Money committees grant staff authority to adjust statewide internal service rates after GFO briefing

A joint meeting of the Assembly Committee on Ways and Means and the Senate Committee on Finance on March 31 heard the Governor's Finance Office present the executive budget's statewide decision units, including proposed changes to internal service rates, employee fringe benefit rates and Office of the Chief Information Officer (OCIO) technology service rates. After questions from members, the committee granted fiscal staff blanket authority to make technical adjustments to those statewide decision units to reflect committee closing actions.

The presentation was delivered by Tiffany Greenemeyer, director of the Governor's Finance Office, with Curtis Palmer, deputy director. Greenemeyer summarized the governor's recommended decision units — labeled in the budget as M100 and M300 among others — and said they adjust state-related service costs such as payroll and personnel assessments, Attorney General cost allocations and fringe-benefit rates. "This slide indicates services and projected rates, such as personnel assessment, payroll assessment, attorney general, basically all internal service rates," Greenemeyer told the committee.

The committee's questions focused on specific rate drivers discussed in the presentation. Daniel Marlowe, administrator of the Administrative Services Division at the Department of Administration, attributed an increase in the vehicle liability rate primarily to recent claims nationwide: "there's been a lot of ... extreme liability payments that have happened, within the nation as a whole for these payouts," he said. Marlowe also explained differences in daily versus monthly vehicle rental rates, saying the governor's recommendation moves the state toward an industry-standard all-inclusive rate and shifts certain costs to monthly billing to improve cash flow. He said the state has roughly 100 short-term pool vehicles and more than 1,200 monthly-pool vehicles.

Members pressed on buildings-and-grounds rent assessments after Marlowe said the rate rose from $0.94 per square foot (in the prior biennium) to a recommended $1.81. Marlowe said the change reflects higher operational costs tied to new buildings, utilities and outsourced janitorial and landscaping contracts as well as recovery of lower-than-target reserve levels in the prior biennium. "I do not have any concerns for excess reserve in this budget account," Marlowe said when asked about reserve accumulation and cited a U.S. HHS standard allowing up to 60 days of reserves.

On technology rates, the OCIO's witnesses explained two principal drivers: a recent labor allocation study that reallocated staff time across services and an expanding portfolio of projects and security services. Timothy DiGaluzzi of OCIO said the agency consolidated previously separate help-desk rates (after-hours law-enforcement support versus general support) into a single rate on the recommendation of LCB auditors, and that labor cost increases ("labor went up approximately 15% across all of my rates") also raised infrastructure and security assessments. OCIO staff said the infrastructure and security rates are based on full-time-equivalent (FTE) counts and that changes followed a time-study and LCB audit recommendations to rebalance labor allocation.

Assemblymember Torres-Fassett asked about the purchasing assessment and was told by Marlowe that the governor's recommendation includes a temporary rate holiday driven by excess reserves in that account; Marlowe said a previously earmarked $1 million for a warehouse project contributed to the excess reserve. On questions about the Public Employees' Retirement System (PERS) contribution rate increases, Greenemeyer said PERS and actuarial staff were not present and that the committee would be provided additional information at members'request.

After discussion, Wayne Thorley and Sarah Kaufman of the Legislative Counsel Bureau requested committee authority for fiscal staff to make technical adjustments to statewide decision units that affect internal service rates. Senator Titus asked whether there was a dollar range for such adjustments; fiscal staff said technical adjustments are generally non-policy, operational changes and did not provide a fixed dollar threshold. The committee approved the request by voice vote; Vice Chair Daniele Dondero Loop moved the motion and Senator Titus seconded. The motion carried.

Members were also briefed on the upcoming budget work session and closing schedule. Thorley and Kaufman outlined that budget closings begin April 1 in full committee and April 2 in joint subcommittees, and that fiscal staff will compile committee closings into the six major funding bills, including the Appropriations Act, the K-12 funding bill and the PEBB bill.

The meeting concluded without public comment and was adjourned.