Texas Parks and Wildlife Commission
Finance Committee

July 20, 2010

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

BE IT REMEMBERED, that heretofore on the 20th day of July 2010, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission in the Commission Hearing Room of the Texas Parks and Wildlife Department Headquarters Complex, to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION:

THE TEXAS PARKS AND WILDLIFE DEPARTMENT:

P R O C E E D I N G S

COMMISSIONER HOLT: Okay. Good morning, everybody. This meeting is called to order, July 20th, 10:45. Before proceeding with any business, I believe Mr. Smith has a statement to make.

MR. SMITH: I do, 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, Government Code, referred to as the Open Meetings Act. I would like for this fact to be noted in the official record of this meeting. Thank you, Mr. Chairman.

COMMISSIONER HOLT: Okay. We will begin the Finance Committee meeting this morning. Chairman Falcon is unable to attend so I will call this meeting to order, which means ‑‑ let's flip the page here ‑‑

Okay. Committee Item Number 1, Proposed Fiscal Year 2011 Operating and Capital Budget Overview. Mr. Mike Jensen. Mike?

MR. JENSEN: Good morning, Commissioners and Chairman. We're going to go over the '11 budget for you. It says it's a workshop; this is really more of a briefing. So we'll work through this on a high-level summary. Before I get started, I'd like to thank Lance Goodrum back here and Julie Horsley. They were hoping to blend in but it's kind of hard to blend in. So what we'll do is we'll give you a summary of the process that's used to develop the '11 budget. Then we'll give you a couple of summaries on the operating budget and a summary of the capital budget and how the full-time equivalent ‑‑ the positions work into that from the Appropriations Bill.

Then we'll very quickly go over ‑‑ highlight a couple of the riders that we have. Then we'll give you an update on where we're at with the legislative appropriations request that's currently being developed by staff.

COMMISSIONER HOLT: When we say fiscal year 2011 ‑‑ I've only been doing this for eight years, you'd think I'd remember ‑‑ are we talking about the biennium or are we just doing it for the one year?

MR. JENSEN: We're just doing it for the one year that begins on September 1st. We're about to close out 2010 on August 31st.

COMMISSIONER HOLT: Okay.

MR. JENSEN: So the new one will start in September.

COMMISSIONER HOLT: Okay. So we're going to approve the one that's already been approved for fiscal year 2011.

MR. JENSEN: Yes, sir.

COMMISSIONER HOLT: In the sense that's it's approved by the legislature. Okay.

MR. JENSEN: And we're just going to go over '11 today. During the commission meeting in August, we'll give you a summary of '11 and a summary of the LAR at that time.

MR. SMITH: I just want to make sure we clarify. But, ultimately, you will need to approve this budget in August.

COMMISSIONER HOLT: Yes, I understand that.

MR. SMITH: Okay. Yes.

COMMISSIONER HOLT: This budget's for fiscal year 2011.

MR. SMITH: That's right.

COMMISSIONER HOLT: Okay.

MR. JENSEN: The basic method that we use is the same method that we did last summer when we talked about the '10 budget. We start with this big fat Appropriations Bill as the base. This go round there'll be a slight reduction from that because we had a 5 percent instruction and so we're going to be at 100 percent of what we had for 2010, less the 5 percent reduction that we've already implemented in '10 and '11.

Item Number 3. It talks about exceptional item, that's already built into the base. We built that in last summer when we did the budget for 2010. We've the balanced the revenue side of Accounts 9 and 64. For support functions, we do have some divisions that are split-funded. That proportion, right now, is about 53 percent for Fund 9; about 47 percent for Fund 64.

Point Number 5 up there. There's only going to be supplemental budget requests, provided that we have appropriation authority and the revenue to support it. We have a Rider 27, which allows us opportunities to grow the budget at times. There are other riders that allow that. And in this presentation, we prepared the capital budget at 100 percent.

Again, just to summarize, we start with the appropriation bill that the legislature passed. We're an Article 6 agency, so our section is in Article 6 of that bill. We start with that.

And then, Article 9 is a section of this appropriation bill that applies to all state agencies. We do have a couple of items in Article 9 that add to our budget. And, in this current year, Article 12 was the stimulus money. We did have some amounts that were allocated for the Department, in Article 12, for this current year.

We started at $1.7 million ‑‑ we're actually going to get about $500,000 for patrol boats for the Law Enforcement Division.

We do have some rider limits. Riders don't just limit things but they also grant authority and we'll talk about that a little bit later.

And our FTEs are going to be capped at 3,180.3. That's what's in the Appropriations Bill. But we did have a 5 percent reduction item that was effective this year; the Canadian River Corridor, and that did have five FTEs that was associated with it.

So our cap is actually going to be less five; subtract five from that amount.

COMMISSIONER BIVINS: That's taking away that whole project fund.

MR. SMITH: Yes. In our 5 percent plan ‑‑ reduction plan that we submitted to the legislature, we proposed to eliminate that from the budget, including the five FTEs ‑‑ additional FTEs that they granted us.

COMMISSIONER BIVINS: And was it ‑‑ how much? ‑‑ half a million that we have?

MR. SMITH: Yes. In the aggregate, it was almost a million over the biennium and from multiple sources but there was a half a million in additional general revenue ‑‑ I think that Mike supported it and then there was some funds that we had in other places that they had appropriated to us.

COMMISSIONER BIVINS: And those were appropriated and this is just a question of how this whole system works and they were appropriated during the last session and now they're going back into our general budget.

MR. SMITH: The funds that were associated with general revenue. That's right.

COMMISSIONER BIVINS: Do we ever receive those funds?

MR. JENSEN: It was part of the appropriation bill. What happened is the Legislative Budget Board and the Governor's Office told all state agencies to hit a reduction target and that was one of the line items. We'll have a slide that gives you a list of what those line items were and the dollars also had FTEs that were associated with those dollars so when we cut those dollars that's going to have an effect ‑‑ the LBB expects us to also reduce our FTEs by five.

MR. SMITH: I think his question, Mike, is, was there actually a half a million dollars in funds that were formally transferred to an account that we manage that we are then formally transferring back.

MR. JENSEN: They were made available in general revenue so, basically, we're just reducing that back. We'll make an entry into the comptroller system that shows all those reductions. We have until August 31st to do that, to true it up, actually make those entries for the statewide accounting system.

COMMISSIONER BIVINS: I don't want to bog us down now but when we get to that we can re-address that.

MR. SMITH: Okay, okay.

MR. JENSEN: Okay, this line is going to start with the appropriation bill. When you look in the appropriation bill on our section, we start with a $290.4 million baseline budget in Article 6. But we need to do some additions to it because we had some funding in Article 9 ‑‑ $2.3 million that goes to that base. And, $1.4 million of that is related to the Schedule C pay increases that were in Article 9. Then we had $825,000 in border security funds and we had some marine conservation plates; almost $25,000. That's what comprises that $2.3 million amount.

During the course of the year, we also do some supplementals and some adjustments based upon the federal funds that come in. I think most of you all know that we had a significant increase in sport fish federal funds but we did have a decrease ‑‑ actually, we had a decrease in sport fish but we had an increase in wildlife restoration funds.

So we have $3.5 million in federal funds. That gets added to the appropriation amount. We have appropriated receipts of about $733,000, which is from about eleven different sources. Inter-agency contracts with Water Development Board and the Forest Service; $61,000. The largest item on here ‑‑ it's an historically large item, is an unexpended balance forward of capital construction monies of $88.6 million.

COMMISSIONER HOLT: Help me understand. You said, spent balances.

MR. JENSEN: Could we stop there? These are unexpended balances.

COMMISSIONER HOLT: Are we going to get into how much of that we're going to spend in fiscal year 2011? I don't want to get ahead.

MR. SMITH: We certainly anticipated that that was going to be a question that you would have and, you know, we had covered that in some detail last commission meeting but I think it would be good ‑‑

COMMISSIONER HOLT: All right. I want to go over it again.

MR. SMITH: Yes. Go over it again. And so Scott and Richard are prepared to go through that with you at whatever level of detail, when you want to do that.

COMMISSIONER HOLT: Go ahead. And the reason I'm bringing this up for the Commissioners is, that's a big target, relative to going into the legislature in January, relatively speaking, unless I understand incorrectly ‑‑ and that's why I want to get clarification ‑‑ if it is unspent then can it be either held by the legislature, relative to counting against deficits or, actually, do we lose it in some form or fashion.

MR. SMITH: Or re-allocate it.

COMMISSIONER HOLT: We re-allocate it and that kind of thing.

MR. SMITH: Yes.

COMMISSIONER HOLT: So we spend a little time on it. I don't know if we need to spend hours on it.

COMMISSIONER BIVINS: It's the same premise I was getting ‑‑

COMMISSIONER HOLT: On your situation too. No, I agree.

MR. SMITH: Well, I mean, the high-level answer to that is, if it goes back to the legislature, then they can use it, at their discretion, whether they choose to spend it or re-allocate it or allocate it back to us, which is probably the most unlikely of scenarios.

COMMISSIONER HOLT: Even if it's been voted on and it's a ‑‑ by the voters ‑‑ under a bond situation.

MR. SMITH: That's correct. Yes.

COMMISSIONER HOLT: Yes.

MR. SMITH: It would go back. Now, if the legislature chooses to re-purpose the use of those funds for something that was not approved by the voters, they would have to go back to the voters.

COMMISSIONER HOLT: Okay. So they're not going to do that so they ‑‑ probably what they would want to do is hold it. Maybe Gene or Scott ‑‑ you can tell us, I mean, what's been their history ‑‑ I can't remember ‑‑ in 2003, what happened? Did they just ‑‑

MR. BORUFF: Well, money that has been issued to us ‑‑ at least in the ‑‑ For the record, my name is Scott Boruff, Deputy Executive Director of Operations. Commissioner, historically ‑‑ at least for the last ten years, all the bonds that have been issued to us, we have kept and we have expended.

COMMISSIONER HOLT: Okay.

MR. BORUFF: And I ‑‑

COMMISSIONER HOLT: Have we slowed down or ‑‑ in any of our spending or were we able to keep going, as we ‑‑

MR. BORUFF: No, sir. In fact, as you may recall, between 2000 and about 2008, we were expending about $20 to $25 million a year in bond money, which was a pretty good clip for us. We had a good track record. At your direction in 2008, we went back to the Infrastructure Division and tried to figure out a new model that would allow us to encumber funds more quickly.

COMMISSIONER HOLT: Right.

MR. JENSEN: And the good news is, in the last two years, we've been encumbering around $30 million a year in construction funds so we put together a new model. It's in its second year. It's looking pretty successful right now in enabling the agency to encumber funds quicker because we hope to go back and ask for more in the future because we have a big backlog of repairs.

COMMISSIONER BIVINS: The Battleship Texas money ‑‑

MR. JENSEN: Yes, sir. It's in there.

COMMISSIONER HOLT: A big chunk of it.

MR. BORUFF: And I'm prepared, at your discretion, to share with you where we are with all the construction, UB money forwarded. It might be better to do it in one piece, at either the end or now, whenever you want us to do it.

COMMISSIONER BIVINS: You can do it when we come to it.

MR. BORUFF: We have another slide on capital. We can do it there, unless you'd like to do it now.

COMMISSIONER HOLT: That's fine. Yes, but we do need to spend some time on it because it is such a big chunk of change. We've worked so hard to get it. We've got the voters to pass it and I just ‑‑

MR. BORUFF: And you will get questions about it from the legislature ‑‑

(Simultaneous discussion.)

COMMISSIONER HOLT: ‑‑ so whatever. Okay.

MR. JENSEN: And the largest portion of that amount is there's $64, almost $65 million in general obligation bonds. That's what comprises most of that. Then, there's a couple of other items ‑‑ about $6 million that are appropriated receipts. Remember, the Friends group donated almost $4 million for the Battleship and then there was some ‑‑ Cedar Hill State Park had another $1 million come in. And then there's the donation that was recent for the Game Warden Training Center, when you were out there. That's another piece that's going to be unexpended balance forward out of appropriated receipts.

COMMISSIONER HOLT: So most of that can't be grabbed by the Legislature.

MR. SMITH: Well, certainly, certainly.

COMMISSIONER HOLT: I mean there's certain types of those.

MR. SMITH: You're right.

COMMISSIONER HOLT: It's tied to those funds.

MR. SMITH: The appropriated receipts bring their own appropriation authority.

COMMISSIONER HOLT: Right.

MR. SMITH: So if they come in, we can expend those however we choose. So you're right, those are separate and apart.

COMMISSIONER HOLT: Okay.

MR. JENSEN: The appropriated receipts are very flexible. So ‑‑

And we do have, on this slide, fringe benefits and benefits replacement pay. When the legislature publishes this book ‑‑ it's a different color every two years ‑‑ in this purple book they do not account for fringe so this presentation does account for the fringe benefits and that cost that's incurred so it's budgeted in here as a separate line.

And, that's usually a reconciling item, when somebody takes this bill ‑‑ the General Appropriation Act ‑‑ because it's really not included in there.

COMMISSIONER HOLT: Commissioner Duggins wants to read that book. Can you get him a copy?

MR. JENSEN: You can borrow mine. I have an electronic copy.

COMMISSIONER DUGGINS: I actually do have a question, though. Why is it not included?

COMMISSIONER HOLT: Yes, it's a big chunk of change. I don't know.

MR. JENSEN: You want to come up, Gene? That's probably an answer that the legislature had to provide you; we don't have it here.

(Simultaneous discussion.)

MR. MCCARTY: Gene McCarty, Deputy Executive Director for Administration. I really can answer your question. It has never been ‑‑ fringe has never really been appropriated to the agencies. It's always out there and it's always paid, kind of as ‑‑ I guess I'd say, it's appropriated to the elements in which it's spent. For example, ERS, Employee Retirement System, is where most of that money goes so it's kind of appropriated to them, not to us.

COMMISSIONER HOLT: That's true of all agencies.

MR. JENSEN: That is everybody.

COMMISSIONER HOLT: I thought it was just ‑‑

MR. JENSEN: No, it's all state agencies.

MR. MCCARTY: It's all state agencies.

COMMISSIONER HOLT: Okay.

COMMISSIONER MORIAN: Is it in there? Is this included? Is this ultimately that $41 million in there somewhere?

MR. MCCARTY: In that book?

COMMISSIONER MORIAN: Yes.

MR. JENSEN: It may be. No, it's not in there.

MR. McCARTY: I don't think so. I don't think it's in there.

COMMISSIONER HOLT: There's our $422 million at the bottom there though. In the past, I mean, we always counted it as being part of our budget.

MR. JENSEN: We have to include here.

COMMISSIONER HOLT: Overall budget.

MR. JENSEN: The reason we have to include it here and be very visible, is we have dedicated accounts. Many state agencies are just pure Fund 1 so when they're paying salaries, their fringe is going to be covered by Fund 1, whereas we're paying salaries out of Fund 9, Fund 64 ‑‑

COMMISSIONER HOLT: That's Fund 1, general revenue ‑‑ MR. JENSEN: We have to pay ‑‑ they have a rule that's called Benefits Proportionality, so if you have multiple sources of funds that you're paying salaries on, then you have to pay the fringe on those multiple sources of funds. It's less of an issue for the Fund 1 agencies and more of an issue for us and I think that's one of the reasons why it's not in here. Many of the other agencies, most of their salaries are paid out of Fund 1, as opposed to dedicated accounts.

There is one more line item on here; it's the 5 percent reduction. We have a reduction in 2011 of approximately $13.9. In the current year, 2010, we have a reduction amount of $8.3 million.

COMMISSIONER HOLT: This has already been approved by LBB and they won't ‑‑ we know this is going to be the number ‑‑

MR. McCARTY: Yes, sir.

COMMISSIONER HOLT: ‑‑ for fiscal year 2011?

MR. McCARTY: Yes.

MR. JENSEN: I'd say it's 98 percent approved. There is one thing ‑‑ we'll get to a slide that will discuss certification for Fund 64, Rider 27. I'm going to advance to the next one.

This slide shows you the reduction amounts for fiscal year 2011. We actually have eight items on here that total up to $13.1 million but you'll see an adjustment on the bottom. When we were preparing the base reconciliation and we sent that ‑‑ staff sent that to the Legislative Budget Board; they suggested that we need to get a certification out of Rider 27 for Fund 64, so staff prepared a letter and we've gotten a response from the Comptroller's Office and they've approved those amounts that were in the Appropriation Bill, approximately $386,000 for each fiscal year for Fund 64.

We're in the process of waiting for the Legislative Budget Board analysts to contact the Governor's Office to see what impact that might have for us, what leverage we might be able to use those funds for a reduction or for some other strategic purpose.

But if we go through here, Item Number 1 is the GLO transfer and what we did on that was about a 5 percent out of the total amount, about $1.3 million and the second item ‑‑

MR. SMITH: Mike, just as a comment. Folks, remember that's for the coastal erosion account that transfers through us. Okay. All right.

MR. JENSEN: And that's going to reduce the base so, at this point, we started from $25 million less $1.3, so the base for the next biennium is going to $25 less $1.3.

Item 2 is the data center consolidation. These were additional amounts that were acquired in order to pay the contract that's been in the news.

Item Number 3 ‑‑ we mentioned earlier, the Canadian River corridor, $228,000. In 2010, we reduced to $267,000, so the two amounts ‑‑

COMMISSIONER BIVINS: Let me go back on the Data Center Consolidation. What's the status of that? Is it done?

MR. SMITH: No. It absolutely is not. Right now the state of Texas, through DIR is in a major dispute with IBM Team for Texas, with respect to specific performance levels and so they have given IBM 30 days ‑‑

COMMISSIONER HOLT: Yes, it showed up in the paper the other day.

MR. SMITH: ‑‑ to fix it, whatever that means.

COMMISSIONER HOLT: They've gone public on it.

MR. SMITH: Yes, very much so, very much so. Now, we expect the data center project, in some form or fashion, to continue but my guess is it'll look very differently than what it looks now so there may be other contractors that get involved in providing bits of it. DIR may decide to take on more of this. Some may go back to the agencies.

COMMISSIONER BIVINS: Now, will this affect our licensing abilities or ‑‑

MR. SMITH: No, no.

COMMISSIONER BIVINS: ‑‑ plus there's more state agencies ‑‑

MR. SMITH: No, This has to do with, you know, IBM was hired to manage a process to transfer all of the servers in data storage capabilities for the 27 participating agencies to two major data centers; one in Austin, one in San Angelo and they are, after three years, they're about 10 percent complete.

IBM was also tasked with providing then customer service to the agencies to help with management of data and that's been a perennial Achilles heel for this project. Customer service levels associated with this contract have really been unacceptable by everybody's standards.

COMMISSIONER BIVINS: But our cutting back to $1.1 is not going to interfere with our ability to do business?

MR. SMITH: No. No. We had originally proposed that we just cut the data center project altogether because, as I think you will recall, we have realized appreciably more costs associated with this transition, to the tune of three or four times what we were paying before.

This reflects, basically, costs that we don't think that we're going to have to pay as part of this contract, and so, therefore ‑‑

MR. JENSEN: Carter, can I add, this $1.1 is really just so far behind in their contract that, had they been on schedule, it would have cost $1.1 but this is a $1.1 million expense in 2011 that's not going to be incurred because they're so far behind.

But if this contract continues and we're a part of this contract, somewhere down the road, that cost is going to be incurred down the road but it's not going to be an expense in 2011 just because they're behind.

COMMISSIONER BIVINS: They won't get to it.

MR. SMITH: Yes.

MR. MCCARTY: That was the point I was going to make. They're ‑‑ these are transformation costs, costs that we were going to incur to transform our information over to the data center and they're so far behind on that that we're not going to have those costs now.

We will have those costs, probably in 2012, 2013, so we're going to have that in our LAR as an exceptional item, to get that money back but we don't have it now so we might as well give it up as part of the 5 percent process but we're going to need it back in the LAR.

COMMISSIONER HOLT: Give up something we're not going to spend and don't want to spend.

COMMISSIONER MARTIN: I like that.

COMMISSIONER HOLT: Yes, if you have to give up something.

COMMISSIONER DUGGINS: Carter, do we have a stand-alone contract with IBM or are we part of a larger contract?

MR. SMITH: We're part of a larger contract and we have an agreement with DIR but DIR contracts with IBM to provide services under the [indiscernible] master contract.

COMMISSIONER DUGGINS: So in terms of who would take any legal action, if it were warranted, it's DIR that would make that call?

MR. SMITH: That's right. Yes. Yes.

COMMISSIONER HOLT: Carter's on that board.

COMMISSIONER DUGGINS: Well, I was just making sure that we're ‑‑

COMMISSIONER HOLT: He's the one overseeing all of that.

COMMISSIONER DUGGINS: Good. Fine.

MR. JENSEN: It'd be DIR and Ann ‑‑

MR. SMITH: Your accolades are appreciated.

MR. JENSEN: Commissioner Duggins, Ann would probably have the Office of Attorney General ‑‑ would get pulled into that if it was going to be litigating, down the road but ‑‑

COMMISSIONER DUGGINS: I just wanted to make sure somebody was looking after whatever our contractual rights were.

MR. JENSEN: Right.

COMMISSIONER DUGGINS: And if it's DIR, that's fine. I have total confidence in Greg Abbott and his office to do whatever is appropriate. I just want to make sure it wasn't a stand-alone contract.

COMMISSIONER HOLT: I don't know if you remember, I can't remember if all of you were ‑‑ Mark was probably there ‑‑ but anyway, when we first went on this, we actually were given extra money because it was going to ‑‑ because it was going to cost, no doubt, in our case, it was going to add to our costs.

MR. DUGGINS: Right.

COMMISSIONER HOLT: Some, supposedly, were going to save money. To my knowledge, nobody saved money but some agencies were, supposedly, going to save some money; the large ‑‑ the very large agencies. In our case, we were going to ‑‑ remember, we got allotted, at least in one of the legislative ‑‑

MR. McCARTY: In both ‑‑ the last two sessions.

COMMISSIONER HOLT: We were actually given some extra money to go with this program. We didn't ‑‑ we weren't interested. Did that happen when ‑‑ I can't remember when did that happen in the last legislature? That was the previous ‑‑

MR. MCCARTY: No, we got additional funds last session too.

COMMISSIONER HOLT: Both times, the last two times.

MR. SMITH: I want to clarify this. We got additional authority the last session so we ‑‑

MR. McCARTY: We got authority to spend both 64 and Fund 9 ‑‑ both of our dedicated accounts, we got authority to spend those.

COMMISSIONER HOLT: It's turned into ‑‑ and they finally went public. It's been a disaster for a long, long time, really, probably since it started and behind the scenes, there's been a battle going on and then it just showed up in the San Antonio paper last week. So, obviously, the state's taken it to whole other level and going public on it and then IBM, obviously, started fighting back. They claim, you know, it's working, at least in the article that I saw in the San Antonio paper.

MR. SMITH: Yes, there's a big dispute.

(Simultaneous discussion.)

COMMISSIONER HOLT: A lot of money too.

MR. SMITH: And so they're pursuing this aggressively, no doubt about it.

COMMISSIONER MORIAN: Is this money we are contractually obligated to spend ‑‑

MR. SMITH: Yes.

COMMISSIONER MORIAN: ‑‑ when we get to that point or just a postponement?

MR. SMITH: Yes. That's exactly right. It's a postponement. Yes. But there is basically a fee For service model and we have to pay for all of the services we use under the contract, including every byte of data that we produce, we have to pay a certain rate to store that. So, to some extent, for a science-based agency that is responsible for collecting lots of data, there's a dis-incentive to collecting data because you have to pay for the storage and protection and security of that and that's one of the challenges associated with this agreement.

MR. JENSEN: Item Number 4.

Do you have a comment, Commissioner Bivins?

COMMISSIONER BIVINS: No.

MR. JENSEN: Okay. Item Number 4 is local park grants and in '11 the reduction will be $5.8 million and a lot of that was authority that we had in '10. For example, the Bexar County Special Needs Park and there were a couple directives for Missouri ‑‑

COMMISSIONER HOLT: That's an asterisk on that line ‑‑

MR. JENSEN: Yes. So that was an opportunity to utilize that authority for a cut. Item Number 5 is Rider 27 merit program, $2.3 million and in 2010 there was also another $1.9 million that was tied to that cut. Item Number 6, Capital Construction. In 2011, the cut amount is $1.4 million. In '10, the cut amount that was planned was $4.4 million and then we had the letter back from the Governor's Office saying, you have an exemption for $3.9 million. So that reduced 2010's target but don't mean to cloud the issue.

Let me go to Item Number 7. In 2011 that reduction's $881,000. In the current year it was a reduction of $822,000. And Item Number 8 is $100,000 reduction to the current project for automation for the administrative and accounting system.

We have that adjustment that I mentioned before with the LBB and if we crosswalked what we also did in 2010, there's an Item 9, an operations reduction of $815,000 out of this year.

So between the two, the target that we hit was $21.4 million. The original target was $24.8 million but they gave us that exemption for capital of $3.39 million.

This big pie chart gives you a graphic image of our source of funds and our method of finance. You can see that the largest piece of this pie is Account 9, Game Fish and Water Safety, $128.8 million, 30 percent.

The next piece is general revenue of $113.9 million or 27 percent and I'm going to make a couple of comments on that one. That looks large but really what that is is general revenue that comes to the Department that then gets transferred into a number of different accounts, primarily Fund 64. We'll have a transfer of $52 million into Fund 64.

We'll have a transfer of $7.7 million into Fund 467, which is the Texas Parks and Recreation Account. It's pass-through funds for grants. And then there's Account 5004, which is a capital account, which receives $1 million.

Then there's the large community and municipal fund, which was created this last session, which receives $5.1 million of that GR. Then there are also included in this GR, it is important to mention, that we have a piece of fringe. We have to budget the fringe when there are salaries that are tied to that. And there are some small pieces of construction, unexpended balance, in that amount.

Account 64 has ‑‑ before that transfer, has $44.9 million in it. It will more than double when that transfer's made from GR. Federal funds, $54.4 million and we have Other, which is appropriated receipts, donations and some bond interest and Other-GR dedicated is $5.1 million, 1 percent.

COMMISSIONER HOLT: Federal funds. Is that ‑‑ what little stimulus money we got. Is that in there or did we already spend that or ‑‑

MR. JENSEN: We only received ‑‑ actually, we received $500,000 in stimulus money out of the Burns' Access to Justice grant to purchase patrol boats. The Department also applied with the Comptroller's Office and got approximately $75,000 as an incentive to purchase fuel-efficient, green, hybrid-type vehicles. So we're going to purchase, I believe, about 19 vehicles. So, of the stimulus money, we really have about $570,000 that we report to the comptroller. Most of those ‑‑

COMMISSIONER HOLT: This number or is that in '10?

MR. JENSEN: That's in '10 but if those boats are not ‑‑ those boats have not been produced so it's going to be unexpended balance forward. I mean, the funds are good for the full biennium.

MR. SMITH: So most of these funds are the Pittman- Robertson and Dingell-Johnson federal excise taxes.

MR. JENSEN: We can probably move through these slides fairly quickly. It's just basically showing you how the numbers fall out with respect to the amounts that are for each budget category. We have salaries and other personnel costs. That's ‑ between that and capital budget, those are the largest pieces of our operating budget. Salaries and other offerings, $148 million, 35 percent of the budget.

The capital budget ‑‑ $125.3 million, is another 30 percent of the budget. So that's 65 percent of the budget just between those two items.

Then we have $82.8 million for operating and grants. Local park grants $17.5 million. Benefits are $41.6 million and, again, that's one of those fringe items that we need to keep track of, and we do keep track of. And debt service is $7.4 million on the older bonds that were issued a long time ago.

COMMISSIONER DUGGINS: Mike, does the $17.5 million for park grants include the $5.8 million reduction?

MR. JENSEN: Yes. The reduction has already been made. This is the balance that's available within that fund right now.

COMMISSIONER DUGGINS: But, what I'm saying is, but for the $5.8 million proposed reduction, would that number be ‑‑

MR. JENSEN: That would be higher by $5.8 million.

COMMISSIONER DUGGINS: By $5.8 million. Okay.

COMMISSIONER BIVINS: And then, on the salaries and personnel costs, in fiscal year 2011, how does that compare with the prior period?

MR. JENSEN: I could say I'd get back to you but I think I have the slides from the August commission meeting. I'll flip through and try to find that for you quickly.

COMMISSIONER BIVINS: Well, I just ‑ just trying to see, in general terms, if it's substantially different.

COMMISSIONER HOLT: I remember we added parity dollars.

(Simultaneous discussion.)

MR. JENSEN: It's slightly higher this time around but we also had targeted pay increases across the board for the biologists, the scientists and the natural resources folks, as well as all across the Department, so in 2010 we started the Salaries and Other Personnel Costs of $146.3 million.

COMMISSIONER BIVINS: Okay.

MR. JENSEN: So we're at now at about $148 million.

COMMISSIONER HOLT: So what we pushed for in the last legislature was the parity, you know, to try to get that extended. It was focused on wildlife biologists and [indiscernible] on that side of the equation, primarily. It should be hitting '10 and '11.

MR. JENSEN: Yes.

COMMISSIONER HOLT: Good.

MR. JENSEN: The next slide, we'll break it down by division for you. On this first slide, these are the smaller divisions for the Department. Administrative resources — that's the division I'm responsible for; $9.4 million.

Coastal Fisheries has $18.9 million and they're heavily federally funded. Communications is $9.5 million. Departmentwide is ‑‑ we call it a division. It's basically a place where we segregate money that benefits all of the different divisions for the Department and it also has a place ‑‑ we have a separate slide for that, so we'll get to that. For a strategic reserve, for the executive office. The Executive Administration, Executive Office, has $3 million; Human Resources, $2.1. Information Technology has $12.9; Infrastructure, $7.9; Inland Fisheries, $20.1.

I go to the next slide, we have the three larger divisions plus the capital and GLO transfer accounts for about 72 percent of our total budget. Law Enforcement's $58.4 million, Legal's $1.1, State Parks $92 million, Local Parks $18.5 million, Wildlife $30.3 million, Capital Construction $98.4, Capital Land Acquisition, $11.4. Of that, $9.3 is the funding from the Eagle Mountain Lake sale from years ago and the GLO transfer's $11.3.

COMMISSIONER DUGGINS: And the $98.4 includes the $25 million for the Battleship?

MR. JENSEN: Yes, it does.

COMMISSIONER DUGGINS: Is there any reason not to footnote that because it seems like if we leave it that way, it looks like we're getting more money when that money's been appropriated years ago. It seems a bit misleading on just how generous ‑‑ I think we ought to footnote that or I suggest we consider it anyway.

MR. JENSEN: We'll consider doing that. We also have a couple of additional slides just specific to capital and it'll be clearer to see where it falls in there ‑‑ more clear.

The next slide is going to break down the Departmentwide budget for you. Like I said, this is a placeholder that benefits all the divisions of the Department. Debt Service is budgeted there for the bonds; $7.4 million. We have payments to the license agents, the various partners who sell hunting and fishing licenses for us across the state; $3.7 million and the license system is $3 million and to go back to Commissioner Bivins' question, Verizon is the service provider who does this and they're not housed within the IBM so that's not going to be a problem for maintaining the level of service we have for our constituents.

State Office of Risk Management, that's $900,000. This is a payment that all state agencies have to make to SORM. They're a branch of the Office of the Attorney General to cover like Workers Compensation-type things.

Airport Commerce Park is a facility we have about two miles from here, off of Highway 71. That's the rent.

The general budget here is basically the strategic reserve for the Department of $2.5 million. We have $295,000 for the automated financial system and we have $200,000 budgeted for claims and settlements. Riders 14 and 30, $160,000; Rider 14 is for license plate receipts and Rider 30 is OHB trail and recreation area programs. And we have $64,000 for the motor pool, for a total of $18.9 million.

Now, the next couple of slides ‑‑ this may be where Scott comes back up to the table and talks a little bit more detail than what I can on construction. This slide is going to show you the capital budget by categories, as well as the unexpended balances that are associated with each category. So we have construction and major repairs, a base amount of $9.8 million, with a UB amount of $88.6 million. And, as we mentioned before, a good portion of that ‑‑ $64 million is related to the General Obligation Bonds.

Construction and minor repairs is $3.4 million. Land acquisition ‑‑ we start with $2.15 plus the Eagle Mountain Lake unexpended balance move forward for a total of $11.45.

Information Technology ‑‑ most of that $4.8 million is related to the data consolidation contract with IBM. I think before that contract, the Department was able to get its work done on approximately $1.2 to $1.6 million, so that just gives you an idea of the increased costs of that contract.

Transportation items ‑‑ vehicles and, conceivably, some boats, $5.6 million. Capital equipment, $1.5 million and the Master Lease, for improvements that were done to this building to reduce the expenses, they put window film. There's a payment of $1.13 million that's scheduled each year. So that's a total ‑‑ capital budget ‑‑ of $125.28 million.

COMMISSIONER MARTIN: I have a question. On the Eagle Mountain money, how much longer can we hold on to that money before we have to spend it?

MR. SMITH: So it's a very good question. You know, our goal has been to get those funds obligated by the time the session rolls around.

COMMISSIONER MARTIN: I just didn't know if we end up at a point that we lose it.

COMMISSIONER HOLT: Yes, we could. That's a worry.

MR. SMITH: Mike, what I think we'll do, unless the Commissioners object is come back at the end and have Scott and Rich talk about the Capital Construction program and the UB program and how we're going to deal with that.

MR. JENSEN: Okay.

MR. SMITH: So you okay with that?

COMMISSIONER HOLT: Be sure, in that, we talk about the Battleship. Okay? It's something that just drags on and on and on. Eight years and we're still talking about it. Nothing's been done so we need to talk about it.

COMMISSIONER BIVINS: Real quick. What is the Airport Commerce Park?

MR. JENSEN: It's a facility that we have. A number of different divisions are ‑‑ part of our Communication Division's over there, our training and human resources is over there and it's about two miles from here off of Highway 71. It's over by Riverside Drive.

COMMISSIONER MARTIN: Our OGT people are over there too.

MR. JENSEN: Yes.

COMMISSIONER BIVINS: Their operation, yes. We [indiscernible] to that every two years.

MR. JENSEN: It's relatively new. That's only been leased for about two years now, I think. Isn't that correct?

Okay. I'm going to advance to the next slide that talks about the number of employees that we're able to have, according to the Appropriation Bill.

In the current year of 2010, we have an established cap of 3,178.3. What the Department does is, we know that there's going to be a trade-off when people leave, people retire, so we budgeted approximately 4 percent higher than that so we come as close as we can to hitting that target without exceeding it.

In 2011, that cap is going to be 3,180.3, according to this purple book, however we already have implemented a 5 percent reduction to Canadian River Corridor, which did have five FTEs. So the ‑‑ Oversight's going to expect it to be 3,180, less the five, so our adjusted cap is going to be 3,175.3. We are still budgeting at approximately 4 percent higher but we cannot exceed 3,175 and what Gene and I are hearing from the other agencies who are preparing their LAR, there's been a lot of questions from the Governor's Office about these types of limits on employees.

I've seen about three or four different agencies that had a series of five or six specific questions going all the way back to 2005, in terms of FTE caps and limits and what the fill rates were.

So we have not yet received those questions but we're anticipating that we probably will receive those questions.

COMMISSIONER HOLT: I mean, which way is he driving? Trying to get it lowered? I mean, help me understand what the questions are going to be. What do you mean?

MR. MCCARTY: We're not sure, actually.

COMMISSIONER HOLT: Well, some of these other agencies ‑‑

MR. MCCARTY: From the line of questioning, you can't tell whether they're driving to reduce the cap or eliminate the cap or whether the cap is effective as a budgeting management tool. You can't really tell from their questions. They're just looking at what the agencies' trend has been in terms of total FTEs.

MR. SMITH: On this subject, though, one of the things we've been thinking about in the upcoming session is, for example, our intern program. We hire interns, which are a critically important part of the agency, as you know. Those hires count against our FTE cap and some agencies have exemptions of their intern program against the cap and that is an issue that we're interested in exploring with the legislature, with your consideration and approval.

COMMISSIONER HOLT: Okay.

MR. JENSEN: I'll move on to the next slide that's going to show the breakdown of FTEs ‑‑ budgeted FTEs, by division. Administrative Resources have 138; Coastal Fisheries 201; Communications 85; the Executive Office 35, that also includes all of our internal auditors; Human Resources 27.5; Information Technology 90; Infrastructure 137; Inland Fisheries has 225; Law Enforcement 657.5; Legal 11.5; Local Parks 17; State Parks 1,352; Wildlife 319.5.

And, I'm not going to spend a lot of time on these riders. I just wanted to kind of walk you through their importance. I mean, we rely heavily on these. For example, Rider Number 2 is our capital budget. That really tells the Commission and the rest of the world what we have for capital, including construction.

We have a Rider 7, which is unique to Parks and Wildlife. Many agencies do not have this ability to have unexpended balance authority between biennia. We have that in Rider 7 for construction projects because the life cycle of construction is five years.

Rider 11 provides some guidance on debt service and lease payments.

Rider 16 gives us direction on payments to license agents who sell hunting and fishing licenses for us.

Rider 17 allows us to use funds ‑‑ federal funds or appropriated receipts donation money for capital purposes without counting against our cap in the capital budget in Rider 2.

Rider 24 is the funds that we receive ‑‑ sporting goods sales tax that we are then directed to pass to the General Land Office.

Rider 25 ‑‑ I've put this in here because we've got the invasive species money, $750,000 for aquatic vegetation, last year as well as in '11.

Rider 27 is important to the Department, specifically in the past, because we're able to get additional appropriation authority based upon the revenue that comes in for Fund 9 and 64.

Rider 28 is an informational listing on sporting good sales tax.

Rider 31 gives direction for the GO bonds.

Rider 33 kind of ties in with what Carter said about the full-time equivalent employees. That allows us to have a full Game Warden Academy without them counting against the FTE figures until they've graduated from the Academy. So for the first nine months that they're being trained they don't count against our cap.

In the LAR, when it comes to riders, there are a couple of things that we're suggesting that may be considered. One is program income. When you have a piece of property that the federal government contributed to, they feel that they have an interest in it so if you do another piece of work on that property, they consider that as federal interest program income and what we want to be able to do is to have appropriation authority for what they consider to be program income so that the piece of program income we can then put it back into that project and spend it. Right now, we do not have that ability so it dilutes the power of the federal funds that we have when that instance occurs.

On average, I think we have approximately $3 million ‑‑ correct, Gene? ‑‑ in program income per year so that would improve our ability to better use that $3 million if we had appropriated authority.

The second item, Carter already mentioned, is an FTE exemption for interns, Teacher Retirement System and TxDOT.

COMMISSIONER HOLT: What do you mean, better use that $3 million? Help me understand that.

MR. MCCARTY: Well, you actually get to have appropriation authority for the revenue as opposed to losing appropriation authority. What happens is ‑‑ federal funds bring their own appropriation authority.

COMMISSIONER HOLT: Right.

MR. MCCARTY: But when they get treated as program ‑‑ when you have program income, you lose that authority so if you can get a rider that allows you to have that authority to spend it then you can better utilize it.

MR. JENSEN: You can put that back into the project. The program income ‑‑ it really dilutes. If you have $1 million of federal funds and it's in an area and you generate $100,000 of program income, the effective value then of those federal funds is $900,000. You can't use that $100,000. If we had the appropriated receipt authority, we put it back in and we can spend it back on that project.

MR. MCCARTY: Right.

MR. JENSEN: Right now we can't do that because we don't have ‑‑

COMMISSIONER HOLT: We can add it ‑‑ let's say you're appropriated is a $1 million. You can make it to $100,000. I mean, you spend a million-one ‑‑

MR. MCCARTY: You really can only spend $1 million. What happens is, you don't lose the $100,000.

COMMISSIONER HOLT: Okay.

MR. JENSEN: And a third item that's out there, just for discussion is, we do have the Game Warden Training Center. It might be nice to have a rider that allows us to effectively feed them, buy food. There's not a statute that prevents state agencies from buying food but there's an old Attorney General opinion so every state agency is afraid to buy food because they get audit exceptions when they're audited because of that old Attorney General opinion.

But if you have a rider, like DPS does for their academy, it makes it easier to do that and I think it would be easy to do this for the Game Warden Training Center but we have other facilities down the road in the future ‑‑ if we could flesh that out and just allow the Department to be able to acquire food and prepare food, when it's appropriate to do so with the funds that we have to have the express authority to do that. It helps avoid the appearance of impropriety or possible audit findings.

COMMISSIONER HOLT: So would you just focus this on the Game Warden Academy or all the ‑‑

MR. MCCARTY: This go-round we're just looking at the Game Warden Academy.

MR. JENSEN: We can probably get the food in the door because ‑‑

COMMISSIONER HOLT: At least you have precedent there with the DPS Academy.

MR. McCARTHY: Yes, sir. Yes, sir.

MR. JENSEN: We were looking to find something similar from any other agency.

COMMISSIONER HOLT: Right.

MR. JENSEN: But I couldn't find anything specific to food. There are things about meals.

COMMISSIONER HOLT: So if you go over there, you can't eat.

MR. SMITH: Just to put that in perspective. I mean, we've got cadets that are there for seven months and every breakfast, lunch and dinner, while they're there, they have to cook their own meals and they're going through very rigorous physical training, in addition to all of the studying they have to do. It's important that they have balanced meals but yet they're sort of on their own. The other side of this, you know, for example, let's take state parks where you have Friends groups that come out and give us a huge amount of volunteer hours, let's say Palo Duro Canyon. We can't buy hamburgers or hot dogs to cook them to say, Thanks for coming out this morning and helping us build a new trail. So those are the kind of things that we're interested in exploring with the legislature on maybe getting some dispensation for.

COMMISSIONER BIVINS: And so at the training center.

COMMISSIONER HOLT: Yes. How is that?

MR. SMITH: So the cadets right now have to bring their food and buy their own food and cook it or they drive in to Starr and eat at the little café ‑‑ they can do that. I mean, it's a ‑‑

COMMISSIONER HOLT: Three meals a day?

MR. SMITH: Well, if they want to eat three meals.

(Simultaneous discussion.)

COMMISSIONER MARTIN: We should charge them for weight-loss program.

COMMISSIONER DUGGINS: Why don't we ask the AG to revisit that old opinion if we think it may be unsound or outdated?

MR. JENSEN: It's a 1965 opinion. They were apparently mad at the governor at the time. At least that's the gist when I've read it.

COMMISSIONER HOLT: Probably there's not that many people that have a need for this, I would assume. Is that a part of the issue? I mean ‑

COMMISSIONER DUGGINS: If we asked for a revisit of the opinion, as to this agency and as to the DPS, because of the unique situation, we might get a different opinion.

COMMISSIONER HOLT: Ann?

MS. BRIGHT: I'm Ann Bright, General Counsel. Definitely, I mean, that's definitely something we could do. I would want to also go back and just look at that opinion again. I suspect that the basis of it was that ‑‑ and it goes back to a very basic tenet of state government is that you can only use state resources for state purposes and I think most of the instances where someone is talking about buying food, it's usually not for state purposes. But, in this instance, I think we would have a really good argument that it truly is for state purposes.

You know, honestly, I have not looked at that opinion, at least not in recent memory. So I'd want to go back and look at that and, you're right, I mean, I think we probably could make a very good argument that this is ‑‑ that there is a state purpose in using funds for that way.

COMMISSIONER DUGGINS: Let's do that, talk about it. Because I think ‑‑

MS. BRIGHT: There's sort of two issues here. One is just sort of the statutory and constitutional use of state funds. The other issue ‑‑ and that's why I want to go back and look at the opinion, is the appropriations issue. Because there are a lot of things that might be a legal use of state funds but you still can't use it unless it's appropriated back to you as a state agency for that purpose. Does that make sense?

COMMISSIONER HOLT: Yes. Well, that's part of what you're trying to do with Rider 33 but ‑‑ and maybe you can visit. Once you look at it, maybe also visit with DPS, see how they're handling it too. I mean ‑‑

MS. BRIGHT: Absolutely.

COMMISSIONER HOLT: I assume they're doing the same thing.

MS. BRIGHT: Absolutely.

COMMISSIONER HOLT: Let's find out and then maybe there's a way to approach the AG's office. I mean, this is a requirement to become a Game Warden, so I mean, these individuals ‑‑ I mean, it's a state requirement, licensing and everything else that goes with it.

COMMISSIONER DUGGINS: Exactly.

MS. BRIGHT: Absolutely.

COMMISSIONER MARTIN: I had no idea.

COMMISSIONER HOLT: I didn't either. This is all news to me.

MS. BRIGHT: I also seem to recall Walt may know about ‑‑ have more on this but we do have an issue with some of the inmates that were working on our properties in that the corrections Department, CDCJ, was really more willing to let them go some place that was going to feed them and so that was a problem for us at one point. We may have been able to work around that in some instances.

MR. JENSEN: That got resolved, I think.

MS. BRIGHT: Did it?

MR. JENSEN: Yes. And, Chairman Holt, the DPS, they actually have a rider. What they do in their academy is they have a reduction from their pay, an emolument, that then funds whatever cafeteria they have for food. So that was a starting point for us to look at but long-term, we have other facilities and I think it'd be ‑‑ if we can get our foot in the door and have something that has express authority, it'd make it easier than to build on that down the road.

COMMISSIONER HOLT: I don't deny that but I think we ought to look at it from the legal side of the picture in this particular situation where these people are required. Well, gosh, when we moved out of Austin, they must have really been ticked off. Let's face it. We've all been out there to Hamilton County. I mean, are we paying for the gas to drive the 25 miles to go eat a hamburger?

MR. SMITH: Why don't we do this then, as a next step. We'll look into the legal authority here and take a look at that and then also then look at the appropriations issues and we'll come back to you with a recommendation as to how you think we ought to proceed? Is that fair?

COMMISSIONER HOLT: Very, very good.

MR. JENSEN: I have three more quick slides for you before we turn it over to Scott and Rich. Just a quick update on the legislative appropriations request. We always called that the LAR.

The first thing is just to remind everybody, the baseline request cannot exceed the current biennium baseline, less the 5 percent. That's the starting point. We start with what we already have and less that 5 percent. And any amounts above the base are going to be considered exceptional items and Executive Office is still discussing what those may be or may not be. The next slide will kind of give a list of where we're at for right now. And we have prepared a supplemental schedule that has a 10 percent reduction. The very last slide that we'll show you will show those target amounts that we're supposed to cut in the next biennium, '12 and '13.

The LAR is going to be due on Monday, August 23rd. Some options for exceptional items that we have here. This is in no-priority order. It's ‑‑ look at Capital Construction, Capital Development, Land Acquisition, automation and technology that will relate to what you saw in the past for the law enforcement folks for their vehicles; outreach to new constituents and the data consolidation contract.

MR. SMITH: So I think just a little background on this and, obviously, you all are cognizant of where the state is with respect to the expected budget deficit so this is not a very timely session to be asking for anything in addition when we are being asked to put together a schedule to cut our budgets by 10 percent.

There are some kind of core things associated with the agency's mission. For instance, like the capital construction that we've been steadily building on, very consistent with the State Parks Advisory Committee recommendation to the Commission that the Commission take forward that, you know, we'd hate to lose the ability to secure additional capital construction dollars to fund deferred maintenance issues at our facilities and so, you know, those kind of things we definitely want to talk to you all about, as we prepare the LAR and decide whether or not to request that, as an exceptional item.

Gene and Mike touched on the data center consolidation contract. Is, you know, the deferred cost that we are not expected to expend in '11, we do expect to expend in '12 and '13 and if that's going to be the case, we're going to need funds and appropriation authority to be able to handle that.

So we certainly are very, very aware of the climate in which we're operating in but we just wanted to make you aware at high level, the kind of needs that are out there and then have a conversation with you all about whether or not we can or should pursue any of these.

MR. JENSEN: This is the very last slide on this presentation. This shows you the 10 percent reduction targets that we have. For General Revenue, the calculated amount is $20.2 million, General Revenue Dedicated, $28.6 million. So the total target reduction amount for the next biennium is $48.8 million and that footnote is pretty small, it just points out that we have GR and GRD proportionality between the two is incurred but it's not required so we're not going to have to strictly give $20.2 out of GR and $28.6 but we do have to hit that target of $48.8, between the two.

And, I'll just leave it at that. If there's questions that you have on this, specifically, or any other slides, I'd be happy to try to answer them before capital comes up to the table.

MR. SMITH: Are you comfortable with having Scott and Rich come forward to talk about the unexpended balances and kind of our capital construction program of where we are and talk about the Battleship?

COMMISSIONER HOLT: We all knew this was going to be this kind of meeting and it's ‑‑ you know, we need to talk about this capital expenditures we fought so hard to have and see what we can do with them.

COMMISSIONER HOLT: Okay, maybe we can talk about jobs or something, keep this momentum going.

MR. BORUFF: Mr. Chairman, Commission. Once again, for the record, Scott Boruff, Deputy Executive Director of Operations and with me, Colonel Rich McMonagle, Director of the Infrastructure Division. High level, I mean, just to refer back to one of Mike's slides, we're looking at probably an $88 million UB, going into '11 and rather than try to line-item you to death here, I wanted to give you the big picture and then if you've got specific questions we can answer those too.

Of the $88 million, $27 million and possibly $29 million of that is Battleship-related. You will recall that we got a $25 million bond. We had a commitment from the Battleship Texas Foundation to provide $4 million in match, which was a total of $29 million. We have already received $2 million from the Battleship Texas Foundation. We anticipate receiving the other $2 million in the next month or two so, depending on whether that $2 million hits this year or next year, it'll be $27 million or $29 million that UBs.

So that's a pretty big chunk of the $30 ‑‑ I mean of the $88 million. In addition to that, you may remember that, relative to Proposition 4, which was a bond initiative approved by the voters of Texas, the second tranche of that bond was issued early this year in April ‑‑ not so early, just a couple of months ago and $34 million of that $38 million will UB into next year because we just got it. We're not going to be able to expend it by the end of this year.

So now you've got almost $30 million with the Battleship. You've got an additional $34 million in Prop 4 bonds that are going to UB; that's $63 million right there.

We have about $6 million from the previous tranche that is going to UB forward in capital construction so that brings us up to almost $70 million ‑‑ I mean $60 million and then we have $8 million ‑‑ as you will recall, we got $12 million for Galveston and Sea Rim in the last session and we are moving ‑‑ and that was primarily for master planning and design, there was no construction money in that money. We are in the master planning piece of that but about $8 million of that $12 million is going to UB forward because the design process won't be started or certainly won't be completed by the end of this fiscal year, the end of next month.

So if you take those four items, $27 or $29 million for the Battleship, $34 million for the tranche we just received, about $6 million from an earlier bond issue and the $8 million, you're talking $78 of the $88 million is captured in those four items.

The other $10 million is scattered among some Fund 9 and federal funds and those kinds of things. So the big picture is, I think we've been doing a pretty good job. It's a big number and we always have to explain this as we go into the session but I think we can pretty easily explain the reason that this has not been expended.

I'll reiterate just briefly that we did change our model to try to be able to expend more. It looks like the model has been successful in the first year and a half. We're just coming up on the completion of the second year. We do believe that, given $88 million UB this year for capital construction ‑‑ unless we get lucky and get some new money, we believe, going into the biennium, that number will be down around $58 million so a $30 million reduction going forward from when we come back and do this presentation next year.

And that will still be the Battleship. A point well taken. The Battleship probably will not be completed until 2014, at best, assuming we don't run into any more opposition from former Friends groups.

COMMISSIONER HOLT: Where are ‑‑ let's stop at that.

MR. BORUFF: Yes, sir.

COMMISSIONER HOLT: Where are we on the Battleship? I mean, studies? I mean, where are we with this Battleship?

MR. MCMONAGLE: Right now, Chairman, we are in negotiations with the designer so we have gone out for proposals from a number of firms, we have selected a firm and, based on that selection, we're in negotiation with that firm about price and work.

COMMISSIONER HOLT: Price and work ‑‑ to do the work?

MR. MCMONAGLE: To do the design.

MR. BORUFF: Do the design.

COMMISSIONER HOLT: To do the design. What does "do the design@ mean? What does that mean?

MR. MCMONAGLE: Well ‑‑

COMMISSIONER HOLT: Designing? What are you designing?

MR. MCMONAGLE: Well there ‑‑ we had, as you will recall, there were four options that were given to us about different methods for doing the dry berth. So what the design company ‑‑ the first thing they're going to do ‑‑ this design firm ‑‑ is, they're going to look at those four and maybe come up with another but within the first six months they are to provide to us their decision about ‑‑ their recommendation about which is the best of those methods to do.

Once we have done that, then we go out, with that design scheme and we do the ‑‑ all of the natural and cultural resource clearances that are required. Because there's federal money involved and the ship is through the Department of the Navy, we have to adhere to federal law so we're anticipating that will be about two years in order to do all those clearances.

We'll then give the firm another year to complete their design, based upon all of that. So that's well over three years and then we have 18 months of construction. And, of course, that's all best case. If we run into opposition or problems with the clearances, especially environmental clearance, that could stretch from the two years that we've scheduled out to five or more.

MR. BORUFF: I would remind the Commission that we ‑‑ at that same site, at the San Jacinto site, seven years ago ‑‑ six-and-a-half years ago, we received a federal grant to build a visitor's center out there. We have yet to do the design on the visitor's center because of the opposition of one small group that opposes that and so it is an intensive bureaucratic process at the federal level that we have absolutely no control over and that process requires the opportunity for the public to have input, and so when we have one segment, be it small or large, of the public that opposes it, it slows down the process dramatically.

So just as a reminder. I mean, we're six years into that project and we've yet to do the design. We're only really only two-and-a-half years since this bond was issued into this ‑‑ for the Battleship. So 2014 is an optimistic estimate of when we might be done with the Battleship. So you're going to be hearing about this probably for the rest of your tenure on this Commission.

COMMISSIONER HOLT: I've already been here eight. I'm telling you what.

COMMISSIONER MARTIN: You have eight more to go.

COMMISSIONER HOLT: Reed, you made this little trip over there in Houston, convince them ‑‑ figure out how we're going to have to give it back to the federal government ‑‑

You can see. I mean, this is the never-ending project. Never-ending.

MR. BORUFF: I think the brighter picture, if I might, for just a moment.

COMMISSIONER HOLT: Try to give us a brighter picture.

MR. BORUFF: Yes. I'd like to end on a positive note, here, Chairman. We have, I think, developed a system here that allows us, in good faith and good conscience, to go back to the legislature and in times, when there is money available, say to them, that we can expend more than $22 million a year. You'll recall that at the legislature's direction, we contracted with a group that came in and said, In a best case scenario, we're falling about $32 million a year behind in capital construction. We have many hundreds of millions of dollars of backlogged repairs but, if you look at today's picture, in the best case scenario, $32 million a year, we're falling behind in capital construction.

So even at $22 or $25 million a year, which has been our track record over the last ten years, if you accept the study, we're still falling behind $8 or $10 million a year. And so our hope was to at least set the stage to go back to future legislators and say, you know, we need $30 to $35 million a year just to stay where we are. Not to catch up on the backlog but just to stay where we are.

And I think we've at least set that stage. It's unfortunate timing, given the economic scenario we're facing but I think we've evolved a model there that allows us to at least keep up and as we go forward may well allow us to start catching up if we were given more than $32 million a year.

COMMISSIONER HOLT: Well, you're talking about, yes, excluding these special-type projects.

MR. BORUFF: Excluding the Battleship and all these ‑ I'm just talking about our Fund 9 and Fund 64 normal repairs. Most of those, as you will recall, about 80 percent of this money goes, typically, into state parks. The other 20 percent goes into wildlife management areas and fisheries.

Now, I'm excluding fish hatcheries and Battleships. Those are obviously big ticket items that drive the raw numbers but I'm talking about our normal routine maintenance; major repairs.

COMMISSIONER DUGGINS: Let me ask for some clarification on the Battleship issues here. The Commission wrote a letter to senators Cornyn and Hutchison urging their assistance. That was in connection with the visitor's center. Correct?

MR. MCMONAGLE: That's correct, Commissioner.

COMMISSIONER DUGGINS: What's the holdup on the clearances sought in connections with the dry-berthing design, as distinguished from the visitor's center?

MR. MCMONAGLE: None at this point because we haven't gotten to that stage. So we're still in the hiring the designer part of that project. Once we hire the designer, then part of his design process will be to get the clearances that are required.

COMMISSIONER DUGGINS: But has there been some reason why this hasn't occurred over the last year or two?

MR. MCMONAGLE: No, sir.

MR. BORUFF: Well, let me put that into context, Commissioner. The process, once those bonds are issued is about a year-long process before we can go out and negotiate with a vendor and ‑‑ which we're in right now. So we have been, for the last year out there trying to get to the point we are now. So I didn't want ‑‑ I don't want you to ‑‑

COMMISSIONER DUGGINS: So have you been precluded because of the lack of funding in proceeding with the vetting of the design ‑‑ design group?

MR. BORUFF: Yes, sir. Remember when ‑‑ and this is one of the things, I think, that confuses all of us ‑‑ certainly did myself when I came in. When go you into this next legislative session and they give ‑‑ they authorize bonds, it might well take a year and a half before those bonds ‑‑ those dollars hit you.

And you can't go out and contract and encumber that bond money for any kind of activity until you actually have the money in the coffers. So there's quite a delay sometimes from the time that the legislature says you can get the bond and the time those monies actually hit your coffers.

COMMISSIONER DUGGINS: All right. But we now have the funding to proceed to select the design firm. Correct?

MR. BORUFF: Yes, sir.

COMMISSIONER DUGGINS: And what's the timing on recommending the selection of the design firm so that they can move forward with the options for the dry berth.

MR. BORUFF: We've already gone through the early phases of that. We had to go out for a request for proposal; we had to go out first for a request for qualifications. It's a multi-tiered process. So first you go out and say, who's qualified? And all the firms send you their qualifications. Then you need to ask for a specific proposal. Then you go through the negotiations, which is where we are now and assuming you can come to a price that's reasonable and we think we're getting the best value for the state then you issue the contract.

COMMISSIONER DUGGINS: But I'm asking you, what's your projection of when you'll bring to this Commission a recommendation on selection of a designer and entry of a contract?

MR. MCMONAGLE: I hope to be under contract within two months ‑‑ depends on how this negotiation goes.

COMMISSIONER BIVINS: Cause we looked at the design options a long time ago.

MR. MCMONAGLE: Yes, sir.

MR. BORUFF: What you looked at the results of a study that we had done prior to this exercise. We had gone out and contracted with a marine engineering group to come back and give us some ideas about how we could take care of the Battleship in the long term.

They came back to us and recommended four potential solutions. And I believe that, probably, Commissioner Bivins, was what you're referencing. We brought back to the Commission at that point those four recommendations and that was the basis for which we went to the legislature and said, Here's what we think could work ‑‑

COMMISSIONER BIVINS: Okay.

MR. BORUFF: ‑‑ and how much it might cost, you know, in the bigger picture. So there was two years of preliminary work that went into convincing the Commission ‑‑ I mean convincing the legislature to fund this thing and it included the study that I think you were referencing.

MR. SMITH: And those were conceptual designs.

(Simultaneous discussion.)

COMMISSIONER DUGGINS: Well, I think we ought to be able to, now that we have the funding, to move forward on selection of a designer. Surely we can get this process jump-started and do it sooner than four years.

MR. BORUFF: Well, we will be glad to share with you the steps that have to go through that.

COMMISSIONER HOLT: Well, that's ‑‑ what we need to get out there everybody maybe the next, maybe not August but the next meeting is all the timelines [indiscernible] stack it up. Remember you've got the issues because it's federal. We have multiple issues that are layered ‑‑

COMMISSIONER DUGGINS: Clearances.

COMMISSIONER HOLT: — clearances, environmental issues. You ‑‑ actually the U.S. Navy is going to still be involved. Okay. See what I'm saying? So now you have a double whammy. It isn't just the normal environmental issues, now you've got the Navy's got to prove it relative to the Navy belong to that ship or having control of the ship. So you see what I'm saying? Now, you've got to go through the Pentagon and, I mean, that's probably two years ‑‑ they were saying two years. It's just trying to get the federal permits. Even if we already have the design, they've got to okay ‑‑

MR. BORUFF: That's if there's no opposition.

(Simultaneous discussion.)

COMMISSIONER HOLT: That doesn't include opposition, which will be there, probably, at least from that one group.

COMMISSIONER DUGGINS: The other thing is, there's a part of this being able to move forward on the design ‑‑ selection of the designer and the designer then comes back and reviews the four options and perhaps another option or two. It seems to me, given the amount of time that's expired, we might want to revisit the number that we gave the legislature because I don't think that number's realistic anymore. I don't know that but I'm just suggesting that, as we're going into the LAR, we could adjust that upward, if appropriate.

COMMISSIONER HOLT: Well, not this round.

(Simultaneous discussion.)

COMMISSIONER HOLT: I mean, why go into a round when they tell you they've got $20 billion deficit. Secondly, it's ‑‑ what. You remember when the first $25 million came from a bond voted on by the public. So I mean, and then we've raised about 4 through donations or will have raised or will have raised 4. No, I don't disagree by the time you actually start building this thing and doing it, you may need more money but ‑‑

(Simultaneous discussion.)

MR. BORUFF: This is not quite the logical process you might assume.

COMMISSIONER DUGGINS: Well, I guess what I meant. I didn't articulate it well. Shouldn't we at least note that this number which was approved X number of years ago. So there's some indication of the date or not? I don't know whether you do that or not. You wouldn't?

COMMISSIONER HOLT: No.

MR. BORUFF: And, in fact, I'm going to say this is because it's going to come back to us later. We're dealing with this now in the visitor's center that I referenced earlier. We got a federal grant for that visitor's center six-and-a-half years ago and with construction costs, notwithstanding the economy where they are, we already believe we're not going to be able to do what we thought we would do ‑‑ Infrastructure's already going back and reducing the scope of the building in order to keep it in budget.

Relative to this, I want you ‑‑ while you were not here when this money came around, we originally asked for $52 million for the Battleship. That was the first number we floated downtown four years ago and through the process of give and take, we were told what we would get. It was not based on a true estimate. We were told, You're going to get $25 million. You'll go out there and do the best you can with $25 million and don't come back and ask for more. We have a letter to that effect from the Governor's Office and Lieutenant Governor's Office. We'll give you 25 if you don't come ask for anymore.

So just to make sure that the Commission understands, those were the parameters under which we got this $25 million. It was not an estimate on our part that it would take $25 million to fix the Battleship?

COMMISSIONER HOLT: It's twice that. So the issue's going to be is ‑‑ to go through the design process, the permits and by then two and four years from now and then you may have to go back and use what you're saying, inflation costs, construction costs, inflation ‑‑ those kind of things and say, We understand you don't want us to come back but the reality is, this is the only way the ship's going to be able to be saved.

COMMISSIONER DUGGINS: I wasn't aware of that history but I'm glad to know it.

COMMISSIONER MORIAN: There is some sense of urgency.

(Simultaneous discussion.)

COMMISSIONER HOLT: The last couple of hurricanes. The last hurricane scared the hell out of us.

(Simultaneous discussion.)

COMMISSIONER HOLT: We're pumping twenty-four/seven. I mean, the last hurricane ‑‑ when Ike came through there ‑‑ I mean, yes, we were really worried about this thing. No doubt about it, there's a real potential that thing get in there in the middle of the Houston Ship Channel ‑‑ so I'm not being the chairman at that time. I'm out of here.

(Laughter.)

COMMISSIONER HOLT: I'm telling you what, I'm not having that on my watch.

(Simultaneous discussion.)

MR. SMITH: Well, there was a recent leak where, fortunately, one of our colleagues noticed that leaving he literally stuck a rag to stop the leak.

COMMISSIONER HOLT: This thing is completely rotted out underneath ‑‑

MR. SMITH: Paper thin.

COMMISSIONER HOLT: Paper thin. You can actually punch your fist through some parts of it. I'm not kidding. This thing was made with the thickest steel ever built. I mean, they don't build ships like that anymore and it's just rusted ‑‑ I mean, it's been sitting in saltwater since 1910 or whenever they built this darn thing. So no, it's just a major issue. It's one of the ones that just hangs over Parks and Wildlife ‑‑ the park side of it. It doesn't make any difference ‑‑ TPW, and it's just going to be there for a long time because of all the ‑‑ everything. The issues of the actual problem, okay, and then the fact we have so many groups involved, everything from the federal government ‑‑ and it isn't just one part of the federal government, it's two parts. The DOD and, I guess ‑‑

COMMISSIONER DUGGINS: Navy too.

COMMISSIONER HOLT: Well, no, DOD would be Navy but who's the other side? It would be the ‑‑

MR. MCMONAGLE: No sir, Federal Highway Administration is involved.

(Simultaneous discussion.)

COMMISSIONER HOLT: It's a huge bureaucracy. Each one has to approve. We have to approve the design, once we get to the design, whatever we decide, in floating this thing or somehow getting it out of the saltwater and then we've got the state, you know, all the approvals we have to go through in the environmental issues and so ‑‑ anyway, it's ‑‑ like I say, I've been here eight years and it's been ongoing since I've been here.

MR. BORUFF: Notwithstanding the frustrations of these big, unique projects, the real benefit ‑‑ the hope of the agency is that we can continue the major project stream of funding. To us, that's the most critical. You know, we've been pretty lucky in the last decade to receive, on average, $20 to $25 million a year. We're not really catching up but at least we're putting our finger in the dike. If at some point we stop getting those bond funds year after year, we're going to be in serious trouble. I mean, we're looking at multi-hundreds of million of dollars of backlog right now. We've got our finger in the dike with this $25 or $27 million a year. If that suddenly stops, it will be bad news for the agency.

COMMISSIONER BIVINS: Is there any hope that we can move forward without having to deal with these opposition groups?

MR. BORUFF: No. That's the right of the public to comment and they have the right to do that.

COMMISSIONER HOLT: One group is probably going to file suit, take the time.

COMMISSIONER DUGGINS: It's a shame.

COMMISSIONER HOLT: It is a shame.

COMMISSIONER MORIAN: Another hurricane might help.

(Simultaneous discussion.)

COMMISSIONER HOLT: If that thing ends up in the middle of the Houston Ship Channel, Lord ‑‑ I remember Ned Holmes, when he was here saying, Oh, my God ‑‑ I think we had a presentation about theoretically that could happen. It's a little more than theoretical, I mean, there's certain conditions that could happen.

MR. SMITH: Well, remember Hurricane Ike, you know, it sits monopoles and the storm surges came in at 60-and- a-half feet. The monopoles allow for an 18-foot play so you had ‑‑ on this World War I-era Battleship, you had exactly a foot and a half of sort of leaving the way there. So that's a very real consideration.

COMMISSIONER MORIAN: We may not build far before it sinks.

(Simultaneous discussion.)

COMMISSIONER HOLT: If it backs up 15 feet, it's in the channel.

COMMISSIONER MARTIN: I know we can get the divers over there.

COMMISSIONER HOLT: Then we have this group that doesn't want it there. You know, they want us to move it to Galveston or something and we're saying ‑‑ Oh Yeah, that's a solution. There's no bottom. Try to move it out of the Ship Channel and try to move it to Galveston or wherever the hell they want to move it. I mean, it's not moveable, except by force of nature. I mean, as humans, we don't want to even mess with it.

COMMISSIONER BIVINS: And those were all the San Jacinto ‑‑

COMMISSIONER HOLT: No, there's one group and they're not an officially designated group at this point.

MR. SMITH: That's correct. They ‑‑

COMMISSIONER HOLT: That's the way to say it?

MR. SMITH: Yes. They were historically a Friends group with the authorization from the Commission, they are no longer a formally sanctioned Friends group of this agency, as approved by the Parks and Wildlife Commission. They still remain in a separate advocacy group and take on projects related to what they feel is the welfare of the San Jacinto Battleground.

COMMISSIONER HOLT: And the battlefield. They don't ‑‑ you know, they don't believe that the battlefield should be there.

MR. BORUFF: Or the visitor's center.

COMMISSIONER HOLT: Or the visitor's center.

MR. BORUFF: Or the monument.

COMMISSIONER DUGGINS: And the record should reflect that, as we understand this, that a small number of people ‑‑ vocal but a small number of people.

COMMISSIONER HOLT: And they have to find a lawyer as part of the group. Pro bono, see.

MR. BORUFF: Be glad to answer any questions.

(Laughter.)

MR. BORUFF: Thank you.

COMMISSIONER HOLT: Why don't we talk about this ‑‑ why don't we talk about ‑‑ I don't know if Ted's here ‑‑ the Eagle Mountain Lake situation, relative to those dollars in a general term.

MR. SMITH: Yes. I mean, we're certainly going to have a discussion with you all in Executive Session about an opportunity.

COMMISSIONER HOLT: Oh, that's right. I'm sorry. We are going to do an executive session. Yes, we'll wait to that.

COMMISSIONER DUGGINS: But it is on the budget by category, isn't it?

COMMISSIONER HOLT: Yes, it is. The one thing I can say in public, I mean, that's the place definitely where the legislature grab, so ‑‑

COMMISSIONER MORIAN: Carter, can you feed us?

MR. SMITH: Right now?

COMMISSIONER MORIAN: No.

MR. SMITH: Oh, okay.

COMMISSIONER MORIAN: I'd be glad to chip in some.

MR. SMITH: Oh, you mean, can I feed you all? Well, the way that we have handled that is actually through the Parks and Wildlife Foundation and so the Foundation can feed you. And I can certainly feed you personally.

(Laughter.)

COMMISSIONER HOLT: I think it may be the other way around.

COMMISSIONER DUGGINS: And since you're in charge of the annual dinner this fall ‑‑ Mr. Bivins reminded me, he's expecting caviar at this meeting.

COMMISSIONER BIVINS: I think that we should go to McDonalds at the ‑‑

MR. SMITH: So I guess ‑‑ Chairman, next would be whether or not you want to turn it over to ‑‑ want to complete this committee's work and then turn it over to Chairman Bivins to take us to Executive Session for the Conservation Committee. We have two items in Executive Session.

COMMISSIONER HOLT: Okay, Executive Session. What else do we have with this Appropriations?

MR. SMITH: That's it. Yes. Unless you've got some more questions or there's anything you'd like to visit about.

COMMISSIONER HOLT: All right. Any other questions from anybody about anything ‑‑ the group down here.

COMMISSIONER DUGGINS: Is there any reason to update us on the oil spill or not?

MR. SMITH: It's not on our agenda, so ‑‑

COMMISSIONER DUGGINS: I'll drop that.

MR. SMITH: Okay.

COMMISSIONER MARTIN: We got the look.

MR. SMITH: We are in pretty good shape there, at least on the Texas side. We'll just leave it at that.

COMMISSIONER HOLT: Any other questions or comments on this? And the Finance Committee has completed its business and we will now move to the Conservation Committee.

(Whereupon, at 12:00 noon, the Finance Committee was concluded.)

C E R T I F I C A T E

MEETING OF: Texas Parks and Wildlife Commission
Finance Committee
LOCATION: Austin, Texas
DATE: July 20, 2010

I do hereby certify that the foregoing pages, numbers 1 through 72, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Parks and Wildlife Commission.

07/26/10
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731


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