Texas Parks and Wildlife Commission
Finance Committee

P R O C E E D I N G S

COMMISSIONER FALCON:  And what I am going to do is to change up, and do Item Number 2 first, and then Number 1.  Is that okay?  The first order of business is the approval of the previous committee meeting minutes from the November 3, 2010, meeting, which have already been distributed.  Is there a motion for approval?

COMMISSIONER MARTIN:  So moved.

COMMISSIONER FALCON:  Commissioner Martin.

COMMISSIONER MORIAN:  Second.

COMMISSIONER FALCON:  Second, Commissioner Morian.  All of those in favor, say aye.

(A chorus of ayes.)

COMMISSIONER FALCON:  Opposed, same.

(No response.)

COMMISSIONER FALCON:  All right.  And we will move right along here to the second item, Financial Overview.  Mr. Mike Jensen.

MR. JENSEN:  Good morning, Commissioner Falcon, Commissioners.  My name is Mike Jensen, Director of Administrative Resources Division.  I have a relatively brief presentation for you this morning.  And I think Carter is going to have a more in-depth information about the House and Senate Bills that have been filed recently.

I am just going to focus on the year-end summary of revenues from the prior fiscal year.  And then I will give you an update on where we are in this fiscal year for revenue, a quick budget update, and a little talk about this fiscal year, and the 2- 1/2 percent reduction target that we have been recently been given by state oversight.

We will start first with year-end of last fiscal year, state park revenue, it held about even with the prior fiscal year, fiscal year ‘09.  In ‘10, we ended with $38.4 million.  In ‘09, we had 38.49-.  So we are about $93,000 behind the prior fiscal year.

But that is not bad, because the prior fiscal year had a pretty strong – ‘09 was a strong summer, and it had a strong fall as well, beginning of the year.  Miscellaneous revenue, which includes donations, and some other categories was down by $268,000 or 26 percent.

Our park passes do great.  And they were up 3.7 percent, $209,000.  Entrance fees were up 2 percent; that is about $223,000.  Concessions and facilities were down slightly.

I can get you caught up on the next slide, is the boat revenue.  The revenue is up 6.45 percent, which is $1.3 million in total.  The tax is down by 6.15 percent or that is in the hole $135,000.  Titles were up almost 1.7 percent or $73,000.  But the majority of the revenue that we account for here is in registrations, and that was up nearly 10 percent; 9.8 percent, which accounts for $1.39 million in revenue.

I think at the August Commission meeting, Commissioner Duggins had a question about titles.  Why was the revenue up?  When we did the fee increase, they actually increased the title fees as well.  If we look at the same period, the count of titles was down by almost 5.3 percent.  So that accounted for a little difference there.

At the end of the year with boat and title and sales was very slow.  And again, I think when we get into this current fiscal year, we will see a slight improvement.  I think they have actually sold some boats in this fiscal year.  But we will get to that when we get to the current fiscal year.  Let me go to the license revenue real quick.

The license revenue, at the end of the year, we were down in total $1.18 million.  But that amount includes the lifetime licenses.  And we have gone over this previously, but just to remind you, we had a spike when they increased the fee at the end of ‑‑ right before 2009.  And some of that trickled into 2009.  Actually, a significant amount trickled into 2009.

So when you exclude those Fund 9 revenues, they are actually looking very good at the end of the prior fiscal year.  Nearly 3 percent up, $2.61 million.  The next slide is going to give you an easier comparison than we have had in the past.  It was hard to compare three years, but it is much easier to compare two.  So when you look at the slide, you can see the variance between 2009 and 2010 fairly quickly and fairly easily.

You can see that we did very well on residential hunting licenses.  And that is a 9.61 percent improvement.  That is $819,000.  And you can see we did well on residential fishing.  And we did pretty strong on combination licenses as well.  And again, just reiterating what was on the previous slide, Fund 9 revenue, that is an increase of 2.95 percent, if we look at just a Fund 9.

And then a lifetime license endowment fund is ‑‑ we have restrictions, so we don’t have as great a use as we do on Fund 9 monies.  I went ahead and put this next slide in just for reference.

COMMISSIONER DUGGINS:  But before you leave this current slide.

MR. JENSEN:  Sure.

COMMISSIONER DUGGINS:  Why are we down so much in other, and what is other?

MR. JENSEN:  The other includes the lifetime license.  That is the primary reason.  Because this fiscal year, we didn’t expect to sell them, because they cost so much more.  Right at the beginning of 2009, fiscal year 2009, there was a huge spike.  Our staff just could not handle the amount of revenue that came in.  So it actually showed up in 2009.

So I am comparing 2010 to 2009, that lifetime license increased this anomaly.  So when we get into the next biennium, that anomaly is going to fade away.

COMMISSIONER DUGGINS:  Are there any other licenses in the other categories, besides the lifetime, that were markedly up or markedly down?

MR. JENSEN:  No.  I mean, lifetime is really causing this.  When we get to the next slide you will see that ‑‑ the reason why I included the next slide, is so you could ‑‑

MR. JENSEN:  Did it go to it? So you could look at the count.  When you look at the total count and you exclude the Fund 9, you can see that number doesn’t even budge.  Because the reality is, most of this change is the result in a change in about 4,000 less lifetime licenses.  And that, while it doesn’t skew the count, it has a significant skewing effect on the revenue.

That is the main reason why I put this slide in.  So you could see that a small population of licenses can really throw off the revenue in terms of comparing it.

COMMISSIONER BIVINS:  What did we raise the prices to, on those?

MR. JENSEN:  On lifetime licenses, I believe is $1,800.  They went up from $1,000.  Did I answer your question?  I hope I did; I tried.

(No response.)

MR. JENSEN:  I will move on to the next group of slides.  Basically, it is going to be a pretty quick brief update again on the revenue.  This fiscal year, state park receipts are doing very well.  They had a very strong October and December, when we compare month to month, or prior year, October was 21 percent better than last year.  December was 24 percent better than last year.

So we are up $900,000.  So they are performing very well.  In terms of park passes, that accounts for $619,000 of this amount.  And they are up 45 percent so they are doing a great job.  Concessions is up $100,000, which is about 8.3 percent.  Entrance fees are also up $436,000.  That is about a 16 percent increase over the prior year.  So they are doing good so far.  Very well.

Boat revenue, it is down 4.86 percent, or $197,000.  One of the things to remember, the biggest source of revenue here is registrations.  The peak period for that isn’t going to happen until later in the spring, right before the summer, when we will probably catch up.

But when I break it down by the categories on the sales tax, it is currently down about 4 percent.  But it is gaining.  Back in November, it was down almost 6- 1/2 percent.  So that indicates some people are actually, this fiscal year selling and transferring some boats.  And titles are up, 5.9 percent, almost 6 percent.  That is $55,000.

And the registration is just because of the timing.  This is, there is their slow period; they’re down 8.6 percent.  And that accounts for most of that $197,000 when you compare it to the prior year, year-to-date.  So I think the outlook is actually improving with respect to the titling and the tax.

License sale revenue as of December 31, 2010, this fiscal year we have collected $67.36 million in total, compared to the prior fiscal year, $67.71.  Again, that includes that anomaly at the beginning.  Well, that includes that anomaly of lifetime licenses.  When you exclude the lifetime licenses, the Fund 9 revenue is up 1.4 percent and that is an increase of 2.16.

The next line is going to be easier for you to see that because it gives a variance between the two fiscal years by each of these groupings.

You can see we are performing very well with residential ‑‑ on the fishing licenses as a whole, as well as with the residential hunting licenses.  Residential fishing is 7.37 percent better.  That is $758,000.  And again, on the Other category, the biggest factor in there were the lifetime licenses.  And we expect it to perform poorly, just because of that anomaly.

When we present information to Carter and other senior staff, we remind them as well of why this is skewed like that.  The next slide will show you the count.  And this is actually looking very good, compared to the analysis that was done way back in 2008.  The total number of licenses sold is up 3.1 percent.  Hunting licenses are up 1-1/2 percent.  Total fishing is up 7-1/2 percent.  And the total combos are up 1.6 percent.

When I show you the variance on that, you can see every one of these high level categories which has many different types of licenses rolled into each category is doing very well, compared to the prior year.  So I think this is favorable for the Department as a whole.

This is better than I think the analysis had anticipated about two years ago when they were anticipating the fee increase.  So we are doing well; very strong on residential fishing, and on the combination licenses.

COMMISSIONER HOLT:  Can I stop you there and just ask Carter or somebody.  I mean, how are other states doing?  The economies.  You know, you hear that everybody else’s licensing is going down.  Did you do any comparisons at all or look into what other states are doing?

MR. SMITH:  We do, and I think it is highly variable.  Chairman, yes.  I think we are a bit of an outlier, compared to other states, based on what we are hearing.  I mean, the good news here is, you know, we will recall that we saw a significant dip in non-resident purchase of hunting and fishing licenses.

We are starting to see some upward movement there, and I think that is a reflection of improved economy.  More folks feeling confident about traveling across borders and coming to Texas.  And so that is a good thing.  So obviously, we will continue to push on that.

Also, the improvements we are seeing on the fishing side, you will recall, we were very concerned about that over the last year or two.  And so seeing those improvements are very positive.  But yes, Chairman, to answer your question, we do kind of monitor what is going on in other states, and see what is happening.  And we feel good about where we are positioned right now.

COMMISSIONER HOLT:  Yes.  The states are having a tough time of it.

MR. SMITH:  They are certainly having a very difficult time budget-wise.  You know, that is a recurring theme across the country.

COMMISSIONER HOLT:  Uh-huh.

MR. JENSEN:  The next slide is a comparison to revenue through December, compared to the Comptroller’s revenue estimate.  We are tracking favorable, because if you look at this, only 33 percent to the fiscal year has elapsed.  So we have collected at least that or more in each one of these categories.

Fund 9, which is game, fish and water safety, is at 43.5 percent collected.  So we are doing well there; we are on target.

And you can see from the last slide, we are doing well with the hunting and fishing license sales.  State Park Fund 64, it is right on target, 33.  It is going to be tight to meet the BRE.  But we are on target for it.  And in terms of all of the different funding pieces that roll into this, State Park fees are up 1-1/2 percent compared to the prior year.  So we are doing well in Fund 64 on that.

And on both of these, the Comptroller revenue estimate, they are still estimating high on the BRE interest.  And we are just not going to achieve it.  And that kind of objectively, we are doing well in other things.  Royalties, oil and gas, we are doing well on 9 and 64.

The Local Park Fund, which is Fund 467, collections are ahead of the BRE target.  You can see at 46 percent.  The primary contributing factor to that is federal funds that we have pulled in.  And that go into that fund.

The other category is made up of a number of different items that includes artificial reef funds, the lifetime license endowment funds, the license plate conservation capital account.  And the shrimp buyback program money is in there.  So Other, is at 62, almost 63 percent compared to the BRE.

Most of that is tied to the artificial reef account, which is Account 679, because of donations that have come in.  And there have been a number of companies and donors who have really contributed to that.  So we are looking good in terms of overall comparison to the BRE.

We have three more slides.  The next one is just a high-level summary of the budget adjustments in August.  We presented a $423.2 million budget; that was approved.  Since then, we have some adjustments to increase it.  We have some federal grants that have come in; about eight different types of sources of federal funds for 7.1.

And we have federal grants UB, which is unexpended balance forward.  And those are federal funds that existed in prior years, but just have not been obligated.  Their life continues.  So we are bringing them into this fiscal year.

We have appropriated receipts.  And these are primarily donations of $6.6 million, 3.8, plus a UB, unexpended balance amount of 6.6.  And license plate revenue, unexpended balance forward that comes in a Force account.

That is how we fund the infrastructure projects, and the staff that work on those projects.  That is a total adjustment amount of 28.9.  So the adjusted budget as of December 31st is $452.1 million.

In the next slide, we will break that into the high level categories.  Internally, we have larger categories than this.  But for a roll up, on salaries and other, in benefits, this is what we expected, with 33 percent of the year exhausted, and 67 percent remaining, that is on target with what we expected.

The operating equipment grants and capital projects, we still have additional funds available.  And some of that is just the nature of what we are facing with the legislative session.  Carter is going to get into that.  Where we have to be as conservative as we possibly can, in expending this fiscal year’s funds, so that we can strategically do what we need to do, once we get some direction from you, the Commission, and from our Executive Management.

The last slide, it is probably going to segue into what Carter really needs to brief you all on, in terms of what is going on right now.  We do have a directive from state oversight to reduce the 2011 budget by 2-1/2 percent.  The actual amount, it is kind of small down there on the bottom; it is $5,993,819.

Executive management has discussed a number of strategies, how to hit that target.  We have a number of options that can be considered.  And but that is the target they expect us to hit.  And they had led us to believe we had until May.  But now we have until the end of this week to try to give them additional information on what those strategies are going to be.

So with that, I will take any questions that you may have.  If you don’t, then Carter will probably take it from here.

COMMISSIONER FALCON:  Any questions?

(No response.)

COMMISSIONER FALCON:  Thank you, Mr. Jensen.

COMMISSIONER HOLT:  Can you wait, sorry.  Going back about two or three slides, you have appropriated receipts, for example.  Unexpended balances of 6.6.  Okay.  Do you see that?

MR. JENSEN:  Yes.  We have ‑‑

COMMISSIONER HOLT:  It says, appropriated.  So those are dollars we can spend in this fiscal year?

MR. JENSEN:  Those are dollars available in the budget right now.  That is part of the adjustment.  I can break it down for you.  I mean, we have on the UBP, appropriated receives, some of that is from one of our riders, Rider 3, almost 450,000.

Then we have received additional artificial reef monies.  Artificial reef UB comes in, that is $4.4 million of it.

COMMISSIONER HOLT:  Yes.  And I am going to stop you there, in the sense of, do we have something to spend that on?  I mean, do we have reef?

MR. SMITH:  Yes.  We have got a bunch of artificial reef projects in the pipeline.

COMMISSIONER HOLT:  For this fiscal year?

MR. SMITH:  I can’t speak to that specifically.  Robin, do you ‑‑

COMMISSIONER HOLT:  Can you keep rolling this over?  It is appropriated now, but I mean, what happens to next year?

MR. SMITH:  Yes.  It is UB’d or not?  Just quickly.

MR. RIECHERS:  Robin Riechers for Coastal Fisheries again.  You know the artificial reef program is a dedicated account.

COMMISSIONER HOLT:  Right.

MR. RIECHERS:  So it is really only can be used for that sole purpose.  We certainly are aggressively looking at projects in the next year.  I can’t say that we are going to use all of those up.  But we will be working on some key significant projects.

We have really been pushing our near shore program.  And we have been pushing a program down near Corpus Christi to get a new site, working with the new Minerals Management Service, in trying to get some activity going down there.  So we have got projects on the way, and on the books, and moving.  I don’t know the exact dollars amounts that we will be looking at right now.

COMMISSIONER HOLT:  Okay.  But are these on ‑‑ let me, how to ask the question.  Are these on our fiscal ‑‑ where it says appropriated receipts.  Is that geared to our fiscal year or is that geared to the federal fiscal year?  I always get confused about that.  And how you spend the money.

MR. JENSEN:  These are geared to our fiscal year.  Some of these are bringing in prior year money into this fiscal year.

COMMISSIONER HOLT:  Theoretically.

MR. JENSEN:  Yes.

COMMISSIONER HOLT:  Of course, bringing in, and the state appropriated.  Okay.  Now the biennium will end.  And the new biennium will start in September 11.

MR. JENSEN:  Yes.  That is correct.  Yes, sir.

COMMISSIONER HOLT:  If you haven’t spent this money, what ‑‑

MR. JENSEN:  They said dedicated.  The cash is going to be dedicated.  The cash is there.  It can’t be used for other purposes.

COMMISSIONER HOLT:  But if it is not appropriated ‑‑

MR. JENSEN:  If the Legislature doesn’t give us appropriation authority, then we can’t spend it.  The cash will sit there.

COMMISSIONER HOLT:  And it is going to be used to offset the deficit.

MR. JENSEN:  And Carter is going to probably get into more details across the board on that, in terms of what the House and Senate are recommending right now.

COMMISSIONER HOLT:  It took me a long time to get to where I was trying to get to there.

MR. SMITH:  Chairman, just to clarify, the appropriated receipts, what we are talking about here, are donations.  They bring their own appropriation authority, and they can be UB’d forward.  So if we are not able to get those encumbered this year, they will move forward into the next biennium, with respect to the donations for the Rigs to Reef program.

COMMISSIONER HOLT:  They are appropriated, but you haven’t used them.  Then, how, from a budget point of view relative to the Legislature, then, can they then apply that as against the deficit?  How does that work?

MR. SMITH:  All right.

COMMISSIONER HOLT:  That is the kind of stuff we are going to be getting into.  This is a classic example of something that’s probably more long-term.  And they’re wanting it all spent.  So then what happens?

MR. MCCARTY:  Gene McCarty, Deputy Executive Director for Administration.  They are appropriated receipts, but they are donations.  So they bring their own appropriation authority with them.  And their UB.  So their appropriation life stays with them, and continues on as we UB them, until they are expended.

COMMISSIONER HOLT:  Until they are expended?

MR. MCCARTY:  Yes, sir.

COMMISSIONER HOLT:  So theoretically, three years from now.

MR. MCCARTY:  Three years from now.  That is correct.

COMMISSIONER HOLT:  Okay.  So why don’t you, any time until ‑‑ in other words, we will have the opportunity or right to expend that money at any time.

MR. MCCARTY:  That is correct.  That is correct.  Under the current rules.

COMMISSIONER HOLT:  Okay.  These are a little different.  Okay.

MR. MCCARTY:  Under current rules.  Appropriation rules can change at any time.  But under current rules, that is the rule.  Now, I don’t expect appropriation rule to change on donations.

COMMISSIONER HOLT:  I don’t either.

MR. MCCARTY:  That would defeat the whole purpose for donations.

COMMISSIONER HOLT:  Yes.

MR. MCCARTY:  But stranger things have happened.

COMMISSIONER HOLT:  These are all donations.

MR. MCCARTY:  Yes, sir.

COMMISSIONER DUGGINS:  Let me ask, Gene.  When we get a federal grant, Reed and I were talking about this, this morning.  When we get a federal grant, do we have to get legislative authority to expend that grant money?  Or is that ours to spend, as long as it is in accordance with the federal directives?

MR. MCCARTY:  As long as we are staying within the terms and conditions of that grant, that grant brings its own appropriation authority with it.  If it is federal funds.

COMMISSIONER HOLT:  Independent appropriations.

MR. MCCARTY:  They give us independent appropriation authority for it, but it is not restrictive.  It can grow.  Because federal grants bring in their own appropriation authority.

So in our budget, you will see a line item for federal funds.  But that is not a limiting line item.  You know, you can exceed that with additional grants.

COMMISSIONER DUGGINS:  I guess what I am asking is, can the state legislature affect that?  Either freeze it, limit it in any way, a federal grant?

MR. MCCARTY:  They can.  I mean, they can write into legislation, write in the Appropriation Act that you know, that the state does not have the authority to spend federal funds.  I mean, but they have to pass that in the ‑‑ because the rules as they exist right now, in the current appropriation authority, federal funds bring their own appropriation authority.

MR. JENSEN:  And on the two base bills that Carter is going to talk to you right now, they have not changed that.  They could attempt to change that during the session, but they have not, at this point.

COMMISSIONER DUGGINS:  That, meaning the rules.

MR. JENSEN:  The rules that they come with their own appropriation authority.

COMMISSIONER FALCON:  Any more questions, anybody?

(No response.)

COMMISSIONER FALCON:  Right now, we will go back to Item Number 1.  Update on Texas Parks and Wildlife Department progress in implementing the Texas Parks and Wildlife Department Land and Water Resource Conservation and Recreation Plan.

MR. SMITH:  Thank you, Mr. Chairman.  I have got three matters that I want to talk about.  The first two have to do with securing permission to publish a couple of minor rule changes.  And then, the third has to do with an update on the proposed budget bills that we have seen in the House and Senate, that have been filed.

The first one has to do with just a basic correcting a citation to the statewide HUB program, the Historically Underutilized Business program rules.  And in that regard, we are proposing an amendment to Chapter 51, Section 171 of the Parks and Wildlife Code concerning Historically Underutilized Business program.

The current rule adopts by reference the provisions in Chapter 1 of the Texas Administrative Code, Chapter 1, Section 111.111 through Section 111.128.  That sets forth the requirements that have to be followed by state agencies in implementing the HUB business rules.  Those provisions have now been moved in the Texas Administrative Code to Chapter 34, Section 20.11 through Section 20.28.

Our proposed amendment to the Parks and Wildlife Code would simply update that reference, and make it consistent.  It is non-substantive.  And so we are simply asking for your permission to publish those changes in the Texas Register.

The second request we have with respect to securing your permission to publish a change in the Texas Register has to do with how we allocate the Super Combo funds to the different stamp funds.  As you know, we have got an Upland Game Bird stamp, a Migratory Game Bird stamp, a Saltwater stamp, and a Freshwater stamp.

And so, by Parks and Wildlife Commission-approved rule, we conduct an annual survey of our Super Combo buyers to see who is utilizing what resource.  And then we make an appropriate pro-rata allocation to the different stamps to distribute the Super Combo funds to those stamps.  The last five years, we really have not seen any appreciable changes from those surveys.

And so in an effort to help reduce costs, we are proposing to go to a three-year survey regime, as opposed to an annual survey regime.  But we will use, at the end of those three years, when we do a survey, we will look at the historical average of the last five surveys, just to make sure that we have got appropriate information.  And so a cost-saving measure.

Something that we don’t think will have any impact on this, but would save us time and money.  We would like to publish this proposal in the Texas Register for public comment, and bring that proposal back to the Commission for consideration in March.  And so, with you all’s permission, we would like to move forward on that, Mr. Chairman.

COMMISSIONER FALCON:  Yes, sir.

MR. SMITH:  Okay.  The next item I have, is just a very sobering one.  And it has to do, I want to give you kind of the information behind the published House and Senate Bills that HB 1 and SB 1 that came out with the proposed base budgets.  Really, a lot of commonalities between the two bills overall.

The Senate Bill was a little bit restrictive overall, from the state government perspective.  On our end, we certainly saw that with respect to the Senate’s support for law enforcement.  But let me kind of walk you through the key elements of this, at the top level.  And then kind of what it means to the Department and the average hunter and angler and park enthusiast, that is looking to Parks and Wildlife for our work.

The proposal is basically, to reduce the biennial budget by $162 million over the biennium.  That is a 25 percent cut to the budget.  That of course, would be on top of the 5 percent cut that we have already taken.  The way it is proposed, is that much of that cut would be front end loaded in the first fiscal year; $120 million of reductions in fiscal year 2012.  And then $42 million in fiscal year 2013.

The proposal is for us to reduce our FTEs, our full time equivalents, by 304 positions in the first fiscal year, and then bring that up a little bit in the second fiscal year to see a reduction in only 233 FTEs.  So what does that mean to the agency in terms of our business?  Here it is.

All of capital equipment purchases are proposed to be eliminated.  So that means, no funding for vehicles, boats, trailers, computers, capital equipment, lawnmowers, tractors, printers, essentially, all of the tools of our business.

The proposal is to eliminate all grant fundings.  And so no funding available for local park grants, outreach grants, trail grants, shooting range grants, landowner incentive program grants.  The proposal in both the House and Senate Bill is to eliminate any new funding for capital construction.  Rich had mentioned our LAR request.  But the proposal in both bills is to eliminate any new funding for capital construction.  And to limit funding for capital repairs to only that which can be UB’d.

So actually, they are looking at us being able to UB those funds that we have, that are not encumbered.  But there is a proposed limitation on how much funding we can UB for the Fund 9 divisions.  And so that is an issue for us.  They have also proposed to eliminate all funding for land acquisition over the biennium.  They have proposed a 15 percent across the budget cut to Division and agency administration.

COMMISSIONER HOLT:  How much?

MR. SMITH:  Fifteen percent.  I will come back to this, because this is an issue that when you talk about it, propose eliminating the construction based appropriation life for local park grants, that is a real problem for grants that we have already given out to communities that have not been expended.  And so that is an issue we want to work with the Legislature to fix.

I will now kind of talk about some of the division- specific cuts that were identified.  Start with Communication Division funding.  Proposing to reduce the funding in the first fiscal year by 40 percent.  But then in the second fiscal year, reduce it by 2 percent.

And the thought-process there is basically that we would defer activities in the first half of the fiscal year from an operational perspective, that is very problematic.  We can’t simply defer activities, whether it is hunter education or angler education or boater ed, or the magazine for six months.  And then just pick it up.

So an issue that we will come back to, on how we normalize this, or try to, across the years of the biennium.  A proposed reduction in our IT divisional funding by 25 percent in the first fiscal year, and 22 percent in the second fiscal year.  Problematic for a lot of reasons.

One, they have looked at taking out all of the extra funding that we need to support the state’s data center project, and take that from our IT budgets to cover that.  And that is really debilitating to that division.  So that is an issue that we certainly want to work with the Legislature on.  A proposed reduction to the State Parks Division by 18 percent in the first fiscal year and 15 percent in the second.

They contemplated as to how they could kind of come up with these proposed numbers that we would look at transferring or closing seven state parks and several regional offices.  And also, deferring any minor repairs in state parks for a period of six months.  And then, significantly, reducing funding for our cultural natural resources work in state parks and business development.

In the House Bill, Law Enforcement Division funding reduced by 11 percent in the first year, and 9 percent in the second, with a proposal to defer law enforcement training in the Academy for a period of six months, and reduce our Game Warden force by 20 game wardens or 20 Game Warden positions.  The Senate Bill does not go down that path.

On Inland Fisheries, the proposal to reduce the budgets by 12 percent the first year and 11 percent in the second would eliminate the funding that we have received for aquatic invasive species and also reduce funding for the golden algae research that we have been working on for so long.

And Coastal Fisheries proposal to reduce fiscal year ‘12 budget by 10 percent, 9 percent in the second year of the biennium, and significantly reduce the shrimp license buyback program.

In Wildlife Division, a proposal to reduce the budget in the first fiscal year by 18 percent, and then 11 percent in the second fiscal year.  And reduce our wildlife diversity and research program by $1 million.  With also, a proposed elimination of FTEs, and to defer our public hunting program by six months.

Again, an operational issue that would be very practically difficult to implement.  Also, a proposed reduction of our Infrastructure Division by $900,000 in the first fiscal year and 15 percent in the second.  That doesn’t begin to really cover the true impacts to Infrastructure.

Because without new capital construction authority, which is where most of our staff expenditures are tied, Infrastructure takes a very significantly disproportionately large hit there.  Reduce grant administrative staff funding by 50 percent.  And again, reduce the administrative divisions by between 14 to 16 percent over the course of the biennium.

So again, overall, a proposed 25 percent reduction to the agency’s budget.  And a significant reduction of full time equivalent positions.  As we think about how to proceed under the fiscal clarity and realities that the Legislature is facing, you know, obviously, Parks and Wildlife is not somehow being singled out.

All agencies are being asked to significantly reduce their budgets.  So we are seeing that across the board.  We do have some issues though, that I think it is important that we work on, with respect to perhaps technical changes, or operational changes to give the agency flexibility to operate and conduct its mission within the confines of the resources.  And those are the kind of areas that we want to focus on.

For instance, where you see these proposed reductions, heavily front end loaded in the first fiscal year, looking at how we equalize those over two years is going to be important to us.  Otherwise, very difficult to do things, particularly in our communication and outreach, and statutorily required hunter ed, and angler ed.

I mentioned the construction life reductions for current local park grant funds.  That is a very important technical fix, because communities have already been given grants.  And they have a certain time frame to expend those funds.  And if they are told they can’t ‑‑ they have to have them expended by the end of the fiscal year, this fiscal year, that is going to be very problematic for communities.

There was an interesting mechanism built into the bill, with a thought about an alternative revenue generation idea for state parks.  It would require legislation to do this.  But it has to do with the proposed voluntary checkoff box.  When you register your vehicle, a voluntary $5 registration box on your vehicle registration.  You could donate money.

They have estimated and built into the budget that that would accrue a $1,600,000 for state parks on that front.  Now again, that would have to take legislation to be passed, in order for that to be authorized, and we think that estimate is ambitious.

We have an exemption, but were are asking for ‑‑ I think we asked for an exemption for transferability, so that we can look at being able to transfer funds, particularly into IT, which is taking a disproportionately large hit, to cover the data center costs.  And that is something that certainly, we are focused on.

Also, the way the budgets are written right now, the line items for capital repairs and equipment are essentially lined out.  And so there would be no ability to transfer money from one strategy into that.  And you think about the operation as diverse and sizeable as ours.  And inevitably, there are going to be emergency expenditures that need to be made.  And that is something that we certainly want to look at.

Also, with land acquisition fund taken out, should we sell the Palo Duro Canyon, the Fortress Cliffs portion of Palo Duro Canyon State Park to a conservation buyer, as has been authorized by the Commission, there would be no place to put those proceeds.  So a lot of technical issues like that, which Gene and his team have been poring over, and trying to identify so that we can try to work with the Legislature to address this, and manage through it as best as we can.

A very sobering picture for anybody associated with state government.  Certainly, the colleagues inside this agency.  We have committed to our colleagues to make sure that we are sharing this information with folks that work here.  And that means sharing information that is not always good.  And so we have distributed this initial analysis across the agency.

We will be holding a town hall meeting on Monday, to talk about it.  And I am committed to making sure that our colleagues know what is going on to the extent that we are able to share it, and know that information.  So with that, I will stop there, and see if you have any questions of either Gene or myself.

COMMISSIONER MARTIN:  You’ll keep us in ‑‑ kind of abreast as changes come or in areas that you need our help.  I’m here ‑‑ I will be here in Austin a lot and certainly want to do all I can on my part to knock on however many doors and do whatever I can on my part.  But just to kind of keep abreast to the developments on these situations.

MR. SMITH:  Absolutely, Commissioner.  And I appreciate that every much.  I think it is imperative, going into these times, and this session, that the Commission is actively engaged with this, as we work with legislators to make sure they understand some of the implications and consequences of these decisions.  They will make the best decisions possible, given what they know.  But we will need your help in that regard.

We are expecting probably a Senate Finance Committee hearing sometime first, as opposed to a House Appropriations Committee hearing.  And we will be keeping you apprised of that.

COMMISSIONER MARTIN:  Is it helpful to attend those?

MR. SMITH:  I think it can be.  Yes.  Absolutely.  And also, when we have an opportunity to visit with members who have questions and interests with the particulars of our budget.

COMMISSIONER MARTIN:  Okay.

COMMISSIONER FALCON:  Do you know the rationale for the differences in cuts the first year, versus the second year?  Why they are doing it that way?  Does anybody know the answer to that?  Why are they making those recommendations?

MR. MCCARTY:  When we asked the LBB, they pretty muchly indicated they thought that those were the kind of programs that could be suspended for a short period of time.  So they front loaded and said, just suspend this operation for six months, and then restart it.

I don’t think that their rationale really works very well for most of these programs that they have outlined to cut that way.  Just operationally, we just cannot do it.  So we have got to get some relief from that some way.

When I kind of explained to them that that was problematic to us, they kind of went, okay.  We get it.  You know, we are not going to fight you.  But you are going to need to talk to the members to get that changed.

MR. SMITH:  For instance, Chairman, if we were to suspend our hunter education activities the first of September, what would that mean on the opening day of dove season going full throttle going into hunting season, be an issue.  In terms of the statutory requirement of the agency, it would be an issue with respect to law enforcement out there in the field.

And again, operationally, it is just very hard to stop something like that, for that finite period of time, and then pick it up immediately six months later.  So something we need to work through operationally with them.     COMMISSIONER FALCON:  Because I think a lot of us can understand the need for reducing costs in all of the different areas of state government.  But to do it this way makes it almost impossible to work.  I mean, you just can’t stop doing business for six months, and then start up again.

MR. McCARTY:  Yes.  That is correct.

COMMISSIONER FALCON:  And so how do you propose that we approach this?  At least make this ‑‑ made one of the starting points on how to give us some more leeway on how to run the Department for the next few years under these circumstances.

MR. SMITH:  Well, and I think it is a great question, Mr. Chairman.  You know, we are still completing our analysis of what is actually contained and intended within these budgets.  Gene and his team every day are discovering something new, as are other analysts inside the agency.  We need to complete that and then have a comprehensive list of really kind of what are our technical and practical and operational problems or issues associated with it and then work with the Commission then to strategically communicate that to members so that they understand the consequences of budgeting things, for instance, in that fashion, and also propose some other alternatives, if they are willing to consider those.

We understand we are going to have to manage down to a number.  We all certainly get that.  We have done our part in the past.  We always will do our part.  To the extent that we have some flexibility to do that, that would help us a lot in carrying out the mission of this agency.

COMMISSIONER HOLT:  And that is what we are going to have to do, influencing ‑‑ and of course, we have got ‑‑ I wrote myself a note ‑‑ we have got to get the names of all the new ‑‑ well, all legislators, out to all of the Commissioners to see who knows who and, in particular, the Commissioners [indiscernible] new ones in the House, particularly, is ‑‑ and then find out, you know, who are going to become chairmen of these various committees and who are the influence ‑‑ and that kind of thing and, then, you know, go knock on their doors and explain why, you know, doing it this way won’t work, or can’t work, or makes it doubly expensive once you get six months down the line, it starts and stops.  And that just takes a lot of knocking on doors and, you know, you get an appointment and then you’re trying to explain your position.

COMMISSIONER BIVINS:  The issue you brought up, and you used the example of the Fortress Cliff property sale.  If that transaction takes place, what happens to the funds?

MR. MCCARTY:  Those funds are land sale proceeds for Fund 64.  And they will go, and that’s a dedicated fund account.  So they go into that account.  But they are not appropriated.  So they are just going to end up building fund balances.  Now Fortress Cliff has some additional problems with it, in that it has got federal funds in it.  So if we don’t immediately reinvest those federal funds back into another project, then we have got to refund the Feds, so to speak.

So Fortress Cliff sale has a number of different moving parts in it.  But that portion of it, that is Fund 64 related will go into Fund 64 and remain there as fund balances until we get appropriation authority for it.

COMMISSIONER BIVINS:  So then, it seems to me that it would be in our best interest to not try to sell it.

MR. MCCARTY:  It is in our best interest right now to try to get a simple line item in our capital budget rider which would allow us to sell it, which would allow us to appropriate those funds.  We have the land sale proceeds rider in place.  It didn’t get ‑‑ this is one of those technical adjustments.  The land sale proceeds rider is still in place.

So the rider gives us one piece of authority to appropriate those funds.  But the capital budget rider has to also have a line in it to where you moved the money to.  And there is not ‑‑ that line doesn’t exist now.  We just need to have that line reestablished in the capital budget rider, and have it an estimated zero amount.  And then we can grow it.  So our best action at this point in time is that simple technical adjustment within the bill.

MR. SMITH:  I think then, Commissioner, if we are not able to get that done, then, you are right.  We ought to just fold the property into the Palo Duro Canyon State Park and use that as part of the start of the State Park complex there.

COMMISSIONER BIVINS:  It is complicated.

COMMISSIONER DUGGINS:  You mentioned that there were six or seven parks that were slated to be closed.  Have they identified the parks that they think we should close?

MR. SMITH:  Well, and I want to clarify that, they have proposed reductions in our strategies.  You know how they budget; by strategies.  And so, proposed reduction in State Parks divisional funding.  And then they provided the rationale behind how they thought we could accomplish that.

And part of that was a suggestion that we could transfer seven parks to local entities.  And in visiting with the LBB, we understand then, the rationale for that was the Rider 31 State Park Quality Study that had identified some parks that the consultants felt like could be transferred to a local entity.  Obviously, there is a presumption there that, one, those are the right parks and then, secondly, that the local communities would want to take on those parks, and own and steward those.

And I will say, we are not getting a lot of demand from communities coming to us, asking for our parks, and taking on the stewardship.  So I think that will be a challenge to facilitate.  So I think, Mr. Chairman, if there is not ‑‑ unless there is any more questions on this, we will keep you all appropriately apprised as we move ahead.

Again, we expect the Senate Finance Committee hearing some time in the not-too-distant future, and appreciate everybody’s support as we go forward.

COMMISSIONER HOLT:  Why, I think, let’s do [inaudible] list that ‑‑ I wrote a note ‑‑

COMMISSIONER FALCON:  Any other questions or comments?

(No response.)

COMMISSIONER FALCON:  Chairman Holt, I wish we’d had Item Number 3, how this has been solved, but we don’t so ‑‑

COMMISSIONER HOLT:  Don’t we wish we had?

COMMISSIONER FALCON:  — the committee has completed its business.

COMMISSIONER HOLT:  Yes.  No, this is going to be the topic of conversation for the next six months or so till we ‑‑ this is what June ‑‑ around June 1st when they vote on the budget.  So where are we here?

COMMISSIONER FALCON:  So we’re done.

COMMISSIONER HOLT:  Oh, now, we are going to go back to Conservation.  Right?

COMMISSIONER BIVINS:  Do y’all want a recess for lunch?

COMMISSIONER HOLT:  Yes, and then why don’t we do an executive ‑‑ isn’t that the best thing, do an executive session?

COMMISSIONER FALCON:   And then ‑‑

COMMISSIONER HOLT:  Are you all right with that?

COMMISSIONER BIVINS:  Oh, okay.  Actually, could we do Lydia first to get back on ‑‑

COMMISSIONER HOLT:  Oh, sure.

COMMISSIONER BIVINS:  — Conservation, then recess, and we’ll come back on other things.

COMMISSIONER HOLT:  Lydia’s coming up under Conservation?

COMMISSIONER BIVINS:  Number 2, yeah, Item Number 2.