated accounts. This time we have been asked to submit a budget with our base starting point at five percent below for each year in our General Revenue and General Revenue Dedicated. And so it should not be a surprise to see that were actually starting to grow some fund balances. We have also, as you can see on this particular slide, we go from an ending fund balance at the end of '04 at $11.0 million to $46.8 million by the end of fiscal year 2007. What it is reflecting is the fee increase. The primary drivers for this growing fund balance are two things: First, we passed the fee increases — you approved fee increases this last time around in Fund 9, so those balances are reflected in the funding that is shown here. Beginning in fiscal year 2005 we will also be collecting the new Freshwater Fish Stamp. That is adding another $4 plus million dollars. On the deductions side you can see a decline between '04 and '05 which is primarily in capital outlay. They appropriated funding the first year and it just carried forward for the second. Any unexpended balances. And then in '06-'07 you can see the reduction. The same —

COMMISSIONER HOLMES: Before you leave that slide, Drew, you might point out that those are projected fund balances that are unencumbered.

MR. THIGPEN: That is correct.

COMMISSIONER HOLMES: The additional sums, that in fact, have been previously obligated.

MR. THIGPEN: And I appreciate you mentioning that commissioner. We, on an average, will have about $30 million that is encumbered, but not spent by the end of a fiscal year. And so these fund balances that we are reflecting here are the unencumbered fund balances. These are available fund balances which could be used for an additional purpose. And as you will see in a few minutes, we will have some exceptional items that we will recommend that would in fact level out these. Instead of having a growing fund balance we will probably level it out at some point.

On Fund 64 you see the same trend which I am very pleased to say. The same issue about the expenditures applies to Fund 64 as it does to Fund 9. We have had those reductions over the last few years. The starting point is — starting in fiscal year 2004 we started to receive a $2.6 million in additional transfers of boat title and registration fees based on new legislation that was passed this last session. It's transferred from Fund 9 to Fund 64. The fees, as they were increased overall — Fund 9 gained in boat titling and registration fees, but even after this transfer of $2.6 million per year, the net effect is that we go from $7.2 million ending fund balance in '04 to a $26 million unencumbered fund balance in 2007.

With that I will turn it back over to Mary to complete the presentation.

MS. FIELDS: Thank you Drew. We talked about some of the funding that establishes the budget, but the Legislative Budget Board and the Governor's Office have provided us instructions when we prepare our request as to what our base amount will be for 2006-2007 and this slide just establishes what that base budget is. So we've got — what we do is estimate what our projected expenses will be for 2004 which is at $286.2 million. We are budgeting for 2005 at $208.5 million. This number is a little different from the numbers we talked about earlier because the Legislative Budget Board gives us specific directions on what components of the budget go into the base. There are a few differences and I'm not going to go into the detail of the instructions, but when we follow their instruction it comes out to $208.5 million for '05. So we've got it at 100%; the budget would be $494.7 million. Now, the letter also told us that we had to take a five percent reduction in our General Revenue and our General Revenue Dedicated amounts. That total comes out to $16.1 million. That is an important amount and we are going to be talking a lot about that in the next few slides. So when we take that reduction our base budget starts at $478.7 million for 2006-2007.

MR. COOK: Mary, I think it's worth noting gentlemen and help me out Drew and Mary. We got our instructions some 60 something pages with attachments in early June.

MS. FIELDS: We did receive them in, yes, late May or early June.

MR. THIGPEN: June 6^th.

MS. FIELDS: June 6^th and these are the instruction here — 80 pages plus appendices.

MR. COOK: So, some of those things that are spelled out that direct us here is how to prepare your LAR, we can't really start that process until we get those instructions. Once we get them we can't change them. We can't vary this way or that way, so those numbers really set a base that we have to follow through this process.

MS. FIELDS: That's correct. We did anticipate — in the cover letter they outlined how much the reduction would be and we did anticipate somewhat of a reduction for 2006-07. I know I wasn't anticipating a five percent General Revenue and General Revenue Dedicated reduction, but none-the-less we will deal with the cards we were dealt I guess. The $16.1 million, what we are proposing to accomplish that reduction is to take a $10 million reduction from the Local Park Grants program. The thought process there is that those Local Park Grants are really expansion and development of new parks and we really want to maintain our existing state parks, so this is an area where we thought we could look for a reduction and then ask for an exceptional item to receive that money back. We took operating budget reductions within the divisions of $5.1 million. I am going to be talking a little bit more about those reductions specifically in just a minute. We also have appropriation authority reduction for the Artificial Reef Program of $1 million. That will not actually have a negative impact on the program, but that program is funded with donations and we will still receive those donations and add the authority for that to run the program. So, that is the overall game plan for implementing the $16.1 million reduction.

In the operating, that $5.1 million, just an overview by division what the dollar amounts look like and remember these are biennial totals. I'm not going to read these numbers to you. What I will say is over the next two slides we have each division and the reduction to their operating budget. It ranges from .6% of their overall budget to 1.8%. The reason that that percentage varies between the divisions is because some of the divisions have federal funds. The federal funds were not reduced, just the General Revenue and the General Revenue Dedicated. So here is just an overview of the reductions by division that come up to the $5.1 million.

Some of the key impacts of the $16.1 million is — of course, we are substantially reducing the amount of Local Park Grants. We will eliminate 27 FTEs in the State Parks Division — 25 in the field and two at headquarters is the current plan. We will reduce the game warden cadet class. Eliminate 5.5 administrative FTEs and you can see the breakdown there: three in Administrative Resources, 1.5 in Communications and one full-time equivalent from the Executive Office. We will reduce administrative operating expenses by about $385,000. You can see the breakdown there. We've got funding coming from the Statewide Cost Allocation Plan; reductions to our mainframe services; we will scale back on our employee assistance program and our interns program; the director's office out of Communications and Administrative Resources is going to take reduction pretty much throughout the operating areas. On the resource side we are looking at 12.5 FTEs being eliminated there of which 5.5 will come from Wildlife, three from Inland Fisheries, two in Coastal, and two in the Infrastructure Division. So, that is the impact of the reductions.

The good news is that we will ask for that funding back through exceptional items, and at this point I would like to go through our exceptional items. These are the dollar amounts that we ask for above our base budget. Keep the fund balances that Drew mentioned in mind as we go through these. These are in staff priority order.

MR. COOK: The exceptional items, gentlemen, are anything that is over that 95%. That bottom line. We said here is what we would recommend we would have left at 95%. So anything on this list is above that 95% level.

MS. FIELDS: And we have actually laid those out, the staff have, in priority order. The first item is our Proposition 8 General Obligation Bonds for major repairs and construction. We are asking for bonds in two different priorities. This first priority item at $25.8 million for the bonds is to start construction on multiple priority projects for the agency. You will see in a minute there is another $20 million or so that we will be asking for to complete those projects. Exceptional item number two is that $5.1 million that we talked about in the divisions operating budgets. I will mention that this item won't show up just as a restore divisions base. We have to layout those exceptional items and line them up with the various strategies so you may see multiple exceptional items that actually come up to this $5.1 million to restore, but that is our plan at this point. Eight million, which will be $4 million per year for State Park Operations and Minor Repairs — at this point we are looking at about $3 million of it for operations and $1 million for small repairs per year.

The capital appropriations for replacement vehicles and equipment — that item at $14.6 million, we will be looking at more closely. What I can tell you at this point is that about $11.5 million of that item is replacement vehicles. In 2006 we are looking for 216 vehicles in 2007 it will be 211 vehicles. About half of those, 110 per year, would go to the law enforcement area. There is $1.9 million in there for boats and motors and then an additional $3 million in there for equipment over the biennium — equipment being generators, intake pumps, video equipment, etc. Those types of items are in that exceptional item.

The next exceptional item is for the Freshwater Fish Stamp; just the appropriation for those revenues. We received the rider and actually incorporated the $4.3 million into the '05 budget, so what this does is just level it out for the '06-'07 biennium so that we can bring in what we are estimating at $4.5 million per year. When you consider what's base, this is the balance that is needed.

Exceptional item number 6 — an employee pay raise for our employees — we anticipate that this may be actually a state-wide employee pay raise, but we would like to highlight a pay raise for our employees at $5 million per year. This would be a 4.8% increase in fiscal year 2006 that would carry into 2007. Game warden cadet class, number seven at $5 million or $2.5 million per year, with this class we have a 510 game warden target amount that we are trying to reach here and with this class we are trying to meet that target. Number eight, capital appropriation for information technology; again I mentioned that we had some substantial reductions in '04-'05 for our information technology. We have a five year refresh on our personal computers in this agency which is a pretty extended period of time to have a personal computer. This item will actually ask for computers to refresh roughly 1,700 computers, as well as servers, as well as other information type of equipment. Telecommunications and those sorts of items are in that particular exceptional item. Number nine, capital project related salaries. These are salaries in our Infrastructure Division that are currently funded with bond proceeds. There were reductions that were taken in the past. These salaries were funded with General Revenue in the past and we would like to request General Revenue again to fund those salaries so that we can use the bond proceeds for those construction projects. Number ten, this is the other part of those GO Bonds that we talked about earlier. This would be to complete those projects at $20.6 million. Restoring the Local Park Grant program at $24.7 million. Over '04-'05 this program took a $14.7 million reduction. We just talked about another $10 million reduction for '06-'07. So there is your restore of the Local Parks program.

And finally, a final request for a few more replacement vehicles there. We are looking at 30 for 2006 and 31 for 2007 and about $800,000 of that request is for additional boats and motors. So, currently our exceptional items total $129.6 million.

When you look at our total request, just a reminder there of our base request of $478.7 million and our exceptional items gives us a total request over the biennium of $608.3 million. As Bob mentioned earlier, we will follow the budget structure which is more detailed and it was approved in the Strategic Plan.

The Administrator's Statement, what I kind of call a cover letter to the Legislative Appropriations Request — the administrator being the executive director, but the chairman can also add comments or direction within this statement and it just summarizes what the importance is of the request to this agency. So, we will summarize the exceptional items. We will request debt service on the General Obligation Bonds. The debt service actually goes to the Texas Public Finance Authority, so we don't ask for the debt service but we will ask for it in our statement. We will summarize major initiatives including our construction of the freshwater fish hatchery and providing them an outdoor learning center at Sheldon Lake State Park for environmental education for urban youth. Following in-line with the requests for a salary increase for our state employees, we don't want to forget our executive director so that is also in the Administrator's Statement.

That concludes the formal presentation of the workshop.

COMMISSIONER HOLMES: Mary, before you get too far away, I would like you to back it up to the exceptional items. If you could back your presentation up.

MS. FIELDS: Sure.

COMMISSIONER HOLMES: And I want to make sure that the commission is focused on two or three things that are included within this. As we all know the vehicle fleet is aging. We have a goal of replacing vehicles at what Drew 100,000 miles?

MR. THIGPEN: That's correct.

COMMISSIONER HOLMES: We have run well past that and so we know that is a very critical part of this exceptional item list. The state employees have gone without a pay raise for 3 years. Is that correct?

MR. THIGPEN: Since '92. I mean since 2002.

COMMISSIONER HOLMES: It feels like '92, but it was 2002. This is not going to be a stand alone increase if it occurs; it will be across all state employees so we are simply highlighting it as opposed to asking the State to distinguish the employees of Parks and Wildlife with a raise versus all the rest. One of the other important pieces is to know item one and item ten that are the General Obligation Bonds under Prop 8 for repairs and construction. This is currently not designed to be stand alone projects; it's designed to be the completion of all $45 million in projects that are already started. So out of the total estimate of $45 million we would request as priority number one $25.8 million be appropriated for that, then the balance would be required to actually finish those. As opposed to saying here is $45 million in projects we want this group that totals $25 million started and completed within that priority one request then that balance to be completed later. That is a strategic issue that the commission needs to think about a little bit.

CHAIRMAN FITZSIMONS: How does that affect those Prop 8 bonds? Because, as I remember the presentation I guess that Steve did — of the tons of different projects that came out, some were required by special appropriation and others weren't and it went out over how many years? I have already forgotten.

MR. COOK: Ten. Eight or ten years.

CHAIRMAN FITZSIMONS: How does that figure into our —

COMMISSIONER HOLMES: I haven't seen the detail on how that would figure in or what would be remaining out of those projects. Bob, do you recall that?

MR. COOK: Well, in general and —

CHAIRMAN FITZSIMONS: Steve's here.

MR. COOK: Steve is here, and Scott who could probably tell you, but I can tell you that dividing it out like that you know our plan tranche was at $46 million which is one in ten (inaudiable). We thought when laying out our priorities that if we could get $25 that will finish us at Nimitz, the project that is on the book at Nimitz if I'm correct. Steve?

MR. WHISTON: That's correct.

MR. COOK: It won't start — correct me if I'm wrong — it will not initiate the battleship.

MR. WHISTON: No sir.

CHAIRMAN FITZSIMONS: No.

MR. WHISTON: It will start up the battleship. Restart the San Jacinto Monument and —

CHAIRMAN FITZSIMONS: You did an excellent timeline for us a meeting or two ago and I think my simple question is how does that consideration fit into the timeline that you presented that I thought was very thoughtful?

MR. WHISTON: This will stall it.

CHAIRMAN FITZSIMONS: That's the answer.

MR. WHISTON: It will definitely stall it.

CHAIRMAN FITZSIMONS: And it will stall it to what degree? You would have to go freshen up that timeline and show us the effect on it, correct?

MR. WHISTON: Correct.

CHAIRMAN FITZSIMONS: And that's my only question.

MR. BORUFF: There are two kinds of projects that I think might be important just to be sure you understand. There are some of these bigger projects like this that it will indeed start, but we will need money later to finish. There are a subset of projects though in this $25 million that will be started and finished in that tranche of money.

MR. COOK: Yes. Most of it I think would be regular repair AD&D projects that would be started and completed by that $25 million. That won't finish the battleship.

MR. WHISTON: Of the $25.8 million request, $18 million of that request will be dedicated to major repair projects. All of those will be started and finished with those funds. The balance, about $7 million, will be dedicated to the Levi Jordan, San Jacinto Battleground, Battleship Texas, and the completion of the Nimitz.

CHAIRMAN FITZSIMONS: So they are on-going projects?

MR. WHISTON: They are on-going.

CHAIRMAN FITZSIMONS: That is an important figure.

COMMISSIONER HOLMES: That's right. I think the following question, of that $7 million that starts projects that are in need of additional funding for completion, can you give us a rough estimate of what would be required to complete those that are started in that $7 million?

MR. WHISTON: That is represented in exceptional item number 10 which is $20 million.

MR. HOLMES: Steve, would that totally complete those or would that simply move them farther down the timeline — complete some and not others?

MR. WHISTON: That would complete all of the projects that we are funded through Prop 8 for. That will complete the funding that was proposed or dedicated for Prop 8 for those projects.

COMMISSIONER FITZSIMONS: That were authorized by Prop 8.

MR. WHISTON: Yes. It will fully expend all Prop 8 money.

COMMISSIONER HOLMES: But does it actually complete the projects?

(simultaneous discussion)

MR. BORUFF: There are groups out there that have visions for larger projects which we currently don't envision any money for, those are not captured anywhere in here.

CHAIRMAN FITZSIMONS: Right. Those are called hallucinations.

MR. WHISTON: A good example: there is another upcoming phase of Sheldon that we would like to fund and move forward with. That money is not envisioned or dedicated. It was not included in Prop 8.

MR. COOK: Never was.

MR. WHISTON: Never was Prop 8.

MR. BORUFF: Same thing with —

(simultaneous discussion)

CHAIRMAN FITZSIMONS: That is what exceptional item number ten specs out so to speak; what Prop 8 authorizes.

MR. WHISTON: Correct.

MR. COOK: I think one of the most important points here that I want to be sure that y'all understand about that number one is as of August 31, 2005, if we don't get some of that additional Prop 8 money our repair and maintenance program and our facilities statewide cease.

COMMISSIONER HOLMES: Stop.

MR. COOK: We will have no funding for ongoing repair maintenance projects in any of our facilities across the state.

COMMISSIONER HOLMES: Then the health and safety issues intervene the next day.

MR. COOK: Zero money.

COMMISSIONER HOLMES: And you start to close things.

MR. COOK: Correct.

COMMISSIONER PARKER: That will mean the Battleship Texas sinks.

MR. COOK: It will lean to the left more. Yes sir.

(laughter)

COMMISSIONER HOMES: It's not just the Battleship Texas though.

CHAIRMAN FITZSIMONS: Yea, well the 18 relationship to the hole is the percentage in which it's spread all over the state.

MR. COOK: We recognize that our legislators, the folks downtown, it's going to be a struggle. We feel at least that that request will keep us moving; keep us making some progress and from a funding standpoint, as you can see, we put it higher than restoring our $5.1 million in our base.

CHAIRMAN FITZSIMONS: Yea.

MR. COOK: Because it's that important.

CHAIRMAN FITZSIMONS: No pun intended, but that ship's already out to dock. I mean you're doing that work and $18 of that $25 that is being done in repair, maintenance, etc., that covers almost all 120 state parks.

MR. WHISTON: Correct.

CHAIRMAN FITZSIMONS: Is that right Walt? There aren't many places that aren't getting some benefits from that.

MR. BORUFF: Well also wildlife management areas, fish hatcheries —

CHAIRMAN FITZSIMONS: Right, wildlife management areas — all of our infrastructures.

COMMISSIONER PARKER: Do we have to wait?

CHAIRMAN FITZSIMONS: Facilities open to the public, I'll put it that way.

MR. DABNEY: Yes. Most of that is.

COMMISSIONER PARKER: Do we have to wait until January 3^rd to start talking to the legislature about this? This is critical.

MR. COOK: No sir. We are talking to them and we talked to them last time when they didn't approve it last time Mr. Parker. In other words, it was in our legislative packet last time to bring it forward. They asked us, "Well do you guys have enough money to continue to operate during this next biennium?" This year and this biennium that we are in and we said, "Yes we do." We could keep rolling so they held back. They didn't give us any of this funding in the last session.

COMMISSIONER PARKER: Maybe we should have said no.

MR. COOK: Well, to be honest, I mean that's where we were and we had a lot of projects bid so we have stayed busy. We have made great progress, but I wanted to make sure that you understood the significance of that one. In other words, September 1, 2005, when this LAR starts, unless we get number one and/or some portion of it — they might could only fund $18, but unless we get that our maintenance and repair program across the state will cease.

MR. BORUFF: Not only does it cease, but the machine that we have put together down there to get this accomplished will go away which means even if we get funding in the next biennium we won't be able to spend it.

CHAIRMAN FITZSIMONS: You're loosing momentum.

MR. BORUFF: We will loose the whole ability to do it. We will have to completely gear up and it will take us years, again, to get back to where we can deliver $20 million a year, which is what they are delivering right now — construction on the ground.

CHAIRMAN FITZSIMONS: That's a key point because it's an efficiency issue.

MR. COOK: It's a key point for 115 folks down there for sure.

CHAIRMAN FITZSIMONS: Yes. It's an efficiency issue when you have to restart.

COMMISSIONER HOLMES: When you have to move back in and start your program again from effectively from scratch.

CHAIRMAN FITZSIMONS: That's right. Replan it, rehire, retrain.

COMMISSIONER HOLMES.Right.

MR. COOK: It won't be a gradual thing. It will be from one day to the next. Number three on that list — on that list, of course, again our need is based on previous cuts and our need to put staff and our small repair program into our parks. There is always going to be something that we deal with. We felt like that $4 million per year — $3 million in primarily staffing — either part-time staff or full-time staff and $1 million in the small repair program is very conservative. That doesn't in any form or fashion get us flush. That was a very reasonable request.

Number four, I don't know folks, when we started putting the priority list together I told staff that I thought that it was important that we give you what we felt like were the priorities. There were a number of us that we would put number four first because those vehicles, those replacement vehicles across the state are absolutely becoming a critical, critical situation. Having a total cap on this agency of 80 something vehicles for this year and next year. We are running vehicles right now, Jim, 150,000 or 140,000 and then we give those vehicles to state parks for them to continue to use.

MR. HOLMES: And that becomes an issue of maintenance.

MS. FIELDS: Right.

MR. HOLMES: That you have avoided the capital costs, but you have added to the maintenance.

CHAIRMAN FITZSIMONS: Exactly. The maintenance increases.

MS. FIELDS: As I mentioned, we are feeling the pain for that already in '05 with the vehicles.

COMMISSIONER HOLMES: Right.

CHAIRMAN FITZSIMONS: Right.

MR. BORUFF: That is not unusual to get a request to spend $6,000 to $7,000 to fix a vehicle that isn't worth $5,000.

CHAIRMAN FITZSIMONS: That's a good illustration to this point.

COMMISSIONER HOLMES: That's it.

CHAIRMAN FITZSIMONS: But you really don't have a choice.

MR. BORUFF: We don't right now. We are in handcuffs so we are authorizing $6,000 repairs to $5,000 vehicles.

CHAIRMAN FITZSIMONS: Yea. Remember those last two points.

MR. COOK: Gentlemen, we can go back to page one and take it step-by-step in however much detail or respond to your questions. As I said, we have other staff here. However you would like to proceed. Obviously there are volumes and volumes of detail that can go in this.

COMMISSIONER HOLMES: I think that is one of the things that the Commission needs to focus on as well. We put in 11^th priority, the next to last priority, restoring the Local Park Grants Program. That is of course quite popular, but those are new parks. Those are not our parks. They are local parks that a local community is requesting our help to establish, build, design, etc., those parks. But it's simply putting on ground more structures that need to be taken care of when we aren't taking care of what we got. If there is enough support for that local park then maybe they can figure out how to fund it locally. And so I am very supportive in having that prioritized much lower, but sometimes politics prevail and things may shift around a bit.

MR. COOK: Well if you will recall, Commissioner Holmes, it prevailed last time. In the last session we were requested to cut $16 million, $8 million per year, I believe it was.

COMMISSIONER MONTGOMERY: I believe that's right.

MR. COOK: We recommended, and it went through the entire process of Texas Parks and Wildlife Department — taking that entire cut from Local Parks. The legislature, in their wisdom, and we certainly understand it's a wonderful program, but the truth of it is, is that it is building new parks. That's match money. Usually those parks are $1.5, $2 or $3 million dollar parks and we match up to $500,000 or so. We felt like taking care of what we got with the dollars that we have is more important; if we have to make that choice.

COMMISSIONER MONTGOMERY: Should we even have that on our priority list? I personally wouldn't put it on the priority list.

CHAIRMAN FITZSIMONS: It's almost a mandate.

COMMISSIONER MONTGOMERY: I don't view it as — To me those are local needs. (inaudible) It puts money in but they ought to be funded locally relative to the other priorities which are of state-wide benefit.

CHAIRMAN FITZSIMONS: That's hard to say because when you go down that list and the excellent criteria that Tim's put together —

COMMISSIONER MONTGOMERY: Well that's true.

CHAIRMAN FITZSIMONS: Incredibly disciplined. There are some in there that it is hard to say that they don't have some state-wide significance.

COMMISSIONER MONTGOMERY: Fair enough.

CHAIRMAN FITZSIMONS: It's almost an entry level for those people who don't come to our parks otherwise, and start going to a park close by and then start coming to our parks.

COMMISSIONER HOLMES: I think I would be supportive of leaving it in the priority list because it's just politics. The issue is should it be at $24.7 or some other number? There may be flexibility within the numbers to have a bigger number put on it.

MR. COOK: If we take the cut, and Drew you may have to help me out here, if they accept the reduction as we have requested of $5 million per year we will still have a grant program. We will still be funded at about $4 million or so a year. Drew?

MR. THIGPEN: We would receive about $3.1 million per year from the Sporting Goods Sales Tax allocation, but we would be able to give grants of over $5 million a year because of interest and fund balances.

CHAIRMAN FITZSIMONS: What's the highest great year?

MR. THIGPEN: The highest I am aware of is 2003 where we gave about $20.4 million in grants.

COMMISSIONER MONTGOMERY: I'm not opposed to the program; I'm just trying to overcome —

MR. COOK: I understand. I understand.

COMMISSIONER MONTGOMERY: It looks like we are going to get compensated.

MR. COOK: Those are some of the very considerations we have had.

(simultaneous discussion)

MR. COOK: But I wanted you to be aware that even though we are proposing to take another $5, we've got many, many strong constituents and supporters out there of our programs who the last time this came up stood beside us and said we support you. We are with you. People from local parks programs — this will be hard for them, but I think they will understand. It does leave, as we just said, it does leave us about $4 to $5 million a year that we will be able to continue to operate the program. Quite frankly, it's important from the standpoint too, we've got a bunch of projects out there scattered over the next three or four years to be — those funds to be used. Those projects to be built that we are responsible to monitor.

COMMISSIONER MONTGOMERY: Right.

MR. COOK: So we've got to maintain some staff that carries out our responsibilities.

CHAIRMAN FITZSIMONS: I think that the question is how do you prioritize it? And as Bob points out, we have primary responsibilities and missions that have to be taken care of first. The answer when asked why would you cut there is that that can be restored by the legislature in how they deal with the Sporting Goods Sales Tax. They can put that back without forcing us to make sacrifices out of prior obligations we have whether its existing state parks or other. It's one answer for them to say "Oh, but that's important." If it's that important —

COMMISSIONER HOLMES: If it's that important the Sporting Goods Sales Tax —

CHAIRMAN FITZSIMONS: The Sporting Goods Sales Tax is capped and it can be removed and changed to specifically line item and fund Local Park Grants if it is that important to the legislature. And we have the staff that will do that. But don't force us to make the choice of not fixing one of Walt's existing parks in order to continue. Yea, Walt?

MR. DABNEY: It's paid point on that politically. I'm leaving here and going to the Texas Recreation Parks Society board meeting. I mean I'm on my way. Those folks, at the last legislative session with absolutely no effort, got a resolution from virtually every city council in the State of Texas to help us. If we were to eliminate them from the exceptional items request, we would be picking a fight with most of the urban centers and either county commissions or city councils all over this State and that doesn't serve us any.

CHAIRMAN FITZSIMONS: No. You're absolutely right.

(laughter)

CHAIRMAN FITZSIMONS: Commissioner Montgomery has volunteered to go to the —

(simultaneous discussion)

CHAIRMAN FITZSIMONS: And provide his personal cell phone. No, you're right. Absolutely, you're right Walt and the more I think about it, and as everyone knows I am a big fan of that program and I can't say enough about it, in many ways what Tim does there is a model of good government. I mean it is so disciplined. He takes all the local politics out of it which is an incredible feat in itself and again, if it is a state-wide priority and the vehicle to fund it is there and all the legislature has to do is do that with sales tax. Walt?

MR. DABNEY: Yes. The other point I make with them in every case is 120 of these sites not only are a part of the state parks system, they're a local park and they are a working park, and depending on where it is it may be a local park as well. Why shut one of those down and go build a new one somewhere.

CHAIRMAN FITZSIMONS: Right.

MR. DABNEY: And they respond well to that.

CHAIRMAN FITZSIMONS: No, they have been good friends. The TRAP meeting is?

MR. DABNEY: I'm on my way.

CHAIRMAN FITZSIMONS: You're on your way. And where is that going to be?

MR. DABNEY: It's in Corpus Christi. That's not their annual meeting; this is their board meeting. I'm on their board.

COMMISSIONER HOLMES: The other item that Mary touched on a minute ago is information technology. I don't know how many of us operate on five-year old laptops, but I suspect not many. But that is kind of the replacement age that we target.

MS. FIELDS: Yes.

COMMISSIONER HOLMES: Plus we have a few hundred people out there that should be plugged into the information system that Parks and Wildlife currently has, but are not.

MS. FIELDS: That's correct.

COMMISSIONER PARKER: Mr. Chairman, on that vehicle thing, I don't know anything about the car dealerships or anything like that, but instead of owning those things would it be more expensive if we or less expensive if we entered into some sort of contractual system with a particular manufacturer of vehicles?

CHAIRMAN FITZSIMONS: Describe how we would do that bid because it is kind of interesting. Do you know Scott?

MR. BORUFF: The competitive bid process — we are required to go out by state law for competitive bids which we do every year.

MR. COOK: We don't. I mean basically General Services —

(simultaneous discussion)

COMMISSIONER PARKER: Couldn't it be a competitive bid process where —

MR. BORUFF: It's managed through the Texas Building and Procurement Commission though Commissioner. We don't —

MR. COOK: They don't allow us to do that. Building and Procurement does it. Let me ask you something Commissioner. You know, I thought you were headed toward the possibility of a lease system.

MR. PARKER: That's right. That's what I was looking at.

MR. COOK: And there has been some discussion on that. Drew or Scott do you remember where it is?

MS. FIELDS: We put too many miles on the vehicles.

COMMISSIONER PARKER: Wouldn't at a certain mileage we would turn them back in?

MR. BORUFF: The last time we tried that Commissioner was two years ago. The predecessor with the Building and Procurement Commission said they were not interested in doing that.

COMMISSIONER PARKER: Why?

MR. BORUFF: Because they do the bids across multiple agencies — all agencies —and there was some concern that you couldn't get all agencies to concur that they all wanted on a lease. Many agencies wanted to own their own vehicles. I'm not saying that we can't go back and ask them, but we did make that request.

COMMISSIONER PARKER: Wouldn't that save money?

MR. THIGPEN: Well, Commissioner Parker, one of my former positions was with Child Protective Services. That particular agency had workers that were driving and putting 32 million miles a year on their personal vehicles.

COMMISSIONER HOLMES: Thirty-two — how many?

MR. THIGPEN: Thirty-two million miles a year.

MR. COOK: Million?

MR. THIGPEN: Million.

COMMISSIONER MONTGOMERY: The whole agency?

MR. THIGPEN: The whole agency. Oh, I'm sorry. Individually.

(simultaneous discussion and laughter)

MR. COOK: They're a busy driver.

MR. THIGPEN: They made a pretty good income on their mileage reimbursement. We also looked at that because we couldn't get a lump sum capital appropriation to buy vehicles for the agency, and as it turned out even for that agency — which those were highway miles, and so the vehicles would probably be returned in pretty good shape. Some of the difficulties that they ran into is that they transported children who sometimes were disturbed and so sometimes those children destroyed the insides of the vehicles, or damaged them, or some of those kids of things. It was determined to not be a cost effective method. Lots of corporations do it and I understand your interest in it but apparently the state, from our own determinations and investigation with a number of different leasing companies, we have found that it was not cost effective.

MR. COOK: We have looked at it and let me inject what I think is probably one of the most important points of us owning our vehicles. When wildlife or law enforcement, again as I mentioned while ago, get that vehicle up to 125,000, 130,000 or 150,000 miles and it becomes not dependable or not safe to operate on a highway in a pursuit situation, we supply it to state parks at that point and they can get a lot of good use out of it at the parks.

COMMISSIONER MONTGOMERY: Leasing is not going to be cheaper because the State views its cost as of capital zero. The leasor puts a cost of capital in and we don't get any benefit from the deduction. That is why it's not available to businesses and we are willing to hold them for the full term where the other lessees usually do not hold it the full term. So those three factors are going be a lease calculation over time.

MR. COOK: I knew that but I was just holding back.

(laughter)

COMMISSIONER HOLMES: There is also a motivation in some corporate cultures not to have any more capital allocated on the balance sheet than they have to and so it just runs it through the income statement.

MR. COOK: It does, John. It does come up regularly in state government and I think it has been looked at and we will look at it again real quickly and just make sure that it's where we think it is, but I think folks, the way Texas Parks and Wildlife Department is operating their vehicle fleet, say we don't have problems but we do. We have worked hard the last three to four years to get our fleet by the book, in good shape, and we are just wearing them out. We are not going to be able to continue to conduct business at Texas Parks and Wildlife Department without a major influx of replacement vehicles. Our law enforcement officers, our wildlife folks, our fisheries folks are not going to be able to operate.

COMMISSIONER HOLMES: We do have a full life cycle use of the vehicles.

MR. COOK: Walt's guys take the windshields out and move the windshields over. I mean literally. Any questions? Any discussion at all? This is a process. Drew or Mary help me out here. But this is a process that is on-going. As we have said, the LAR we have to have it in by August 20^th which means we need to pretty well get it. I told Mary the other day — I said, "Mary, we will have a couple of weeks to work on that won't we? And speak to us on where we want to go on this." She sort of politely indicated to me that we probably ought to have our LAR, which of course is a very broad document, and we should have that complete within a week to 10 days and have those numbers ironed out.

MS. FIELDS: Yes. A lot of the numbers that you are seeing in this presentation are in draft form. As we go through and actually identify all of these exceptional items we have to take it right down to each specific piece of equipment, so we will be finalizing that. We need a good week to just print and produce this for distribution on the 20^th and there is a lot of work that rolls-up at a very detailed level of our accounting system through our structure. The budget structure, actually that is in the binder that I gave to you. There is just a lot of work involved. I will just mention in the binder that I handed out to you, there is an overview of the approved budget structure. There is a copy of the Appropriations Act that is in effect right now for 2004 and '05. That's in the pocket. In the back pocket is just an overview of all the contents that are in the Legislative Appropriations Request and then there is a copy of the presentation itself. Yea, we would need to, if you had feedback for us, we would need to hear about it within the next week or two so that we could incorporate any direction into the actual preparation of the document. Also, earlier I failed to thank the staff. The division budget coordinators have put a lot of work into the operating budget that we discussed today, as well as the Legislative Appropriations Request. The budget staff within the Administrative Resources Division have put in a whole lot of time and will continue to burn the midnight oil I'm sure until we get the request complete and submitted on time.

MR. THIGPEN: Danny Mask and Reggie Pegues are both here and we have got a couple of e-mails from Danny recently. One from 1: 00 in the morning; another one at 4: 00 in the morning.

MS. FIELDS: One at 4: 59 a.m.

MR. THIGPEN: So, they and a lot of other staff are really doing a lot of work on this. The important point that I think Bob and Mary both have mentioned is that we are going through and proofing everything. We are trying to make sure that if we've got some numbers in here, we have support behind them. That everything ticks and ties. We want it to be mathematically correct as well as appropriate and reflecting your guidance. So, there may be some changes in some of the numbers — just small changes between here and the August final presentation when we present it to you.

COMMISSIONER HOLMES: I think we need to emphasize that point. It's still dynamic and just to highlight that in the last however many days that Mary has been sending me these documents that — I think that I am either on my third or fourth one. There are little changes that come through and we have to figure out now which one am I looking at and which one she is looking at. So there will be alternations and there will be some movement, but it's not been material.

MR. COOK: Not to get us off subject here, which it won't be, but like these exceptional items gentlemen, a lot of what you see there is asking for appropriation authority. At some point in time, and Drew might help me out here, we will have to or someone will have to identify method of finance — whether that's general revenue we are asking for or whether we are willing to use some of these balances that we have. Tell us a little about how that gets lined out.

MR. THIGPEN: Do you want to tackle that? There are some items that could clearly be funded by Fund 9 or Fund 64 or a combination of the two. There are some others that are clearly, we need general revenue for.

MR. COOK: Absolutely.

MR. THIGPEN: For example, the game warden academy that we are talking about, one of the issues that we have right now that the feds have raised with us is the fact that our game wardens do things other than just enforce the game and fish laws of the State of Texas. They also are called from time-to-time to assist other law enforcement agencies and to do things that are unrelated to the purposes of Fund 9.

MR. COOK: Many times.

MR. THIGPEN: And it could put the State of Texas into diversion, as far as the feds are concerned, if we are using these funds for general government kinds of purposes. So by asking for some general revenue funding to cover the cost of that class and put it into law enforcement, that would remove any concern about diversion. That is an example of one. Obviously —

CHAIRMAN FITZSIMONS: Would that be to the point that we've discussed before of law enforcement for instance enforcing TCEQ regulations?

MR. COOK: Yes.

CHAIRMAN FITZSIMONS: Issues like that?

MR. COOK: Yes.

COMMISSIONER MONTGOMERY: You actually get paid by TCEQ don't you?

MR. COOK: A little bit.

COMMISSIONER MONTGOMERY: A little bit?

MR. COOK: But mostly what it is gentlemen is when our law enforcement officers are out there they're a Texas peace officer.

CHAIRMAN FITZSIMONS: Right.

MR. COOK: Certified Texas peace officers. They are obligated — if it's a drunk going down the highway or somebody holding up a 7-11, they are obligated by law to pull in there and try to get things settled down. In providing some funding from GR specifically to that unit, to that group, will I believe, put it to bed. And that is what many states do. Some states have gone through that process of fighting off the issues of diversion by providing a little funding to that group for that purpose. So that is a real good example.

The vehicles, you know, if we could get appropriation authority then we could buy those vehicles with some of this balance money. We raised our fees because we needed money to do things and we could utilize some of our balances. Now I am conservative enough, as you know, that I don't mind having some balances. I don't mind that at all. You will notice back in the presentation here that we booked 100 percent of our budget. We have no cushion. We have no emergency fund. We have no hurricane fund. If we get a good hurricane on the coast and our parks or our facilities are impacted, we could spend two to three million dollars in the blink of an eye just to get back in some sort of semblance of operation. So, ideally as the years go by here, what we are trying to do is put ourselves in a position of having a balance that we could call on in an emergency and budget each year an emergency contingency fund. Put it in there strictly for that purpose. That we would start the year with a million or two in an emergency contingency situation; and that is going to become particularly important if this Prop 8 type funding goes away. Over the last five or six years we have been able to respond to those situations utilizing Prop 8 on previous critical repair funding. We are at a point now where that is not going to happen.

MS. FIELDS: One other thing to mention on these exceptional items, in the method of finance — some of them have a very clear method of finance where we could use Fund 9 or Fund 64 to fund them or a combination of both, such as with the employee pay raise. We could use a combination of Fund 9 and Fund 64 to fund that or we can ask for pure general revenue. We do have some choices there and we do have to specify, of course, in our request what type of funding we would want to utilize for that; so there are some decisions that will be made on some of these items.

MR. THIGPEN: And one additional point. We will finalize our Legislative Appropriations Request, decide exactly how we want to do our method of finance, and we will submit it. Then, as I mentioned earlier, the Governor's staff and the LBB are going to go off and they are going to look at it and then they will introduce a bill that will have a certain method of finance. It may impact what our projected fund balances are going to be so we will then adjust going into the session exactly what method of finance we want for whatever exceptional items are still needed to be funded.

COMMISSIONER MONTGOMERY: You know, Commissioner Parker's leasing thing — leasing would be more expensive over the term but it would be fewer dollars obviously; so if they would let us do it, realizing that it will cost more over the term of the lease, it might be something worth throwing out to them if you get in that situation.

MS. FIELDS: Well, don't a lot of leases have mileage requirements where you can't drive? And I am just wondering with as many miles as we put on —

COMMISSIONER MONTGOMERY: You would just pay extra for it.

MS. FIELDS: Pay extra for it?

COMMISSIONER HOLMES: It's a full life cycle lease. It will be different than most of them.

COMMISSIONER MONTGOMERY: It's going to cost more the way the government is going to look at it.

COMMISSIONER HOLMES: Right.

COMMISSIONER MONTGOMERY: But it will be fewer dollars each year.

CHAIRMAN FITZSIMONS: No. Ours will definitely — would have to be custom for the first two or three years I think.

(simultaneous discussion)

MR. BORUFF: That is if you assume you don't have to replace those old state park vehicles which are hand-me-downs. If you went to a lease you would also have to factor in that reality.

CHAIRMAN FITZSIMONS: Yea.

MR. BORUFF: Which is those now, and there is a huge number of them that go to state parks to support them. If you are leasing you are going to have to lease that many more additional vehicles on top of what you are leasing for the other divisions.

COMMISSIONER PARKER: Or buy the vehicles that you need for state parks at the end of the lease and give them to state parks.

COMMISSIONER MONTGOMERY: What I have seen is those buy back numbers are way over what they are worth at the end of the lease.

CHAIRMAN FITZSIMONS: Oh yea. That's why they —

COMMISSIONER PARKER: Turn back and then buy back.

COMMISSIONER MONTGOMERY: I have tried and it is hard.

CHAIRMAN FITZSIMONS: The complete life cycle, as you say at the end of it, they go to the artificial reef program.

(laughter)

COMMISSIONER MONTGOMERY: Then we get them back.

CHAIRMAN FITZSIMONS: Some of the ones I have seen are ready for the artificial reef program.

COMMISSIONER MONTGOMERY: When we finish cleaning up the crab traps (inaudiable) — on the lease cars.

CHAIRMAN FITZSIMONS: You had a comment on the first or second slide. I think it was sort of on the side, but on the decline in the magazine circulation — how much?

MS. FIELDS: Approximately $800,000 of that $1.1 million was a reduction of appropriated receipts. And it does relate to less advertising revenue and a decreased circulation of the magazine.

CHAIRMAN FITZSIMONS: How much? My question is what is the reduction in circulation and what do you contribute it to?

MR. THIGPEN: I think over time our reduction in circulation has gone from about — I've seen some numbers recently, but it was about 180,000 at one point and we are down to about I think a little under 120,000. A lot of it has to do with — we have been trying to recover costs. We have increased the cost of the magazine in recent years and that seems to have had an impact.

CHAIRMAN FITZSIMONS: A 30% reduction over what period of time?

MR. THIGPEN: I'm doing this off the top of my head, but I believe it was over about a five year period. From about '97 maybe '98 to 2003.

CHAIRMAN FITZSIMONS: That is a big reduction.

MR. THIGPEN: Yes.

CHAIRMAN FITZSIMONS: And you are saying it was self imposed because of cost?

MR. THIGPEN: Well, I'm not sure of that. There are several things that go into it. The magazine — I have learned a lot about the magazine business. I never thought —

MR. COOK: We have all learned a lot about the magazine business.

MR. THIGPEN: There is some percentage of people that will automatically renew a subscription and you don't have to do anything. They will send it back in and renew, but that's about 30 to 40%. I'm using some really rough ballpark numbers here. But then to maintain some of the others, you can maintain some of those other current subscribers not 100%, but you have to work at it. You have to send them reminders and that costs money.

COMMISSIONER FITZSIMONS: Cost of sale.

MR. THIGPEN: It truly is. We don't budget those dollars necessarily on a regular basis. It's not built into the expense side of the house and so we have allowed — because there were a couple of years where things were tight and we just didn't budget those kinds of dollars. Well this past year we have put some more of those dollars back in so that we can do those kind of mailings. The other thing is trading subscription lists with other types of magazines — with Texas Fish and Game.

CHAIRMAN FITZSIMONS: Can you sell the magazine with the hunting and fishing licenses as an option? If people want to include it?

MR. THIGPEN: We could probably market it anyway we want to do it.

MR. COOK: I am getting the urge to interject here.

COMMISSIONER HOLMES: You could rewrite that program.

MS. FIELDS: I was thinking of our license system.

(laughter/simultaneous discussion)

MR. COOK: We have looked at it very closely. One of the reasons we have looked at it very closely and looked at options of how to increase subscriptions, and/or increase advertising, and/or you know — is because right now the magazine by itself, and correct me if I get too far off here, is loosing about $1.5 million per year. That is historic I would say to you through the last 10 or 12 years. The magazine, the issue becomes — and I have sat down and spent a complete almost 24-hour period with the staff there brainstorming ideas, and one of the questions becomes one of if you have more subscribers is that just going cost you more money? So we are looking very, very closely at it. We believe the magazine is a very, very important part of Texas Parks and Wildlife Department. We believe that the people that it does reach and the message that it delivers is an important piece of what we do.

CHAIRMAN FITZSIMONS: If you had to go hire someone to deliver that message in that much — it would cost you more than $25 million dollars.

MR. COOK: So we are not looking to get rid of the magazine, but what we are looking to do is try to find ways that we can make it work better for us financially; and at the same time our magazine — every time our magazine is compared against any similar game and fish magazine on the North American continent we sweep the contest.

COMMISSIONER MONTGOMERY: It's superb.

MR. COOK: It's the best.

COMMISSIONER PARKER: Mr. Cook?

MR. COOK: Yes sir.

COMMISSIONER PARKER: The last issue of Texas Parks and Wildlife Magazine was the most important issue that has ever been published; in my opinion.

MR. COOK: I understand.

COMMISSIONER PARKER: About Texas water.

MR. COOK: I appreciate that comment.

COMMISSIONER PARKER: An outstanding publication.

MR. COOK: And we feel the same way.

COMMISSIONER PARKER: Dr. McKinney and all of the other contributors — Mr. Durocher. Every household in the State of Texas should have had a copy of that delivered to them.

MR. COOK: And I would love to be able to put one in every household.

COMMISSIONER PARKER: I wished I could. I wish I had a way to do it.

MR. COOK: We are in the process right now Commissioner of producing a kind of a companion video that will come out about the first of the year about water, water issues and those kind of things. Again, be that kind of quality.

I handed out that magazine yesterday. I was at the House Ag and Livestock Committee and we made a little presentation and talked about watershed management and the value of the wildlife management programs and the watershed management programs, that are on-going habitat management programs that are going on across the state, as well as water conservation, water quality, and water quantity which we think is a key to the water issues in Texas. Absolute key. And I handed out that issue to them. Before I left we had members of that group coming to me saying "Could I have a couple of extras?" In fact, when we handed it out they quit meeting and started reading the magazine.

COMMISSIONER PARKER: Absolutely outstanding.

CHAIRMAN FITZSIMONS: Did every legislator get a copy?

MR. COOK: Not necessarily. We do have a complimentary list that is extensive.

CHAIRMAN FITZSIMONS: But it costs more.

MR. COOK: But it's just an issue of cost.

MR. THIGPEN: The legislature —

MR. COOK: All of our committees you know — the committees that we deal with we do provide — like the Natural Resources, etc. We do provide it.

MR. THIGPEN: The members actually, we do notify them that it is available and if they are interested they let us know but we can't just give them a copy of it. There is a rider that prohibits that.

MR. COOK: That's what I meant to say.

CHAIRMAN FITZSIMONS: Always give Drew time after you skip (inaudiable).

MR. COOK: Him or McCarty one.

(simultaneous discussion)

CHAIRMAN FITZSIMONS: Don't skip the pause. So we're not even sure if sales are good for us. Is that what you are saying?

MR. COOK: Yes sir.

CHAIRMAN FITZSIMONS: Or circulation? We don't know what that number is.

MR. COOK: Well we have some real good ideas.

CHAIRMAN FITZSIMONS: Yea.

MS. FIELDS: It will be real obvious too. I just want to mention, in our request this time because the magazine is its own strategy —

CHAIRMAN FITZSIMONS: Right.

MS. FIELDS: I mean we have had to detail this down to 29 programs and the magazine is one of them, so it is going to be real clear how much of that magazine is covered by receipts versus general revenue or dedicated revenue. So they will be able to see it clearly.

CHAIRMAN FITZSIMONS: And I noticed in the last few years you have gone to distributors so you're on newsstands now. Has that been successful?

MR. THIGPEN: I wished Lydia were here. She is out at a conference this week.

COMMISSIONER PARKER: If you don't have the answer let me ask you another one that you might have. The advertising agencies that sell ads for us, have we had the same old, same old, or have we changed up?

MR. THIGPEN: I honestly don't know. I know that we —

COMMISSIONER PARKER: The key to the magazine business is in the ads business.

MR. THIGPEN: It is. We have been very successful with our ads.

COMMISSIONER MONTGOMERY: I believe they have gone up over the last couple of years.

MR. THIGPEN: Yes. We have a —

COMMISSIONER MONTGOMERY: The ads have gone up the last couple of years.

CHAIRMAN FITZSIMONS: The ad revenue?

COMMISSIONER MONTGOMERY: Yes.

MR. THIGPEN: Yea and the ad revenue is based on an audited circulation of the magazine that you do semi-annually so we have a pretty good mix right now. I'm not sure that we really want to sell a bunch more ads to make more money. Now if we increase our circulation back up, and I'm not sure what the next break point is, then we could get more per ad and so our ad revenue would go up but we have a pretty good mix right now. It's a very informative magazine without the ads being intrusive. I think of Texas Monthly as one where it takes a while to find the articles, but it's a great magazine.

COMMISSIONER PARKER: They are making money too.

MR. THIGPEN: Indeed they are.

MR. COOK: I want to mention it because it came up, but it's one of those when we go through this budget process before we get to you I wanted you to know that we (inaudiable). I'm just using that one example. We have worked many of those steps down to a lot of detail and we are not finished with all of them. We are still working on some of them.

MR. THIGPEN: Anything else? We certainly appreciate the opportunity this afternoon.

CHAIRMAN FITZSIMONS: Thanks for your work and the good information.

COMMISSIONER HOLMES: Thanks.

MR. COOK: We will be sending you information along and keeping you informed. Feel free to contact us if we can provide any information.

COMMISSIONER HOLMES: Chairman, that concludes the Finance Committee section.

CHAIRMAN FITZSIMONS: We're adjourned. Thank you.

(Meeting adjourned at 2: 39 p.m.)

Notes prepared by: Cidney Sunvison