MIKE SULLIVAN GOVERNOR

STATE OF WYOMING OFFICE OF THE GOVERNOR

CHEYENNE 82002

December 30, 1988

TO: MEMBERS OF THE FIFTIETH WYOMING LEGISLATURE

I am pleased to submit this report of the Joint Legislative-Executive Government Efficiency Study Committee as required by Chapter 57, Wyoming Session Laws, 1988.

After several months of intense study by the Committee and valuable input from both executive and legislative branch representatives, as well as the business and general citizenry of the State, the Committee's findings and recommendations are outlined. As the law requires, this report is accompanied by legislation and constitutional amendments for your consideration which are necessary to implement these recommendations.

In my opinion, you have made a wise and prudent decision in funding this study as many of the recommendations it contains, if implemented, will provide a lasting benefit to the citizens of this State. The release of the GnMA and FHLMC securities, in itself, will make available some $50 million in resources, which was facilitated by the Committee's investigation and analysis. Other recommendations, though perhaps more controversial or difficult, should nonetheless be considered, discussed and assessed in terms of their long-term fiscal and administrative benefits.

I have expressed on previous occasions, my desire to make government more efficient and believe that many of the recommendations contained in this report will advance that cause. The reorganization plan outlined herein represents a gradual transition from the current structure which has served Wyoming since its statehood. Technological, sociological, economical and other changes which we have experienced lend argument to the fact that we must adjust and adapt in order to meet the challenges of today and the future.

I wish you success in your deliberations of this important issue.

Very truly yours,

~~ Mike Sullivan

COMMIITEE: Sen. John Perry Sen. Alvin Wiederspahn Rep. Craig Thomas Rep. Bill Rohrbach Robert Pettigrew, Jr.,

Chairman Paul Cleary Frank Galeotos Rodger McDaniel

401 W.19th • Sulte303 Cheyetme, Wyoming 82001 (307) 777.fiiJ70

:Joint Leg ii.fatiue - Executiue

c::Etate § oue 'tnment E({iciency

c::Etudlj Committee

December 20, 1988

Honorable Mike Sullivan Governor of Wyoming Capitol Building Cheyenne, WY 82002

Dear Governor Sullivan:

MIKE SULLIVAN Governor

.JOHN F. TURNER President of the Senate

PATRICK H. MEENAN Speaker of the House

It is with a deep sense of satisfaction that I submit this Report of the Joint Legislative-Executive Efficiency Study Committee.

The charge given this Committee was not a small one. This became quickly apparent as study and research brought into focus the magnitude of the project.

As Chairman, I cannot adequately express my admiration and appreciation for the personal dedication and tireless efforts so freely given by Committee members, state officials and employees, the University of Wyoming, and countless citizens of the State.

I would particularly like to express my appreciation to the Ferrari Group, Consultants to the Committee. Their professional abilities have been invaluable to this effort. Without the sense of devotion and total commitment to the people of Wyoming of Dave Ferrari, Ruth Sommers, and Jan Washburn, our task would have been a great deal more difficult, if not impossible.

Sincerely,

e~~grew,J. Chairman

A Study in State Government

Efficiency

Joint Legislative-Executive Efficiency Study Committee

Robert L. Pettigrew, Jr., Chairman Senator John Perry

Senator Alvin Wiederspahn Representative Craig Thomas Representative Bill Rohrbach

Paul Cleary Frank Galeotos

Rodger McDaniel

- iii -

ACKNOWLEDGMENTS

The Joint Legislative-Executive Committee is greatful for the efforts and con­tributions of those who provided input to this study.

The State Library was instrumental in providing research data and support to the Committee throughout the project. The staff responded quickly and profession­ally to requests for documents and information. Without such prompt courtesies, the Committee's work would have been exceedingly more difficult.

The Committee wishes to expressly thank Mr. Joe Meyer, Attorney General, for his personal attention to the details of portions of the study and for the unselfish dedication of many of his staff. Ms. Sylvia Hackl, Ms. Rowena Heckert, Ms. Vicci Colgan, Mr. Dennis Cook, Ms. Barbara Boyer, Mr. John Renneisen, Ms. Mary Guthrie, and Mr. Pete Mulvaney devoted many hours to researching statutes, annual reports and agency budget documents in an effort to define agency programs, serv­ices and responsibilities. Their conscientious review and analysis provided the Com­mittee with invaluable information which otherwise would have been extremely difficult to obtain.

The Committee would also like to thank the State's five elected officials for their time and attention to the study. Governor Sullivan's guidance and support of the project and considerable time given for briefings and discussions were especially meaningful. Secretary of State, Kathy Karpan, provided the Committee with unusual insight into the operations of the Board of Charities and Reform, the Department of Health and Social Services, and the operations of her office, as did State Auditor, Jack Sidi. Mr. Sidi's insight into the State's various auditing and budgeting efforts was also greatly appreciated. State treasurer, Stan Smith, and his staff were extremely helpful in providing information and advice on the State's investment program.

Mr. Rick Miller, Director of the Legislative Service Office, contributed numer­ous hours to the drafting of legislation for the Committee and provided a steady guiding hand in the early stages of the project. The Committee is especially appreciative for his input and counsel.

Many hours were spent by members of the Governor's staff in reviewing drafts, discussing issues, and providing expertise on various portions of the study. Ms. Nancy Freudenthal, Mr. Ernie Mecca, Dr. Pete Maxfield, and Mr. Leonard Bucsanyi were all extremely helpful.

The Committee would also like to thank all of the legislators and state govern­ment executive branch officials and employees who took the time to provide input and information. The task of assimilating much of this input data was accomplished by Phill Harris in the Budget Division of the Department of Administration and Fis­cal Control. Without their patience and assistance, the Committee could not have completed this project in a timely or meaningful manner.

- iv-

CONTENTS

CHAPTER

I INTRODUCTION AND OVERVIEW ........................... .. • State Government Efficiency Study ............................. . • Consolidation of Funds and Analysis of Pooled Interest .......... . • Investment Program and Cash Management Techniques .......... . • Reorganization of the State's Administrative Structure ............ . • In Summary ................................................. .

II FUND CONSOLIDATION AND POOLED INTEREST ............ . • The Impact of Earmarking ..................................... . • The General Fund ............................................ . • The Earmarked Revenue Fund ................................. .

Higher Education ............................................ . Elementary and Secondary Education ........................... . Professional Licensing Boards ................................. . Regulatory Boards and Commissions ........................... . Local Government ........................................... . Water Development Accounts ................................. . Employment Security Commission ............................. . Reserves Available for Appropriation ........................... . Other Earmarked Accounts .................................... .

• The Federal Fund ............................................ . • Trust and Agency Fund ....................................... .

Governor's Office ............................................ . State Auditor's Office ........................................ . State Treasurer's Office ....................................... . Department of Education ..................................... . Department of Administration and Fiscal Control ................ . Adjutant General ............................................ . Public Defender ............................................. . Department of Agriculture .................................... . Revenue and Taxation ........................................ . Archives, Museums and Historical Sites ......................... . Arts Council ................................................ . Environmental Quality ........................................ . Water Development Commission ............................... . Emergency Management ...................................... . Employment Security Commission ............................. . State Engineer ............................................... . Pari Mutuel Commission ...................................... . State Examiner .............................................. . Game and Fish Commission ................................... . Fire Prevention and Electrical Safety ........................... . Geological Survey ............................................ . Wyoming Insurance Department ............................... . Manpower Planning Administration ............................ . Labor and Statistics Department ............................... . Economic Development and Stabilization Board ................. . Oil and Gas Conservation Commission ......................... .

-v-

PAGE

1 4 5 6 7 9

11 12 16 17 18 19 21 22 24 24 26 26 28 31 31 32 33 34 35 36 37 38 38 39 40 40 40 41 41 41 41 41 41 41 42 42 42 42 42 42 44

CHAPTER PAGE

III

IV

Department of Public Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 State Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 University of Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Workers' Compensation and Wyoming Retirement System . . . . . . . . . 45 Health and Social Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Recreation Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 State Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

• Debt Service Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 • Intragovernmental Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 • Highway Fund................................................ 47 • Game and Fish Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 • University of Wyoming Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 • In Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

WYOMING'S INVESTMENTS AND CASH MANAGEMENT ..... . • Methodology ................................................ . • Financial Aspects ............................................ . • The Need for a Cash Management System ...................... . • Repurchase Agreements ....................................... . • Capital Preservation and Risk Tolerance ........................ . • Comparison to Other States ................................... . • Maximization and Calculation of Yields ........................ . • Investment Strategy .......................................... . • Wyoming Treasury Rate of Return ............................. . • Legislatively Mandated Investments ............................ . • Comparative Yields .......................................... . • Comparison of Long-Term Rates .............................. . • Deposits in Wyoming Banks ................................... . • Merrill Lynch's Analysis of the Portfolio ....................... . • GnMA's Held in Escrow ...................................... . • Professional Financial Management ............................ . • In Summary ................................................. . • Overall Recommendations ..................................... .

A FOUNDATION FOR RESTRUCTURING ...................... . • Why Reorganize? ............................................ . • Prevailing Typology of State Executive Branch Reorganization .... . • Key Activities ................................................ . • Wyoming Constitution ........................................ . • 49th Wyoming Legislature ..................................... . • Wyoming's Organizational Structure ............................ . • Appointment of Agency Directors .............................. . • The Principles of Organizational Structure ...................... .

The Scalar Principle .......................................... . The Principle of Unity of Command ........................... . The Principle of Span of Control .............................. . The Principle of Organizational Balance ........................ . The Principle of Organizational Simplicity ...................... . The Principle of Departmentation .............................. .

• Applying Organizational Principles to Reorganization in Wyoming ................................... .

-VI-

67 68 69 70 71 72 73 74 74 75 76 77 79 79 80 81 82 83 84

87 87 88 88 88 90 90 91 94 94 96 96 97 98 98

99

CHAPTER PAGE

v

VI

• Standards of Administrative Reorganization . . . . . . . . . . . . . . . . . . . . . . 99 • Current Structure- An Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 • Revised Structure Using Principles of Organization - An Example. . . 102 • In Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

SURVEY, QUESTIONNAIRE AND INTERVIEW RESPONSES .... . • Survey of Wyoming Businesses ................................ .

General Perception of State Government ........................ . Analysis of Negative Responses ................................ . Suggestions from Businesses ................................... . Economic Development ....................................... . Tax Issues ................................................... . Privatization ................................................. .

• Survey of Wyoming Citizenry ................................. . General Perception of State Government ........................ . Analysis of Negative Responses ................................ . Problems Facing Wyoming .................................... . Tax Issues/Government Services and Spending .................. . Economic Development ....................................... . Privatization ................ ~ ................................ .

• Survey of State Agency Managers/Supervisors ................... . Problem Identification/Suggestions ............................. . Personnel Issues ............................................. . Organizational Structure ...................................... . Planning .................................................... . Fees ........................................................ . Administrative Functions ...................................... .

• Interviews with Legislators .................................... . Boards, Commissions and Councils ............................ . Structure of the Executive Branch .............................. . Current System of Elected Officials ............................ . Responsibilities of Elected Officials ............................ . Appointment Authority ....................................... . Budget Process .............................................. . Personnel Issues ............................................. . Privatization ................................................. . Audit ............................................. ··········· Education ................................................... . Role of the Legislature ....................................... .

• In Summary ................................................. .

CONCEPTUAL REORGANIZATION STRUCTURE FOR WYOMING • Process of Reorganization ..................................... . • Suggested Statutory Language ................................. .

Purpose ..................................................... . Definitions .................................................. . Reorganization Concept ....................................... . Structure of the Executive Branch .............................. . Directors of Departments - Powers and Duties ................... . Appointment and Removal Power .............................. . Method of Reorganization .................................... .

Type One Transfer ......................................... .

-vii-

105 105 106 107 108 110 111 112 112 112 113 113 114 115 115 115 116 117 119 120 120 121 122 122 122 123 123 123 123 124 124 124 124 124 125

129 129 130 130 131 131 132 132 133 133 134

CHAPTER PAGE

VII

Type Two Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Type Three Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Rights and Obligations of Succeeding Department. . . . . . . . . . . . . . . . . 134 Federal Aid, Bond Obligations; Not Impaired . . . . . . . . . . . . . . . . . . . . 134 Amendment of Conflicting Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

• Overall Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Governor's Office.................................. . . . . . . . . . . . 135 Secretary of State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 State Auditor..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 State Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Superintendent of Public Instruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

• The Cabinet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Department of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Department of Commerce...................................... 141 Department of Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Department of Family Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Department of Administration.............................. . . . . 141 Department of Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Department of Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Department of Agriculture and Natural Resources . . . . . . . . . . . . . . . . 142 Department of Public Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

• Impact on Statewide Elected Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 • Impact on Boards, Commissions and Councils.................... 143 • Impact on the State's Personnel System...... . . . . . . . . . . . . . . . . . . . . 148

Creation of a Separate Classification and Compensation Plan for Exempt Positions . . . . . . . . . . . . . . . . . . . . . . . . 148 Reclassification of Existing Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Staff Development Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

• Impact on the State's Budgeting System . . . . . . . . . . . . . . . . . . . . . . . . . 151 • The Implementation Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

The State Government Reorganization Act of 1989.............. . . 152 Constitutional Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 Departments to be Implemented in 1989 . . . . . . . . . . . . . . . . . . . . . . . . . 153 Governor's Office/DAFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 State Auditor's Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Department of Revenue and Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Departments to be Implemented in 1990 and 1991....... . . . . . . . . . . 153

• In Summary.................................................. 153

THE DEPARTMENT OF EMPLOYMENT ....................... . • Employment Security Commission ............................. . • Department of Labor and Statistics ............................ .

Wyoming Fair Employment Commission ........................ . Wyoming Commission for Women ............................. .

• Job Training Administration .................................. . • Division of Workers' Compensation ............................ . • Occupational Safety and Health Department .................... . • Division of Vocational Rehabilitation ........................... .

General Rehabilitation ........................................ . Independent Living ........................................... . Business Enterprises .......................................... . In-Service Training ........................................... .

- Vlll -

157 157 159 159 159 159 161 163 163 166 166 166 166

CHAPTER PAGE

VIII

IX

X

Living Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Social Security Disability Determination Services . . . . . . . . . . . . . . . . . . 168 Governor's Committee on Employment for the Handicapped....... 168 Supported Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

• Department of Education Visually Handicapped Services . . . . . . . . . . 168 • State Inspector of Mines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 • The Need for Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

Labor Law Compliance........................................ 168 Payments to Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Job Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Labor Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

• The Hearings and Appeals Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 • Boards, Commissions and Councils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 • The Department's Proposed Organizational Structure . . . . . . . . . . . . . . 17 6 • In Summary.................................................. 176

THE DEPARTMENT OF AUDIT ............................... . • Federal/State Requirements ................................... . • Current Audit Efforts ........................................ . • The Need for a Concentrated Audit ........................... . • The Need for Independence ................................... . • Proposed Examiner General's Office ........................... . • Identifiable Efficiencies ....................................... . • Workers' Compensation and Employment Security Commission ... . • Mineral Audits .............................................. . • Quantifying Efficiencies ....................................... . • Severance and Ad Valorem Statutes and Policies ................. . • Structure of the Examiner General's Office ...................... .

Financial and Consumer Credit Institutions Division ............. . Minerals Division ............................................ . Governmental Accountability and Compliance Division ........... . Excise Tax Division .......................................... .

• Performance Auditing ........................................ . • In Summary ................................................. .

THE DEPARTMENT OF COMMERCE ......................... . • Division of Promotion and Research ........................... . • Division of Business and Community Development ............... . • Division of Financial Support ................................. . • Division of Professional Licensing ............................. . • Division of Recreational and Cultural Resources ................. . • Other Moves Suggested ...................... : ................ . • The Department's Proposed Organizational Structure ............. . • In Summary ................................................. .

STUDY SUMMARY ........................................... . • Short-Term Revenue Shifts .................................... . • Long-Term Impact ........................................... . • Management Issues ........................................... .

-IX-

177 177 177 178 179 180 181 182 183 185 185 186 187 187 188 188 190 190

193 195 197 199 203 205 208 208 208

211 211 212 213

TABLE

1-1 11-1 11-2 11-3

11-4 11-5 11-6 11-7

11-8 11-9 11-10 11-11 11-12 11-13 11-14 11-15 11-16 11-17 11-18

11-19 11-20 11-21 11-22 11-23

11-24 11-25 11-26 11-27

11-28 11-29

11-30 11-31 11-32 11-33

11-34 111-1

111-2 111-3 111-4

TABLES

Cash and Investment Balances, Selected Reserve Accounts .......... . Wyoming Fund Structure ....................................... . Programs Typically Earmarked .................................. . History of Cash and Investment Balances, Earmarked Revenue Fund, End of Fiscal Year ............................... . Groupings of Earmarked Fund Accounts ......................... . Higher Education Earmarked Fund Accounts ...................... . Elementary and Secondary Education, Earmarked Fund Accounts ... . Estimated Revenues, Expenditures and Cash Balances, Capital Construction Account ................................... . Appropriations to the School Foundation Program ................. . Professional Licensing .......................................... . Regulatory Boards and Commissions ............................. . Local Government Earmarked Accounts .......................... . Fiscal Profile, Water Development Account #1 .................... . Fiscal Profile, Water Development Account #2 .................... . Appropriations from Budget Reserve Account ..................... . Appropriations from Legislative Royalty Impact Assistance Account .. Fiscal Profile, Legislative Royalty Account ........................ . Other Earmarked Accounts ...................................... . History,of Cash and Investment Balances, Trust and Agency Fund, End of Fiscal Year. ...................... . Trust and Agency Accounts, Governor's Office .................... . Trust and Agency Accounts, State Auditor's Office ................ . Trust and Agency Accounts, State Treasurer's Office ............... . Trust and Agency Accounts, Department of Education ............. . Trust and Agency Accounts, Department of Administration and Fiscal Control ............................... . Trust and Agency Accounts, Department of Agriculture ............ . Trust and Agency Accounts, Department of Revenue and Taxation .. . Trust and Agency Accounts, Department of Environmental Quality .. . Trust and Agency Accounts, Economic Development and Stabilization Board ......................................... . Trust and Agency Accounts, Department of Public Lands .......... . Trust and Agency Accounts, Department of Health and Social Services ...................................... . Intragovernmental Fund ........................................ . Highway Fund ................................................. . Game and Fish Commission ..................................... . Summary of Recommendations, Enhancement to General Fund, Pooled Interest and Fund Consolidation .................... . Pooled Interest Distribution ..................................... . Major Increases in State Government Expenditure, Fiscal Year 1983 Through Fiscal Year 1987 ........................ . Certificates of Deposit, Varying Maturities ........................ . Processing and Depositing of Tax Receipts ........................ . Percentages of the Entire Wyoming Portfolio Invested in Repurchase Agreements .............................. .

-X-

PAGE

2 11 14

17 18 18 19

20 20 22 23 24 25 26 27 27 28 29

32 32 33 35 36

37 38 39 40

43 43

45 46 47 48

51 54

67 69 70

71

TABLE

III-5 III-6

III-7 III-8 III-9 III-10

III-11 III-12

IV-1 IV-2

IV-3 IV-4

IV-5 V-1 V-2 V-3 V-4 V-5 V-6 V-7 V-8

V-9 V-10 V-11

V-12 V-13 V-14 V-15 V-16 V-17 V-18 V-19 VI-1 VI-2

VI-3

VI-4 VII-1 VII-2 VII-3

VII-4 VII-5

Investment Instruments Authorized by Wyoming Statute ............ . Legislatively Mandated Investments, Balance of Permanent Funds Available June 30, 1987 ........................ . Overall Rate of Return Without Selected Loan Programs ........... . Yields and Investment Practices for Responding States ............. . Yield to Maturity on Long-Term Portfolios for Fiscal Year 1988 .... . Comparison of Wyoming Institution Deposits and FnMA Discount Notes ...................................... . Fiscal Year 1988 Rates of Return for the Wyoming Portfolio ........ . Financial Data Relative to the Purchase of GnMA and FHLMC Pools ................................... . Governor Appointment of Agency Directors ....................... . Governor Appoints Board, Commission or Council, Which Appoints Agency, Division or Program Manager ................... . Governor Appoints Boards ...................................... . Boards, Commissions and Councils with Hiring Authority Below the Level of Agency Director ..................... . Appointments Made by the Five Statewide Elected Officials ......... . Percentage of Respondents by Standard Industrial Classification ..... . Percentage of Respondents by Amount of Annual Sales ............ . Response to Business Survey, General Perceptions ................. . Agencies Identified as Overstaffed or Overfunded .................. . Agencies Identified as Understaffed or Underfunded ............... . Increase or Decrease in Government Expenditure Areas ............. . Forms Identified as Too Complex ..................... , .......... . Industrial Sectors Which Should Receive State Economic Development Support ................................. . Preferred Allocator of Economic Development Monies ............. . Practices Used by Businesses to Avoid Paying Taxes ............... . Most Effective Method of Eliminating Non-Compliance with Tax Laws ................................................. . Government Services Which Could be Privatized ................... . Response to Citizen Survey, General Perceptions ................... . Most Important Problems Wyoming Faces ........................ . Potential Government Action to Solve Problems ................... . Increase or Decrease in Government Expenditure Areas ............. . Businesses Which Should Receive Economic Development Support ... . Services Which Could be Privatized .............................. . Services for Which Fees Could be Charged or Increased ............ . Selection of Chief State School Officers .......................... . Gubernatorial Appointments to Boards, Commissions, Councils and Committees ....................................... . Boards, Commissions, Councils and Committees Not Requiring Gubernatorial Appointment ............................ . State Government Levels Held by Political Appointees ............. . Agency Staffing, Administrative/Statistical/Business Services ........ . Agency Staffing, Other ......................................... . States With a Single Agency for Workers' Compensation and Unemployment Insurance ................................... . Field Offices .................................................. . Annual Costs Associated With Payroll Reporting, ESC and Workers' Compensation ................................ .

-xi-

PAGE

73

76 77 78 79

80 80

82 91

92 92

93 93

105 105 106 106 107 107 108

110 111 111

112 112 113 114 114 115 115 115 121 139

143

147 149 170 170

170 171

172

TABLE

VII-6 VII-7 VII-8

VIII-1 VIII-2 IX-1

IX-2 IX-3 IX-4 X-1 X-2

Hearings and Appeals Process ................................... . Proposed Labor Standards, Hearings and Appeals Process .......... . Current Boards, Commissions, Councils of the Proposed Department of Employment ............................ . Statistics Pertinent to Current Audit Effort ....................... . Clarity of Wyoming Department of Revenue Statutes ............... . Current Boards, Commissions, Councils of the Proposed Department of Commerce .............................. . Economic Development Programs ................................ . Agencies/Boards to be Moved to the Department of Commerce ..... . Staffing Levels, Site Administration .............................. . Distribution of GnMA Funds .................................... . Summary of Recommendations .................................. .

- xii -

PAGE

172 173

174 181 186

194 200 204 206 211 212

FIGURE

I-1 I-2 III-1

IV-1 IV-2 IV-3 IV-4 VI-1 VI-2 VI-3 VI-4 VI-5 VII-1 VII-2 VII-3 VII-4 VII-5 VII-6 VII-7 VIII-1 IX-1

FIGURES

General Fund Revenues ......................................... . Declining Reserve Balances ...................................... . 18-Month Historical Trend, Treasury Bond Index and Federal Fund Rates ......................................... . Chain of Command, Industrial Organization ...................... . Chain of Command, Executive Branch Organization ............... . Current Structure of the Board of Charities and Reform ............ . Structure Based on Principles of Organization ..................... . Governor's Office .............................................. . Secretary of State .............................................. . State Auditor .................................................. . State Treasurer ................................................ . Proposed Organization for the State of Wyoming .................. . Employment Security Commission, Organization ................... . Department of Labor and Statistics, Organization .................. . Job Training Administration, Organization ........................ . Workers' Compensation Division, Organization .................... . Occupational Safety and Health, Organization ..................... . Vocational Rehabilitation Division, Organization ................... . Department of Employment, Conceptual Structure ................. . Department of Audit, Conceptual Structure ....................... . Department of Commerce, Conceptual Structure ................... .

- xiii -

PAGE

1 2

72 95 95

100 101 135 136 137 138 140 158 160 162 164 165 167 175 189 207

CHAPTER D

INTRODUCTION AND OVERVIEW "The hardest crossword puzzle to solve is the one in which we have penciled in a wrong word and are too stubborn or fixated to erase it; in much the same way, it is often easier to solve a problem when you are merely ignorant than when you are wrong."

There is a crisis in Wyoming! The crisis is real; it is serious; and, it is inevitable. It is inevitable, unless Wyoming policymakers have the courage, foresight and wisdom to make sweeping changes in the way they do business.

The State cannot cope with the revenue declines it will be facing in the next few years, given the current level of expenditures, the cur­rent administrative and fund structure, and the traditional methods of allocating resources. The State faces declining revenues with General Fund

Sidney J. Harris

income in each of the next three years project­ed to be less than it was 10 years ago. In Fiscal Year 1982, total General Fund revenue was $362.7 million; it is estimated at only $306.4 mil­lion in Fiscal Year 1989; $307.5 million in Fis­cal Year 1990; and $320.6 million in Fiscal Year 1991. These projections are partially based on projected oil prices of $13.00 per barrel in Fis­cal Year 1989 and $15.00 in each year thereafter. Unless a dramatic change occurs in OPEC, revenues may not reach these levels.

FIGURE 1-1

GENERAL FUND REVENUES STATE OF WYOMING

400~-----------------------------------------.

!

M I

380 ········· ................ .

~ 360-tt±:I:IJ:ltt:l:tl· I 0 N s 1340

3 2 0 -!t±t:lltl±J±tl·

I i

················································ ·····J

300~~~~~~~~'""'-~-"'---i~~~~'---T'·~~=--r="'~ I I I

82 83 84 85 86 87 88 89 90 91 92 FISCAL YEARS

FY 1982-88 = ACI'UAL REVENUE FY 1989-92 = PROJECTED REVENUE

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The funding picture is of great concern when one looks at the use of reserves and assesses the extent to which these reserves have been drawn down in the past few years. At the end of Fiscal Year 1987, the State had a total of over $596 mil­lion in the General Fund and seven of the larg­est "reserve" accounts in the Earmarked Fund.

By the end of Fiscal Year 1988, they had been spent down to $500.9 million. And, according to the Legislative Service Office, by the end of Fiscal Year 1990, they will contain a total balance of roughly $109.9 million. These are shown in Table I -1.

TABLE 1-1

CASH AND INVESTMENT BALANCES SELECTED RESERVE ACCOUNTS

Actual Actual Fund or Account Name June 30, 1987 June 30, 1988

General Fund $ 46,175,293 $ 72,235,629 Budget Reserve Account 137,019,011 55,301,875 Legislative Royalty Account 25,706,222 30,492,598 School Foundation Program Acct. 13,955,382 38,048,271 School Capital Constn. Accts. 70,691,382 41,012,674 Water Development-Account I 216,001 ,343 * 185,092,689 * Water Development-Account II 26,498,276* 27, 136,087* Coal Impact Tax Account 60,142,196 51,569,508

TOTAL $596,189,1 05 $500,889,331

Projected by LS01

June 30, 1990

$ (30,200,231) 48,823,882

3,446,414 (40,523,331) 23,724,651 77,171,241 25,966,632

1 ,452,115

$109,861 ,373

* According to the Water Development Commission, all but approximately $43 million of these balances was obligated at year-end.

Thus, the State spent $95.3 million of these reserves, or roughly 16 percent, during Fiscal Year 1988. It has been estimated by the Legis­lative Service Office2 that these reserves will be reduced to $42.2 million by the end of Fiscal

Year 1992, based on recent expenditure patterns, projected revenue expectations, and utilization of available resources where possible. This is depicted in Figure 1-2. It appears, from this data, that during Fiscal Year 1988, through Fiscal Year

FIGURE 1-2

DECLINING RESERVE BALANCES STATE OF WYOMING

600·-~~---------l

r 4oo L L I 0 N s

88

' ' '''''"""''-.:"

'

89 90 FISCAL YEARS

91

FY 1987-88 = AcruAL FY 1990-92 = PROIECTED

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1992, the State will spend an average of approx­imately $110.8 million per year from its reserves in order to maintain existing government serv­ices. Clearly, if these projections are accurate, beginning in Fiscal Year 1993 (in just four short years), the State will be in trouble.

As revenues and reserves decline, the State still faces a demand for services that is constant, if not increasing. These services, especially health and education, will not get less expensive as Wyoming continues to be competitive with her sister states. Yet, Wyoming may face a future of declining revenues and continuing needs with a fiscal and bureaucratic structure that is incapa­ble of responding. The current administrative structure is not designed to assure the State is getting the most it can out of every dollar ex­pended for government services. With inade­quate revenues, the State can no longer afford to ignore the duplications which are occurring within various departments and within several programs administered by different agencies. The State cannot afford to continue to deliver uncoordinated programs with gaps in services rendered by multiple state agencies. Frankly, the State can no longer attempt to fill the gaps and voids which exist between programs and agen­cies by just funneling additional money to them.

Prosperity during the late 1970's and early 1980's enabled the State to expand programs and address the problems of population growth by increasing the number of government agencies, offices, employees and services. Interestingly, ex­cluding the University and community colleges, the number of state employees increased by 27.4 percent between 1977 and 1987 (from 5,225 3 to 6,6564

); but total appropriations from all funds, excluding the School Foundation Program, in­creased by 216 percent (from $470.2 million in the 1975-1977 biennium, 5 to $1,483.8 million in the 1987-1988 biennium6

). Eight newagen­cies were created during this period and they hired 80 additional persons: Industrial Siting; Public Defenders; Real Estate Commission; Women's Center; Cosmetology Board; Radio­logic Technologists; Counselors Licensing Board; and the Wyoming Water Development Commission. The State's institutions hired an additional376 persons; Health and Social Serv­ices, 117; Revenue and Taxation, 102; and High­way, 454. Programs enacted in the midst of financial prosperity did not need to be particu­larly efficient, manageable or effective in their operation because there was always more rev-

enue which could be directed to a problem or a public need. Special funds were created to ac­cumulate reserves to be used for special needs and purposes. Special programs were started to deal with impact and to address the lack of ade­quate facilities, especially at the local level. If the first try at solving a problem wasn't success­ful, more resources were made available to solve it. Most programs weren't necessarily bad, but many were duplicative or not well designed. In any event, the state government structure grew around these programs, and less concern for ef­ficiency was apparent while the "boom" was on.

Wyoming is in a crisis because state govern­ment has failed to prepare itself for change. Dur­ing this expansion of government services, programs and employees, an already cumber­some and unwieldy state government structure became even more complex and disjointed. Gov­ernors are responsible for managing state gov­ernment, but cannot effectively manage it because it is unmanageable in its present form. The structure of Wyoming government, as it ex­ists today, represents a "mish-mash" of agen­cies, departments, boards, commissions, insti­tutions, divisions, programs, offices and activi­ties that are difficult to coordinate and control by the State's Chief Executive. This lack of coor­dination and control translates into unnecessary spending, duplication of effort, ineffective pro­gram delivery, lack of continuum of services, and an absence of accountability.

Unlike earlier years, reserves will not continue to pile up in the State Treasury unless massive steps are taken to streamline government oper­ations. Both executive and legislative officials en­gineered cost containment measures during the past couple of years which were designed to check the growth in state spending. These meas­ures have, to some degree, been effective. How­ever, current demands on the State Treasury greatly exceed current revenues and the most ef­fective way of meeting these demands is to not only utilize portions of existing reserves, but also to streamline the government's fund, account, income and administrative structures to enable more efficient and effective delivery of services at less expense. This does not mean that the State needs to abolish programs, fire employees, freeze salaries, curtail all construction, or reduce benefit payments. It merely means that the State needs to rethink and reshape all of its manage­ment functions and administrative activities in such a way that top government officials will be

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in a position to effectively manage the State's resources. A reduction in expenditures, "cut­backs," "down-sizing," and other cost contain­ment benefits should be a natural outcome, as well as enhanced tax collections and investment earnings.

Though revenues are declining, the State still has substantial resources at its disposal, and the 1988 Legislature again used a portion of its reserves to keep state government afloat. It ap­pears that as long as the State's reserves are avail­able to supplement General Fund needs, Wyo­ming's policymakers have a tendency to continue to allocate these reserves in reaction to demands. Such practices, however, will be shortlived, for it also appears that the reserves which can be uti­lized without structural changes will soon be gone. And when reserves are gone, changes will be forced on the State whether it has planned for them or not.

Little has been done to respond to this crisis. The State has an administrative structure very similar to what was in place in its early state­hood in 1890. The structure is more cumbersome today because of the addition of boards, com­missions, agencies, offices, functions and pro­grams which have been created over the past 100 years. But the basic structure is the same. There are still five state elected officials, each with their area of limited responsibility and in concert, their joint responsibilities for the State's charitable and penal institutions. They also still serve on the State's Liquor Commission, State Land Board, Farm Loan Board, and others. And, serving in these various capacities, they still ef­fectively eliminate the Governor's ability to ef­ficiently manage any of these functions.

It was noted in the Joint Legislative-Executive Revenue and Expenditure Study' that there are some 108 boards, commissions, agencies, depart­ments, institutions, districts and other separate entities in state government. Seventy-nine of these are in the Executive Branch, and each of these is either directly or indirectly the respon­sibility of the Governor. This structure can be described as a sprawling government, running along a horizontal plane. It can be depicted as 79 individual boxes, each representing a board, commission or agency, and each with a direct or indirect line connected to the Governor. The Governor is responsible for the hiring and fir­ing of some agency or department directors, the appointment of board/commission members, and is responsible to see that the entities are

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performing as intended in the most efficient and economical manner; but strong and indisputa­ble statutory and constitutional authority to han­dle the State's affairs is not present. Some boards, commissions and councils function without a clear definition of their role or their responsibilities; many members do not under­stand the potential for the State's or their own personal liability due to conflicts of interest. They sometimes do not act in accordance with the Governor's prerogatives and, on occasion, actually undermine direction from the Executive Branch. No Governor, no matter how capable, can contend with such a dysfunctional adminis­trative structure. Peter Drucker, 8 himself, would be hard pressed to describe how such a cumber­some, disjointed entity could be made to func­tion efficiently.

It is because of this tremendously complex or­ganization and the confusion surrounding its funding, with earmarking of funds and special accounts, that the 1988 Budget Session of the Wyoming Legislature authorized a study of state government efficiency.

STATE GOVERNMENT EFFICIENCY STUDY

Enrolled Act No. 52, Senate, Forty-Ninth Leg­islature of the State of Wyoming, 1988 Budget Session, was signed into law on March 14, 1988 by Governor Mike Sullivan. The Act is common­ly referred to as the State Government Efficiency Study and the study's objective, scope and ex­pected contents are generally defined in Section (1), paragraph (a): 9

"On or before January 1, 1989, a report shall be made to the legislature by the gover­nor on the efficiency in state government and shall recommend abandonment, modification or combination of any agen­cies, departments, boards, commissions or other entities of the executive branch of state government or the creation of new departments and the termination or trans­fer into the general fund of all special ac­counts, as may be required for the most economical and efficient operation of state government. Drafts of any constitutional re­visions and proposed legislation necessary to implement recommendations shall be in­cluded with the report as well as a complete accounting of funds expended for purposes of this section."

The Act created an eight-member Joint Leg­islative-Executive Committee to oversee the study. The President of the Senate appointed two members of the Senate to the Committee, Senators Alvin Wiederspahn and John Perry, while the Speaker of the House appointed Representatives Craig Thomas and Bill Rohr­bach. Governor Mike Sullivan appointed Paul Cleary, Deputy State Land Commissioner, and Frank Galeotos, Manpower Planning Adminis­trator, from the Executive Branch of state government. The Governor also appointed Rodger McDaniel and Robert Pettigrew, two citizens from the private sector, to contribute to the eight-member Committee. The Governor selected Mr. Pettigrew to serve as the Commit­tee's Chairman.

An appropriation of $200,000 was con­tained in the Act to fund the study and the Cheyenne consulting group of Ferrari, Sommers & Washburn was contracted to conduct the study.

The legislation clearly called for recommen­dations to reorganize the administrative struc­ture of state government when it addressed such topics as " ... modification or combination of any agencies, departments ... " It further re­quired recommendations for the consolidation of funds and/ or accounts in the State Treasu­ry, with language such as '' ... termination or transfer into the General Fund of all special ac­counts, as may be required for the most econom­ical and efficient operation of state govern­ment.'' From these provisions, the focus of the required study was reasonably clear. However, in addition to these requirements, Governor Sul­livan also requested that the study encompass a thorough investigation of the State's invest­ment program. The Governor correctly observed that a study of "efficiency in state govern­ment" would be incomplete without such an analysis.

On June 13, 1988, the Joint Legislative­Executive Efficiency Study Committee conduct­ed its first meeting and the direction of the study was charted. It was decided the study would con­centrate on three major topics: a study of the consolidation of funds and pooled interest; an analysis of the investment program and cash management techniques; and a study of the re­organization of the administrative structure of state government.

CONSOLIDATION OF FUNDS AND ANALYSIS OF POOLED INTEREST

In 1973, the Wyoming Funds Consolidation Act was enacted and the Legislature's policy with regards to funds coming into the State Treasury was specified: 10

"It is the policy of the Legislature that all general government programs, activities, and functions shall be subject to its review regardless of the sources of revenue ... ex­cept as otherwise provided."

Of course, one of the problems with having such a clear statement of legislative intent is that it is obvious when such policy is partially ig­nored. Clearly, if the Legislature intends to review all general governmental programs, ac­tivities and functions, regardless of funding source, then it ought to do so. If the Legisla­ture has no intention of reviewing all general governmental programs, activities and functions, as has apparently been its desire for at least the last dozen years, then this language ought to be repealed or amended, for the Legislature has reviewed only a fraction of general government in recent sessions.

The consolidation of funds efforts of the Legislature in 1973 and 1974 resulted in the es­tablishment of 13 funds in the State Treasury. For accounting purposes, the State Auditor created a 14th fund in 1986 to accommodate the accounting of Retirement System Accounts. Within these 14 funds, however, are nearly 750 accounts. And, nearly 500 of these are outside of the General Fund and thus are, for the most part, not subjected to legislative nor gubernatori­al scrutiny through the State's budget process. The number of accounts escaping detailed anal­ysis is probably not so important, as these are merely accounting entities necessary for some logical grouping and reporting of data. What is important is the amount of taxpayer funds con­tained in these 500 accounts. During Fiscal Year 1987, these 500 accounts received over $1 bil­lion of the State's $1.4 billion in revenue ( exclu­sive of fiduciary-type funds), or roughly 71.1 percent of the total. Conversely, only 28.9 per­cent of the State's revenue was deposited to the General Fund and thus subjected to the budget process and made available for the support of general government operations. In other words, over $1 billion, or 71.1 percent of the State's resources were earmarked or allocated for other

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than general governmental operations. The cri­sis referred to earlier, then, may not be that of inadequate resources for state government, but rather of inadequate or inappropriate allocation of these resources. Chapter II attempts to exam­ine this issue and present recommendations for consideration.

Chapter II also discusses and considers alter­natives for the allocation of pooled interest. Dur­ing the past three years, pooled interest in the State Treasury has been $152.3 million in Fis­cal Year 1986, $132.3 million in Fiscal Year 1987, and $101.8 million last year. In all of these years, most of this interest was used for other than General Fund purposes. Including the pooled in­terest transferred from the Permanent Wyoming Mineral Trust Fund, the General Fund in fact received only $60.2 million in Fiscal Year 1986, $47.6 million in Fiscal Year 1987, and $29.3 mil­lion last year.

The Legislature's practice of diverting pooled interest to special projects or special interests is perhaps reflected in the total amount received by the Earmarked Fund, which has been the sec­ond largest receiver of this source. Last year, $32.5 million, or 31.9 percent of the total, was deposited here. In Fiscal Year 1987, it was $36.9 million, or 27.9 percent of the total, and in Fis­cal Year 1986, it was $34.1 million, or 22.4 per­cent of the total.

One of the problems associated with pooled interest is that often the deposition of this in­come is made in the absence of statutory guidance. Distributions are made to accounts wi­thin the State's funds on the basis of their aver­age daily cash balances. Although this basis may be deemed appropriate, the method by which the accounts are selected to receive interest is ques­tionable. Out of the total of nearly 500 accounts outside of the General Fund, only 209 have been credited with pooled interest; nearly 300 accounts received none. Most statutes are silent with regard to which accounts should or should not receive interest earnings. In these situations, the decision must be made administratively, and is. The decision is made on the basis of discussions between the State Treasurer's and the State Auditor's Offices. Although the decisions, over the years appear sensible and reasonable, it can be argued that many of them were made at the expense of the General Fund and they ought to be reviewed and perhaps challenged. Such is done in Chapter II, and recommendations for a redistribution of many interest earnings allo-

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cations are accompanied by suggested enabling legislation.

INVESTMENT PROGRAM AND CASH MANAGEMENT TECHNIQUES

Governor Sullivan requested this topic be in­corporated in the State Government Efficiency Study in an effort to find ways to increase the State's current yield on investments. The invest­ment program is an integral part of the State's total revenue picture, generating from 12.6 per­cent to 12.9 percent of the State's total revenue (projected at $162.2 million to $171.9 million each year over the next three years, based on cur­rent yields). As the State's total budget resources continue to decline, investment income takes on an increasingly important role as one way to help endure the State's economic problems.

The State Treasurer, in 1988, reported an aver­age yield on the State's investments of 7.37 per­cent. 11 This yield pertains to the State Treasury's entire portfolio, both short and long-term. In the recent financial markets, longer-term port­folios tended to yield higher returns than short­term portfolios. Therefore, it is entirely possi­ble that the State Treasury's yield on short-term (only) investments is significantly less than the 7.37 percent reported as the overall portfolio yield. The following yields from other states are included for informational purposes only and a more detailed comparison is included in Chap­ter III. The Treasurer's rate, although debata­ble, can be compared to the short-term working capital yield obtained by several other states: North Carolina, 9.137 percent; West Virginia, 7.86 percent; Texas, 7.40 percent; Alaska, 8.06 percent; and Oklahoma, 6.46 percent. Arguably, there are many factors to be considered when comparing one state's performance with the per­formance of another. Examples include: the por­tion of a state's portfolio which is dedicated to low interest, subsidy-type, loan programs; the mix of short-term versus long-term investments; the statutory level and degree of risk as it varies among the states; and the portfolio investment mix itself, i.e., portion of U.S. Treasury Notes, deposits in state banks, U.S. government backed mortgages, notes, bonds and debentures, day­to-day and term repurchase agreements.

In order to examine possible methods of in­creasing the State's investment yield, profession­al institutional investment experts were asked to study the State's investment portfolio, with the

objectives of: recommending alternative invest­ment decisions; assessing the true rate of return (yield); and ascertaining the market value of the State's total portfolio. Such analysis excludes the State's legislatively mandated programs, concen­trating only on the State's "discretionary" investment decisions. The outcome of this sec­tion of the study (Chapter III) is a formula for increasing the State's total yield by from one to three percent, which will generate anywhere from $20 to $57 million annually in additional rev­enue. Legislation necessary to enable desired changes in the State's investment program is sug­gested.

In conjunction with the analysis of the State's investment program, Chapter III of the study also discusses the State's cash management sys­tem, and touches on specific techniques, i.e., electronic fund transfers, lock box systems, and revenue and expenditure daily forecasting models. The objectives of this phase of the study are to point out not only procedures to get revenues into the State earlier, but also recog­nizes the need to more precisely forecast daily cash flow, so the State can shift more of its resources into the best performing investments, thus enhancing yields.

REORGANIZATION OF THE STATE'S ADMINISTRATIVE STRUCTURE

Like most states, Wyoming's organizational structure has basically been dictated by its econ­omy. State government grew during the prosper­ous first two decades of the 1900's, and the State assumed the responsibility for services tradition­ally administered by local governments or pri­vate enterprise. 12 Post-war depression and reduced tax revenues resultant from decreased property valuations demanded a down-sizing in government in 1923 and 1925. During the late 1920's and 1930's, the expansion of federal government programs actually increased the number of state agencies as Wyoming responded to national policies formulated in response to the Great Depression. In 1933, the State, for the first time, systematically studied comprehensive reor­ganization and hired consultants to analyze the State's organization and revenue potential. The report, written by Griffenhagen & Associates, was ignored by lawmakers. Its suggestions were drastic and upsetting. 13 Some consolidation did take place independent of the formal study. Sub­stantial salary cuts were enacted and admin-

istrative expenses were reduced by 30 percent from 1933 to 1939. 14

The push for government reorganization receded after 1939 as economic prosperity returned. During the next 30 years, the State's structure was largely modified in response to fed­eral programs. The Great Society legislation of the 1960's had significant ramifications on states. New federal legislation, coupled with the State's economic and population growth, emphasized the need for the State to control its own des­tiny. 15 Better state government was the key to better home rule.

The most significant recent changes in state government organization occurred under the Hathaway administration, which began in 1967. A Commission on Government Reorganization and Constitutional Revision was created and within one year made sweeping recommenda­tions to streamline state government opera­tions.16 The basic findings were that the State had responded to additional federal programs by merely adding new departments, agencies and boards on a horizontal basis. These new units had been left without clear lines of authority or responsibility. 17

The 40th Legislative Session created the State Planning Coordinator, the Department of Eco­nomic Planning and Development, and the Department of Health and Social Services. The executive powers of the Governor were broad­ened and the Executive-Legislative Commission on Reorganization of State Government was established on a continuing basis. 18 In 1971, the Legislature ratified all four proposals the Com­mission submitted and created the Department of Administration and Fiscal Control, the Legis­lative Service Office, a lay Board of Parole, and a legislative budget session.

In 1973, the Department of Fire Prevention and Electrical Safety was created to encompass two previously independent agencies. The Envir­onmental Quality Act was passed and consoli­dated six separate entities. The state police force was replaced with a special investigative unit, and the Funds Consolidation Act was passed. 19

In 1977, a proposed constitutional amendment to limit the number of state agencies, offices and boards to 20 failed to pass the Legislature. 20 The creation of the Department of Highways and Public Transportation was recommended to con­solidate management of highways, air, rail, pipe­lines and public transportation, but a bill was not drafted. 21

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Little restructural organization has taken place since the Hathaway administration. The Com­mission on Reorganization of State Government died quietly and was formally abolished in stat­ute in 1982. Despite the significant steps taken in the early 1970's to consolidate the State's operations, some of the efforts were piece-meal, subject to political compromise, and rendered somewhat inconsequential. Many agency struc­tures are still weak in that lines of authority are muddled through board appointments of direc­tors, or through gubernatorial appointment of administrators under department heads. The major power pockets in state government have not been touched by reorganization, and many boards and commissions still operate with little accountability.

The Executive Branch of government is made up of 79 agencies. There are more than 100 boards, commissions and councils, with over 700 appointees involved in running the State's busi­ness. The dominance of boards and commissions is reflected in the fact that 52 of the 79 state agen­cies are run either by boards, commissions or councils, or the appointees of these bodies. The Governor, though he is held responsible by the State's citizenry, has little authority or control over most state activities, inasmuch as he sin­gularly appoints and supervises only 19 direc­tors of the operating agencies of state govern­ment. All other appointments require the approval of another authority, or are actually appointed by another authority.

The Revenue and Expenditure Study describes the confusion associated with the role and im­pact of so many different boards and commis­sions:22

''The state currently operates under a sys­tem which has agencies with no boards or commissions, agencies with one or more boards or commissions, boards and com­missions with no agencies, and boards and commissions which act as agencies. Agen­cies are titled departments, divisions, offices, councils, commissions, and authori­ties; agency heads are called commissioners, directors, superintendents, coordinators, and executive directors."

The proliferation of boards and commissions in state government reflects Wyoming's philos­ophy of citizen input into the operations of its government. The expansion over the years in the membership and makeup of these boards, un-

fortunately, has mitigated their effectiveness and the cohesiveness of state government has been all but eliminated. The authority and power of the Governor has gradually deteriorated with this proliferation and has reached a point where, today, the Chief Executive has little capacity to manage this sprawling bureaucracy.

Most states over the past 30 years have experienced similar problems but have responded by undergoing a certain degree of reorganiza­tion. The basic premise of these efforts has been primarily to: concentrate more power in the Governor's office; consolidate similar functions along departmental lines; eliminate the admin­strative responsiblities of boards and commis­sions to reflect more of an advisory role; coor­dinate administrative services of all state entities; strengthen the Governor's control over budget­ing and accounting; and provide the Legislature with more effective reporting and audit controls.

The Governor's span of control, with some 79 different executive agencies, is clearly in con­flict with accepted management principles. According to one of the nation's leading authori­ties on management, Peter F. Drucker, the span of control: 23

" ... is rarely cited properly. It is not how many people report to a manager that mat­ters. It is how many people who have to work with each other report to a manager. What counts are the number of relation­ships rather than the number of men (or women)."

Drucker went on to say that: 24

''The president of a company who has reporting to him a number of senior execu­tives, each concerned with a major function, should indeed keep the number of direct subordinates to a fairly low number -between eight and twelve is probably the limit. For these men (and women) ... have to work with each other and with the com­pany's president. If they do not work together, they do not work at all."

These observations from Drucker are focus­ing as much on the "sideways" relationships in an organization as they are on the vertical, superior/subordinate relationships. Drucker says we need to replace the traditional span of con­trol concept with what he terms a more impor­tant concept - that of the span of managerial relationships. 25

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The problem which has long been observed in state government is that the various agencies, though many are performing similar or related services, do not necessarily work together. Perhaps, as Drucker professes, they "do not work at all" as a result. The duplication of serv­ices, lack of coordination, and lack of con­tinuum in our activities is no doubt an out­growth from the fact that it is difficult for these 79 separate agencies of state government to work together. This has recently been recognized in some functional areas and, under new manage­ment direction, one or two functional groups have begun formal and frequent meetings to help eliminate conflicts and move toward common goals. One of the major objectives of this study is to present an administration whereby the var­ious agencies are grouped according to the type and nature of the services performed, to present a manageable span of control so that the struc­ture which results will enable these "sideways" relationships to take place and will provide the Governor with an administrative structure through which he can effectively manage state government. Chapters IV through X address this portion of the study.

IN SUMMARY

The study of efficiency and accountability in state government stemmed primarily from a recognition that Wyoming has experienced a period of declining revenues, reserves are being "tapped" to sustain the current level of govern­ment services, and a desire on the part of the Governor and the Legislature, to examine the current administrative and funding structures of state government.

Wyoming is facing a fiscal crisis. Though this crisis may not "hit" until sometime in Fiscal Year 1993, it is nonetheless real, and it is seri­ous. Revenues are projected to remain at levels lower than those enjoyed 10 years ago, yet demands for public services and the outlays to support these services remain at all time highs. Reserves have had to be seriously depleted dur­ing the past few years in order to sustain these services. In fact, between June 30, 1987 and June 30, 1988, reserves in seven of the State's major

accounts were reduced by an estimated $95.3 million. It is expected the balances in these accounts will decline by an additional estimated $459 million over the next four years, leaving only $42.2 million by June 30, 1992.

The need for enhanced efficiency in state government is evidenced perhaps most clearly by the State's lack of an adequate auditing effort in the area of mineral severance taxes and ad valorem taxes. No consensus can be achieved as to the size of revenue losses experienced, but some experts indicate that the number is in the millions of dollars. Investment returns on the State's portfolio are also suspect, especially in relation to that enjoyed by several neighboring states. Enhanced interest earnings and collections of all taxes due are but two ways for the State to painlessly respond to the impending crisis.

The lack of an efficient administrative struc­ture hampers the Governor's ability to manage and control state government. Due to the large number of boards, commissions, councils, agen­cies, departments and institutions, coordination of related programs is difficult, if at all possi­ble. Relationships between and among entities performing similar or related services need improvement if the State is to maximize its effec­tiveness. Duplication and overlap of service deliveries are difficult to eliminate when they are occurring in possibly 79 different Executive Branch entities. Responsibility and authority are diffused and unclear due to the existence of 700 or more individuals serving in various capaci­ties on boards, commissions, councils and com­mittees.

This study is a joint effort of both the Legis­lative and Executive Branches of state govern­ment. Citizen input was also provided through the conduct of public hearings, opinion polls, surveys and questionnaires. The report which follows reflects no piecemeal reorganization sug­gestions and contains no political compromises. It is a comprehensive plan to enhance and improve state government efficiency, designed to be implemented in several phases over a period of years. It does not reflect the desires and pleas­ures of a select few, but rather embraces the needs and welfare of the public. The only spe­cial interests addressed are those of all the citizens of Wyoming.

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FOOTNOTES-CHAPTER I

1. Jim Orr, Fiscal Specialist, Legislative Service Office, memo to members, 49th Wyoming Legislature, "Enclosed Fiscal Profiles," October 27, 1988.

2. Jim Orr, Fiscal Specialist, Legislative Service Office, memo to members, 49th Wyoming Legislature, "Final Green Sheets," March 15, 1988.

3. James B. Griffith, Wyoming State Auditor, Appropriations and Employment in Wyoming Government, for the Biennial Periods 1975-77 through 1985-86, February 1, 1986, p. 13.

4. Research and Statistics Division, Administration and Fiscal Control, Wyoming Data Handbook 1987, December 31, 1987, p. 107.

5. James B. Griffith, op. cit., pp. 36, 41 and 42. 6. Mike Sullivan, Governor, 1989-90 State Budget,

December 1, 1987, p. xiii. 7. David G. Ferrari, Ruth C. Sommers and Janet E.

Washburn, Wyoming, 1988, A Study of Revenue and Expenditures, Volume II, State of Wyoming Joint Legislative-Executive Committee, January 1988, p. 4.

8. Peter F. Drucker is one of the nation's leading management experts. Mr. Drucker was professor of management at the Graduate Business School of New York University from 1950 to 1972. Since 1972, he was the Distinguished University Lecturer at New York University and since 1971, he has been Clarke Professor of Social Science at the Claremont Grad­uate School, Claremont, California. His books in-

elude: The New Society, The Effective Executive, The Practice of Management, America's Next Twenty Years, Landmarks of Tommorrow, Manag­ing for Results, The Age of Discontinuity, and two volumes of essays, Technology, Management and Society and Men, Ideas and Politics.

9. Chapter 57, Session Laws of Wyoming, 1988, p. 136. 10. Wyoming Statutes, Cummulative Supplement, June

1987, Section 9-4-202. 11. Wyoming State Treasurer Annual Report, 1988, p.

16. 12. Nancy Bedont, The History of Government Reor­

ganization in the State of Wyoming, July 20, 1977, p. 16.

13. Ibid., p. 36. 14. Ibid., p. 44. 15. Ibid., p. 54. 16. Ibid., p. 55. 17. Ibid., p. 56. 18. Ibid., p. 59. 19. Ibid., p. 64. 20. Ibid., p. 70. 21. Ibid., p. 68. 22. Ferrari, Sommers & Washburn, op. cit., p. 507. 23. Peter F. Drucker, Management Tasks, Responsibil­

ities and Practices, Harper and Row, Publishers, 1974, p. 412.

24. Ibid. 25. Ibid., p. 413.

-10-

CHAPTER 0 0

FUND CONSOLIDATION AND POOLED INTEREST

"Adde parnum parvo magnus acervus erot. "a

Money in the Wyoming Treasury is grouped into 14 general categories known as funds. Prior to 1973, there were 212 of these categories; 211 of which were outside of the General Fund. Though the number of funds are fewer (14), the number of accounts within these funds has in­creased (747 at last count; 478 of these are out­side of the General Fund). Thus, instead of hav-

OVID

ing 211 other funds to deal with, the Governor and Legislature now have 478 accounts to manage and monitor, in addition to the Gener­al Fund. The problem, then, is a little more than twice as complex as it was 15 years ago.

The 14 funds, number of accounts in each, and cash and investment balances on June 30, 1988 are shown in Table 11-1.

TABLE 11-1

WYOMING FUND STRUCTURE (in millions $)

Fund Number of Cash Number Fund Name Accounts Balance

1 General Fund 269 $ 72.2 2 Earmarked Revenue Fund 126 439.5 3 Federal Revenue Fund 47 5.3 4 Trust and Agency Fund 230 354.7 5 Debt Service Fund 4 -0-6 lntragovernmental Fund 7 8.1 7 Highway Fund 7 76.8 8 Game and Fish Fund 22 38.5 9 University Fund 2 4.8 10 Permanent Land Fund 12 146.6 11 Permanent Land Income 5 15.5 12 Permanent Wyo. Mineral Trust 1 132.2 13 Enterprise Fund 10 1.9 14 Retirement Fund 5 -13.0

TOTAL 747 $1,283.1

Source: Wyoming State Auditor's Office.

a "Add little to little and there will be a big pile."

- 11 -

June 30, Investment 1988

Balance Balance

$ -0- $ 72.2 -0- 439.5 -0- 5.3 7.5 362.2 -0- -0--0- 8.1 -0- 76.8 -0- 38.5 -0- 4.8

490.4 637.0 -0- 15.5

835.8 968.0 -0- 1.9

1,145.5 1 '132.5

$2,479.2 $3,762.3

The conditions which led to the Funds Con­solidation Act in 1973 were not unlike the con­ditions found in Wyoming government today. That is, there were a large number of accounts containing significant sums of money which were never contained in the executive budget and therefore were not analyzed and scrutinized in a consistent manner. The existence of numerous funds and accounts, with revenues being trans­ferred between funds and between accounts within the same funds, and with expenditures being made directly from some funds and accounts but not from others, has resulted in confusion, misunderstandings and uncertainty about the State's finances. The example which follows may serve to illustrate this problem. John Doe and his wife, Jane, receive income from five sources:

John's Salary Jane's Salary Stocks Rental Income John's Second Job

$20,000/yr. 10,000/yr. 1,000/yr. 6,000/yr. 5,000/yr.

$42,000/yr.

John deposits his salary in a checking account from which most monthly bills are paid. Jane's salary is deposited in a different checking account and if John's account balance is insuffi­cient to pay the bills, Jane transfers money by check into John's account. She also buys grocer­ies occasionally from her account, and purchases a few other items from time to time.

The stock account income is split: 50 percent is allocated as a savings account for their son and 50 percent is earmarked into a savings account to build up until they can buy a new car. The rental income is placed in a broker's account for stock purchases unless the money is needed for a vacation, in which case they buy traveler's checks from Jane's checking account and then reimburse it from the broker's account. Income from John's second job is put into the cookie jar and periodically used to pay the paperboy, library fines, movie rentals, etc.

When Internal Revenue Service audits John's tax returns, he says he is not quite sure of his income or expenses. John does not think the stock income should count since, in part, it is being saved for his son unless it is needed for the car. Because John's expenses are paid from five different accounts, as well as the cookie jar, John is not quite sure which of these are deduct-

ible. John thinks that the best thing would be for him to review all of his income, expenditures and transfers before the IRS can make any final decisions.

The State of Wyoming need not worry about an IRS audit, but John and Jane's method of financing their operational expenses is not exceedingly different than the methods used by the State. The State's situation, however, is com­pounded by the fact that there are nearly 100 agencies and over 700 accounts involved. Inas­much as revenue forecasts reveal General Fund revenue will be inadequate to meet demands over the next several years, it is likely many of these accounts will be called upon to help ease the General Fund through this period. It only makes sense that this be done in an orderly, meaning­ful manner. This chapter will attempt to ana­lyze each of these accounts, identify those which are sensible candidates from which to draw resources, and suggest selected accounts to be consolidated into the General Fund.

THE IMPACT OF "EARMARKING"

Earmarking is ''. . . the designation of cer­tain revenue for specific purposes on a continu­ing basis." "A simple way of viewing earmark­ing is to distinguish taxes that do or do not go into a state's general fund." 1

It is difficult to determine if the earmarking of funds or the dedication of income streams to specific programs has been destructive to the State's overall budget process. There are those who argue that earmarking is good; that it guarantees that specific programs (departments, activities) will have a certain source of funding regardless of other demands on the State's budget. Others feel that dedicating these income streams or "earmarking of funds" lessens the resources available for competing government entities and that all programs ought to be pri­oritized and evaluated in relationship to the total resources available.

Though an affront to most Wyomingites, the budget for this State can be compared to that of the U.S. Government. According to the State Auditor's Office, 2 total appropriations, in­cluding non-appropriated funds for the Game and Fish Commission and the Highway Depart­ment, equals $2.2 billion for the 1989-90 bien­nium. In 1951, just 37 years ago, the annual budget for the entire U.S. Government (exclud­ing military and interest on the public debt) was

- 12-

just $2.1 billion. Today, it is over $1 trillion. In assessing the reasons for this growth, a former Deputy Director of the Office of Management and Budget (OMB), Frederic V. Malek, ob­served:3

"The principal deterrent to intelligent bud­geting is that for the most part the budget in any given year is not determined by the executive branch or the Congress, nor is it developed in an objective, unbiased man­ner. Rather, the bulk of spending is deter­mined by the laws enacted to meet a differ­ent set of needs, and that spending, once started, is generally perpetuated."

Mr. Malek went on to say that roughly 75 to 80 percent of the federal budget is made up of these "uncontrollable" expenditures and that lit­tle discretion can be used in changing these pay­ments or controlling the number of beneficiaries unless Congress shows uncharacteristic courage in rewriting the laws. Similarly, such can be observed in Wyoming government today. According to the National Conference of State Legislatures (NCSL), 4 Wyoming had the second highest degree of earmarking in 1984 (the latest data available), when 69 percent of all taxes were designated for specific purposes. The average for all of the states was 21 percent. Out of the $2.2 billion in appropriated and non-appropriated funds reported by the State Auditor, $42.3 mil­lion for the Game and Fish Commission and $434.4 million for the Highway Department are not included in the state budget and thus are not reviewed by either the Governor or the Legisla­ture. Additionally, $209.6 million for the School Foundation Program, $15.6 million for school district capital construction, $19.4 million for the Farm Loan Loss Reserve, and $17.6 million for cities, towns and counties were all appropriated from the Earmarked Fund5 and all escaped inclu­sion in the budget process. When one includes the additional $388.8 million in federal funds (some appropriated; some not) scattered throughout government in this list, clearly over half of the appropriations were made without the benefit of careful, detailed scrutiny by the State's budget experts in DAFC and the Legis­lative Service Office.

This is not to suggest that "all" funds need to be included in the State's budget to attain effi­ciency in the budget process. It has been a prac­tice in the federal government as well as the states to exclude those programs of greatest priority.

However, it must be recognized that programs with automatic funding, earmarked funds or dedicated revenue streams, typically will not be reviewed with the same degree of care as pro­grams financed by the General Fund. This is due largely to the fact that most policymakers are of the opinion that these other funded programs are outside of their purview, and it is a common tendency throughout most government entities to ignore them.

Though there is little formal literature avail­able today on the subject of earmarking and dedication of income streams and the impact this has on budgetary "controllability" efforts, there are nonetheless documented materials available which suggest that such practices contribute to program expenditure levels growing to dis­proportionate levels as compared to the growth in appropriations for programs included in the budget process.

One budget observer, Dan A. Cothran, Assis­tant Professor of Political Science at Northern Arizona University, said ''. . . the automatic nature of the funding can lead to unpredictable results that may be politically very unaccepta­ble . . . " 6 Cothran also observed that ". . . a major reason for the rapid growth of govern­ment budgets is that the proportion of uncon­trollables has increased ... " 7 In assessing which programs in government ought to have dedicated revenue streams or earmarked monies, Cothran identified three program qualities that are re­quired:8

'' 1. Those in which the total amount of money needed for the program is clearly a function of the number of "users" (education, unemployment insurance, social security).

2. Programs that fill such basic social needs that they must have priority in the budget process, and "politics" must not be allowed to interfere with their supply (education, social secu­rity).

3. Those that have several sources of revenue, such as government and employer (unemployment insurance) or state and local governments ( elemen­tary and secondary education)."

The Efficiency Study Committee, in consider­ing these program attributes, concluded that a fourth "quality" should be added:

- 13-

4. Programs which are funded by the users themselves through fees, licenses, permits, etc., e.g., game and fish pro­grams, snowmobile trails, etc.

According to Tax Foundation, Inc., there are common programs typically identified through­out the states which meet one or more of these three qualities:

TABLE 11-2

PROGRAMS TYPICALLY EARMARKED

Program Number of

States

Aid to public education (primary and secondary) Aid to local government

31 14 12 11 10 18

Highways Pension payments Welfare Other (higher education, public health, unemployment compensation, etc.)

Source: Tax Foundation, Inc., State Expenditure Controls: An Evaluation, New York: Tax Foundation, Inc., 1965, p. 44.

The problem commonly cited with these pro­grams is that they tend to grow faster than policymakers intended. Cothran summarizes this problem as follows: 9

"Since most agencies want more revenue rather than less, they act according to the incentives presented to them and perform more of the services, redefine services already performed, and thus enroll more clients than before."

He recommends caution in the use of auto-matic funding techniques: 10

"The lessons for policymakers are relatively straightforward. Automatic funding is an established way of financing certain pro­grams and probably will persist. Because of the fiscal uncertainty, however, policy­makers must be especially careful when using automatic funding. The services to be performed should be specified as clearly as possible. If administrators are to be given wide discretion in specifying which services are eligible, policymakers may wish to monitor subsequent agency behavior more closely, perhaps by postaudit or program evaluation, in order to determine whether the agency is wandering too far from what policymakers intended. Some programs are inherently more flexible than others and can more readily add functions or services than can other programs. If those programs are to be funded automatically, they must be monitored.''

The problem of earmarking was also noted in the analysis of the budget crisis faced by another energy-dependent state, Alaska. In Transition Team recommendations presented to Governor Steve Cowper, several observations were made with regard to program funding outside of the budget process: 11

"These items are inevitably loaded in at the end of the session; most items receive far less committee scrutiny than they would receive in the normal operating ... review process; others escape review altogether ... Can the state afford to allow this signifi­cant slice of budget activity to take place outside the normal budget process? The simple remedy is to insist that . . . items lapse to the General Fund and new appropriations take place through normal channels."

"Programs relying on 'other funding' sources, be it federal, program receipts, etc., must not be excluded from consideration in any budget . . . ''

''Program receipts may be available independent of the program operation which it currently funds, and therefore could be used to support other government operations. This may also be true, to a lesser degree, with federal funds. Programs should be reviewed and prioritized to make certain 'other funds' are used for the greatest benefit."

- 14 -

The State of Louisiana recognized the problems created by the "dedication of funds" long before the latest "bust" in energy revenues. The Federal Technical Assistance Program, in 1972, addressed this problem: 12

''Extensive dedication of funds vitiates the capability of the Governor and the legisla­ture to establish overall State policy. . . . Many agencies possess numerous pockets of funds and the same bill can be paid out of one pocket when another runs empty. In this way, the Governor and the Division of Administration lack effective control over the amounts of money spent and (more probably) the purposes for which the expen­diture is made. The enforcement of legis­lative intent is weakened through mul­tipocket budgeting and it becomes more difficult to maintain basic fiduciary con­trols."

These points were reinforced by Malek, 13 as reflected in the following observations:

'' ... government executives find they are limited if they want to use the budget as a management tool in forging new directions, launching new initiatives, or making judi­cious choices between alternative courses of action. There are simply not enough funds left over to do these things adequately after satisfying the huge appetite of uncon­trollables."

Obviously, the debate over dedication of revenues and earmarking is important mainly in terms of its impact on the state budget and the Governor's and Legislature's control over state spending. There is certainly no consensus on whether this is good or bad. There are, frankly, fairly intense disagreements in Wyoming over whether or not state spending has reached "excessive" levels. Typically, the legislators in­terviewed, in gathering data and opinions for this study, feel that spending has reached "undesira­ble" levels and action is needed to bring expen­ditures under greater control. While most legis­lators see state spending as a problem, not all of their executive branch counterparts agree. Most believe that there may be a problem in the allocation of resources, but not necessarily that the total allocation of resources is excessive.

In analyzing whether or not earmarking is a good policy, the NCSL listed the criticisms of, and justifications for, earmarking: 14

"Criticisms of Earmarking

1. Earmarking, it is said, hampers effective budgetary control, in some cases seri­ously. Effective financial management requires enabling legislatures to weigh the relative merits of each state program in terms of the total funds that are available.

2. Earmarking leads to a misallocation of funds, giving excess revenues to some functions while others are undersup­ported. There is no necessary, or even probable, relationship between the yield from a dedicated source and the most reasonable level of expenditure on the designated activity.

3. Earmarking makes for a troublesome inflexibility of the revenue structure, with the consequence that legislatures experience difficulty in arranging suita­ble adjustments to changing conditions.

4. Earmarking statutes tend to remain in force after the need for which they were established has passed.

5. Earmarking infringes on the policymak­ing powers of the executive branch and the legislature, since it removes a por­tion of governmental activities from periodic review and control.

Justifications for Earmarking

1. Earmarking makes it possible to require those who receive the benefits of a govenmental service to pay for it.

2. Earmarking assures a minimum level of expenditures for a desired governmen­tal function.

3. Earmarking can contribute stability to a state's financial system.

4. Earmarking assures continuity for specific projects.

5. Earmarking can induce the public to support new or increased taxes."

The NCSL also identified what it felt was one of the main considerations in earmarking desira­bility: 15

''One of the main considerations in weigh­ing the desirability of earmarking is the rela­tionship, if any, between the revenue source

- 15 -

and the designated spending program. When a tax (or user charge) is paid primar­ily by those who benefit from a government service, the case for earmarking is much stronger. The more difficult cases arise when little or no relationship exists between the revenue source and how the revenue is spent."

In Wyoming, earmarking has made it difficult to assess the adequacy of various taxing rates and levels. Earmarking tends to hide the fact that excessive revenue is being generated, such as occurred in the early 1980's. This was partially because the total surplus produced was scattered among several funds. At such times, the cutting of taxes should be considered.

The Joint Legislative-Executive Efficiency Study Committee considered the practice of ear­marking and concluded early in its deliberations that a certain amount of earmarking is proba­bly desirable in specific situations, but that over­all the State's policy ought to be one of reduc­in~ the number and amount of monies flowing into and out of the State Treasury "outside" of the General Fund. The central theme of this chapter then is how to enhance legislative and executive control over the state budget. Where possible, funds which are currently bei~g administered external to the budget process, will be considered for consolidation to the General Fund.

Budgeting is probably the best-developed of all central management processes in state govern­ment. While there are opportunities to strength­en management of the budget process, it is believed that the biggest payoffs will come from expanding the process to include many of those programs which until now have been excluded from the budget preparation, review and approval process.

THE GENERAL FUND

W.S. 9-4-204(b) defines the intended purpose and use of the State's General Fund: 16

''The general fund is to be used to account for the ordinary operations of state govern­ment and is designated to receive all reven'ues and account for all expenditures not otherwise provided for by law in any other fund."

The number of accounts in the General Fund is a function of the number of programs identi-

fied in the Appropriations Act and other legis­lation containing appropriation items or pro­grams. Each account, thus, represents an indi­vidual budget or program as authorized by the Legislature. The number of accounts in the General Fund typically will be substantially less during the first year of the biennium than dur­ing the second year. This is due to the fact that many first-year budgets and accounts are "car­ried over" into the second year of the biennium. During the second year of the biennium, the accounting system will contain all of the new fis­cal year budgets and accounts, plus all of the old fiscal year budgets and accounts that were car­ried over. This is perhaps reflected in the fol­lowing example. The Revenue and Expenditure Study 17 reported that on November 20, 1987, there were 474 accounts in the General Fund. On July 11, 1988, after the start of the new bien­nium, there were only 269 accounts.

The preceding comments are intended to pro­vide the reader with an overview of the General Fund accounts but really have no bearing on any consideration to consolidate accounts or redis­tribute pooled interest. The benefit of such action, of course, would be to enlarge the amount of resources in the General Fund, which would in all likelihood increase the number of accounts as well. The important thing to reflect on is the fact that the General Fund receives only approximately 23.8 percent of all revenues com­ing into the State Treasury, 18 yet is called upon to support 100 percent of the general operations of state government, as well as portions of certain other special programs such as higher education, water development, and th~ School Foundation Program, any of which can amount to sizable demands on General Fund resources.

The Committee also took a close look at the distribution of pooled interest as a potential source of substantially increased General Fund resources. This examination was prompted, in part, because the General Fund share of pooled interest (after receiving all pooled interest from the Permanent Wyoming Mineral Trust Fund) over the past three years has declined signifi­cantly. For example, in Fiscal Year 1986, 40 per­cent of all pooled interest was deposited into the General Fund. In Fiscal Year 1987, this rate dropped to 36 percent, and in Fiscal Year 1988, it dropped to 28.8 percent. A total of $72.5 mil­lion in Fiscal Year 1988 was credited to accounts outside of the General Fund.

- 16 -

The Committee assessed the potential of redirecting pooled interest to the General Fund based on a review of the statutes governing the purpose and use of each account within the State's fund structure. A complete accounting of pooled interest credited to each fund and account is shown in Table 11-34 at the end of this chapter. This table also shows the estimated pooled interest which may be earned in Fiscal Year 1989, the Committee's recommendation as to where the pooled interest should be deposited, the statute creating the account, and whether or not this statute directs that the account should receive interest earned.

An opinion from the Attorney General, writ­ten to the Governor on October 20, 1988, served as a guiding principle in the Committee's recom­mendations. Fundamental to this process were the following comments from the Attorney General:

''Absent a specific statutory directive that investment earnings or interest income is to be credited to the account from which the invested funds come, the only remaining statutory directive is W.S. 9-4-204(b) which provides that all revenues not otherwise provided for by law shall be credited to the general fund."

Additionally, the opinion rendered identified specific statutes which further clarify the above provisions. These are enumerated as follows:

"Thus, even though pooled earnings and interest are currently credited to every account on a pro rata basis, the statutes seem to provide as follows:

1. Interest from bank deposits under W. S. 9-4-811 to each account of each from which earned except as provided by W.S. 39-6-305 (some interest to general fund);

2. To the account from which earned if required by trust agreement or federal law;

3. To the general fund or permanent land income fund as provided by statute, act of admission and Wyoming constitution;

4. If a specific statute, to the account from which earned;

5. Otherwise, to the general fund."

THE EARMARKED REVENUE FUND

With the exception of the State's permanent funds and retirement funds, the Earmarked Revenue Fund is the largest fund in the State Treasury. On July 1, 1988, there were 126 accounts in the fund, with total assets of $439.5 million. Activity in the accounts within the Ear­marked Revenue Fund is governed by W.S. 9-4-204(c), which provides: 19

"The earmarked revenue fund is to be used to account for state revenue which is spe­cifically dedicated by law, whether ear­marked or restricted (limited in amount by legislative appropriation), to defray the cost of a particular governmental unit, activity or function of state government, and to account for proceeds from bond issues ... "

Up until Fiscal Year 1988, the fund has shown considerable growth over the years, as reflected in Table II-3. The decline experienced between Fiscal Years 1987 and 1988 marked the first time in the last dozen years that the fund balance experienced a drop and reflects the fact that resources from this fund were partially used dur­ing the past year to supplement General Fund resources.

TABLE 11-3

HISTORY OF CASH AND INVESTMENT BALANCES-EARMARKED REVENUE FUND

END OF FISCAL YEAR

Fiscal Year

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

Source: Wyoming State Auditor's Office.

(in millions) Balance

$ 5.1 1.7 6.6

34.3 36.1 45.4 99.1

139.7 189.2 278.2 462.1 600.4 611.1 439.5

The State Auditor groups accounts according to their intended purpose. In the Fiscal Year 1987

- 17-

TABLE 11-4

GROUPINGS OF EARMARKED FUND ACCOUNTS WYOMING STATE AUDITOR'S OFFICE

General Category

Higher Education Elementary & Secondary Education Professional Licensing Boards Regulatory Local Government Water Development Employment Security Commission Reserves Available for Appropriation Other Earmarked Accounts

TOTAL

Number of Accounts

5 5

28 7 2

60 1 4

14

126

June 30, 1988 Cash or Investment

Balance

$ 187,538 37,447,450

2,051,147 5,255,385

82,091,764 215,055,187

47,305 85,869,473 11,580,976

$439,586,225

TABLE 11-5

HIGHER EDUCATION EARMARKED FUND ACCOUNTS

Pooled Interest

Redirect to Account FY 1988 FY 1989 General

No. Account Name Actual Estimate Fund?

057-003 Community College Contingency Reserve $ 95,000 $60,000 Yes 057-005 Community College Mineral Severance - Old 15,000 -0- N/A 060-012 Mineral Royalty - Community College 753,000 -0- N/A 060-031 Bond Proceeds- Community College -0- -0- N/A 060-033 Current Money Construction - Community College 107,400 -0- N/A

TOTAL

Annual Financial Report, all Earmarked ac­counts were included in nine different broad categories. These are shown in Table II-4 and it is this order in which the accounts will be dis­cussed.

HIGHER EDUCATION

As shown in Table II-5, within this category during Fiscal Year 1987, there were five ac­counts; only one account, 057-003, Community College Contingency, remains, as account 057-005 was abolished, and accounts 060-012, 060-031 and 060-033, through legislation last year were consolidated into the Legislative Royalty Account, which is discussed later in this section. According to W.S. 21-18-205(b)(ii), funds in account 057-003 are to be used to sup­plement a community college budget if one or

$970,400 $60,000

more of the following events occur: a) there is a shortfall of local revenue; b) enrollment varies by 10 percent or more; c) the college needs to make emergency repairs to facilities; or d) the college is unable to meet bond payments.

During the last few years, and projected through at least Fiscal Year 1991, community colleges will experience shortfalls in local revenues. This is due to their reliance, in part, on local property taxes which are forecast to con­tinue declining. Consequently, it is expected revenues in this account will be required to at least partially offset these declining resources.

The income into the account projected dur­ing the next few years amounts to roughly $1.7 million annually plus pooled interest, which is expected to total $60,000 each year. W.S. 39-6-306(b)(iv) provides that " ... any unex-

- 18 -

pended revenues within the account at the end of any biennial period shall be credited to the general fund." 20 The argument can be advanced that the account's dedicated revenue stream should be diverted to the General Fund, in view of the fact that the State currently funds roughly 70 percent of all community college operations and all units of government are facing serious revenue shortfalls. This would enable the State to control, through a General Fund appropria­tion, the exact level of contingency funds it wants to make available to the Community College Commission to administer in compliance with the provisions of W.S. 21-18-205(b)(ii). The Committee recommends that this entire revenue stream be deposited to the General Fund, enhancing General Fund revenues by roughly $1.8 million per year. Appropriations, then, for an emergency contingency should be made from the General Fund.

ELEMENTARY AND SECONDARY EDUCATION

The Department of Education maintains three accounts in the Earmarked Fund and the Depart­ment of Public Lands also maintains three accounts for the support of school districts. These are shown in Table 11-6.

005-005 DEPARTMENT OF EDUCATION AUDIT EXCEPTIONS

As recommended in the Revenue and Expen­diture Study, this account should be abolished. 21

The account balance has remained unchanged for the last six years; it was created administra­tively, not by statute; the funds are not needed nor budgeted by the Department of Education; and, the money should probably never have been deposited to the Earmarked Fund in the first place. These funds should be transferred to the General Fund.

005-008 SCHOOL DISTRICT CAPITAL CONSTRUCTION

This account was established by W.S. 39-6-306(b )(iii), but amended by the 1988 Legis­lature. Future revenues to this account were enhanced due to legislation in the 1988 Session which consolidated various school accounts from both the Earmarked and Trust and Agency Funds into this account. Those consolidated include: Earmarked Fund-060-010, Mineral Royalty Entitlement; 060-011, Mineral Royalty Grants; and, 060-020, Mineral Royalty Reserves; Trust and Agency Fund-060-063, School Entitlements-Fees; and, 060-066, School Grants­Fees. Pooled interest from these five accounts

TABLE 11-6

Account No.

005-005

005-008

005-009

060-010

060-011

060-020

ELEMENTARY AND SECONDARY EDUCATION EARMARKED FUND ACCOUNTS

Account Name

Department of Education Audit Exceptions School District Capital Construction School Foundation Program Mineral Royalty Entitlement -School Districts Mineral Royalty Grants -School Districts Federal Mineral Royalty Reserves

TOTAL

Pooled Interest Consolidate to

General Fund? Redirect to

FY 1988 FY 1989 General Actual Estimate Fund? Yes/No Amount

$ -0- $ -0- N/A Yes $6,536

47,800 2,000,000 Yes No N/A

940,900 600,000 Yes No N/A (account consolidated into 005-008)

2,873,700 (account consolidated into 005-008)

154,500 (account consolidated into 005-008)

728,800

$4,745,700 $2,600,000 $6,536

- 19 -

totalled $4.2 million in Fiscal Year 1988 and is expected to be only approximately $2 million this year. This pooled interest should be redirected to the General Fund. Deficiencies which result, if any, can be considered for appropriation from the General Fund.

the end of Fiscal Year 1991. This is shown in Table 11-7.

It is estimated by the Legislative Service Office22 that the Capital Construction Account will reflect excess cash balances between now and

These excess funds will undoubtedly be needed to help support the School Foundation Program. The account should therefore be merged with that account to simplify revenue estimating and cash flow analysis. W .S. 39-6-306(a) should be amended to provide the pooled interest be deposited into the General Fund.

TABLE 11-7

ESTIMATED REVENUES, EXPENDITURES AND CASH BALANCES CAPITAL CONSTRUCTION ACCOUNT

Beginning Balance Revenues:

From Annual Entitl. Program From Grant Program From Repayment Account Federal Mineral Royalties Pooled Interest Public Land Fees Repayment

Total Revenues

Available Cash & Revenue

Expenditures: To Foundation Program To Capcon Pledges To Mill Levy Supplement Per Supreme Court Decision Previous Commitments

Ending Balance

(Projected by LSO on 1 0/26/88)

FY 1989

$41,012,674

-0--0--0-

4,359,378 2,000,000

-0--0-

6,359,378

47,372,052

15,600,000 2,669,000 3,000,000

7,103 6,320,131

$19,775,818

TABLE 11-8

APPROPRIATIONS TO

FY 1990

$19,775,818

-0--0--0-

4,617,833 2,000,000

-0--0-

6,617,833

26,393,651

2,669,000

$23,724,651

THE SCHOOL FOUNDATION PROGRAM ACCOUNT Statutory Reference

Ch.218,'87 S.L. Ch.218,'87 S.L. Ch.218,'87 S.L. Ch.218,'87 S.L. Ch.218,'87 S.L. Ch.82,'88 S.L. Ch.82,'88 S.L. Ch.82,'88 S.L.

Source of Appropriation

General Fund Legis. Royalty Impact Assist. Acct. Advanced Entitlement Account School District Grant Account School District Repayment Account Capital Construction Account Capital Construction Account General Fund

- 20-

FY 1991

$23,724,651

-0--0--0-

4,899,542 500,000

-0--0-

5,399,542

29,124,193

2,669,000

$26,455,193

Amount

$47,150,000 1,250,000

17,200,000 2,800,000 4,800,000

15,600,000 3,000,000

650,000

005-009 SCHOOL FOUNDATION PROGRAM

The School Foundation Program Account within the Earmarked Fund was established by W.S. 21-13-306(a). Resources in the account " ... consist of funds appropriated to, or desig­nated to the account by law, or by gift from whatever source ... " Because of insufficient revenues coming into the account to support payments to school districts in recent years, the Legislature has had to appropriate additional funds to this account from the General Fund and several Earmarked accounts. Several of these appropriations are shown in Table 11-8, and total $92,450,000.

Clearly, the revenues coming into this account are insufficient to meet today's needs based on the current formula. Included in this account's revenue stream is an estimated $600,000 per year from pooled interest. Inasmuch as the program will likely need to be supplemented with a General Fund appropriation in future years, it is recommended that this pooled interest be credited to the General Fund. Consistent with the Attorney General's opinion, legislation to effect this change is not necessary.

060-010 MINERAL ROYALTY ENTITLEMENT; 060-011 MINERAL ROYALTY GRANTS; 060-020 MINERAL ROYALTY RESERVES

As discussed under the School District Capi­tal Construction Account, during the 1988 Legis­lature, legislation was passed consolidating these accounts " ... into one (1) capital construction account within the Earmarked Revenue fund.'' 23

This virtually abolished these accounts with any dedicated revenues destined here to be redirected to the Capital Construction Account.

At best, legislation related to funding of the Public School Foundation Program and School District Capital Construction, is complicated. At worst, it is beyond the comprehension of the average observer. All accounts ought to be con­solidated into the School Foundation Program and the statutes in question repealed. Dedicated income streams currently supporting public schools should be redirected totally to the School Foundation Program to be distributed in con­formance to the School Foundation formula. Supplemental funding for the support of capi­tal construction should be requested as a General Fund appropriation on a case-by-case basis included in the budget request of the Department

of Education. New construction proposed ought to be funded only after approval by the local tax­payers and only through approval of a local mill levy increase to support it, unless unique prob­lems require a state supplement, which should be addressed case-by-case and not on a formula basis. The State should not continue diverting income and earmarking revenue to support these local construction projects.

All pooled interest accruing to these accounts should be credited to the General Fund. This action would enhance General Fund resources by approximately $2.6 million annually.

PROFESSIONAL LICENSING BOARDS

There are 28 accounts within the Earmarked Fund related to professional licensing activities. Table 11-9 identifies these accounts, with com­bined account balances totalling $2,051,145 on June 30, 1988.

It was suggested in the Revenue and Expen­diture Study24 that these accounts should be con­sidered for consolidation to the General Fund and that the appropriation from the Earmarked Fund to support these activities be replaced with a General Fund appropriation. Inasmuch as no action was taken on this suggestion during the 1988 Legislative Session, the recommendation is advanced again here.

It should be noted that the amounts shown for both pooled interest and account balances are estimates only. Both will change somewhat between now and the time any legislation becomes effective. This action would result in enhanced General Fund interest earnings of roughly $124,100 per year. Additionally, the consolidation itself would generate a one-time cash injection into the General Fund of an esti­mated $2 million. Thereafter, fees should be reviewed and collected at a level which would insure future revenues were always adequate to cover required expenditures.

Clearly, the consolidation of these accounts into the General Fund is only a small part of the work which should be done with regard to licens­ing activities in the State. As will be described in later chapters of this report, legislation is needed addressing such things as fees charged, per diem and travel paid to board members, daily compensation for board members, and the number of board members serving each profes­sion should be examined. More uniformity in these areas would serve to streamline state

- 21 -

TABLE 11·9

PROFESSIONAL LICENSING

Pooled Interest Consolidate

Account FY 1988 No. Account Name Actual

012-001 Architects $ 10,100 016-001 Barber Examining 2,600 017-001 Radiologic Technician 400 018-001 Real Estate Admin. 21,700 018-002 Real Estate Recovery 1,400 018-003 Real Estate Education 5,800 028-001 Podiatry 700 030-001 Chiropractic 2,000 033-001 Cosmetology 4,500 034-001 Dental 5,900 035-001 Embalmers 1,800 037-008 Examining Engineers 3,100 038-001 Pari Mutuel Admin. 2,500 038-002 Pari Mutuel Breeders 100 039-007 Collection Agency 800 044-003 Insurance Agents 1,800 051-006 Veterinary Medicine 3,600 052-001 Medical Licensing 11,300 054-001 Nursing 13,100 056-001 Optometry 4,100 058-002 Audio Speech 1,000 059-002 Pharmacy 12,300 061-001 CPA's 9,100 062-001 Physical Therapy 500 064-001 Hearing Aid 900 068-001 Psychologists 1,400 079-001 Nursing Home Admin. 500 102-001 Law Examiners 3,300

TOTAL $126,300

government and lessen the administrative requirements of managing these activities. The State should consider strengthening the adminis­trative capabilities of each entity as well. Sug­gestions for accomplishing this are also offered in later portions of this report.

REGULATORY BOARDS AND COMMISSIONS

There is clearly a distinction between profes­sional licensing activities just discussed and the regulatory functions handled by boards and commissions. The State Auditor has identified seven regulatory boards and commissions in state government. These are shown in Table 11-10.

Redirect to to

FY 1989 General General Fund?

Estimate Fund? Yes/No Amount

$ 10,000 Yes Yes $ 152,688 2,500 Yes Yes 41,727

400 Yes Yes 9,632 21,000 Yes Yes 254,000

1,400 Yes Yes 51,447 5,800 Yes Yes 53,988

600 Yes Yes 11,751 1,900 Yes Yes 33,094 4,400 Yes Yes 81,290 5,800 Yes Yes 51,605 1,700 Yes Yes 24,535 3,100 Yes Yes 34,877 2,500 Yes Yes 118,429

100 Yes Yes 104 700 Yes Yes 15,264

1,800 Yes Yes 13,883 3,500 Yes Yes 55,894

11,200 Yes Yes 197,964 13,000 Yes Yes 307,012 4,100 Yes Yes 66,274 1,000 Yes Yes 15,394

12,000 Yes Yes 202,411 9,000 Yes Yes 156,007

500 Yes Yes 11,614 900 Yes Yes 14,805

1,400 Yes Yes 16,932 500 Yes Yes 10,589

3,300 Yes Yes 47,935

$124,100 $2,051,145

010-018 WYOMING WHEAT COMMISSION; 022-002 INDUSTRIAL SITING ADMINISTRATION

The first two accounts shown in Table 11-10, the Wyoming Wheat Commission and the Indus­trial Siting Administration Accounts, are of a nature incompatible with General Fund activity. Both accounts receive revenue which is used in direct response to the payer. The wheat assess­ment is used to promote wheat both domesti­cally and in foreign markets. No benefit would be derived from moving these funds to the General Fund. Likewise, the revenue in the Industrial Siting Account is used to pay the costs associated with each application. Unused monies are refunded to the applicant.

- 22-

023 PUBLIC SERVICE COMMISSION

Accounts administered by the Public Service Commission (PSC) on the other hand, need not be earmarked, as all of the three accounts are used to support the general operating budget of the PSC. Consequently, it is recommended that all three accounts be abolished or consolidated into the General Fund. Appropriations to sup­port the administration and utilities budgets should be replaced with General Fund appropri­ations. The resources supporting the Highway Crossing Protection Program should come directly from the Highway Fund as augmenting revenue to the General Fund.

This action would increase General Fund interest earnings by roughly $121,000 annually. Additionally, future revenue can be set to match expenditures, assuring therefore that the over­all future impact on the General Fund is not negative. The current existing balances in these three accounts would provide an additional one­time cash injection of roughly $1.3 million, after consideration is given to this biennium's revenues and expenditures.

051-007 LIVESTOCK INSPECTION

This account supports approximately 67 per­cent of the Livestock Inspection Program budget. The remaining 33 percent support comes from the General Fund. Revenue is derived from

a mill levy, not to exceed 10 mills imposed on all cattle and sheep in the State. Based on the source and use of these funds, there appears to be no logical justification for maintaining this account within the Earmarked Fund. It is recom­mended that the account be consolidated to the General Fund; that all balances and revenue be deposited in General Fund revenue; and, that the future expenditures be appropriated from the General Fund based on budget requests submit­ted by the Livestock Board. Pooled interest would approximate $140,000 annually, and, the cash balance above and beyond expenditures should generate a one-time enhancement to the General Fund of $2.1 million this biennium.

055-001 OIL AND GAS COMMISSION -ADMINISTRATION

The mill levy to support this activity could as easily be deposited to the General Fund as to this account. Revenue is used to support the Oil and Gas Commission budget which is totally self­funded from this source. Because the Commis­sion does not draw on General Fund resources, its operations typically are not carefully scru­tinized through the budget process. It is recom­mended that the account be consolidated to the General Fund, the mill levy be established at 4/5ths of one (1) mill, and the resultant rev­enue be deposited to the General Fund. Pooled

TABLE 11-10

REGULATORY BOARDS AND COMMISSIONS

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

010-018 Wyoming Wheat Comm. $ 3,000 $ 3,000 No No N/A 022-002 Industrial Siting

Administration 4,800 4,700 No No N/A 023-001 Public Service Comm. -

Administration 16,400 16,800 Yes Yes $ 194,097 023-002 Public Service Comm. -

Utilities 88,400 88,000 Yes Yes 1,610,056 023-004 Highway Crossing

Protection 16,300 16,000 Yes Yes 202,904 051-007 Livestock Inspection 140,700 140,000 Yes Yes 2,113,916 055-001 Oil & Gas Commission -

Administration 113,300 110,000 Yes Yes 1,017,834

TOTAL $382,900 $378,500 $5,138,807

- 23-

TABLE 11-11

LOCAL GOVERNMENT EARMARKED ACCOUNTS

Pooled Interest

Account FV 1988 FY 1989 No. Account Name Actual Estimate

Redirect to General Fund?

Consolidate to

General Fund?

Yes/No Amount

060-006 Wyoming Coal Tax Grants $4,496,990 $2,500,000 Yes No N/A 060-009 Government Royalty

Distribution 1,934,800 1,900,000 Yes No N/A

TOTAL $6,431,790 $4,400,000

interest should equal roughly $110,000 annually. The current budget would require a General Fund appropriation to replace that appropriated from the Earmarked Fund. However, the cur­rent balance plus revenues less expenditures will generate an additional $25,000 for the General Fund.

LOCAL GOVERNMENT

The State Auditor has included two accounts in this category, as reflected in Table II -11.

060-006 COAL IMPACT TAX

As provided by W.S. 39-6-303(b), the two per­cent tax on coal originally existed to mitigate impact, and expired once the cumulative taxes collected totalled $160 million. However, W.S. 39-6-305(d) provides that " ... interest earned shall be credited to the account. " 25

The Legislative Service Office has projected the account will receive $2.5 million in pooled interest earnings in Fiscal Year 1989. This, added to the cash balance of $51,569,508, indicates a total of $54,069,508 will be available during the current fiscal year. From this amount, prior-year authorized projects total $35,017,393. Also to be subtracted from the amount is $17,600,000 appropriated during the 1988 Legislative Session. Thus, the account should have an uncommitted balance of $1,452,115 on June 30, 1989. The Committee recommends this balance not be granted by the Farm Loan Board, but instead be transferred to the General Fund.

060-009 GOVERNMENT ROYAL TV DISTRIBUTION

During the 1988 Legislative Session, the share of federal mineral royalties flowing into this account was reduced from 7.5 percent to 5 per-

cent. This revenue may be used to issue revenue bonds. Proceeds from the bonds, or the revenue stream in the absence of bonds, are loaned or granted to local government. Additionally, 50 percent of the bonus payments are deposited to this account and this portion is used to finance capital construction as approved by the Farm Loan Board. During Fiscal Year 1987, the account received a total of $14.4 million from both royalties and bonuses. It received $11.9 mil­lion in Fiscal Year 1988; and is projected to received $8 million in Fiscal Year 1989; and $8.6 million in Fiscal Year 1990. Interest earnings are expected to supplement this income by approx­imately $1.9 million each year.

Under federal statute (30 USC 191), these royalty shared revenues are "to be used by such State and its subdivisions, as the legislature of the State may direct giving priority to those sub­divisions of the State socially or economically impacted by development of minerals leased under this Act, for (i) planning, (ii) construction and maintenance of public facilities, and (iii) provision of public service."

Inasmuch as W.S. 9-4-601 contains no require­ment the interest earned be deposited to the account, the Committee recommends it be diverted to the General Fund.

WATER DEVELOPMENT ACCOUNTS

There are currently 60 different accounts within the Earmarked Fund allocated for water projects. All but five of these are within the Wyoming Water Development Commission. Of the remaining five, three are within the Attor­ney General's Office, one in the State Engineer's Office, and one in the Economic Development and Stabilization Board.

The two largest accounts are 029-002, Water Development #1, and 029-003, Water Develop-

-24-

TABLE 11-12

FISCAL PROFILE WYOMING WATER DEVELOPMENT ACCOUNT #1

Cash Balance, July 1, 1988

Add: Estimated Revenue FY 1989 - Taxes Estimated Revenue FY 1989 - Interest Estimated Revenue FY 1989 - Loan Repayments Estimated Revenue FY 1990 - Taxes Estimated Revenue FY 1990 - Interest Estimated Revenue FY 1990 - Loan Repayments

Total Cash and Revenue Subtract: Prior Years Appropriation

1988 Session Appropriation

Estimated Available

ment #2. Both of these accounts contained roughly $212.5 million as of June 30, 1988. Rather than attempt to discuss each of these 60 accounts, attention will be focused on the two major ones, where the lion's share of the resources are located.

029-002 WATER DEVELOPMENT #1

As of June 30, 1988, there was a $185.1 mil­lion cash balance in this account. This is down from $216 million on June 30, 1987. This account was created by W.S. 39-6-302(c). Income to the account is primarily derived from a 1.5 percent tax (out of the 10.5 percent total) on strip mine coal. In Fiscal Year 1987, this amounted to roughly $16.4 million. Addition­ally, however, the account is a beneficiary of a huge amount of pooled interest, which amounted to around $15 million in each of the last two years ($14.7 million in Fiscal Year 1988 and $15.9 million in Fiscal Year 1987).

On October 27, 1988, the Legislative Service Office prepared a fiscal profile which shows there is $77, 171 ,241 estimated to be available from this account. This profile is shown in Table II-12.

W.S. 39-6-302(c) which created the account does not require interest be credited to the account. Consistent with the Committee's desire

$ 15,463,290 11,000,000

180,000 14,451,075 7,200,000

185,000

$139,698,865

16,701,948

$185,092,689

48,479,365

$233,572,054

156,400,813

$ 77,171,241

that all pooled interest be deposited to the General Fund, it is recommended the $11 mil­lion estimated in Fiscal Year 1989 and all future pooled interest earnings be redirected to the General Fund. In view of the large estimated cash balance of $77,171,241, the reduction of all interest earnings ($18,200,000 for the 1989-90 biennium) would still leave $58,971,241 availa­ble for new projects.

029-003 WATER DEVELOPMENT #2

W.S. 39-6-302(g) and W.S. 39-6-305(k)(v) pro­vides that one-twelfth (1112) of the two percent tax levied on oil and gas shall be deposited to this account for the improvement of water projects completed and in use prior to 1970, and for other water projects if specifically appropri­ated for that purpose by the Legislature. The fis­cal profile prepared by the Legislative Service Office shows this account should have a total of $25,966,632 in uncommitted funds. Included in these resources are interest earnings of $1,750,000 in Fiscal Year 1989 and $1,900,000 in Fiscal Year 1990. These amounts are shown in Table II-13.

In view of the large balance forecast in this account, the Committee recommends all interest be deposited to the General Fund. This would still leave the account with an uncommitted balance of $22,316,632.

- 25-

TABLE 11-13

FISCAL PROFILE WYOMING WATER DEVELOPMENT ACCOUNT #2

Cash Balance, July 1, 1988

Add:

Estimated Revenue FY 1989 - Taxes Estimated Revenue FY 1989 - Interest Estimated Revenue FY 1989 - Loan Repayments Estimated Revenue FY 1990 -Taxes Estimated Revenue FY 1990 - Interest Estimated Revenue FY 1990 - Loan Repayments

Total Cash and Revenue

Subtract: Prior Years Appropriation

1988 Session Appropriation

Estimated Available

EMPLOYMENT SECURITY COMMISSION

On June 30, 1988, the Employment Security Commission's Administration Account in the Earmarked Fund, 036-001, contained a balance of $47,305. This account was created by W.S. 27-3-205 and the legislation provides that it must be used ''. . . for the payment of necessary administrative expenses of this act as determined by the United States Secretary of Labor and for the establishment and maintenance of free public employment offices ... " 26

Because of the federal restrictions placed on these funds, it is recommended that they remain intact in the Earmarked Fund. No apparent benefit could be enjoyed by the State in any con­solidation effort.

RESERVES AVAILABLE FOR APPROPRIATIONS

It was noted in Chapter I that the Legislative Service Office identified seven reserve accounts in the Earmarked Fund which are available for appropriation. All but two of these, 003-030 Budget Reserve Account, and 004-003, Legisla­tive Royalty Account, have been discussed.

$3,790,920 1,750,000

180,000 3,938,956 1,900,000

185,000

$7,802,011

5,112,320

$27' 136,087

11,744,876

$38,880,963

12,914,331

$25,966,632

003-030 BUDGET RESERVE ACCOUNT

This account was created in Fiscal Year 1984, primarily in response to excessive revenue accumulations in the General Fund. During times when revenue coming into the General Fund greatly exceeded expenditures from it, the unexpended General Fund cash balance grew to record levels. In anticipation of less prosperous years, Governor Herschler recommended this account be created to receive transfers of excess monies from the General Fund. The law27

provides that the amount transferred should be " ... not more than five percent (50Jo) of estimated General Fund receipts for the next biennial budget ... '' Additionally, the legisla­tion requires that ''At the end of each bien­nial budget period, General Fund appropriations for the biennium in excess of expenditures ... shall be transferred to the budget reserve ac­count.''

Expenditures from the account cannot be made without a legislative appropriation, and appropriations during the past few years have been made for a variety of purposes. Included among them are the following examples:

- 26-

TABLE 11-14

APPROPRIATIONS FROM BUDGET RESERVE ACCOUNT

Statutory Reference Source of Appropriation

State Self-Insurance Super Collider Proposal

Amount

Ch.3,'87 S.L. Ch.3,'87 S.L. Ch.3,'87 S.L. Ch.3,'87 S.L. Ch.231,'87 S.L. Ch.231 ,'87 S.L. Ch.220,'87 S.L. Ch.89,'88 S.L. Ch.89,'88 S.L.

Research and Development Facilities Secure New Gas Pipeline System General Fund Supplement

$19,350,000 400,000 200,000 50,000

25,312,177 47,150,000 5,000,000

General Fund Supplement - Foundation Amendment IV Loan Program General Fund Supplement Farm Loan Loss Reserve

46,000,000 19,350,000

TABLE 11-15

APPROPRIATIONS FROM LEGISLATIVE ROYAL TV IMPACT ASSISTANCE ACCOUNT

Statutory Reference Source of Appropriation Amount

Ch.123,'86 S.L. Ch.123,'86 S.L. Ch.81,'86 S.L. Ch.219,'87 S.L. Ch.220,'87 S.L. Ch.18,'87 S.L. Ch.232,'87 S.L. Ch.89, '88 S.L.

Rock Springs-Green River Water Guernsey Airport

$11 ,000,000 601,035

4,800,000 Local Government Insurance Amendment IV Loan Program Amendment IV Loan Program School Foundation Program Uranium Tailings

130,000 5,000,000 1,250,000 1,800,000

General Fund Supplement

The Legislature may wish to consider con­solidating this account into the General Fund. According to projections by the Legislative Serv­ice Office, the account should have approxi­mately $48.8 million in unencumbered resources.

004-003 LEGISLATIVE GOVERNMENT ROYALTY IMPACT ASSISTANCE

Revenues to this account are derived as provided by W.S. 9-4-601(a)(viii) and W.S. 9-4-601(b)(ii). The intent of this legislation was to provide an account from which the Legisla­ture could appropriate funds '' ... to alleviate impact problems resulting from mineral devel­opment." 28

The impact problems (influx of people, de­mand for public services and facilities because

23,000,000

of the influx of people, etc.) are no longer evi­dent in the State of Wyoming. The State has experienced an out-migration of nearly five per­cent of its population in the last five years. There simply are no impact problems resulting from mineral development and none are anticipated for at least five years, according to national and state minerals experts.

It is equally obvious these funds have not been appropriated consistent with legislative lan­guage, when one examines the appropriations of the past few years. This is reflected in Table II-15.

The Legislative Service Office has estimated that this account will contain an estimated $3,446,414 in uncommitted funds by the end of the current fiscal year. This is shown in Table II-16.

- 27-

TABLE 11-16

FISCAL PROFILE LEGISLATIVE ROYAL TV ACCOUNT

Cash Balance, July 1, 1988

Add: Estimated Revenue FY 1989 - Interest Federal Mineral Royalties- Coal Bonus

Total Cash and Revenue

Subtract: Transfer to General Fund Uranium Mill Tailings Local Government Insurance

Estimated Available

The Committee recommends the pooled interest be deposited to the General Fund reduc­ing the $3,446,414 to $2,246,414.

OTHER EARMARKED ACCOUNTS

There are 18 other earmarked accounts which do not appropriately fit within the categories previously discussed. These are shown in Table 11-17.

006-016 STATE SELF INSURANCE

This account was created by W.S. 1-41-103 and it is used to fund the State's Self Insurance program. Officials of the Department of Admin­istration and Fiscal Control are administrators of the program and they have indicated there is no way of projecting how much will be needed to fund this program. The law provides the account shall include any legislative appropria­tion, transfers, payments by insurance compa­nies, and income from investments. During the past two years, pooled interest earnings dis­tributed to the account were $114,112 in Fiscal Year 1987 and $414,662 in Fiscal Year 1988.

W.S. 1-41-104 authorizes the State Treasurer to utilize an interfund transfer from the Budget Reserve Account of an amount not to exceed $20 million if necessary to make payments autho­rized for self insurance purposes.

The Legislative Service Office has projected interest earnings will amount to roughly $250,000 in each of the next two years and beyond. Inasmuch as there is no evidence the current balance will be expended, or the interest

$ 1,200,000 553,816

$23,000,000 1,000,000 4,800,000

$30,492,598

1,753,816

$32,246,414

28,800,000

$ 3,446,414

earnings will be needed, or if any of the $20 mil­lion loan authority will need to be used, it is recommended that the statute be amended per­mitting earned interest to be deposited to the General Fund rather than to this account.

006-071 MINERAL SEVERANCE TAX

This account is merely a transfer account for taxes collected by the Department of Revenue pending distribution to public schools, commu­nity colleges, and the Wyoming Highway Department, as provided by W.S. 39-6-306(b). The statute requires the Capitol Building Com­mission administer the account and in the process of holding these distributions, pooled interest accrues, which subsequently must also be allocated. During Fiscal Year 1987, pooled interest totalled $85,961; in Fiscal Year 1988, it was $87,811.

In an effort to streamline this procedure, the Capitol Building Commission should be elimi­nated from this process. The Department of Revenue, upon collection of the taxes, should transfer the funds directly to the three recipients, by-passing the Commission altogether. Though no savings to the General Fund are anticipated, this should speed the transfer to the ultimate recipient and eliminate paperwork, extra pooled interest calculations, etc.

010-015 RODENT AND PREDATORY ANIMAL CONTROL

The Department of Agriculture enters into cooperative agreements with counties, other agencies, organizations and individuals for the

- 28-

TABLE 11-17

OTHER EARMARKED ACCOUNTS

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

006-016 State Self Insurance $414,700 $250,000* Yes No N/A 006-071 Mineral Severance Tax 87,800 87,800 No No N/A 010-015 Rodent & Predatory

Animal Control 4,500 4,500 Yes No N/A 010-022 Leaf Cutter Bee 600 600 No No N/A 013-008 Review & Compliance -0- -0- N/A Yes $ 27,396 013-013 Micro-Film Project -0- -0- N/A Yes 1,913 015-004 Medical Review Board -0- -0- N/A N/A N/A 015-008 Governmental Claims Act -0- -0- N/A Yes 130,093 015-009 Crime Victims Campen. 300 300 No No N/A 037-004 Little Big Horn Adjud. 700 700 No No N/A 053-004 Investment Program -

Administration -0- -0- N/A No N/A 053-005 Revolving Investment

Fund 276,800 276,000 No No N/A 053-061 Fontanelle Dam

Rehabilitation -0- -0- N/A No -0-071-001 DHSS Audit FY 86 & FY 87 -0- -0- N/A Yes 6 071-045 Home Health Nursing -0- -0- N/A Yes 305,067 071-050 Project Help -0- -0- N/A Yes -0-074-041 Snowmobile Gas Tax 2,800 2,800 Yes No N/A 201-003 LSO Federal Mineral

Royalty -0- -0- N/A No N/A

TOTAL $788,200 $622,700 $464,475

* W.S. 1-41-103 provides interest earnings shall be credited to the account.

purpose of controlling rodents and predatory animals. Furs, skins and specimens taken by hunters and trappers paid from this program are sold and the proceeds deposited here. Counties buy into the account from proceeds of a mill levy, not to exceed 20 mills on sheep, and two mills on cattle. Revenues from these levies first go to the county treasurer of the county wherein the predatory animal district is located. Funds are paid to the State Treasurer only if a cooper­ative program (with the Agriculture Department) is initiated. These external entities contribute funds to assist in this program. The funds con­tributed are appropriated, along with general funds, to operate the program.

Inasmuch as local governmental units and others contribute to this account, it is appropri­ate that the account remain in the Earmarked

Fund. However, all interest earned ought to be directed to the General Fund. Pooled interest has amounted to $6,221 in Fiscal Year 1987 and $4,546 in Fiscal Year 1988.

010-022 LEAF CUTTER BEE

This account is funded through fees assessed by the Department of Agriculture to persons who transport, process or control alfalfa leaf cutter bees. Proceeds are used to provide ana­lytical services at the University of Wyoming Agriculture Extension Center in Powell. The program is designed to protect leaf cutter bees from the disease chalk brood, parasites, and pre­dators, which make the bee less able to pollinate alfalfa for seed productions. No changes to this account are recommended.

-29-

013-008 REVIEW AND COMPLIANCE

This account was established without statu­tory authority as required by W.S. 9-4-204(c), and in fact is in violation with W.S. 9-4-204(b), which requires that revenues and expenditures of this nature be handled through the General Fund. Fees are received from charges for access to cultural records in the State Historical Preser­vation Office. These file search fees amount to approximately $27,000 annually. Fees are deposited in the account and used to support the State Historic Preservation Office (budget #08) in the Archives and Historical budget. In the 1987-88 biennium, they totalled $52,000, or about five percent of the program's budget.

It is recommended that the account be abol­ished and that all future revenue be deposited directly to the General Fund. That portion of the agency's budget #08, State Historical Preser­vation Office, currently appropriated from the Earmarked Fund should be deleted and replaced with a General Fund appropriation. Based on the current balance, expected revenues and expenditures, this action will generate a net gain for the General Fund of roughly $30,630.

013-013 MICROFILM PROJECT

This account was also created in non­conformance to W.S. 9-4-204(c), and is in vio­lation of W.S. 9-4-204(b). Consequently, the account should be abolished and future proceeds deposited to the General Fund. Microfilm projects of this nature ought to be provided by the agency's regular General Fund budget. The General Fund benefits through receipt of approximately $1,900.

015-004 MEDICAL REVIEW BOARD

As of this writing, all revenues in the account have been refunded to doctors and hospitals who have contributed to the account. The account was originally created to fund medical review activities; however, due to an adverse Supreme Court decision, this activity has been suspended and the monies refunded. No further activity is anticipated; therefore, the account should be abolished.

015-008 GOVERNMENTAL CLAIMS ACT

Created by Chapter 100, 1985 Session Laws, this account was originally established to pay for claims against the State. There has been no

activity in the account for several years and none is anticipated due to creation of the Self Insur­ance Account in the Department of Administra­tion and Fiscal Control. The current balance of $130,093 should be transferred to the General Fund.

015-009 CRIME VICTIMS COMPENSATION

Revenue from imposition of $50 surcharge, added on top of penalties from County and Justice of the Peace Courts, goes into this account. These revenues are transmitted to the Attorney General's Office from the courts and are used to compensate victims of crimes as prescribed by W.S. 1-40-110. This account is an on-going activity which is appropriately situated in the Earmarked Fund. No changes are recom­mended.

037-004 LITTLE BIG HORN ADJUDICATION

Chapter 100, 1985 Session Laws, authorized this account to hold funds as required for liti­gation regarding the Little Big Horn. This liti­gation is still in progress and continuing activity in the account is anticipated. No changes are recommended.

053-004 INVESTMENT PROGRAM -ADMINISTRATION; 053-005 REVOLVING INVESTMENT FUND

Both of these accounts are related to the Amendment IV Loan Program, as authorized by W.S. 9-9-103. No changes are recommended.

053-061 FONTENELLE DAM REHABILITATION

Chapter 38, 1986 Session Laws, created this account with a $5 million appropriation. The rehabilitation of this dam is still in progress. No changes are suggested.

071-001 DHSS AUDIT FY86 AND FY87; 071-045 HOME HEALTH NURSING; 071-050 PROJECT HEALTH

These three accounts are administered by the Department of Health and Social Services. None of the accounts are authorized by statute and, therefore, it is recommended all three be abol­ished and the account balances be transferred to the General Fund. This will require the Nurs­ing Services Program General Fund appropria-

- 30-

tion be increased to replace the current ear­marked appropriation. The overall impact on the General Fund, however, will be negligible as revenues will be deposited to make up for the increased appropriation. W.S. 9-4-204(b) pro­vides direction in the administration of revenues and expenditures of this nature.

074-041 SNOWMOBILE GAS TAX

Revenue to this account is derived from the imposition of an $8 fee for each registered snow­mobile in the State. The funds are used for the purpose of improving snowmobile trails. This tax generates roughly $100,000 per year and, in addition, pooled interest is credited to the account. This amounted to $2,805 in Fiscal Year 1988 and $1,628 in Fiscal Year 1987.

It is recommended all pooled interest be deposited to the General Fund. However, inas­much as this program is financed by user fees, the Committee recommends the account be maintained for its present utilization.

201-003 LSO FEDERAL MINERAL ROYALTY

This account currently contains a balance of $75,000 which has remained in the account for at least the past year. The account is mis-named inasmuch as it currently has nothing to do with federal mineral royalties. The balance was de­rived from the Wyoming Highway Department and is currently committed to conduct a trans­portation study. No change to this account is recommended.

THE FEDERAL FUND

In early July 1988, there were 47 accounts within the Federal Fund reflecting a total cash balance of $6.3 million. This was spread among 35 different state agencies; all cash balances were derived from the federal government.

W.S. 9-4-204(d) governs the use of the Fed-eral Fund with the following provisions: 29

''The federal revenue fund is to be used to account for all revenue received from fed­eral sources which is to be used in the activi­ties and functions of state government except revenue from federal sources accounted for in the trust and agency fund, the highway fund or the game and fish fund.''

Pooled interest earnings are not distributed to any of the accounts within this fund and, con­sequently, no advantages are anticipated with any consolidation of these accounts. Thus, no recommendations are advanced regarding the Federal Fund.

TRUST AND AGENCY FUND

W.S. 9-4-204(e) describes the purposes for which accounts within the Trust and Agency Fund should be used: 30

''The trust and agency fund is to be used to account for:

(i) Money which the state administers as a trustee pursuant to law or trust agree­ment which restricts the use of the money to a specified purpose;

(ii) Money which the state holds and dis­burses as an agent, except as otherwise provided in this act;

(iii) Cash bonds, to hold money pending distribution to any person, business organization or governmental agency, to hold tax or other payments which are in dispute, and to hold advance payment for services to be rendered or goods to be delivered until the payment is earned at which time the payment shall be credited to the proper fund as provided by law; and

(iv) All revenue received from federal sources which the state disburses to local governments or to other persons or associations in accordance with fed­eral requirements.''

It was noted that there are 230 accounts within this fund, with combined cash and investment balances of roughly $362.2 million. Legislative review and appropriation of these resources is precluded by W.S. 9-4-205(a). Since passage of this legislation in 1973, the number of accounts within this fund has varied, generally peaking towards the end of a fiscal period, and con­versely, "bottoming out" at the beginning of the period. As an example, on November 20, 1987, there were 321 accounts; on July 11, 1988, the number had declined to 230.

The fund has shown considerable growth in resources over the years, as reflected in Table 11-18.

- 31 -

TABLE 11-18

HISTORY OF CASH AND INVESTMENT BALANCES

TRUST AND AGENCY FUND

Inasmuch as the resources of this fund have multiplied by over eight times since Fiscal Year 1975, there is some justification for review­ing the contents of the fund and assessing the appropriateness of the accounts residing there.

END OF FISCAL YEAR

Fiscal (in millions) Year Balance

1975 $ 43.9 1976 66.3

1977 65.4 1978 91.6 1979 94.1 1980 118.2

1981 227.1

1982 283.2

1983 326.0

1984 400.2 1985 450.9

1986 431.1

1987 336.8

1988 362.2

Source: Wyoming State Auditor's Office.

GOVERNOR'S OFFICE

For purposes of this analysis, the accounts were reviewed on an agency-by-agency basis.

001-006 GOVERNOR'S SPECIAL CONTINGENT

This account is used to account for funds received for the Governor's Prayer Breakfast. Proceeds are derived from ticket sales and are used to support expenses for the event.

Inasmuch as these are not state funds and the event is an annual recurrence, the account should remain as is.

001-010 VETERANS' AFFAIRS COMMISSION

This account should be abolished and the $62.87 balance transferred to the General Fund. The program is funded by a General Fund appropriation (program 10). The Governor's Office concurs with this recommendation.

TABLE 11-19

TRUST AND AGENCY ACCOUNTS GOVERNOR'S OFFICE

Pooled Interest Consolidate

Account FY 1988 FY 1989 Redirect to to

General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

001-006 Governor's Special Contingent -0- -0- N/A No N/A

001-010 Veterans' Affairs Commission $ 4 -0- No No N/A

001-011 International Trade -0- -0- N/A No N/A 001-021 Oil Overcharge -

Refund 911,006 900,000 No No N/A 001-031 Wyoming Commemorate -0- -0- N/A No N/A 001-040 Exxon Overcharge -

Refund -0- -0- N/A No N/A 001-041 Diamond Shamrock -0- -0- N/A No N/A 001-042 Stripper Wells -0- -0- N/A No N/A 001-043 Belridge, Palto Pinto -0- -0- N/A No N/A

TOTAL $911,006 $900,000

- 32-

001-011 INTERNATIONAL TRADE

This account should be abolished. There is no activity in the account and none is expected in the current biennium.

001-021 OIL OVERCHARGE - REFUND

This account should be abolished. The balance in the account was transferred to accounts 040, 041, 042, and 043 in early July 1988. No fur­ther activity in this account is anticipated.

001-031 WYOMING COMMEMORATE

W.S. 9-2-1606(b) provides that revenues will be received from license fees and/ or royalties in exchange for use of the official centennial logo. Funds are used to provide assistance to any local non-profit corporation or local government for planning, organizing, or conducting a centennial activity which is conducted in compliance with

STATE AUDITOR'S OFFICE

the state plan sanctioned by the Wyoming Cen­tennial Commission.

Inasmuch as this activity will be on-going through at least 1990, the account should remain as is.

001-040 EXXON; 001-041 DIAMOND SHAMROCK; 001-042 STRIPPER WELLS; 001-043 BELRIDGE, PAL TO PINTO

These accounts are all used to account for funds derived from petroleum violations. They are escrow accounts to be administered by the Governor in accordance with court settlements and U.S. Department of Energy rules. Each ac­count receives pooled interest; in Fiscal Year 1988, this totalled $911,006. In Fiscal Year 1987, pooled interest distributed to these accounts was $673,455. The Governor's Office has advised that the crediting of pooled interest to these accounts is a requirement of U.S. Department of Energy rules. Thus, no changes are recommended.

TABLE 11-20

TRUST AND AGENCY ACCOUNTS STATE AUDITOR'S OFFICE

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

003-000 Undistributed Cash $ -0- $ -0- N/A No N/A 003-036 Unemployment Insurance

Claims -0- -0- N/A No N/A 003-041 Social Security Refunds -0- -0- N/A N/A N/A 003-044 Bad Debt Recoveries -0- -0- N/A Yes $15,911.29 003-050 Undistributed Fund -0- -0- N/A No N/A 003-059 Federal Tax Withholding -0- -0- N/A No N/A 003-060 Retirement Contributions 97,000 97,000 Yes No N/A 003-061 Social Security

Contributions -0- -0- N/A No N/A 003-062 Health Insurance

Contributions 74,400 74,400 Yes No N/A 003-066 Rent Withholding -0- -0- N/A No N/A 003-069 Credit Union Deductions -0- -0- N/A N/A N/A 003-073 WPEA Dues -0- -0- N/A N/A N/A 003-074 Prepay Account -0- -0- N/A No N/A 003-075 Deferred Compensation -0- -0- N/A No N/A 003-080 Western States Mining

Workshop -0- -0- N/A Yes 120.19 003-090 Stale Date Warrants -0- -0- N/A No N/A

TOTAL $171 ,400 $171,400 $16,031.48

- 33-

Three accounts in Table II-20 should be abolished inasmuch as they are either no longer used or procedures have changed rendering them unnecessary. Included in this category are the following: 041, Social Security Refunds; 069, Credit Union Deductions; and, 073 WPEA Dues.

Several of the State Auditor's accounts are used in conjunction with the State's payroll sys­tem and, thus, must be maintained to facilitate this function. These include: 036, Unemploy­ment Insurance Claims; 059, Federal Tax With­holding; 060, Retirement Contributions; 061, Social Security Contributions; 062, Health Insur­ance Cont{ibutions; 066, Rent Withholding; 074, Prepay Account; and, 075, Deferred Compen­sation.

003-044 BAD DEBT RECOVERIES

W.S. 9-1-415 provides for the authority to col­lect debts due and owing the State of Wyoming; however, no directive is legislated showing the destination of those recoveries. The State Audi­tor traditionally has deposited these funds back into the fund of origin. As provided by W .S. 9-4-204(b), it is recommended that all future bad debt collections be deposited to the General Fund. W.S. 9-1-415 should be amended to reflect this provision. The current balance in the account should be deposited into the General Fund.

003-080 WESTERN STATES MINING WORKSHOP

This account was used to house registration fees for workshops sponsored by the State Audi­tor's Office and attended by officials and representatives of other states involved in the auditing of mineral royalties. The current balance represents the residue from income over expenses and should be transferred to the General Fund. The account should be abolished.

003-060 RETIREMENT CONTRIBUTIONS; 003•062 HEALTH INSURANCE CONTRIBUTIONS

It was previously, noted that these two accounts are among those required to facilitate processing of the State's payroll. They must remain for this purpose. However, in the past three years, these two accounts have been credited with pooled interest earnings. As noted

in the Revenue and Expenditure Study, 31

revenues are received in these accounts from deductions made from employee wages, pend­ing transfer to their ultimate destination. It is recommended that this practice be discontinued and all interest accruing as a result of this tem­porary cash balance be deposited to the General Fund. General Fund earnings should increase by an estimated $171,400 annually with this action.

STATE TREASURER'S OFFICE

As of July 11, 1988, the State Treasurer main­tained 19 accounts in the Trust and Agency Fund. These accounts are shown in Table II-21.

An examination of these 19 accounts indicates all are properly categorized in the Trust and Agency Fund. A consolidation to the General Fund appears inappropriate; however, several observations are advanced with respect to pooled interest distributions.

Out of the 19 accounts listed in Table II-21, pooled interest has traditionally been credited to five of them. The largest recipients, due to the very large average daily cash balances, are the two accounts related to GnMA (040 and 041). During Fiscal Year 1988, this amounted to $1,269,561 and $2,444,514 respectively. The State Treasurer advised that because these two accounts are subject to unresolved bankruptcy proceedings, all interest earned must be credited to the account, pending the bankruptcy out­come. However, the Attorney General has advised that ''. . . neither the trustee nor any creditor appears to have any cause of action against the State of Wyoming at this time,'' and the Attorney General recommended these funds be allocated. The State Treasurer, as of this writ­ing, is determining the proper allocation of this $67.2 million and he has informed the Attorney General that at least $48.4 million represents earned interest. The Committee recommends all interest earnings, unless directed elsewhere by the Constitution, be deposited to the General Fund.

Account 061, Escheat Account, also receives pooled interest which is deposited directly into the Common School Account, 011-005-015. This amounts to roughly $36,000 annually. W.S. 2-15-107 requires that all unclaimed assets in the Trust and Agency Fund which remain unclaimed for five years shall then be transferred to the Common School Account. However, no men­tion is made regarding interest earnings. Con­sequently, it is recommended that consistent with

- 34-

TABLE 11-21

TRUST AND AGENCY ACCOUNTS STATE TREASURER'S OFFICE

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

004-030 Wyoming-STAR $ 6 $ -0- N/A No N/A 004-040 GnMA Principal 1,269,561 1,269,000 Yes Yes $24,740,624* 004-041 GnMA Interest 2,444,514 2,444,000 Yes Yes 42,501 ,481 * 004-050 Special Fuel Tax -

Cities -0- -0- N/A No N/A 004-051 Special Fuel Tax -

Counties -0- -0- N/A No N/A 004-061 Escheat Account 36,000 36,000 Yes No N/A 004-062 Government Royalties -0- -0- N/A No N/A 004-063 Car Company Tax -0- -0- N/A No N/A 004-064 Gasoline Tax Refunds 234,710 234,000 Yes No N/A 004-066 Taylor Grazing Act -0- -0- N/A No N/A 004-067 United State Forest

Reserve -0- -0- N/A No N/A 004-068 Gas Tax Municipal

Refund 20,125 20,000 Yes No N/A 004-069 Motor Vehicle - Financial

Responsibility -0- -0- N/A No N/A 004-071 Workers' Compensation -

Performance & Indemnity Bond -0- -0- N/A No N/A

004-073 Labor Department -Bonds -0- -0- N/A No N/A

004-074 2% Mineral Severance Tax -0- -0- N/A No N/A

004-075 Sales & Use Tax Impact Assistance -0- -0- N/A No N/A

004-076 Citimae Fees -0- -0- N/A No N/A 004-998 Pooled Interest -0- -0- N/A No N/A

TOTAL $4,004,916 $4,003,000 $67,242,105*

• Portion attributed to earned interest ($48.4 estimated by the State Treasurer) is recommended to be consolidated to the General Fund, unless otherwise directed by the Constitution (General Fund share is estimated at $37.7 million).

W.S. 9-4-204(b), all future pooled interest be deposited to the General Fund.

Two other accounts in the State Treasurer's Office, 064, Gas Tax Refunds, and 068, Gas Tax Municipal Refund, also receive pooled interest. W.S. 39-6-210 describes the distribution of gaso­line and special fuels taxes. W.S. 39-6-211 and W.S. 39-6-212 govern refunds of these taxes to agricultural and municipal uses. None of these statutes discusses the distribution of pooled interest and it is recommended all pooled interest be directed to the General Fund as required by

W.S. 9-4-204(b). This will enhance General Fund income by an estimated $234,000 from account 064, and $20,000 from account 068 annually.

DEPARTMENT OF EDUCATION

The Department of Education maintains six accounts in the Trust and Agency Fund as re­flected in Table II-22. Only one of the six ac­counts was established by statute; the others were created administratively or by trust agreement. Three of the six accounts receive pooled interest.

- 35-

PUBLIC DEFENDER

W.S. 7-6-113 provides that 85 p.ercent of the Public Defender's budget shall be from state and federal sources. The balance comes from coun­ties based on county populations, county assessed valuations, and the serious crime case load in each county. There are no statutory pro­visions that any unexpended county contribu­tions to this program be returned to the coun­ties. In view of the heavy General Fund support to this program, it would seem appropriate that such county contributions, if unexpended at the end of a biennium, ought to revert to the General Fund alqng with lapsed General Fund appropri­ations. On July 11, 1988, there was $5,131 in the Public Defender's Trust and Agency Account. This amount should be transferred to the General Fund.

DEPARTMENT OF AGRICULTURE

There are four accounts in the Trust and Agency Fund managed by the Department of Agriculture. These are reflected in Table II-24.

010-006 AGRICULTURE PLANNING AND DEVELOPMENT

No statutory reference can be located creat­ing this account, however, W.S. 11-2-202(e) pro­vides the Commissioner of Agriculture may accept grants from private or public entities for developing and promoting agriculture products. Presumably, this is the purpose of this account and, thus, resources in the account are not con­ducive to General Fund merging.

010-008 STATE FAIR

This account appears to be in conflict with W.S. 11-10-106 which provides that: "All money collected from any source shall be deposited in the State General Fund." 34 W.S. 11-10-107 pro­vides the Board may allow the fair grounds to be used for other than fair purposes and may charge fees to pay expenses of maintaining the grounds and facilities. No provision, however, is made for the Board to depart from the require­ment of depositing those fees in the General Fund. It is therefore recommended this revenue be consolidated into the General Fund and the account be abolished. A General Fund appropri­ation of roughly $32,000 annually will need to be made to replace this funding source inasmuch as the program is included in the Agency's budget request. Pooled interest of roughly $1,700 annu­ally will be gained by the General Fund.

010-014 HIGHWAY WEED AND PEST CONTROL

Revenues to this account are derived from the Wyoming Highway Department. Projects are authorized by W.S. 11-5-105 in conjunction with local weed and pest control districts, with land­owners paying a portion of the costs of the pro­gram. Because there may be multiple sources of revenue to support these projects, the Trust and Agency Fund seems to be the appropriate mech­anism to house these funds. There is no require­ment pooled interest be credited here and, dur­ing Fiscal Year 1988, this amounted to $5,845. In the absence of such a requirement, it is recom­mended that all future pooled interest be credited to the General Fund.

TABLE 11-24

Account No.

010-006

010-008 010-014

010-016

TRUST AND AGENCY ACCOUNTS DEPARTMENT OF AGRICULTURE

Pooled Interest

FY 1988 FY 1989 Account Name Actual Estimate

Agriculture Planning & Development $ -0- $ -0-State Fair Misc. Activities 1,677 1,600 Highway Weed & Pest Control 5,845 5,800 Wyoming Beef Council 9,082 9,000

TOTAL $16,604 $16,400

- 38-

Consolidate

Redirect to to

General General Fund?

Fund? Yes/No Amount

N/A No N/A Yes Yes $24,798

Yes No N/A No No N/A

$24,798

TABLE 11-25

TRUST AND AGENCY ACCOUNTS DEPARTMENT OF REVENUE AND TAXATION

Pooled Interest Consolidate

Account FY 1988 No. Account Name Actual

011-020 Sales Tax Vendor Bond $ -0-

011-021 Registered Vehicle Listing -0-

011-022 Commercial Vehicle Tax Protection Acct. -0-

011-023 Special Fuel Tax Bonds -0-011-025 Special Fuel Deposits -0-011-030 Lodging Tax -0-011-060 Compensatory Fee Cash

Bonds -0-011-061 Cigarette Tax - City &

Municipal -0-011-062 Old Mineral Severance

Protest 1 ,238,178 011-063 Gas Tax - 4-Cent

& Aviation 91,626 011-064 One-Cent Gas Tax 28,091 011-065 Gas Tax - Cities &

Towns -0-011-066 Gas Tax- Counties -0-011-067 Sales Tax- County &

Municipal -0-011-068 Motor Vehicle Prorate

Registration -0-011-069 Deposits - Mineral

Severance Pending -0-011-080 Deposits - Sales Tax

Protests -0-011-081 New Mineral Severance

Protest -0-011-083 Motor Vehicle

Registration - Other Jurisdictions -0-

TOTAL $1,357,895

010-016 WYOMING BEEF COUNCIL

No changes are recommended in the adminis­tration of this account. Revenues to the account are paid by Wyoming producers on a per head of cattle sold basis. A five percent deduction from collections is made and transferred to the Livestock Board for collecting and handling these funds, and by law the account should pay

Redirect to to FY 1989 General General Fund?

Estimate Fund? Yes/No Amount

$ -0- N/A No N/A

-0- N/A Yes $246,588

-0- N/A No N/A -0- N/A No N/A -0- N/A No N/A -0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

1,238,000 No No N/A

91,600 No No N/A 28,000 No No N/A

-0- N/A No N/A -0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

-0- N/A No N/A

$1,357,600 $246,588

the Department of Agriculture for handling financial work associated with this account.

DEPARTMENT OF REVENUE AND TAXATION

Table II-25 reflects the accounts in the Trust and Agency Fund administered by the Depart­ment of Revenue and Taxation.

- 39-

All these accounts appear to be consistent with the intended use of the Trust and Agency Fund with the exception of account 021, Registered Vehicle Listing. W.S. 31-5-1214(f) provides that the Revenue Department shall keep all abstracts received from every justice of the peace or court judge related to traffic complaints, citations or charges. These records are open to public inspec­tion and revenue is generated from the sale of copies of them. On July 11, 1988, the account contained $246,588; revenue is projected at $72,000 annually, with expenditures of $48,000. This account should be administered in compli­ance with W.S. 9-4-204(b) and, thus, consoli­dated into the General Fund. The projected expenditures should be made therefrom, thus requiring a General Fund appropriation. The enhancement to the General Fund would be approximately $300,000 for the first biennial period, and $24,000 per year thereafter.

Three of the accounts in the Revenue Depart­ment receive pooled interest. These are 062, Old Mineral Severance Tax Protest; 063, Gas Tax-4-Cent and Aviation; and, 064, One-Cent Gas Tax. W.S. 39-6-210 governs the distribution of gasoline licenses taxes. Provisions are made for the allocation of these revenues to various enti­ties. No provision is made for the crediting and distribution of pooled interest; however, the

Attorney General advises that W.S. 24-1-119 coupled with Article 15, Section 16 probably cre­ate a requirement that interest earnings cannot be deposited to the General Fund.

ARCHIVES, HISTORICAL AND MUSEUM DEPARTMENT

This agency maintains one account in the Trust and Agency Fund, 013-008, which was created to accommodate funds transferred from the Territorial Prison project in Albany County derived from the one percent capital facilities tax. The account should remain as is.

ARTS COUNCIL

The Trust and Agency account maintained by this agency is used to house the proceeds from an endowment donated by a private Wyoming resident. Interest from this endowment is used to grant awards to aspiring writers. The donor has restricted all interest earned to this purpose.

DEPARTMENT OF ENVIRONMENTAL QUALITY

On July 11, 1988, the Department of Environ­mental Quality maintained 13 accounts within the Trust and Agency Fund. These are shown in Table 11-26.

TABLE 11-26

TRUST AND AGENCY ACCOUNTS DEPARTMENT OF ENVIRONMENTAL QUALITY

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

020-020 Air Quality Penalties $ 16,173 $ 16,100 Yes No N/A 020-030 Water Quality Penalties 34,240 34,200 Yes No N/A 020-040 Land Quality Penalties 12,669 12,600 Yes No N/A 020-041 Land Quality Special Projects 3,362 3,300 Yes No N/A 020-042 OGLE Petroleum, Inc. - 50¢ 82,499 82,400 Yes No N/A 020-044 Abandoned Mine Reclamation 26,239 26,200 No No N/A 020-045 Subsidence Program 1,283 1,200 No No N/A 020-046 Mine Subsidence Premium 2,109 2,100 No No N/A 020-047 Mine Subsidence Set Aside Grant 16,677 16,600 No No N/A 020-051 Powder River Basin 281 200 Yes No N/A 020-060 Solid Waste Penalties 2,965 2,900 Yes No N/A 020-090 Environmental Quality Cash Bonds 12,590 12,500 No No N/A 020-095 Husky Oil Trust 674 600 No No N/A

TOTAL $211,761 $210,900

-40-

These accounts may be classified as either: a) fines, penalties, and forfeiture accounts; or, b) Abandoned Mine Reclamation Accounts. Nine accounts fit the former definition, and four accounts (044 through 047) fall into the latter category. W.S. 35-11-424 provides that all for­feitures and other monies collected shall be deposited to the Trust and Agency Fund and that all fees shall be deposited in the General Fund. No mention is made with regard to earned interest; therefore, the Committee recommends diversion to the General Fund.

Inasmuch as the Abandoned Mine Reclama­tion Accounts are funded primarily with federal funds, it is appropriate that interest earned on these funds be credited to these accounts (044, 045, 046 and 04 7). This is also appropriate in the cases of the Environmental Quality Cash Bonds Account (090) and the Husky Oil Trust Account (095).

WATER DEVELOPMENT COMMISSION

Account 029-090, Shoshone Water Treatment Plant, contained $14.6 million on July 11, 1988. These funds are being utilized to construct a water treatment plant which will be completed in 1990. All interest accruing is being deposited into the General Fund. No changes are recom­mended.

EMERGENCY MANAGEMENT

This agency maintains two accounts within the Trust and Agency Fund. One is funded by the federal government; the other by employees of the agency. Neither receives pooled interest and neither is suitable for consolidation into the General Fund.

EMPLOYMENT SECURITY COMMISSION

The Commission maintains three accounts within the Trust and Agency Fund. W.S. 27-3-516(d) provides accrued interest should be refunded to the payor, in the case of bond accounts (036-090 and 036-091); consequently, pooled interest should continue to be credited to these two accounts.

Account 036-003, Employment Security Revenue, however, was created by W.S. 27-3-207 which, by its language, indicates that no federal funds are involved in this account; only "replacement" funds "from the General Fund." Inasmuch as the State of Wyoming is contribut-

ing to the Commission in this manner, it seems only appropriate that the pooled interest be deposited to the General Fund, not to this account. This would enhance General Fund earnings by roughly $6,000 annually.

STATE ENGINEER

W.S. 41-4-201 through W.S. 41-4-211 governs the activities of the State Board of Control. These statutes provide for the assessment of fees, primarily as a result of photocopying and cer­tifying documents and instruments related to water rights and appropriations. All statutes are silent with regard to the disposition of such col­lection, with two exceptions: W.S. 41-4-210 and W.S. 9-4-204(b). W.S. 41-4-210 provides: ''Funds derived from the sale of such volumes shall be paid into the general fund of the State of Wyoming. " 35 In light of this provision, it is recommended that this account be consolidated to the General Fund and the board's expenses be appropriated therefrom. On July 11, 1988, the account contained $27,818. The agency projects revenue and expenditures of $14,475 in each of the next two years. Thus, enhancement to General Fund resources will be $27,818.

PARI MUTUEL COMMISSION

W.S. 11-25-105(d) provides that all fines and penalties assessed as a result of pari mutuel wagering will be credited to the County School Fund. This is consistent with Article 7, Section 5 of the Wyoming Constitution.

STATE EXAMINER

The Collection Agency Board Account (039-008) in the Trust and Agency Fund is uti­lized for two purposes: a) a collection agency has the option to deposit cash in lieu of a bond; the agency then normally obtains a bond and requests a refund; and, b) proceeds of a bond of a terminated agency are held for disbursement to claimants. If the total claims exceed the amount of the bond, disbursements are prorated. Under either case, the resources of this account are unavailable to the State's General Fund, thus no changes are recommended.

GAME AND FISH COMMISSION

The Game and Fish Commission maintains two accounts in the Trust and Agency Fund. One is used to deposit license fees pending results of

- 41 -

drawings. Unsuccessful applicants receive refunds from this account; the remainder is transferred to the Game and Fish Fund. The second account is used to house performance bqnds of construction contractors in the field of wildlife habitat management. No changes are recommended in the administration of either account.

FIRE PREVENTION AND ELECTRICAL SAFETY

The two accounts maintained by this agency (041-002 and 041-003) are used to hold registra­tion and seminar fees paid by participants receiv­ing training in either fire prevention or electri­cal safety. No changes are recommended.

GEOLOGICAL SURVEY

The account maintained by this agency (042-004) was established in 1987 and is used to handle revenue from the sale of geological pub­lications which are published by outside pub­lishers. The agency purchases these materials and then sells them to various people visiting the Geological Survey Offices. The agency makes approximately 50 percent on the sales price and this profit is periodically transferred to the General Fund. Inasmuch as the agency has no statutory authority to spend these fees, it appears a General Fund appropriation is required and all income should be deposited to the General Fund.

WYOMING INSURANCE DEPARTMENT

The Insurance Department maintains two accounts in the Trust and Agency Fund. The Foreign Insurance Protest Account (044-001) represents premium taxes paid by several insur­ance companies under protest and claims have been filed for refunds with the State Auditor. The basis for this protest stems from the insur­ance companies' allegations that Wyoming's premium tax statutes are discriminatory and remain unconstitutional. Pursuant to W. S. 26-4-104, certain premium tax credits are awarded to all insurers based on their percent­age of total assets invested in Wyoming. The for­eign insurers have filed suit claiming the Wyom­ing premium tax structure violates the

equal protection clause by taxing the domestic industry at a lower rate. The Legislature amended the Wyoming Insurance Code in 1986, requiring all insurance companies to be taxed at the same rate. The Attorney General's Office will file for a Declaratory Judgment in District Court to resolve this matter.

The Insurance Department's only remaining "T & A" account relates to that portion of the premium tax distributed to the Firemen's Pen­sion Fund. Pursuant to W.S. 15-5-202, 50 per­cent of the gross annual tax levied on all fire insurance premiums are appropriated for the benefit of the Firemen's Pension Fund. An addi­tional 40 percent of the gross fire insurance premium tax is transferred to the Volunteer Fire­men's Pension Fund in accordance with W.S. 15-5-202. The Committee recommends these funds remain segregated to avoid any compli­cations concerning the actuarial benefits for all Wyoming firemen.

MANPOWER PLANNING ADMINISTRATION

The Manpower Supplies Trust Account (046-004) was established to house revenue generated from the occasional sale of surplus equipment. Federal regulations dictate that the funds be either spent on the program or returned to the U.S. Treasury.

LABOR AND STATISTICS DEPARTMENT

This agency maintains two accounts in the Trust and Agency Fund. The Wage Claim Pay­ments Account (047-010) houses funds collected by the Commissioner of Labor on behalf of clai­mants and if unclaimed for a period of two years from the date of collection, it reverts to the General Fund. No changes are recommended.

The Wyoming Women's Commission's con­tributions are donated funds which the Depart­ment administers. Again, no changes are recom­mended.

ECONOMIC DEVELOPMENT AND STABILIZATION BOARD

The four Trust and Agency Accounts main­tained by the Economic Development and Stabilization Board are shown in Table II -27.

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TABLE 11-27

TRUST AND AGENCY ACCOUNTS ECONOMIC DEVELOPMENT AND STABILIZATION BOARD

Pooled Interest Consolidate

Redirect to to Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

053-006 Promotion & Investigation $ 1,045 $ 1,000 Yes No N/A

053-060 Small Water Loans 45,834 45,800 Yes No N/A 053-061 Fontanelle 2,383 2,300 No No N/A 053-070 Small Water Loan -

Farm Loan Board 2,339 2,300 No No N/A

TOTAL $51,601 $51,400

TABLE 11-28

TRUST AND AGENCY ACCOUNTS DEPARTMENT OF PUBLIC LANDS

Pooled Interest Consolidate

Redirect to to

Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

060-002 Forestry Deposits $ -0- $ -0- N/A No N/A 060-003 Emergency Fires -

Supervisor Forestry 6,888 6,800 No No N/A 060-004 Public Lands -

Deposits 38,095 38,000 No No N/A 060-032 Farm Loan Revenue 5,144 5,100 Yes Yes $88,630

060-050 County Fire Assist. -Forestry 2,166 2,100 No No N/A

060-063 Fees/Entitlements -School Districts 102,165 -0- N/A N/A N/A

060-064 Public Land Revenue 6,481 6,400 Yes Yes 8,802

060-065 Tepee Pools Loan -0- -0- N/A No N/A 060-066 Fees/Grants-School

Districts 373,755 -0- N/A N/A N/A

060-090 Joint Powers Board Loans 533,541 533,000 No No N/A

060-091 Cheyenne Phase II Loans 179,173 179,100 No No N/A

060-099 Farm Loan Loss Reserve 33,801 33,800 No No N/A

TOTAL $1,281,209 $804,300 $97,432

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053-006 PROMOTION AND INVESTIGATION

There is no statutory authority for this account according to the Economic Development and Stabilization Board (EDSB). As of July 11, 1988, the account contained $58,289. The account is used primarily to receive and disburse funds for support of the Governor's Tour. Revenue is der­ived from conference and registration fees, and state agency donations. Each year, the account receives pooled interest of a few thousand dol­lars; in Fiscal Year 1988, it amounted to $1,045. Inasmuch as there is no legal justification for crediting pooled interest to this account, the Committee recommends that all future pooled interest be credited to the General Fund.

053-060 SMALL WATER LOANS

Again, no statutory citation was provided by the EDSB and none were located. However, the account was created to accommodate the receipt of FHA funds (approximately $1 million). These funds are loaned and all principal and interest payments, when received, are deposited to this account. Currently, there are 37loans outstand­ing. Loans are administered in coordination with Public Lands and the Farm Loan Board. The account is receiving pooled interest which in Fis­cal Year 1988, totalled $45,834. It is recom­mended that future pooled interest be deposited to the General Fund.

The remaining two accounts (061 and 070) were created by statute. No changes are recom­mended.

OIL AND GAS CONSERVATION COMMISSION

The Seismic Bond Forfeiture Account main­tained by this agency (055-002) is used to hold bond proceeds. When seismic holes are improperly plugged and abandoned, the Com­mission revokes the bond and hires contractors to plug the holes, using the bond money. No changes are recommended.

DEPARTMENT OF PUBLIC LANDS

The Department of Public Lands maintains 12 accounts in the Trust and Agency Fund, all of which receive pooled interest. These accounts are shown in Table 11-28.

It appears all of these accounts are appropri­ately classified in the Trust and Agency Fund,

as the revenues are from a variety of sources, namely deposits, bonds, county, fees, etc. How­ever, there may be an opportunity to redirect some of the pooled interest currently accruing here to the General Fund. As discussed previ­ously, accounts 063 and 066 were transferred to the Earmarked Fund, account 005-009. Thus, pooled interest scheduled to these accounts will accrue there. Several of the other accounts must continue to receive pooled interest for a variety of reasons: 002, includes some federal funds; 003, includes county funds; 004, interest goes to the Permanent Income Fund; 050, includes all county funds; 065, 090 and 091 are merely accounts established to accommodate loan processing and the interest is unavailable for diversion. Some of these funds are used to restore losses to the State's permanent funds.

Pooled interest accruing to the remaining accounts (032 and 004) totalled only $11,625 last year. The General Fund's income should be enhanced by a similar amount in recurring years. Although most of these accounts were initially set up to accommodate the disbursement of funds being loaned or granted from the State's permanent funds, there is no statutory mention of pooled interest supplementing the accounts.

STATE LIBRARY

The State Library maintains three accounts in the Trust and Agency Fund. Account 065-006, Services Reimbursed is used by counties, com­munity colleges, school districts, and state insti­tutions. The ordering library advances the funds; the State Library places orders for materials and pays for the shipment on behalf of the ordering library and the books are shipped directly to the ordering library. All participants enjoy the econ­omies of mass purchasing. Inasmuch as these funds do not belong to the State, they should remain in this account. The pooled interest earned, however, should be deposited to the General Fund. In Fiscal Year 1987, this totalled $7,295.

Account 065-008, Data Base Research, gener­ates revenues as a result of data base searches conducted for state employees in their profes­sional endeavors. Rarely does the State Library charge for this service as it is provided in its nor­mal operating budget. Searches are only billed if the cost exceeds $25. The account should be abolished and the activity continued under the State Library's routine library services.

- 44-

Account 065-009, Circulation System, is used to gather deposits on maintenance agreements for computer terminals, multiplexors, modems, and printers housed in all county and commu­nity college libraries. The funds are collected from the using libraries and then transferred to Data Services in DAFC, which ultimately pays the vendor for these agreements. No changes in administration of this account are recom­mended.

UNIVERSITY OF WYOMING

The University of Wyoming Payroll Deduc­tions Account in the Trust and Agency Fund (067-011) is used to accrue funds for certain faculty members to meet their payroll payments during the summer months. No changes are recommended.

WORKERS' COMPENSATION AND WYOMING RETIREMENT SYSTEM

Both of these agencies maintain numerous Trust and Agency Fund accounts to facilitate management of their programs. Inasmuch as revenues are resultant from nonstate sources, i.e., employer and employee contributions, none are suitable for consolidation to the General Fund. Additionally, interest earned on the account balances is legitimately credited back to the account from which earned. No changes are recommended.

HEALTH AND SOCIAL SERVICES

The Department of Health and Social Serv­ices maintains 11 accounts in the Trust and Agency Fund. None of these accounts received pooled interest in the past. These are shown in Table 11-29.

According to the Department's Fiscal Control Systems Administrator, all of these accounts are established to receive gifts, donations, and other restricted income for use for specific purposes. Most excess funds were transferred to the General Fund a couple of years ago through a cooperative effort between the Department and the State Auditor's Office. Inasmuch as none of these accounts receives pooled interest, no changes are recommended.

RECREATION COMMISSION

As of this writing, the Recreation Commis­sion maintains one account in the Trust and Agency Fund (074-018, Recreation-Special Projects). According to the agency, this account is used to: a) serve as a holding account for dona­tions received pending an approved budget from the Governor; b) serve as a depository for Hynds Lodge donations; c) serve as a temporary hold­ing account at fiscal year-end pending the estab­lishment of carry-over budgets.

This account has received pooled interest in past years which seems appropriate in view of

TABLE 11-29

TRUST AND AGENCY ACCOUNTS DEPARTMENT OF HEALTH AND SOCIAL SERVICES

Pooled Interest Consolidate

Redirect to to

Account FV 1988 FV 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

071-001 Wyoming Health Conference $-0- $-0- No No N/A 071-002 Governor's Commission on

Employment of the Handicapped -0- -0- No No N/A 071-020 Preventive Health -0- -0- No No N/A 071-040 Family Health Services -0- -0- No No N/A 071-050 Personal Needs -0- -0- No No N/A 071-051 Overpayment Recovery -0- -0- No No N/A 071-053 Child Support -0- -0- No No N/A 071-060 Business Enterprise -0- -0- No No N/A 071-080 Community Programs -0- -0- No No N/A 071-090 Aging -0- -0-

- -TOTAL $-0- $-0-

-45-

the nature of the account's contents. No changes are advanced with regard to administration of this account.

STATE INSTITUTIONS

The State Institutions have a total of 31 accounts in the Trust and Agency Fund which were established to accommodate gifts, dona­tions, bequests, and trusts which they administer on behalf of their patients, residents, and/or inmates. Most of these accounts do receive pooled interest and in all cases, this crediting of interest appears appropriate in view of the nature and origin of the accounts' resources. No recom­mendations are advanced.

DEBT SERVICE FUND

The Debt Service Fund is perhaps the least used fund in state government. W .S. 9-4-204(f) provides that: 36

''The debt service fund is to be used to account for money deposited in the state treasury for the payment of principal and interest and for the accumulation of reserves for bonded or other indebtedness . . . ''

There are currently only four accounts on the books, and only one of these, 060-034, Wyoming Community College Bond Debt Service, re-

fleets activity. On July 11, 1988, this account contained a cash balance of $6, 187. No changes are recommended.

INTRAGOVERNMENTAL FUND

This fund was created by W.S. 9-4-204(p) and was designed for agencies of government which provide services for a fee to other government entities (i.e., DAFC). The law provides that the fund: 37

''. . . is to be used to finance and account for services and commodities furnished by state government units which are entirely or predominantly self-supporting from charges to other state government units for the serv­ices and commodities . . . The servicing government unit is expected to recover the costs of operation including provisions for depreciation of facilities and overhead allo­cations. The depreciation recoveries shall be credited to and kept intact in a reserve account for legislative authority to expend. The overhead recoveries credited to the general fund . . . ''

The fund has been used primarily by DAFC for five of its programs: data processing, motor pool, supply warehouse, central duplicating, and telecommunication leasing. Other agencies, such as Aeronautics and the Honor Farm, are cur­rently maintaining an account in this fund also. These accounts are shown in Table 11-30.

TABLE 11-30

INTRAGOVERNMENT AL FUND

Pooled Interest Consolidate

Redirect to to Account FY 1988 FY 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

006-007 DAFC-Data Services $ 82,599 $ 82,500 Yes No N/A 006-010 DAFC - Motor Vehicle

Management 205,076 205,000 Yes No N/A 006-012 DAFC - Supply Warehouse 35,782 35,700 Yes No N/A 006-084 DAFC - Central Duplicating 144,523 144,500 Yes No N/A 006-084 DAFC- Telecommunication

Leasing 10,173 10,100 Yes No N/A 009-003 Aeronautics Operational

Services 33,236 33,200 Yes No N/A 089-002 Wyoming Honor Farm -

Agricultural Sales -0- -0- N/A No N/A

TOTAL $511,389 $511,000

- 46-

During the last fiscal year, these accounts received a total of $511,389 in pooled interest earnings. Clearly, the law does not require that pooled interest be credited to any of these accounts and, in fact, suggests that all charges and billings include provisions for overhead which is to be credited to the General Fund. Thus, the Committee recommends all future interest earnings be credited to the General Fund, enhancing General Fund income by an estimated $500,000 annually.

HIGHWAY FUND

It was noted in the Revenue and Expenditure Study38 that contrary to common belief, the Wyoming Highway Department is funded primarily by the State of Wyoming, not by the federal government. Between Fiscal Year 1977 and Fiscal Year 1987, federal funds averaged 31.5 percent of total Highway Department receipts. Conversely, then, 68.5 percent of the Highway Department revenues were provided by state sources.

During the 36-month period between October 1984 and September 1987, the Highway Fund had a total average monthly cash balance of $98.3 million. 39 One of the benefits of main­taining a balance of this relatively large amount is that interest earnings can be sizeable. In analyzing revenues and pooled interest for this agency over the past several years, the State Auditor has reported that in Fiscal Year 1986, a total of $12.1 million was credited to the agency. In Fiscal Year 1987, it was $7.6 million; and, in Fiscal Year 1988, pooled interest totalled $5.2 million.

The Highway Department maintains five different accounts within the Highway Fund. These are shown in Table 11-31.

Two of the five accounts are federally funded: 004, UMTA and 718, State Highway Fund. Clearly, interest accruing as a result of federal funds ought not be diverted to the General Fund. However, the remaining three accounts are state funded and any attempt to divert these pooled interest earnings to the General Fund is not only appropriate, but desirable, in view of the large average daily cash balances in these accounts over the past several years. The Committee esti­mates that this recommendation will yield approximately $3.3 million annually to the General Fund.

The Committee considered the potential of diverting certain portions of this agency's income streams to the General Fund, e.g., severance taxes and federal mineral royalties. However, the Committee concluded that, much like Water Development and Game and Fish resources, the highway programs meet one or more of the four "qualities" qualifying this agency to have dedi­cated income streams.

Before leaving this agency, it is interesting to note that on June 30, 1988, account 005, Coal Severance Tax, contained no balance, while the balance in account 718, State Highway Fund, increased to $61.5 million, reflecting the fact the agency transferred the entire balance from one account into the other. During the period between Fiscal Year 1984 and Fiscal Year 1987, the Coal Severance Tax Account maintained an average balance of $44.6 million while the State Highway Fund Account maintained an average balance of only $32.2 million. Thus, the balance

TABLE 11-31

HIGHWAY FUND

Pooled Interest Consolidate

Redirect to to

Account FV 1988 FV 1989 General General Fund?

No. Account Name Actual Estimate Fund? Yes/No Amount

045-004 Urban Mass Transit Authority (UMTA) $ 8,618 $ 8,600 No No N/A

045-005 Coal Severance Tax 2,000,144 2,000,000 Yes No N/A 045-609 County Farm to Market 782,633 782,600 Yes No N/A 045-718 State Highway Fund 1,887,194 1,887,100 No No N/A 045-723 Primary Secondary

Forest 506,144 506,100 Yes No N/A

TOTAL $5,184,733 $5,184,400

- 47-

on June 30, 1988 of $61.5 million is nearly twice the amount than is normal. In fact, during the 36-month period analyzed in the Revenue and Expenditure Study, the only month in which this account had anywhere near this balance was June 1985. Consequently, controls should be put in place to prevent the agency from trans­ferring cash from the three state accounts into the State Highway Fund Account, which is con­sidered to be made up of federal funds, until it is absolutely needed. Otherwise, all of the accrued interest will be earned by the federal account at the expense of the state accounts, unless interest is required to be credited to the General Fund.

GAME AND FISH FUND

Account No. Account Name

040-001 Administrative Division

040-002 Fiscal Division 040-003 Communications

Division 040-004 Habitat & Technical

Services Division 040-005 Fish Division 040-006 Game Division 040-009 Agency Common 040-021 100% Reimbursable

Contracts 040-051 Enhancement

Administration 040-053 Enhancement

Communications 040-054 Enhancement Habitats 040-055 Enhancement Fish 040-056 Enhancement Game 040-090 Game & Fish

Revenue 040-091 Gifts & Donations 040-092 Mitigation 040-093 Reserve for Capital

Replacements 040-094 Conservation Stamp 040-095 Land Acquisitions 040-098 Landowner Payments 040-099 Wildlife Trust

TOTAL

W. S. 9-4-204U) specifies the intended utiliza-tion of the Game and Fish Fund: 40

''The game and fish fund is to be used to account for all revenues received by the game and fish department the expenditures of which are restricted to wildlife purposes or which are available for expenditure by the Wyoming game and fish commission excluding general fund appropriations."

On June 30, 1988, the Game and Fish Com-mission had a total of $38.5 million in the fund, scattered among 21 accounts. These are shown in Table 11-32.

TABLE 11-32

GAME AND FISH COMMISSION

Pooled Interest Consolidate

Redirect to to

FY 1988 FY 1989 General General Fund?

Actual Estimate Fund? Yes/No Amount

$ -0- $ -0- N/A No N/A -0- -0- N/A No N/A

-0- -0- N/A No N/A

-0- -0- N/A No N/A -0- -0- N/A No N/A -0- -0- N/A No N/A -0- -0- N/A No N/A

-0- -0- N/A No N/A

-0- -0- N/A No N/A

-0- -0- N/A No N/A -0- -0- N/A No N/A -0- -0- N/A No N/A -0- -0- N/A No N/A

2,731,305 2,731,000 Yes No N/A 3,058 3,000 No No N/A

-0- -0- N/A No N/A

29,030 29,000 Yes No N/A -0- -0- N/A No N/A

232,799 232,700 No No N/A -0- -0- N/A No N/A -0- -0- N/A No N/A

$2,996,192 $2,995,700

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During the past three years, pooled interest to this fund has ranged from $3 .4 million in Fis­cal Year 1986 to $2.9 million in Fiscal Year 1987, and $3 million last year. Clearly, the Game and Fish Commission is self-sustaining, requiring no support from the State's General Fund, and there are many who would argue this is as it should be. They would further argue that, inas­much as this agency does not rely on General Fund support, its revenue is its own and no dis­ruption of this revenue stream ought to be con­sidered. As much as the Committee would like to agree, there is simply no way to ignore the fact that the rest of state government is in a fis­cal dilemma and all possible alternatives for revenue enhancement must be considered, at least until such time as the fiscal crisis is under control.

It is the Committee's further belief that all government agencies should participate in the resolution of this funding problem and that, at least during the interim, all agencies want to con­tribute to an orderly resolution of the revenue shortage. It is neither equitable nor reasonable that any agency be exempt from budget con­straints or belt-tightening when all of those around them are struggling to cope with reduced resources. The demoralizing effect of such exemption is too destructive to the overall per­formance of the government bureaucracy. Thus, the Committee recommends that this pooled interest also be diverted to the General Fund. Obviously, interest earned on donated and trust funds would be excluded from this diversion, resulting in enhanced General Fund income of roughly $2.8 million annually.

UNIVERSITY OF WYOMING FUND

The University of Wyoming maintains two accounts in this fund: 067-012, Student Fees and 067-050, Federal Mineral Royalties. On June 30, 1988, these accounts reflected cash balances of $2.2 million and $2.6 million, respectively. Interest earnings during Fiscal Year 1988 were $296,700 and $287,544, respectively, for a total of $584,244. Consistent with the recommenda­tions advanced throughout this chapter, the Committee suggests that this pooled interest too be redirected to the General Fund. Inasmuch as the University of Wyoming is funded primarily by the General Fund, any consequence to this loss of revenue, which is quite minuscule in rela-

tion to total University spending, can be requested through the budget process. ·

IN SUMMARY

Wyoming's use of earmarking and dedication of income streams appears to be out of line when compared to the other 49 states. According to the National Conference of State Legislatures, in 1984, Wyoming earmarked 69 percent of its total revenue, compared to the national average of only 21 percent. Only one state, Alabama, with 89 percent of its taxes being designated for specific purposes, had a higher earmarking level than Wyoming.

Though the earmarking of revenues does have certain advantages in specific instances (i.e., uninterrupted, though sometimes fluctuating, income stream, can be tied directly to the payer, etc.), generally the Joint Legislative-Executive Committee on Government Efficiency, as well as most other states studied, embraced the notion that earmarking should be avoided wherever possible in an attempt to provide both the Gover­nor and the Legislature with greater control of state budgeting and spending policies. This was deemed especially important during periods of declining resources when all government entities are in fierce competition for scarce resources.

Correspondingly, the Committee adopted the position that where possible, funds and accounts should be consolidated into the General Fund and if feasible, all pooled interest should accrue to the General Fund even in those cases where earmarked or other accounts are allowed to remain outside of the General Fund. Recommen­dations to this effect, thus, are contained on an account-by-account basis throughout this chap­ter. A summary of the impact of such recom­mendations is reflected in Table II-33.

Overall, this analysis has recommended approximately $33 million of the $72.5 million in pooled interest which is annually credited to funds outside of the General Fund be redirected into the General Fund. Additionally, the con­solidation of Earmarked and Trust and Agency Fund Accounts into the General Fund, if accom­plished as recommended, would increase General Fund resources by roughly $51.2 million on a one-time basis. The major contributors involved in this recommendation are the two Water Development Accounts in the Earmarked Fund which would provide $12,750,000 in pooled interest, and the two GnMA accounts in the

-49-

Trust and Agency Fund, which will net roughly $48.4 million in additional General Fund resources. These actions would enhance General Fund resources by an estimated $116.6 million over a biennial period. Clearly, implementation of these recommendations will involve some hard political decisions and perhaps, in some cases, some sacrifices. There are no magic solutions

involved in de-earmarking and discontinuance of income streams. There is no "new found" money. What is suggested, instead, is an incor­poration of more of the existing resources into the budget process. What will result is not addi­tional resources, but rather a chance to better utilize the resources the State already has.

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TABLE 11-33

SUMMARY OF RECOMMENDATIONS ENHANCEMENT TO GENERAL FUND RESOURCES

POOLED INTEREST AND FUND CONSOLIDTION

General Current One-Year Projected Fund Biennium Net Diversion Consolidation Revenue Approprtn. Enhancement

Account of Pooled of Account Current Required to General No. Account Name Interest Balance Biennium to Replace Fund

EARMARKED FUND

004-003 Legislative Govt. Royalty Impact Asst. $ 1,200,000 $ -0- $ -0- $ -0- $ 1,200,000

005-005 Education Audit Exceptions -0- 6,535 -0- -0- 6,535 005-008 School District

Capital Construction 2,000,000 -0- -0- -0- 2,000,000 005-009 School Foundation Program 600,000 -0- -0- 600,000 -0-006-016* State Self Insurance 250,000 -0- -0- -0- 250,000

VI 010-015 Rodent & Predatory ......

Animal Control 4,500 -0- -0- -0- 4,500 013-008 Review & Compliance -0- 27,396 54,000 50,766 30,630 013-013 Micro Film Project -0- 1,913 -0- -0- 1,913 015-008 Govt. Claims Act -0- 130,093 -0- -0- 130,093 023-001' 002,004 Public Service Commission 120,800 2,007,057 3,309,772 4,061,066 1,376,563 029-002 Water Development I 11,000,000 -0- -0- -0- 11,000,000 029-003 Water Development II 1,750,000 -0- -0- -0- 1,750,000 051-007 Livestock Inspection 140,000 2,113,916 3,881,420 2,732,036 3,403,300 055-001 Oil & Gas Commission 110,000 1,017,834 1,271,820 2,264,991 134,663 057-003* Community College

Contingency Reserve 60,000 -0- 3,400,000 3,400,000 60,000 060-006* Coal Impact Tax 1 ,452,115 -0- -0- -0- 1 ,452,115 060-009 Government Royalty

Distribution 1,900,000 -0- -0- -0- 1,900,000 071-045 Home Health Nursing -0- 305,067 3,660,850 3,965,917 -0-074-041 Snowmobile Gas Tax 2,800 -0- -0- -0- 2,800 Various Professional Licensing Boards 124,100 2,051 '145 2,395,596 2,466,417 2,104,424

-

TOTAL EARMARKED FUND $20,714,315 $ 7,660,956 $17,973,458 $19,541,193 $26,807,536

General Current One-Year Projected Fund Biennium Net Diversion Consolidation Revenue Approprtn. Enhancement

Account of Pooled of Account Current Required to General No. Account Name Interest Balance Biennium to Replace Fund

TRUST AND AGENCY FUND

003-044 Bad Debt Recoveries $ -0- $ 15,911 $ -0- $ -0- $ 15,911 003-080 Western States Mining Workshop -0- 120 -0- -0- 120 003-060 Retirement Contributions 97,000 -0- -0- -0- 97,000 003-062 Health Insurance Contributions 74,400 -0- -0- -0- 74,400 004-040 GnMA Principal 1,269,000 4,641,443 -0- -0- 5,910,443 004-041 GnMA Interest 2,444,000 40,057,481 -0- -0- 42,501,481 004-061 Escheat Account 36,000 -0- -0- -0- 36,000 004-064 Gas Tax Refunds 234,000 -0- -0- -0- 234,000 004-068 Municipal Gas Tax Refunds 20,000 -0- -0- -0- 20,000 005-010 School Commodity Revolving Fund 2,100 -0- -0- -0- 2,100 005-011 Education Sales & Service -0- 7,051 48,000 50,000 5,051 006-007 Depreciation - Data Services 175,000 -0- -0- -0- 175,000 006-010 Depreciation - Motor Pool 215,000 -0- -0- -0- 215,000

Vl 006-012 Depreciation - Supply/WHO 3,700 -0- -0- -0- 3,700 N

006-084 Depreciation - Central Duplicating 41,400 -0- -0- -0- 41,400 008-001 Public Defender County Revenue -0- 5,131 -0- -0- 5,131 010-008 State Fair 1,600 24,798 58,000 64,300 20,098 010-014 Highway Weed & Pest Control 5,800 -0- -0- -0- 5,800 011-021 Registered Vehicle Listing -0- 246,588 72,000 48,000 270,588 020-020 Penalties - Air Quality 16,100 -0- -0- -0- 16,100 020-030 Penalties - Water Quality 34,200 -0- -0- -0- 34,200 020-040 Penalties - Land Quality 12,600 -0- -0- -0- 12,600 020-041 Special Projects - Land 3,300 -0- -0- -0- 3,300 020-042 Ogle Petroleum 82,400 -0- -0- -0- 82,400 020-051 Powder River Basin 200 -0- -0- -0- 200 020-060 Penalties - Solid Waste 2,900 -0- -0- -0- 2,900 036-003 Employment Security Commission

Reserve 6,000 -0- -0- -0- 6,000 037-002 Board of Control -0- 27,818 14,475 14,475 27,818 053-006 Promotion & Investigation 1,000 -0- -0- -0- 1,000

. 053-060 Small Water Loans 45,834 -0- -0- -0- 45,834 060-032 Farm Loan Revenue 5,100 88,630 -0- -0- 93,730

General Current One-Year Projected Fund Biennium Net Diversion Consolidation Revenue Approprtn. Enhancement

Account of Pooled of Account Current Required to General No. Account Name Interest Balance Biennium to Replace Fund --060-064 Public Land Revenue 6,400 -0- -0- -0- 6,400 065-006 Services Reimbursed 7,295 -0- -0- -0- 7,295 065-008 Data Base Research -0- 328 -0- -0- 328

TOTAL TRUST AND AGENCY FUND $ 4,842,329 $45,115,299 $ 192,475 $ 176,775 $49,973,328

INTRAGOVERNMENTALFUND

006-007 Data Services $ 82,500 $ -0- $ -0- $ -0- $ 82,500 006-010 Motor Vehicle Management 205,000 -0- -0- -0- 205,000 006-012 Supply Warehouse 35,700 -0- -0- -0- 35,700 006-084 Central Duplicating 144,500 -0- -0- -0- 144,500 006-085 Telecommunications 10,100 -0- -0- -0- 10,100 009-003 Aeronautics Operations Service 33,200 -0- -0- -0- 33,200

TOTALINTRAGOVERNMENTALFUND $ 511,000 $ -0- $ -0- $ -0- $ 511,000 VI w

HIGHWAY FUND

045-005 Coal Severance Tax $ 2,000,000 $ -0- $ -0- $ -0- $ 2,000,000 045-609 County Farm to Market 782,600 -0- -0- -0- 782,600 045-723 Primary Secondary Forest 506,100 -0- -0- -0- 506,100

TOTAL HIGHWAY FUND $ 3,288,700 $ ·0· $ -0- $ -0- $ 3,288,700

GAME AND FISH FUND

008-911 Game & Fish Accts. $ 2,760,000 $ -0- $ -0- $ ·0· $ 2,760,000

UNIVERSITY FUND

067-012 Student Fees $ 296,700 $ -0- $ -0- $ -0- $ 296,700 067-050 Federal Mineral Royalties 287,544 -0- -0- -0- 287,544

TOTAL UNIVERSITY FUND $ 584,244 $ -0- $ ·0· $ -0- $ 584,244

GRAND TOTAL • ALL FUNDS $32,700,588 $52,776,255 $18,165,933 $19,717,968 $83,924,808

* Statutes require that interest earnings be credited to account.

TABLE 11-34

POOLED INTEREST DISTRIBUTION SUMMARY

FUND FY 1986 FY 1987 FY 1988 EST FY 1989

01 Genera 1 Fund $ 36,649,075 $ 22,781,532 $ 17,789,313 $ 14,800,000

% to General 24.1% 17.2% 17.5% 16.8%

02 Earmarked Fund 34,081,071 36,887' 117 32,453,175 22,140,500

% to Earmarked 22.4% 27.9% 31.9% 25.2%

04 Trust & Agency Fund 15,792,843 15,737,891 10,895,650 10,400,170

% to Trust & Agency 10.4% 11.9% 10.7% 11.8%

05 Debt Service Fund 273,271 174,018 59,222 59,200

% to Debt Service 0.2% 0.1% 0.1% 0.1%

Vl 06 Intergovernmenta 1 Fund 559,278 484,425 511,389 511,000

.j:>.. % to Intergovernmenta 1 0.4% 0.4% 0.5% 0.6%

07 Highway Fund 12,118,127 7,607,466 5,184,733 5,184,400

% to Highway 7.9% 5.7% 5.1% 5.9%

08 Game & Fish Fund 3,434,217 2,879,184 2,996,192 2,995,700

% to Game & Fish 2.2% 2.2% 2.9% 3.4%

09 University Fund 903,354 646,234 584,244 584,200

% to University 0.6% 0.5% 0.6% 0.7%

11 Permanent Land Income Fund 24,880,821 20,262,396 19,790,250 19,790,100

% to Land Income 16.3% 15.3% 19.4% 22.5%

12 Permanent Min. Trust Fund 23,576,782 24,867,544 11,485,093 11,485,000

% to Permanent Min. Trt 15.5% 18.8% 11.3% 13.1%

13 Enterprise Fund 11,638 9,854 9,956 9,600

% to Enterprise

TOTAL INTEREST DISTRIBUTED* $152,280,477 $132,337,661 $101,759,217 s 87,959,870

*Unreconciled between Treasurer & WUAS records for FY1987 & FY1986; WUAS figures used.

Vl Vl

AGENCY ACCOUNT

NUMBER NAME NUMBER NAME

04

05

05

06

06

06

10

10

10

12

15

16

17

18

18

18

22

23

23

23

28

29

29

29

Treasurer

Education

Education

DAFC

DAFC

DAFC

Agriculture

Agriculture

Agriculture

003 Leg. Gov' t. Roy. Impact Asst.

008 School Dist. Capital Const.

009 School Foundation Program

016 State Self Insurance

071 Mineral Severance Tax

096 Herschler Building Construction

015 Rodent & Predatory Anima 1

018 Wheat Commission

022 Leaf Cutter Bee

Architects 001 Administration

Attorney Gen. 009 Crime Victims Surcharge

Barbers 001 Administration

Radiol. Techs. 001 Radiology Technician Admin.

Real Estate

Real Estate

Real Estate

Ind. Siting

PSC

PSC

PSC

Podiatrists

Water Deve 1 .

Water Deve 1.

Water Deve 1 •

001 Administration

002 Rea 1 Estate, Recovery

003 Rea 1 Estate, Education

002 Administration

001 Administration

002 Uti 1 ities

004 Highway Crossing Protection

001 Administration

001 Administration

002 Account I

003 Account II

TABLE 11-34

POOLED INTEREST DISTRIBUTION

FY 1986

0

109,301

2,886,250

0

236,806

159,505

10,267

7,055

233

13,654

0

3,036

95

27,844

0

7,331

39,414

32,178

70,517

23,936

679

0

0

0

EARMARKED FUND - 02

POOLED INTEREST RECEIVED

FY 1987

971,440

153,053

2,383,748

114,112

85,961

0

6,221

3,998

406

11,252

0

2,609

155

15,916

0

5,984

11,090

23,158

79,144

18,988

606

0

15,943,022

2,562,029

FY 1988

$ 2,166,542

47,760

940,910

414,662

87,811

0

4,546

3,009

556

10,133

324

2,559

395

21,666

1,447

5,812

4,763

16,363

88,424

16,335

686

28

14,735,178

2,099, 939

EST FY 1989

$ 1,200,000

2,000,000

600,000

250,000

87,800

0

4,500

3,000

600

10,000

300

2,500

400

21,000

1,400

5,800

4,700

16,000

88,000

16,000

600

0

11,000,000

1,750,000

Recommend

Deposit to:

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

N/A

Gen Fund

Account

Account

Gen Fund

Account

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

Gen Fund

Gen Fund

Gen Fund

Gen Fund

N/A

Gen Fund

Gen Fund

Statutory

Citation

9-4-601

36-6-306(b )(iii)

9-4-601(a)(ii)

1-41-103

39-6-306(a)

11-6-107

11-38-109

11-7-401

33-4-109

1-40-119

33-7-103

33-37-107(f)

33-28-105(g)

33-28-101

33-28-206(b)

35-12-109(b)

37-2-107

37-2-107

37-10-105

33-9-108

39-6-302 (c)

39-6-302 (g)

Statutory Int

to Account?

No

Yes 39-6-306(a)

No

Yes 1-41-103

No

No

No

No

No

No

No

No

No

No

Yes 33-28-206(6)

No

No

No

No

No

No

No

VI 0\

EARMARKED FUND - 02, continued

AGENCY ACCOUNT

NUMBER NAME NUMBER NAME

30

33

34

35

36

37

37

37

38

38

39

44

51

51

52

53

53

53

54

55

56

57

57

Chiropractors 001 Administration

Cosmetology 001 Administration

Dentists 001 Administration

Embalmers 001 Administration

ESC 001 Administration

State Eng. 002 Stream Adjud.Suit - Div. III

State Eng. 004 little Big Horn Adjudication

State Eng. 008 Board of Engineers, Admin.

Pari-Mutuel 001 Administration

Pari-Mutuel 002 Breeder's Fund

State Exam. 007 Collection Ag. Board

Ins. Dept. 003 Ins. Agent Licensing

Livestock Bd. 006 Veterinary Medicine

Livestock Bd. 007 Livestock Inspection

Medical L ic. 001 Administration

EDSB 005 Revolving Inv. Fund

EDSB 012 Park Reservoir Dam

EDSB 015 Encampment Leve 1 II

Nurses 001 Administration

Oil & Gas 001 Administration

Optometrists 001 Administration

Comm. Colleges 003 Contingency Reserve

Comm. Colleges 005 Mineral Severance

FY 1986

3,054

3,697

7,959

2,423

0

4,084

898

6,005

4,845

0

973

3,771

4,349

157,527

10,134

0

10,829,345

2,870,678

10,410

283,183

5,407

78,617

0

TABLE 11-34

POOLED INTEREST RECEIVED

FY 1987

2,210

4,064

6,334

1,942

0

5,026

756

3,557

4,003

101

801

3,254

3,710

147,535

10,955

0

0

0

11,650

175,180

4,943

58,063

6,320

FY 1988

1,974

4,472

5,876

1,781

2,952

3,106

711

3,142

2,541

104

772

1,826

3,585

140,740

11,297

276,784

0

0

13,096

113,257

4,140

94,979

14,961

EST FY 1989

1,900

4,400

5,800

1,700

2,900

3,100

700

3,100

2,500

100

700

1,800

3,500

140,000

11,200

276,000

0

0

13,000

110,000

4,100

60,000

Abolished

Recommend

Deposit to:

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

Account

Account

Account

Account

Account

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

N/A

N/A

Gen Fund

Gen Fund

Gen Fund

Gen Fund

N/A

Statutory

Citation

33-10-114

33-12-139(c)

33-15-105(a)

33-16-313

27-3-205

Ch 100, '85 S.L.

33-29-122

11-25-lOS(d)

11-25-105(d)

33-11-111

26-10-107(a)

33-30-204(k)

11-20-405

33-26-307 (b)

9-9-103

33-21-155(b)

30-5-116(a)(b)

33-23-106(b)

39-6-306(b )( iv)

39-6-306

Statutory Int

to Account?

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

No

Yes 39-6-306(a)

Yes 39-6-306(a)

TABLE 11-34

EARMARKED FUND - 02, continued

AGENCY ACCOUNT POOLED INTEREST RECEIVED Reco11111end Statutory Statutory Int

NUMBER NAME NUMBER NAME FY 1986 FY 1987 FY 1988 EST FY 1989 Deposit to: Citation to Account?

Audio-Speech

58 Patho 1 og i sts 002 Administration $ 1,435 $ 1,111 $ 1,027 $ 1,000 Gen Fund 33-33-203( e) No

59 Pharmacists 002 Administration 13,791 12,982 12,292 12,000 Gen Fund 33-24-109 No

60 Public Lands 006 Coal Tax Grants 5,325,560 4,910,292 4,496,990 2,500,000 Gen Fund 39-6-303(b) Yes 39-6-305(d)

60 Pub 1 i c Lands 009 Fed. Min. Roy. Grants 2,938,287 2,111,671 1,934,800 1,900,000 Gen Fund 9-4-601 (a)(vi) No

60 Pub 1 i c Lands 010 Fed. Min. Roy. - Entitlements 3,328,562 3,445,390 2,873,708 To 005-008 N/A 9-4-603(a)(h) No

60 Pub 1 i c Lands 011 Fed. Min. Roy. - Grants 351,870 399,518 154,512 To 005-008 N/A 9-4-603(a)(g) No

60 Pub 1 ic Lands 012 Fed. Min. Roy. - Comm Call 1,397,270 1,348,940 753,070 To 004-003 N/A 9-4-603 No

Vo 60 Pub 1 i c Lands 020 Fed. Min. Roy. - Reserve 725.434 -..)

747,188 728,794 To 005-008 N/A 9-4-603(g) No

I 60 Pub 1 i c Lands 033 Community College Constr 174,714 114,496 107,361 To 004-003 N/A 9-4-603(a)(h) No

61 CPA's 001 Administration 6,182 7,455 9,078 9,000 Gen Fund 33-3-107 No

62 Phys. Ther. 001 Administration 237 365 541 500 Gen Fund 33-25-113(b) No

64 Hear. Aid Spec. 001 Administration 756 807 940 900 Gen Fund 33-35-120 No

68 Psychologists 001 Administration 1,751 1,545 1,417 1,400 Gen Fund 33-27-lll(b) No

74 Recreation 041 Snowmobile Gas Tax 0 1,628 2,805 2,800 Gen Fund 39-6-210(c)(vi) No

79 Nursing Homes 001 Administration 689 593 547 500 Gen Fund 33-22-105 No

102 Law Exams. 001 Administration 4,629 3,819 3,349 3,300 Gen Fund 33-5-106 No

201 LSO 003 Federal Mineral Royalty 1,894,444 936,021 0 0 N/A

TOTAL EARMARKED FUND $ 34,081,071 $ 36,887,117 $ 32,453,175 $ 22,140,500

VI 00

I

AGENCY

NUMBER NAME

01

01

04

04

04

04

04

05

05

05

06

06

06

06

06

06

06

06

06

10

10

10

11

11

11

14

Governor

Governor

Treasurer

Treasurer

Treasurer

Treasurer

Treasurer

Education

Education

Education

DAFC

DAFC

DAFC

DAFC

DAFC

DAFC

DAFC

DAFC

DAFC

Agriculture

Agriculture

Agriculture

Rev. & Tax.

Rev. & Tax.

Rev. & Tax.

Arts Counc i 1

ACCOUNT

NUMBER NAME

010 Veteran's Affairs

021 Oi 1 Overcharge

030 Wyo-Star

040 GNMA Principa 1

041 GNMA Interest

064 Gas Tax Refunds

068 Municipal Gas Tax Refunds

010 Commodity Revolving Fund

014 Visually Handicapped

016 Gifts & Donations

005 Surplus Property

007 Depreciation - Data Services

010 Depreciation - Motor Vehicle

012 Depreciation - Supply/WHO

014 Local Government Ins.

015 Disaster Repair - '85 Flood

016 Purchasing Insurance

064 Insurance Premium Override

084 Depreciation - Central Dup

008 State Fair

014 Highway Weed and Pest

016 Beef Counci 1

062 Min. Sev. Protest

063 Gas Tax - 1/2 Cent. & Aviation

064 One Cent Gas Tax

002 Arts & Projects

TABLE 11-34

TRUST AND AGENCY FUND - 04

FY 1986

21

0

0

1,032,585

2,561,756

273,310

22,009

3,240

231

620

16,199

63,222

268,926

3,602

0

23,323

15,407

235,509

49,257

955

3,273

11,388

709,818

165,837

48,951

0

POOLED INTEREST RECEIVED

FY 1987

3

673,455

0

1,083,136

2,397,861

244,136

19,599

2,887

219

481

11,962

74,305

269,903

3,517

10,150

24,066

34,088

0

47,895

1,092

3,482

6,384

800,601

109,835

34,514

0

FY 1988

4

911,006

6

1,269,561

2,444,514

234,710

20,125

2,138

316

440

10,899

175,871

214,792

3,723

67.345

8,391

13,628

0

41,428

1,677

5,845

9,082

1,238,178

91,626

28,091

1,885

EST FY 1989

0

900,000

0

1,269,000

2,444,000

234,000

20,000

2,100

300

440

10,000

175,000

215,000

3,700

67,000

8,300

13,600

0

41,400

1,600

5,800

9,000

1,238,000

91,600

28,000

1,800

Reconmend*

Deposit to:

N/A

Ac~ount

N/A

N/A

N/A

Gen Fund

Gen Fund

Gen Fund

Account

Account

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

Account

Account

N/A

Gen Fund

Gen Fund

Gen Fund

Account

Account

Gen Fund

Gen Fund

Account

Statutory

Citation

None

None

9-1-416

None

None

39-6-201

39-6-210

21-2-202(a)(x)

None

None

9-2-1016(c)

9-4-216(b)

9-4-216(b)

9-4-216(b)

1-42-101

None

1-41-103(a)

9-4-216(b)

11-10-107

11-5-101

11-37-107

9-4-204(e)(iii)

39-6-210

39-6-210( d)( iii)

None

Statutory Int

to Account?

NO, unless

otherwise

indicated

Vl 1.0

TRUST AND AGENCY FUND - 04, continued

AGENCY

NUMBER NAME

20 DEQ

20 DEQ

20 DEQ

20 DEQ

20

20

20

20

20

20

20

20

20

20

36

36

36

43

43

43

44

44

44

45

53

53

53

53

DEQ

DEQ

DEQ

DEQ

DEQ

DEQ

DEQ

DEQ

DEQ

DEQ

ESC

ESC

ESC

Group Ins.

Group Ins.

Group Ins.

Ins. Dept.

Ins. Dept.

Ins. Dept.

Highway

EDSB

EDSB

EDSB

EDSB

ACCOUNT

NUMBER NAME

020 Penalties - Air Quality

030 Penalties - Water Quality

040 Penalties - Land Quality

041 Special Projects - Land

042

044

045

046

047

051

060

090

095

096

003

090

091

017

018

064

001

055

064

004

006

060

061

070

Ogle Petroleum

Abandoned Mine Reel.

Subside nee Program

Subsidence Premium

Subsidence Set Aside

Powder River Basin

Penalties - Solid Waste

DEQ - Cash Bonds

Husky Oi 1 Trust

ARCH Escrow

ESC Revenue

ESC Incremental Bonds '84

ESC Incrementa 1 Bonds '86

Employee Life Insurance

Employee Health Insurance

Contract Override

Foreign Ins Co. Protest

Firemen's Pension Contrbtns

Unknown

Highway Department

Promotion & Investigation

Sma 11 Water Loans

Fontene11e

Sma 11 Water Loans - FBL

FY 1986

19,470

49,774

34,208

1,191

0

42,823

0

0

0

0

2,768

14,129

4,108

241

12,475

74.892

0

0

0

64' 735

462,565

314,222

978

3,308

60,327

5,055

4,598

TABLE 11-34

POOLED INTEREST RECEIVED

FY 1985

16,773

33,461

19' 668

3,733

52,322

31,670

670

31

0

41

2,528

13,363

714

0

6,573

102,089

405

0

0

0

592,796

0

521,872

442

1, 754

48,169

2,336

9,574

FY 1988 EST FY 1989

16,173 $ 16,100

34,240 34,200

12,669 12,600

3,362 3,300

82,499

26,239

1,283

2,109

16,677

281

2,965

12,590

674

0

6,122

8,449

2,634

5,035

22,671

366,674

116,062

0

0

208

1,045

45,834

2,383

2,339

82,400

26,200

1,200

2,100

16,600

200

2,900

12,500

600

0

6,000

8,400

2,600

5,000

22,600

366,600

116,000

0

0

200

1,000

45,800

2,300

2,300

Recommend*

Deposit to:

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Gen Fund

Account

Account

Account

Account

Gen Fund

Gen Fund

Account

Account

N/A

Gen Fund

Account

Account

Account

Account

Account

Account

N/A

N/A

Account

Gen Fund

Gen Fund

Account

Account

Statutory

Citation

35-11-424

35-11-424

35-11-424

35-11-424

35-11-424

35-11-1203

35-11-1203

35-11-1203

35-11-1203

PL 9587

35-11-424

35-11-418

35-11-1203

27-3-207

27 -3-516( d)

27-3-516(d)

None

None

None

26-4-104

None

9-2-1406

None

Ch 190, 59 SL

11-34-301

Statutory Int

to Account?

NO, unless

otherwise

indicated

Yes 27-3-516(d)

Yes 27-3-516(d)

0\ 0

TRUST AND AGENCY FUND - 04, continued

AGENCY

NUMBER NAME

60

60

60

60

60

60

60

60

60

60

60

60

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

Pub. Lands

ACCOUNT

NUMBER NAME

002

003

004

Forestry Deposits

Forestry-Fire Suppression

Deposits

032 Farm Loan Revenue (Fees)

050 Forestry-County Fires

063 School Entitlements-Fees

064 Pub 1 ic Land Revenue

065 TeePee Poo 1 Loan

066 Schoo 1 Grants - Fees

090 Joint Powers Loans

091 Cheyenne Stage II Loans

099 Farm Loan Loss Revenue

65 State Library 006 Services Reimbursed

70

70

70

70

70

70

72

72

72

72

72

72

72

72

72

74

88

88

Wkr. Camp.

Wkr. Camp.

Wkr. Camp.

Wkr. Comp.

Wkr. Comp.

Wkr. Comp.

Retirement

Retirement

Retirement

Retirement

Retirement

Retirement

Retirement

Retirement

Retirement

Recreation

Women's Ctr

Women's Ctr

060 Miscellaneous

061 Industrial Accident

066 Industrial Accident Reserve

069 Subsequent Injury

070 Worker's Compensation Fund

072 Reinsurance

061 Volunteer Firemen

062 Wyo. Retirement Fund

063 Prudential Life Ins.

064 Paid Firemen

065 Retirement-Wyo. Nt' 1. Bank

066 Highway Patro 1/Warden

072 Retirees Health Insurance

073 Retirees Blue Cross Health

080 Supplemental Retirement

021

050

051

DWSA-Archaeo logy

Gifts & Donations

Solar Donations

FY 1986

16,736

0

7,437

33,583

616

326,607

17,098

0

910,617

775,633

145,329

0

35,352

28,228

1,107,102

414,486

48,010

0

518,463

54,371

1,899,367

4,465

279,395

245,678

131,739

5,147

618

1,844,623

6,846

2

1,441

TABLE 11-34

POOLED INTEREST RECEIVED

FY 1987

0

3,559

12,852

18,476

1,550

276,415

5,608

684,636

602,353

112,991

6,925

21,292

17.782

854,550

152,080

40,652

0

241,622

62,150

4,219,698

5,135

422,096

321,684

139,680

4,042

655

0

3,625

1,213

FY 1988

0

6,888

38,095

5,144

2,166

102,165

6,481

0

373,755

533,541

179,173

33,801

7,295

6,588

411,237

9,188

20,863

348,403

54,103

9,445

725,715

4,503

57,905

164,675

24,819

4,659

350

0

0

1,108

EST FY 1989

0

6,800

38,000

5,100

2,100

To 005-008

6,400

0

To 005-008

533,000

179,100

33,800

7,200

6,500

411,200

9,100

20,800

348,400

54,100

9,400

725,700

4,500

57.900

164,600

24,800

4,600

350

0

0

0

1,100

Recommend*

Deposit to:

N/A

Gen Fund

Gen Fund

Gen Fund

Account

N/A

Gen Fund

N/A

N/A

Gen Fund

Gen Fund

Account

Gen Fund

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

N/A

N/A

Account

Account

Statutory

Citation

None

36-1-401

None

36-3-110

None

36-3-110

36-3-110

36-3-110

Ch 21, 74 SL

Ch 72, 80 SL

Ch 84, 86 SL

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

Statutory Int

to Account?

No, unless

otherwise

indicated

I

"' -

TRUST AND AGENCY FUND - 04, continued

AGENCY ACCOUNT

NUMBER NAME NUMBER NAME

90

90

90

91

91

94

94

94

94

95

95

95

96

96

96

96

96

96

96

96

97

97

97

98

98

98

99

99

Chldrn. Home

Chldrn. Home

Ch l drn. Home

050 Recreation & Special Needs

060 Kollar Trust

061 Goodstein Trust

Girl's Sch.

Girl's Sch.

050 Gifts & Donations

060 Kopper Trust

Pioneer Home

Pioneer Home

Pioneer Home

Pioneer Home

050 Kieffer-Orchard Trust

051 Moe Bequest

060 Montg. Home for Blind

061 Goodrich Estate

State Hosp.

State Hosp.

State Hosp.

050

051

052

Trng. Sch. 050

Trng. Sch. 051

Trng. Sch. 052

Trng. Sch. 053

Trng. Sch. 054

Trng. Sch. 055

Trng. Sch. 056

Trng. Sch. 060

Vets. Home 050

Vets. Home 055

Vets. Home 060

Retire. Ctr. 050

Retire. Ctr. 051

Retire. Ctr. 060

Penitentiary 050

Penitentiary 051

Recreation

Vo 1 unteer Services

Chapel Fund

General

Special Service

Cemetery

Chapel

Playground

Special Olympics

Work Adjustment Ctr.

Petterson Trust

Donations

'86 Nashv. Su11111er Conf.

Montg. Home for Blind

Donations - Resident's Use

Donations - Empl. Benefit

Montg. Home for Blind

Inmate Benefit & Welfare

Blackrose-Reeder Scholar Fund

TRUST & AGENCY FUND TOTAL

FY 1986

109

4,233

110

89

306

3,168

0

182,490

717

1,684

126

169

25

1,810

488

10,391

1,346

42

15

2,281

389

0

562

1,058

40

610

272

18

$ 15,792,843

TABLE 11-34

POOLED INTEREST RECEIVED

FY 1987

59

4,004

93

97

253

2,432

125

163,078

576

1' 192

51

140

5

1,104

375

10,301

1,090

38

17

1,920

396

76

473

1,242

36

504

311

25

$ 15,737,891

FY 1988

46

4,584

87

93

207

2,176

127

160,446

550

816

45

133

0

802

337

1,313

663

34

62

1,660

634

4

444

1,177

34

468

138

16

EST FY 1989

40

4,500

80

90

200

2,100

100

160,400

500

800

40

100

0

800

300

1,300

600

30

60

1,600

600

0

400

1,100

30

400

100

10

$ 10,895,650 $ 10,400,170

*Recommendations to continue deposition of interest to the originating account due primarily to the trust nature of the account

Recommend*

Deposit to:

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Account

Statutory

Citation

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

Statutory Int

to Account?

NO, unless

otherwise

indicated

TABLE 11-34

DEBT SERVICE FUND - 05

AGENCY ACCOUNT POOLED INTEREST RECEIVED Recommend Statutory Staturory Int

NUMBER NAME NUMBER NAME FY 1986 FY 1987 FY 1988 EST FY 1989 Deposit to: Citation to Account?

60 Pub. Lands 034 Wyo. Community College Bonds $ 273,271 $ 174,018 $ 59,222 $ 59,200 Account 9-4-204(f) NO, unless

otherwise

DEBT SERVICE FUND TOTAL $ 273,271 $ 174,018 $ 59,222 $ 59,200 indicated

INTERGOVERNMENTAL FUND- 06

06 DAFC 007 Data Services $ 124,667 $ 127,926 $ 82,599 $ 82,500 Gen Fund 9-4-204(p)

06 DAFC 010 Motor Vehicle Management 196,328 137,426 205,076 205,000 Gen Fund 9-4-204(p)

06 DAFC 012 Supply - Warehouse 44,543 39,689 35,782 35,700 Gen Fund 9-4-204(p)

06 DAFC 084 Central Duplicating 134,165 132,256 144,523 144,500 Gen Fund 9-4-204(p)

06 DAFC 085 Telecom-Leasing 22,815 15,601 10,173 10,100 Gen Fund 9-4-204(p)

I

0\ 09 N

Aeronautics 003 Operational Services 36,760 31,527 33,236 33,200 Gen Fund 9-4-204(p)

I INTERGOVERNMENTAL FUND TOTAL $ 559,278 $ 484,425 $ 511,389 $ 511,000

HIGHWAY FUND- 07

45 Highway 004 UMTA $ 9,886 $ 8,061 $ 8,618 $ 8,600 Account 9-4-204(h)

45 Highway 005 Coal Severance Tax 5,696,612 3,347,434 2,000,144 2,000,000 Gen Fund 9-4-204(h)

45 Highway 609 SC-CFM 545,495 840,526 782,633 782,600 Gen Fund 9-4-204(h)

45 Highway 718 State Highway Fund 3,989,066 2,622,843 1,887' 194 1,887,100 Account 9-4-204(h)

45 Highway 723 PSF-Highway 1,877,088 788,602 506,144 506,100 Gen Fund 9-4-204(h)

HIGHWAY FUND TOTAL $ 12,118,127 $ 7,607,466 $ 5,184,733 $ 5,184,400

GAME & FISH FUND - 08

40 Game & Fish 090 G & F Revenue $ 3,358,596 $ 2,772,927 $ 2, 731,305 $ 2,731,000 Gen Fund 9-4-204(j)

40 Game & Fish 091 Gifts & Donations 13,097 7,497 3,058 3,000 Account 9-4-204(j)

40 Game & Fish 093 Capitol Repl. Reserve 62,524 23,619 29,030 29,000 Gen Fund 9-4-204(j)

40 Game & Fish 099 Land Acquisitions 0 75,141 232,799 232,700 Account 9-4-204(j)

GAME & FISH FUND TOTAL $ 3,434,217 $ 2,879,184 $ 2,996,192 $ 2,995,700

TABLE 11-34

UNIVERSITY FUND - 09

AGENCY ACCOUNT POOLED INTEREST RECEIVED Recommend Statutory Statutory Int

NUMBER NAME NUMBER NAME FY 1986 FY 1987 FY 1988 EST FY 1989 Deposit to: Citation to Account?

67 Univ. of Wyo. 012 Student Fees $ 344,660 $ 237,358 $ 296,700 $ 296,700 Gen Fund 9-4-215 No, unless

67 Univ. of Wyo. 050 Federal Mineral Royalties 558,694 408,876 287,544 287,500 Gen Fund 9-4-215 otherwise

indicated

UNIVERSITY FUND TOTAL $ 903,354 $ 646,234 $ 584,244 $ 584,200

PERMANENT LAND INCOME FUND -11 0\ w I 04 Treasurer 005 Miner • s Hospita 1 $ 1,225,369 $ 1,076,057 $ 1,018,905 $ 1,018,900 Account 9-4-204(m)

05 Education 015 Common Schoo 1 Land Income 21,012,661 16,889,719 16,770,107 16,770,100 Account 9-4-204(m)

67 University 001 University Perm. Land Income 365,559 358,238 272,425 272,400 Account 9-4-204(m)

67 University 002 Agr. Perm. Land Income 968,421 814,320 754,539 754,500 Account 9-4-204(m)

80 BCR 001 Omnibus Land Income 1,308,811 1,124,062 974,274 974,200 Account 9-4-204(m)

PERMANENT LAND INCOME FUND TOTAL $ 24,880,821 $ 20,262,396 $ 19,790,250 $19,790,100

PERMANENT MINERAL TRUST FUND- 12

04 Treasurer 100 Wyoming Mineral Trust $ 23,576,782 $ 24,867,544 $ 11,485,093 $11,485,000 Account 9-4-204(n)

PERMANENT MINERAL TRUST FUND TOTAL $ 23,576,782 $ 24,867,544 $ 11,485,093 $11,485,000

TABLE 11-34

ENTERPRISE FUND - 13

AGENCY ACCOUNT POOLED INTEREST RECEIVED Reconunend Statutory Statutory Int

NUMBER NAME NUMBER NAME FY 1986 FY 1987 FY 1988 EST FY 1989 Deposit to: Citation to Account?

88 Women's Ctr. 088 Canteen $ 719 $ 760 $ 893 s 800 Account 9-4-204(0) NO, unless

otherwise

89 Honor Farm 089 Canteen 185 126 124 100 Account 9-4-204(0) indicated I

0\ .j:::.. 91 Girl's School 091 Canteen 464 381 314 300 Account 9-4-204(0)

93 Boy's Schoo 1 093 Canteen 532 389 237 200 Account 9-4-204(0)

95 State Hosp. 095 Canteen 2,393 1,568 1,327 1,300 Account 9-4-204(0)

96 Trng. Schoo 1 096 Canteen 4,198 2,946 2,659 2,600 Account 9-4-204(0)

97 Vet's. Home 097 Canteen 1,072 1,021 1,123 1,100 Account 9-4-204(0)

99 Penitentiary 099 Canteen 2,075 2,663 3,279 3,200 Account 9-4-204(0)

ENTERPRISE FUND TOTAL $ 11,638 $ 9,854 $ 9,956 $ 9,600

FOOTNOTES - CHAPTER II

1. The National Conference of State Legislators, Ear- 20. Wyoming Statutes, Cumulative Supplement, June marking State Taxes, 1987, p. 3. 1988, Section 39-6-306(b)(iv).

2. Wyoming State Auditor's office, Appropriations - 21. Ferrari, Sommers & Washburn, op. cit., p. 193. 1988 Legislature, print-out, received August 1, 1988 22. Jim Orr, Fiscal Specialist, Wyoming Legislative Serv-from Clyde Gerrard. ice Office, Memo to Members, 49th Wyoming Legis-

3. Frederic V. Malek, Washington's Hidden Tragedy, lature, Education Finance Projections, October 26, The Failure to Make Government Work, Collier Mac- 1988, p. 3. millan Publishers, 1978, pp. 169-170. 23. 1988 Session Laws of Wyoming, Chapter 82, Section

4. The National Conference of State Legislators, op. 12(a), p. 210. cit., p. 4. 24. Ferrari, Sommers & Washburn, op. cit., pp. 178-192.

5. Wyoming State Auditor's office, Appropriations 25. Wyoming Statutes, Cumulative Supplement, June 1988 Legislature, op. cit. 1987, Section 39-6-305(d).

6. Dan A. Cothran, "Some Sources of 'Budgetary 26. Wyoming Statutes, Cumulative Supplement, June Uncontrollability': The Interaction of Automatic 1987, Section 27-3-205(a). Funding and Program Flexibility," Public Budget- 27. Wyoming Statutes, Cumulative Supplement, June ing and Finance, Summer 1986, p. 45. 1987, Section 9-2-1012(e).

7. Ibid., p. 47. 28. Wyoming Statutes, Cumulative Supplement, June 8. Ibid., p. 47. 1987, Section 9-4-601(b)(ii). 9. Ibid., p. 59. 29. Wyoming Statutes, Cumulative Supplement, June

10. Ibid., pp. 60-61. 1987, Section 9-4-204(d). 11. Budget Transition Team, Memo to Alaska Governor 30. Wyoming Statutes, Cumulative Supplement, June

Steve Cowper, General Budget Issues, December 12, 1987, Section 9-4-204(e). 1986. 31. Ferrari, Sommers & Washburn, op. cit., p. 166.

12. Federal Technical Assistance Program, Improving 32. Wyoming Statutes, Cumulative Supplement, June Management and Organization of Louisiana State 1988, Section 21-2-202(a)(x). Government, May 26, 1972, p. 56. 33. Wyoming Statutes, Cumulative Supplement, June

13. Frederic V. Malek, op. cit., pp. 171-172. 1988, Section 21-2-202(a)(ix). 14. The National Conference of State Legislatures, op. 34. Wyoming Statutes, Cumulative Supplement, June

cit., p. 25. 1988, Section 11-10-106. 15. Ibid., p. 26. 35. Wyoming Statutes, Cumulative Supplement, Decem-16. Wyoming Statutes, Cumulative Supplement, June ber 1977, Section 41~4-210.

1987, Section 9-4-204(b). 36. Wyoming Statutes, Cumulative Supplement, June 17. David G. Ferrari, Ruth C. Sommers, Janet E. Wash- 1987, Section 9-4-204(f).

burn, Wyoming 1988, A Study of Revenue and 37. Wyoming Statutes, Cumulative Supplement, June Expenditures, Volume II, State of Wyoming Legis- 1987, Section 9-4-204(p). lative-Executive Committee, January 1988, p. 176. 38. Ferrari, Sommers & Washburn, op. cit., p. 542.

18. Ibid., p. 133. 39. Ibid., pp. 544-545. 19. Wyoming Statutes, Cumulative Supplement, June 40. Wyoming Statutes, Cumulative Supplement, June

1987, Section 9-4-204( c). 1987, Section 9-4-2040).

- 65-

CHAPTER 0 0 0

WYOMING'S INVESTMENTS AND CASH MANAGEMENT

"Things may come to those who wait, but only the things left by those who hustle."

Wyoming is unique among states in that it is one of the few states which possesses a large concen­tration of cash available for long-term invest­ments. The bulk of this cash has been accumu­lated in the Permanent Land Fund and the Per­manent Mineral Trust Fund. These permanent funds were established with forethought to meet the future needs of Wyoming's people. The Per­manent Mineral Trust Fund was created in 1974 in Article 15, Section 19 of the Constitution. The Permanent Land Fund was created as a result of the Act of Admission to be used to receive the revenue generated by the disposal of lands and resources received from the federal govern­ment upon admission to the State.

The Permanent Mineral Trust was established with the intent that, at some point, Wyoming's non-renewable mineral resources would be de-

Abraham Lincoln

pleted and that source of income would no longer be available to maintain government. While those resources are currently still avail­able, global conditions have greatly eroded their market value and thus the tax base of Wyoming. While Wyoming's revenues have been declining in recent years, the demands to be met by gov­ernment have not. In the period from 1983 through 1987, the State's population is estimat­ed to have declined by 4.6 percent. 1 However, state government expenditures, exclusive of flow­throughs to education, local governments, high­way, water, and debt service, increased 39 per­cent. 2 The major portion of government ex­penditures is service (people) oriented. The fol­lowing table depicts, within this overall 39 per­cent increase, the individual increases for health and welfare services, as well as the three budget­ed levels of education.

TABLE 111-1

MAJOR INCREASES IN STATE GOVERNMENT EXPENDITURES (EXCLUSIVE OF CAPITAL CONSTRUCTION)

FISCAL YEAR 1983 THROUGH FISCAL YEAR 1987

Health and Welfare Services Public Schools Community Colleges (less auxiliary) University of Wyoming (less auxiliary) Total increase in state government expenditures* * * Total increase in state government expenditures* * Excludes all flow-through expenditures. * * Excludes all health, welfare, and mine reclamation expenditures.

Source: Wyoming, 1988, pp. 201, 287, 470, 514, Appendix VIII, A-1.

- 67-

47.5% 26.3% (63% increase in the state portion) 12.0% (25% increase in the state portion) 14.8% 13.3% 39.0%

There are those who argue federal expendi­tures should not be included in state government expenditures. This, of course, greatly changes the expenditure distributions, particularly in view of the fact that in 1987 federal grants and aids were the single largest revenue source for the State. The exclusion of federal expenditures rad­ically changes the overall increase in state expen­ditures from 39 percent to 13.3 percent. In any event, a clear trend is established; expenditures are not simply related to the population of Wyoming and, in spite of periodic population declines such as witnessed in the last three years, expenditures are on an upward trend and will, in all probability, continue to escalate even if the population continues to decline.

To match these apparently escalating expen­ditures, the State needs a reliable source of income. If the mineral industry continues in a slump for the next five years, as predicted by some national experts as well as by the State Geologist, the State must find alternate methods for financing operations. An option available to the State which would be "painless" to Wyo­ming's taxpayers is to increase the interest earn­ings on the Treasurer's portfolio.

METHODOLOGY Attention was focused on the yield on the

State's portfolio early in 1988 when both the Governor's Office and the Department of Public Lands became interested in increasing investment income. The Department of Public Lands (along with the Department of Education) naturally placed more emphasis on the Common School Permanent Fund, while the Governor was inter­ested in the entire portfolio return. The Depart­ment of Public Lands initiated a survey of yields on various other state public school funds early in 1988. Because of the wide divergence in the states' investment policies and objectives, a sim­ple comparison of the various rates of return would not be equitable. To facilitate an objec­tive yield comparison among the states, each of the various aspects of a state's policies must be considered. The analysis compensates for invest­ment policies/practices which impact yields, pri­marily limitations as to types of instruments and maturities.

This analysis includes a brief review of the cash management system of the State, with recommendations, along with the comparison of the Wyoming Treasury's yield and practices to

those of selected other states. To facilitate this review, the services of two leaders in the finan­cial industry have been enlisted: a) Shearson, Lehman, Hutton; and b) Merrill Lynch. These financial consultants have graciously offered to assist in this very detailed review, not only to add their much noted expertise, but also their unquestionable objectivity to the analysis. As these firms will be recommending strategies for improving the portfolio rate of return, it was felt that two perspectives would provide a more com­plete scenario than only one.

At the outset of this portion of the study, the Committee became aware of conditions in Wyoming which were unique. First and perhaps most surprising, was the fact that the Wyoming Legislature has never addressed an investment strategy or policy for the State's entire portfolio. Additionally, the Legislature has never instructed the State Treasurer to formulate such a strategy. Consequently, there has never been a specific emphasis placed on maximizing the State's return on investments. Thus, the Treasurer has had to manage the State's investments without the benefit of legislative guidance or direction in this respect.

Second, during the past dozen years, the State's total cash and investment balances have increased by over eight-fold, exclusive of retire­ment funds, going from $314.5 million in Fiscal Year 1975 to over $2.6 billion in Fiscal Year 1987. Throughout these dozen years, the Trea­sury staff has remained static, at eight full-time positions.

Third, during this period of dramatic increases in assets, the national investment and financial communities experienced significant changes influenced by rapid technological advancements. The increasing use of electronics in the manage­ment of investments transformed what was once a rather static, predictable management ap­proach into a requirement for dynamic, aggres­sive techniques in investment management evi­denced by accelerated investment decisions, frequently rolled-over securities, and constant reassessments of a portfolio's mix. Without access to professional investment advisors, due to statutory restrictions, it was only natural that Wyoming's ability to keep pace with these quickly developing industry trends would be somewhat restricted.

Finally, the study was somewhat hampered due to differing opinions of various terms and definitions; those employed by professional

- 68-

managers from Wall Street and those tradition­ally employed by the Treasury staff. Unfor­tunately, mis-interpretations occurred which occasionally resulted in delays, misunderstand­ings and frustrations. The Committee appreci­ates the efforts put forth by the State Treasurer and his staff in the conduct of this study, and apologizes for any inconvenience which may have resulted.

FINANCIAL ASPECTS

For Fiscal Year 1988, the Treasurer calculated the yield on the entire portfolio to be 7.12 per­cenL 3 The year-end portfolio balance was $2.67 billion. 4 This portfolio yield is a calculation both of the Pooled Fund (predominantly short-term) and the permanent funds which are available for long-term investment. At this juncture, it is im­portant to briefly summarize selected financial theory.

In actuality, there are two integral components relative to investment analysis: a) cash manage­ment; and b) investment of cash. Cash manage­ment is a major portion of portfolio manage­ment in that the mix and type of investments hinge upon the present and future availability of cash. Cash management includes day-to-day management of the overall cash balance, cash budgeting and planning, liquidity, and overall working capital management. The treasury is responsible for investing all cash not needed to meet immediate financial obligations. When cash is not invested, not only is there the loss of pos­sible income, but as cash is held, its worth is eroded by inflation. As inflation proceeds, the buying power of a dollar is reduced. It is there­fore extremely important for cash to be invested, not merely to maximize earnings but also to mitigate the erosion of its buying power.

In a cash management system, revenues and expenditures are forecast on a daily, weekly or monthly basis to estimate the excess cash avail­able for investment. Investments of excess (idle) cash are timed to meet the financial obligations of the entity. Ideally, cash projections should be made for at least one year in advance and cons­tantly updated as projections of revenues and expenditures change. Historical data from which trends of revenues and expenditures can be extracted is also very important. It is obviously not a simple process; however, the rewards are a much higher return on the entire portfolio. For instance, since Fiscal Year 1982, the four months

with the highest level of income have been March, May, August and November, months in which severance tax payments are due. The month with the highest level of disbursements has been August, while September generally has the second highest amount. The largest payment to schools in the Foundation Program is made in August, explaining why August is the largest disbursement month.

Since 1982, the months generally showing a higher level of disbursements than receipts tend to be September and April. This does not mean there is not enough cash to meet financial obli­gations during these two months, as the cash balance forward is sufficient to cover demands. What these varying levels of income and dis­bursements do point to is the basis for budget­ing the cash flow of the State. Excess cash received in August which would not be needed to cover the expected cash flow deficit in Sep­tember could be invested in an instrument with a maturity close to 210 days to coincide with the expected deficit in April. When this investment matures at the end of March, the cash could be utilized to augment April's negative cash flow. The forecasting of revenues and expenditures allows a plan to be devised for the allocation of cash to either longer-term investments or work­ing capital.

The reasoning behind this planning process is the identification of funds available for longer­term investments. Since 1982, the longer the maturity of an investment, the higher the yield. The table below details certificates of deposit with varying maturities. As the investment matu­rity increases, the yield increases.

TABLE 111-2

CERTIFICATES OF DEPOSIT­VARYING MATURITIES-NEW YORK

1 month 2 months 3 months 6 months 1 year

7.30% 7.41 7.60 7.78 7.97

Source: Wall Street Journal-Money Rates-7/20/88

As an example, purely as a demonstration of the benefits of cash management, if $5,000,000 in excess cash were invested in a 30-day certifi­cate of deposit, then at the end of that period principal and interest were reinvested at that

-69-

same 30-day rate for another 30 days, and so on until the end of 180 days, interest earnings would approximate $183,000 with monthly compound­ing (earning interest on interest). However, had a J 80-day certificate of deposit been purchased, approximately $194,000 (with monthly com­pounding) could have been earned. Thus, the 180-day instrument would yield six percent more income than purchasing six 30-day instruments. Herein lies the importance of cash management. With accurate forecasts, an investment officer can take advantage of higher returning invest­ments.

Presently, there is no formalized cash manage­ment system in state government. The Depart­ment of Revenue and Taxation prepares one­month forecasts of revenues and the Department of Education informs the State Treasurer when a Foundation payment will be made. Beyond that, no systematic cash management system is in place, nor has research been performed to assess the magnitude of the loss of income to the State. According to the Treasurer, in the past they have attempted to coordinate income and disbursements; however, the data they received from agencies was unreliable, therefore, invest­ment decisions could not be based upon them. However, W.S. 9-1-413 provides state agencies making financial commitments payable from the Treasury shall report approximate dates perti­nent to payments. This appears to enable the Treasury sufficient authority to properly manage the cash flow of the State.

The State Treasurer indicated to the Efficiency Study Committee that the State Auditor should develop a system for forecasting cash needs (daily expenditures) and the Department of Revenue and Taxation a system for forecasting daily receipts. The Treasurer's Office's role would then be that of coordinating these revenue and expenditure forecasts for cash management purposes. The Treasurer suggested the Gover­nor would have to strongly support this concept in order to obtain the assistance of all of the agencies.

THE NEED FOR A CASH MANAGEMENT SYSTEM

The Department of Revenue currently collects the majority of all money remitted to the State. By their estimation, approximately 45 percent of the tax payments are processed and forwarded to the bank within one day. Table 111-3 details

the percentage of the tax returns which are processed within specified time periods.

TABLE 111-3

PROCESSING AND DEPOSITING OF TAX RECEIPTS

Percentage of Tax Payments

45% 40%

7% 1% 7%

Days to Deposit Payments

1 day 2 days

3-4 days 7 days

20-30 days

The Department of Revenue does attempt to process all severance tax payments the day they are received. The most notable processing time occurs relative to commercial vehicle taxes. According to the Department of Revenue, this delay results from a lack of adequate staff in the Commercial Vehicle Tax and Special Fuels Sec­tions which process approximately $25 million in collections annually. A cash management sys­tem could possibly return all of its cost to the State simply by speeding up deposits of only these two taxes. One-trip taxes, totalling $6 mil­lion annually, also have significant potential for increasing interest earnings merely by speeding up the deposit of receipts. Currently, payments for "one-trips" are collected at the Ports of Entry, then mailed to the Department of Rev­enue. As 80 to 85 percent of this revenue is col­lected at only five of the Ports of Entry, two in Cheyenne, and one each in Laramie, Kemmerer and Evanston, setting up a system to speed up the deposit of this revenue should be relatively easy. It will take some research, both with banks and state government, to develop a system which could efficiently provide for the immediate deposit of all receipts.

A change which would greatly increase effi­ciency in processing tax payments would be the elimination of earmarking gasoline, special fuels, and severance tax payments. With particular regard to gasoline and special fuels tax, when a tax payment is processed, various distributions are made manually to the appropriate revenue codes. This greatly slows the process of enter­ing the payments into the system. Payments must be coded for every revenue code, and as many as 12 revenue codes may be effected for each entry. This same burdensome involvement of

- 70-

numerous accounts occurs when a bad check or refund must be processed through the system. The manager of the division estimates that of the nine positions involved in entering this data, two to three could be reallocated to other func­tions if the data entry process were not so cum­bersome. This is another reason, in addition to increasing control over funds, for eliminating the process of earmarking.

The other side of a cash management system is accurate forecasts of revenues and expendi­tures, enabling the treasury to properly time the investment of funds to maximize returns. With­out this system, the treasury must stay more liquid than might otherwise be needed.

REPURCHASE AGREEMENTS An unusual aspect of the Wyoming Treasury

practices relative to other state treasuries is the large amount of cash invested in repurchase agreements. As of June 30, 1988, the Wyoming Treasury had $376.2 million in day-to-day agree­ments or term repurchase agreements. This equates to 25 percent of the working capital (Pooled Fund) and 14 percent of the entire port­folio. The amount had been even greater on May 2, 1988, $453.5 million, carrying a yield of approximately 6.5 percent. Interestingly enough, when the Pooled Fund is reduced further to only marketable securities, repurchase agreements accounted for 43 percent of that total as of June 30, 1988. As can be seen by Table III-8, no other state appears to have such a large portion of its portfolio invested in repurchase agreements (day­to-day investments). This concentration of short-

term funds appears to have historically been the practice of the office according to the Treasurer's Annual Reports, as Table Ill-4 indicates.

Yields could have increased significantly had a portion of these very short-term investments been in securities with a longer maturity. For­tunately, the portfolio has undergone significant changes since the initiation of inquiries (Spring 1988) into the Treasury's rate of return. For instance, while repurchase agreements totalled $453 million in May, as of October 11, 1988 the State Treasurer had reduced the total down to $267 million. This amount equates to 10 percent of the portfolio, which appears to be a 12-year low, relative to Table III-4. The percentages in that table are reflective of June 30 balances only. Additionally, included in the March 30, 1988 master file were approximately $75 million of long-term securities (maturity greater than one year) purchased from January 1, 1988 through March 30, 1988. Conversely, in the two months from May 17, 1988 to July 14, 1988, $290.9 million in long-term securities had been pur­chased. To date, early January, a short period in mid-May, and August were the most oppor­tune times in 1988 to purchase bonds. The Shear­son Lehman Hutton Treasury Index displayed in Figure Ill-1 depicts the changes in bond prices throughout the year, as well as the Federal Funds rates. The best times to purchase bonds, were those times when the index was low. According to the Treasury, the magnitude of purchases is influenced by the quantity of currently matur­ing investments and generally more securities mature in the Spring than later in the year.

TABLE 111-4

1977

1978

1979

1980

1981

1982

PERCENTAGES OF THE ENTIRE WYOMING PORTFOLIO INVESTED IN REPURCHASE AGREEMENTS

AS OF JUNE 30

12.50% 1983

14.00 1984

17.00 1985

12.80 1986

17.00 1987

11.96 1988

-71-

22.27%

14.79

21.42

21.63

16.88

14.00

FIGURE 111-1

18-MONTH HISTORICAL TREND SHEARSON LEHMAN HUTTON TREASURY BOND INDEX

AND FEDERAL FUNDS RATES

BONDS Shearson Lehman Hutton T·Bond Index 1250.22 +0.89

INDEX THUR THUR YIELD

Shearson Lehman Hutton treas. 1250.22 9.11% DJ 10 Industrial 89.i8 9.58 DJ 10Utilities 89.i9 9.85 Bond Buyer municipal 91-1 7.83 Merrill Lynch corporate 93.69 9.86

·A M 1987

ISSUE CLOSE

3-month T·bill .7.32o/o 3-month CD (new) 1.99

Dealer Comrn. Paper !90 daysl 8.25

,.3-month Eurodollar deposit 8.63

Source: October 6, 1988 Wall Street Journal.

A completely new addition to the portfolio is two guaranteed investment contracts, totalling $25 million. These contracts were purchased on June 24, 1988 (yield 9.31 percent) and July 8, 1988 (yield 8.83 percent). These were the first guaranteed investment contracts to be pur­chased; however, they have only been an approved instrument for approximately one year. According to the State Treasurer, the approval of this instrument is largely due to the efforts of the State Treasurer's Office.

The outcome of these and other changes in investment practices is most likely to be im­proved yields. The State Treasurer's Office had

1--t-1--1--f--11275

1--t-HHH1225

F M T W T

WED WED YIELD YR AGO 12-MO HIGH 12-MOLOW

1249.33 9.11% 1160.32 1329.29 1122.98

89.76 9.58 84.98 90.6-1 83.00 89.71 9.85 81.21 91.88 79.51

91-1 7.83 82-7 99 76-9 93.68 9.86 89.13 96.50 187.33

8.33 +0.49

~ ~ ~ ~ !Ill. J

..... ~

9.0%

8.5

8.0

F M T w T

WED YEAR AGO 12·MOHIGH 12-MO LOW

7.22% 6.69% 7.51% 5.03%

7.99 7.42 8.07 6.18

8.20 8.13 8.80 6.35

8.56 8.63 9.19 6.68

indicated in the initial interview that the port­folio was more than likely too short and they would rectify the situation by purchasing longer­term maturities and possibly buying corporate bonds. In any event, recent action taken by the Treasurer's Office is the first step in increasing the State's investment income.

CAPITAL PRESERVATION AND RISK TOLERANCE

Once a good cash management system has determined the amount of cash available for investment, the remaining components of port-

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TABLE 111-5

INVESTMENT INSTRUMENTS AUTHORIZED BY WYOMING STATUTES

Obligations of the U.S. Government; U.S. Government agency obligations; Corporate bonds rated BAA or better; Guaranteed investment contracts rated AAA or better; Guaranteed portions of SBA loans for Wyoming businesses; Student Loans for Wyoming students; Wyoming mortgages meeting certain qualifications; Farm Loans; Irrigation Loans; Bonds issued by Wyoming political subdivisions and irrigation districts; Joint Powers Loans; Clean Coal Technology Loans; Linked deposits; and The Treasurer may deposit money in Wyoming banks.

Source: W.S. 9-4-701 through W.S. 9-4-706.

folio management come into play. The indi­vidual investments made should maximize the portfolio earnings while staying within the pre­scribed guidelines for risk tolerance. Addition­ally, capital preservation, avoiding the loss of principal, is important. Each investor has unique guidelines for acceptance of risk. Governments and institutions tend to accept a low degree of risk and, therefore, a lower rate of return than do individuals and corporate investors. The Wyoming statutes are slightly unusual in that they are fairly conservative as to which marketa­ble securities can be purchased. However, many of the legislatively mandated investments are speculative and, therefore, a relatively high degree of risk is associated with these loans. The list of approved investment instruments is shown in Table III-5.

A U.S. Treasury instrument is assumed to have almost no risk associated with it if it is held to maturity. The yields on these instruments are accordingly lower than securities with a higher degree of risk. Of the instruments in the port­folio, the Wyoming mortgages, and farm and irrigation loans carry the highest degree of risk~ The risk emanates from two factors: a) the loans are long-term and, b) in the case of some farm loans, the fluctuating value of Wyoming prop­erty. The risk inherent in these loans is illumi­nated when the amount of delinquent loans is examined. As of June 30, 1988, there was $9,522,868 in delinquent loans, in foreclosure, or in bankruptcy. These 295 loans represent 17 percent of the total number of outstanding loans.

Additionally, there are 80 irrigation loans (21 percent of the total number of outstanding loans) which are in default, totalling $1,977,196. There is also $1,379,444 in Wyoming mortgages which are in default. 5 As of June 30, 1988, there was $68,382,050 in outstanding mortgages; two per­cent of the loan balance was delinquent.

Thus, there is approximately $13 million in cash which is currently providing no income to the State. If that money were to be invested in an FnMA with one year to maturity, the approx­imate yield would be eight percent. At this rat~, $1,032,760 in interest earnings is being foregone for at least one year. This is an example of the reasoning behind governments typically avoid­ing risky investments, as capital preservation is an objective of all government entities.

It is fair to point out that these delinquencies do reduce the Treasurer's overall yield. They are legislative mandates and should not in any way reflect on the Treasurer's yield performance. Additionally, delinquent loans from the State's permanent funds are restored by legislative appropriations.

COMPARISON TO OTHER STATES

In order to determine how Wyoming's invest­ment earnings compared to other states' returns, several states were surveyed. In selecting the states to participate in the survey, a publication of the National Association of State Treasurers6

was utilized to determine the funds each state had available for investment. The primary

- 73-

consideration for selection of a comparative trea­sury was that the state should have considera­ble funds to invest, just as Wyoming has. This is important because a state treasury which only invests the state's working capital, particularly if the state's cash flow is such that there are no large amounts of cash available for longer-term investments, will not follow the same investment strategy that a treasury with funds available for longer-term investments will utilize. For instance, one state surveyed reported they invested $600 million in working capital; however, the state's annual budget was $4.5 billion. It is very appar­ent that this treasury must maintain a short-term portfolio merely to meet operational needs. Con­versely, Wyoming's working capital (Pooled Fund) is approximately $1.3 billion while the State's annual budget is only approximately $985 million, 7 making available funds for longer-term investments. These longer-term investments should increase the overall portfolio yield. In addition to working capital, Wyoming also has permanent funds available for investment. By the very nature of these permanent funds, they are well suited to long-term investments. Not all of the states surveyed had permanent funds, but for those that did, a comparison will be made.

MAXIMIZATION AND CALCULATION OF YIELDS

Two methods to increase yields, longer-term and riskier investments have previously been mentioned. There is a third method by which yields can be increased- trading securities. This entails buying and selling securities. The Wyo­ming Treasury currently buys and holds invest­ments until they mature. There is a sentiment in Wyoming that the Treasury cannot take a loss on any investment. W.S. 9-4-707 provides that a loss can be taken as long as the loss can be made up within one year or ''within the remain­ing term of the purchased or sold investment, whichever has the shortest maturity." In many instances, the loss in principal would be difficult to make up within one year. However, the increase in future income might more than make up for the loss of principal. Additionally, accord­ing to the Attorney General, the prohibition against taking a loss applies only to the perma­nent funds. Ideally, trades would result in gains more than in losses and, in fact, all12 states sur­veyed trade securities. Therefore, included in the returns of some states will be capital apprecia-

tion, or gains on sales of securities. These capi­tal gains will enhance the total return of a port­folio. This is one definition of yield. There are, however, three other methods of measuring the performance of a portfolio. They are: a) current yield; b) yield to maturity; and c) market value. Current yield is the amount of current income (annual interest) which a bond provides in rela­tion to its market price. Bonds can be purchased below par value (discount) or above par value (premium), depending on the relationship between the current prevailing interest rates and the bond's coupon rate of interest. If a bond is purchased at a discount, the current coupon income is generally lower than would be expected on a bond purchased at par value.

The yield to maturity is a measurement of yield for the life of the security. This is a com­parison of the purchase price of the security to both the interest earnings received and the amount of principal returned to the investor when the security matures. The third method for calculating a yield involves determining each security's market value as if the portfolio were to be liquidated.

Each of these methods for calculating yields has its particular niche in assessing the perfor­mance of a portfolio. Ideally, more than one method should be utilized to judge a portfolio, as portfolios are dynamic and have varying objectives. More than one measurement will pro­vide a more objective and complete assessment of the portfolio's performance.

INVESTMENT STRATEGY

While the states surveyed reported using different methods to calculate yields, all states reported having the same investment objectives (generally in this order): a) safety of principal; b) liquidity; and c) yield. Varying investment strategy is critical in an analysis such as this, as varying strategies will produce varying yields. A portfolio which is invested under a policy where safety is the only consideration could quite pos­sibly have a lower yield than a portfolio where yield was emphasized. In attempts to maximize yields, more risk is generally accepted, therefore impacting the security of the principal. However, the return should be higher.

Identification of the objectives of differing portfolios is also important. For instance, the objective of the working capital fund should generally be to maintain liquidity to meet daily

- 74-

cash needs. While the objective of a permanent fund could be either capital appreciation or income as liquidity should not be an issue since the corpus of the funds cannot be spent. These details are normally contained in the treasury policies. The Wyoming Treasury has no written policies but utilizes the statutes as guidelines. Coupled with this lack of written policies, there has been no particular emphasis on maximiza­tion of yield by the Legislature.

WYOMING TREASURY RATE OF RETURN

In compiling the "Survey of State Treasuries" for the Joint Efficiency Study Committee, the Wyoming State Treasurer calculated the State's portfolio on a yield to maturity basis. The most recently published yield for the Treasurer's port­folio comes from the Fiscal Year 1987 Annual Report. The only segment of the report which alludes to a return on the total portfolio is on the table entitled "Investments by Major Type at Cost,'' as of June 30, 1987. The total column for the average yield indicated that 6.08 percent was the average yield for Fiscal Year 1987.8 This was the annual yield which was apparently provided to the Investment Fund Committee when it was in the process of determining the interest rate to be charged to Char Fuels and Energy Brothers for Clean Coal Technology loans. 9 W.S. 9-4-701(a)(iv)(C)(IV) states the interest rate on the loans (Clean Coal Technol­ogy) shall not be less than the average rate of return on state investments for the preceding fiscal year. The Investment Fund Committee chose to increase the rate over 6.08 percent to 7 percent for Clean Coal Technology. However, in completing the survey for the purposes of this analysis, the State Treasurer's Office responded that the overall yield on the portfolio was actu­ally 7.13 percent (Fiscal Year 1987). In a tele­phone conversation, the Deputy Treasurer indi­cated the rate, 6.08 percent, as calculated on that particular table of the Annual Report, was found to be incorrect, after it appeared in the official Annual Report of the Treasurer's Office. On October 21, 1988, however, the Treasury informed the Study Committee that due to the fact repurchase agreement income has not been included in a computer generated yield to matu­rity calculation, the office had been inaccurately reporting the overall yield for several years. As

an example, the 6.08 percent reported on page 16 of the Fiscal Year 1987 Annual Report should have been 6.87 percent. If the Fiscal Year 1987 rate of return is indeed 7.13 percent, then the interest rate being charged to the two holders of Clean Coal Technology loans are not in keep­ing with W .S. 9-4-701 (a)(iv)(C)(IV).

At this point, three different overall yields for Fiscal Year 1987 have been advanced. This con­fusion over rates of return also extends to Fiscal Year 1986. The Fiscal Year 1986 average yield, per the Treasurer's Annual Report, 10 was 6.51 percent while the Fiscal Year 1986 yield, per the survey response, was 8.28 percent. As of this writing, the Annual Report for Fiscal Year 1988 has not been published, so the only yield for­mally reported to date is that calculated by the Treasurer for this survey - 7.12 percent.

There appears to be a discrepancy between the portfolio yields which have been provided to the Study Committee. As previously noted, in com­pleting the "Survey of State Treasuries" for this analysis, the Treasury responded that the yield on which the portfolio performance was gauged was a yield to maturity basis, and indicated such on the survey. For Fiscal Years 1988 and 1987 yields were 7.13 percent and 7.12 percent, respec­tively. However, in October 1988, in respond­ing to the Committee's report, the Treasurer's Office emphasized the yields as previously cal­culated by that office for the purposes of the survey were realized yields. As of October, the Treasurer indicated the yield to maturity for Fiscal Years 1988 and 1987 was 7.37 percent and 6.87 percent, respectively. The Treasury defined a realized yield as a current yield. The accepted definition of realized yield, according to Arthur Zeikel, a noted investment expert, is: 11

"The anticipated yield of a bond portfolio with explicit assumptions that future rein­vestment rates will remain at current levels."

Realized yield is not a widely used measurement of performance as it involves these assumptions relative to prevailing returns. Given this wide disparity of information relative to the basic operations of the office, it becomes apparent that to obtain an objective assessment of the portfolio's performance, an independent finan­cial expert must be relied upon.

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TABLE 111-6

LEGISLATIVEL V MANDATED INVESTMENTS BALANCE OF PERMANENT FUNDS AVAILABLE

JUNE 30, 1987

Permanent Land Funds $ 601 ,612,569 Permanent Mineral Trust Fund 908,460,599

$1,510,073,168

Interest Current Statutory Outstanding Allotment Programs Rates Rates Allotment Loans Remaining

Farm Loans 3- 10% 8-9% $275,000,000 $214,356,741 * $60,643,259 Irrigation Loans 1.5- 6 6 60,000,000 29,714,216 * 30,285,784 Joint Powers

Loans 5.5- 9 8.5 100,000,000 56,047,869 * 43,952,131 Cheyenne-Stage

II Water Project 6.5 40,000,000 38,518,447 1,481,553 Student Loans 8.7 15,000,000 11,793,753 3,206,247 Small Business

Assistance Act 6- 9.75 50,000,000 19,736,169 30,263,831 Mortgage Loans 10.572-

12.25 150,000,000 83,536,712 66,463,288 City of Gillette

Water Project 4.0 paid 15,000,000 21 14,999,980 ** Hot Springs State

Park 6- 12 8 2,000,000 1,407,131 592,869

$707,000,000 $455,111 ,059 $251 ,888,942 {100%) (64.37%) {35.63%)

Total Available for Investment $1,510,073,168 {100%) Legislatively Mandated Programs

(Allotments) 707,000,000 (46.82%)

Amount Not Statutorily Allocated $ 803,073,168 (53.18%)

* Completed loans are purchased from the Farm Loan Board. The Farm Loan Board has responsibility for approving and processing loans.

**Loan payments received and funds no longer available for this purpose.

Source: Wyoming State Treasurer, Annual Report of the Wyoming State Treasurer, 1987, p. 25.

LEGISLATIVELY MANDATED INVESTMENTS

The Legislature, over time, has directed the Treasurer to invest a portion of the permanent funds in investments (loans) at below market rates. The statutory investment ceilings and amounts outstanding as of June 30, 1987 are detailed in Table 111-6.

As the Treasurer's report for Fiscal Year 1988 had not been published as of this writing, the most recent data available is for Fiscal Year 1987. To the loans and amounts mentioned in Table 111-6 must be added the low interest loans

applicable to Clean Coal Technology. There is $30 million allocated to this program and as of June 30, 1988, the Treasurer's master file reflects $11.7 million in investments. Additionally, the 1988 Legislative Session authorized $250 million of Permanent Mineral funds to be invested in bonds issued by gas pipeline companies operat­ing in Wyoming.

While some of these investments are truly be­low market rates, some are higher than the yields the Treasurer could normally receive on the type of securities permissible for investments. Most notably these higher returning investments are:

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9 and lOOJo farm loans total outstanding $55,777,500

10.572 to 12.25% Wyoming mortgages total outstanding $68,382,050

For instance, one of the highest yielding market­able securities in the portfolio is a U.S. Trea­sury purchased on October 5, 1987, at a pre­mium, to yield 9.34 percent. The major benefit of the U.S. Treasury is the lack of risk associated with it. Other considerations in comparing yields are: a) the U.S. Treasury has a maturity of five years versus 30-year maturities on the farm loans and mortgages; and b) the U.S. Treasury pays interest twice a year, while the farm loans only pay once per year and mortgages pay monthly.

As can be seen, some of the legislatively man­dated investments, aside from the risk, have excellent returns in current markets. Some, however, are at below market rates. Only one other state surveyed invested in below market rate loans- Oklahoma. This is another factor to be aware of in a rate of return comparison, the effect of legislatively mandated investments.

The Treasurer's Office has calculated yields on the overall portfolio without selected legis­latively mandated investments. They are detailed in Table III -7.

The line for time deposits, open accounts is segregated from the other programs as it is not legislatively mandated, but rather at the discre­tion of the Treasurer.

Table III -7 demonstrates a 23 basis point (one one-hundredth of one percent) increase in overall yield with the removal of these programs from the calculations of the yield. A rough estimation of the differential interest income pertinent to

the 7.12 percent versus the 7.305 percent (Fiscal Year 1988 rates) is $4,882,150. This is calculated on an average daily investment of $2.639 billion with no compounding considered. The other side to this adjustment is that while the Treasury was able to calculate yields without link deposits, small business assistance, time deposit, and open account programs, not all of the legislatively mandated programs were excluded. Those pro­grams not excluded tended to carry with them a higher rate of return than those programs which were excluded. Therefore, the net effect of the legislatively mandated programs cannot be determined without the help of an investment consultant. Apparently, there has never been a determination as to the exact yield on the mar­ketable securities.

COMPARATIVE YIELDS

Twelve states responded to the survey request for investment policies and practices. These states were Alaska, Colorado, Florida, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Texas, Utah, Washington, and West Virginia. Not all data was completed by every state, so the number of responses may not always total12. The most common situation found is typified by the treasurer investing government funds while retirement, public land school, or trust funds are invested by another office. Some differences in permissible investments and invest­ment maturities were also noted.

These varying investment policies are critical to an equitable analysis of these states' yields. The less restrictive the policies, the higher the

TABLE 111-7

OVERALL RATE OF RETURN WITHOUT SELECTED LOAN PROGRAMS

Fiscal Year Fiscal Year 1986 1987

Overall 8.28% 7.13% Without Link Deposits N/A * 7.19 Without Small Business 8.31 7.22

Without Time Deposits, Open Account 8.35 7.30

* Program not operational.

Fiscal Year 1988

7.120% 7.284 7.305

7.350

Source: Letter to Jan Washburn from Earl Kabeiseman, July 7, 1988, and telephone converation with Earl Kabeiseman on July 22, 1988.

-77-

expected yield. This hypothesis is somewhat corroborated by Table 111-8.

It is necessary to note that the Treasury does not have a working capital account as the other 12·states do. For purposes of this analysis, the funds construed to be working capital were the Pooled Fund and Merrill Lynch's yield is cal­culated on the marketable securities in such. However, the Treasurer's Office emphasized that, if it were to have a working capital account, it would be defined simply as the investment in repurchase agreements. According to Mr. Reilly, the generally accepted definition of working capital is: 12

''Current assets minus current liabilities . . . net liquid assets with which the entity con­ducts business."

The Treasury's yield on repurchase agreements, 6.73 percent, appears in Table 111-8 as its representation of yield on working capital. The problem in terminology rests with the fact that the Treasury's definition of working capital as repurchase agreements is too restrictive, while

the use of the Pooled Fund is too encompassing. Therefore, this comparison should be considered more an informational schedule relative to poli­cies of the office.

Yields in Table 111-8 are yields to maturity unless otherwise noted. Table 111-8 demonstrates that there is a fairly strong correlation between the flexibility in the states' investment policy and the portfolio return. The more flexible the policy with regard to tolerance of risk and term of investment horizon, generally the higher the yields. Bankers acceptances and commercial paper tend to carry with them slightly more risk than U.S. Government agencies or U.S. Trea­suries. However, those portfolios containing them should result in slightly higher yields. All states surveyed could invest in U.S. Treasuries and repurchase agreements. All states except New Mexico, could purchase agency securities. All states except Texas, could purchase in-state certificates of deposit. Wyoming does not pur­chase certificates as such but has a similar invest­ment- time deposit, open account. Only three treasuries were permitted to purchase out-of-

TABLE 111-8

State

North Carolina Alaska West Virginia Washington Texas

Colorado Utah Florida New Mexico Wyoming (Treasury yield) Oklahoma Wyoming (Merrill) New Jersey

Current yield. Market value.

YIELDS AND INVESTMENT PRACTICES FOR RESPONDING STATES

(WORKING CAPITAL ONL V)

Limit on OJb of Working Yield Maturity Capital/Budget

9.137 none 30.6 8.060 none 40.6 7.860 * none 27 7.500 none 11.6 7.400 5 years 18

7.100 ** 2 years 13 7.040 * **** 13 6.910 2 years 23 6.760 5 years N/A 6.730 * none N/A

6.460 ** 2 years 85 6.170 *** none 138 7.700 * * 6.120 * * * 1 year 34

Effective yield on amortized book value. * * * * Investment horizon on funds cannot exceed the financial need for which they are intended.

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o/o of Portfolio that is

Day-to-Day

N/A N/A 6.4 N/A 3.7

ranges 1 - 17

2 5

N/A 100

N/A 25

N/A

state certificates of deposit. Ten of the 12 states could purchase commercial paper and/or bank­ers acceptances. Eight of the treasuries could purchase corporate notes or bonds. Table III-8 demonstrates that the combination of slightly riskier investments and unlimited investment horizons produces the highest returns. Even with the ability to purchase bankers acceptances and commercial paper, state treasuries with limits on the investment horizon could not out-perform treasuries with no limits on maturities, but which could not purchase the higher yielding securities.

The percentage of working capital to total budget ratio to some degree, indicates any cash available for longer-term investments. As indi­cated on Table III-8, Wyoming has far more (138 percent) working capital than is needed to meet budgetary needs. Therefore, some of this cash can be invested in longer-term instruments. And in fact, in the Pooled Investment Account exist securities with maturities of 28 years. A word of caution should be interjected at this juncture. The Pooled Fund the Treasurer invests includes some monies from the permanent funds, which are not committed to specific investments. Therefore, there is more cash in the Pooled Fund than is strictly attributable to working capital. This is a divergence from the other states sur­veyed in that, in general, they have a specific working capital or agency fund. Alaska had the second highest ratio of working capital to budget at 40.6 percent and that portfolio had invest­ments out only two years. This ability to pur­chase long-term investments greatly enhances Wyoming's possible returns.

Because of the discrepancy in the definition of working capital, it is appropriate to place more emphasis on the comparison of permanent funds' performance than that of the working capital funds. Wyoming's performance on min­eral or other permanent funds ranks last and per­formance on the school funds ranks fifth out of the six states compared. It is again important to note that Merrill Lynch's yields, based only on the marketable securities in the portfolio, is a more equitable comparison to the other states' portfolios not containing legislatively mandated investments.

COMPARISON OF LONG-TERM RATES

As a general rule, outside of pension and retirement funds, the only long-term funds were found in either public land school funds or

mineral trust funds. These types of funds were generally confined to the western area of the country. The rates of return for Wyoming's portfolio provided herein were provided by the Wyoming Treasurer's Office and have not appeared in a published format. The yields for Fiscal Year 1988 on long-term funds are provided in Table III-9.

TABLE 111-9

YIELDS LONG-TERM PORTFOLIOS

FOR FISCAL YEAR 1988

Alaska Schools Mineral

Utah Indian Funds Schools

New Mexico Schools Severance Tax

Texas Schools

Wyoming (Treasury) Schools Mineral

Wyoming (Merrill Lynch) Schools Mineral

Washington Schools

Current Yields

-0-8.10

-0--0-

8.79 8.52

9.25

-0--0-

5.660 4.830

-0-

Yield to Maturity

10.740% 9.010

10.240% 8.460 *

9.510% 9.410

-0-

8.810% 7.710

8.860% 7.760

8.768%

* Portfolio consists almost entirely of older, low-yielding bonds.

Source: Telephone conversations with the appropriate state agencies.

It should be noted that New Mexico invests in New Mexico mort­gages and small business administrative loans, much as the Wyoming Treasury does.

DEPOSITS IN WYOMING BANKS

Deposits in Wyoming banks totalled $152,208,000 as of June 30, 1988. Deposits in Wyoming savings and loan institutions totalled $30,512,000 as of June 30, 1988. 13 Some of these deposits were resultant from the bid program and some were not. These deposits are gen-

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TABLE 111-10

COMPARISON OF WYOMING INSTITUTION DEPOSITS AND FnMA DISCOUNT NOTES

Date Deposit Placed

Wyoming Deposit Rates

FnMA Discount Notes

10/7/87 12/9/87 2/2/87 4/5/88 6/8/88

6.73- 7.50% 6.66- 7.05 6.61 - 6.91 6.28- 6.46 6.80- 7.20

8.58% 7.67 6.88 7.11 7.86

TABLE 111-11

FISCAL YEAR 1988 RATES OF RETURN FOR THE WYOMING PORTFOLIO

Treasurer's Calculation

Marketable Securities per Merrill Lynch

Current Yield to Yield Maturity

Overall Without Link Deposits Without Small Business Without Time Deposit,

7.120 %* 7.37 %** 7.284

5.65% 7.96%

Open Account Permanent Mineral Permanent School

7.305

7.350 7.710 8.810

4.83 5.66

8.04 8.88

Source:* Telephone conversation with Earl Kabeiseman on July 22, 1988. Source:** Meeting with Stan Smith on October 21, 1988.

erally placed for 10 months. Table III-10 details the variance between the rates the banks are quoting the Treasurer's Office and yields for FnMA discount notes as of the same day the deposits were placed. This is merely an example of the opportunity cost relative to placing deposits in Wyoming banks versus purchasing marketable securities. • A very rough estimate of the lost interest income due to these lower rates on Wyoming deposits could be as high as $2.7 million for the year. It should be noted that the deposits in Wyoming banks and the bid programs are not legislatively mandated programs, but rather con­ducted at the discretion of the Treasurer. The interest rates on Wyoming bank deposits is deter­mined by the State Board of Deposits which is comprised of the Governor, Secretary of State, and the State Treasurer. As near as can be deter­mined by the Division of Research and Statis-

tics, the economic segment of ''Banking and Other" contributed 1.82 percent to the gross state product of Wyoming in 1986.

MERRILL LYNCH'S ANALYSIS OF THE PORTFOLIO

A portion of the reasoning for requesting assistance from two of the largest brokerage houses in the world, Shearson, Lehman, Hut­ton and Merrill Lynch, was to aid in the resolu­tion to the question; what is the Wyoming Treas­ury's actual rate of return? The various rates of return for Fiscal Year 1987 utilized by the Treas­ury aroused some questions relative to the rate which would be published for Fiscal Year 1988. Thus, the experience and objectivity of these brokerage houses were employed to calculate the yield on the marketable securities portion of the portfolio only, excluding the statutory programs.

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The State Treasurer's Office had calculated the portfolio yield without selected m~ndated investments. These rates are presented m Table III-11.

Merrill Lynch's yields are true current yields and yields to maturity on the market value of the portfolio. They had calculated the m~r~et value of the portfolio to be about $1 million below its purchase price. The market value would have been much lower than the cost basis had it not been for the large amount of dis­counted securities held as of June 30, 1988; $31.5 million in discounts had been booked. Accord­ing to Merrill Lynch, as discounted securities approach maturity, their market value increases. Remembering that these securities were probably originally sold at a discount because their cou­pons were below the c~Irrent market ra~e,. Mer­rill Lynch believes this market analysis IS the most accurate assessment of the portfolio per­formance. It should be noted that Merrill Lynch had difficulty in pricing the repurchase agree­ments and had to make an adjustment in the market value of the Pooled Fund. This adjust­ment amounted to an overstatement of its mar­ket value by $14 million, only two percent of the entire portfolio. The $1 million loss is net of this adjustment. Also according to Merrill ~ynch, a large discrepancy between the current yield and the yield to maturity is generally indicative of significant room for improvement in the port­folio yield: 14

''2) b) If a portfolio is monitored and traded according to market conditions, the current yield and yield to maturity should not differ by the large amounts displayed in our analysis. In a buy and hold portfo­lio the two yields will diverge due to the in~bility to trade the account in the reign­ing interest rate environment. As int~rest rates rise securities with low current yields will plac; a drag on the entire portfolio's current yield, while their yield to maturity will reflect the higher interest rate levels."

It appears as though current ~ash flow .to the State is suffering to the benefit of the yteld to maturity: 15

"2) a) If the meeting of a short-term cash flow objective is a priority, then a current yield to meet that should become an invest­ment priority for the portfolio. This doesn't mean the entire portfolio should be invested

with this objective. An alternative would be sub-setting the portfolio in accordance with the various investment benchmarks."

It is important to note that Merrill Lynch's calculation of yield was a "snapshot in time," calculated for those securities held on July 14, 1988 (as an approximation of the June 30, 1988 portfolio). As previously stated, there was $291 million in long-term investments (18 percent of the portfolio priced by Merrill Lynch) purchased between May and mid-July 1988. These were generally higher yielding securities than had previously been held and, accordingly, greatly enhanced the rate of return for the portfolio. Additionally, the 7.12 percent yield, as calculated by the Treasurer's Office, is representative of all of Fiscal Year 1988 and includes those large quantities of repurchase agreements which, as has already been seen, dwindled in significance towards the end of the year. The 7.37 percent yield advanced by the Treasury probably includes only those investments held on June 30, 1988. Therefore, it is to be expected that the yield, as calculated by Merrill Lynch, shoul.d be significantly higher than the Treasurer's ytel~. The yield to maturity as calculated by Merrill Lynch is 59 or 84 basis points above the Trea­surer's yield, depending upon which of the T~ea­surer's yields is utilized. The Treasurer's yield is not a true yield to maturity as it does not account for unrealized gains nor is there an accrual of interest income.

GnMA'S HELD IN ESCROW

Excluded from the calculation of yield is approximately $42 million (cost basis) in GnM~ and FHLMC pass-through pools. These secun­ties were the subject of a controversy relative to a bankruptcy proceeding in which the owner~~ip of the securities was in doubt. The secuntles actually came into possession of the State when the brokerage house used by the State became insolvent. The GnMA and FHLMC's had been collateral for repurchase agreements the Trea­surer's Office had entered into during the period from June 1, 1979 through October 19, 197?. The original amount of state funds invested m repurchase agreements and the market value of the collateral at the time the securities were actually put in the State's name (November 7, 1979) are detailed in Table III-12.

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TABLE 111-12

FINANCIAL DATA RELATIVE TO THE PURCHASE OF

GnMA AND FHLMC POOLS

Amount Invested in Repurchase Agreements Market Value of the Securities as of November 7, 1979

$41 ,464,000.00 $37,010,671.94

Source: Letter to Chapman & Cutler from the State Treasurer's Office, November 29, 1979.

The repurchase agreements entered into were apparently term agreements, which means the State keeps the money invested until either the broker or the State wishes to terminate the agree­ment. Term repurchase agreements are not without risk, as evidenced by the above trans­action; however: 16

''Another risk in a term repurchase agree­ment is that as rates change, the market value of the securities will change. A lender who entered a transaction 100 percent col­lateralized may find himself something less than that at some point in the future if the market should drop. Therefore, most term repurchase agreements are done with the lender of funds (i.e., the party reversing in securities- the State) reserving the right to reprice the value of the collateral, adjust­ing for any drop in security prices. Repric­ing can be done anytime during the agree­ment; however, there are usually no set time periods. Often, repricing is a formal part of the repurchase agreement. This reduces some of the risk to the lender.''

In 1979, the Attorney General requested the return of principal and interest income from the securities should be held in escrow until the bankruptcy proceeding was resolved. The balance in these two escrow accounts has grown to approximately $67 million as of October 1988, and it is the opinion of the current Attorney General that, as the statute of limitations expired at the latest in 1983, the funds should no longer be held in escrow. Thus, the funds are available to the State once it is determined how to distrib­ute the interest income. For nine years, these securities had been included in the total portfolio of $2.6 billion, even though the income they had been generating was not available to the State. The Committee has been unable to find dis­closure, within a Treasury Annual Report, of these securities which, while included in the port­folio, were not generating current income to the

State. Disclosure of such a potential liability is common practice in reporting the annual activity of a financial entity and is addressed by the Generally Accepted Accounting Principles, spe­cifically in the Financial Accounting Standards Board (F ASB) Statement Number Five.

PROFESSIONAL FINANCIAL MANAGEMENT

The overall objective of this report is to iden­tify and propose means to expedite the efficient management of Wyoming's funds, thus maxi­mizing yield. The end result of this process should be a substantial increase in interest in­come which could significantly mitigate Wyo­ming's impending cash shortfalls. To implement any of these financial options, certain enhance­ments to existing legislation are needed. These are:

a) Broadening of permissible investments. b) Delegating the responsibility of cash management to the agency in state govern­ment which is most appropriate. This will probably be the Treasurer's Office. c) Employing the services of professional financial managers.

The latter recommendation is certainly the most sweeping, but should result in the greatest financial benefit to the State. The magnitude of these financial rewards is directly dependent upon the willingness of the Legislature to grant the Treasurer's Office the necessary authority to employ a professional manager and then the commitment of the Treasury to maximize yields.

The Treasury informed the Study Committee of its desire to employ an investment firm. One of the proposed bills for the 1988 Legislative Session was House Bill No. 143, which addressed this need for a financial manager. The bill nar­rowly defined the proposed structure for finan­cial managers.

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This firm's strategy is to trade U.S. Treasuries for the client. No direct fees are charged to the State; the firm would take 40 percent of the trading profits (netted against losses). On the surface this sounds good; no expenses would actually be paid by the State, the investment firm would only make money by executing profita­ble trades. It should be noted, however, that the proposed bill made no provisions for the advisor sharing in any losses in excess of gains. The dangers in this strategy are two-fold. One, the total return on the securities under management, unless held to maturity, is completely subjected to market risk and, two, management for capital gains does not necessarily strive to attain the goals of the portfolio. The two points are very interrelated, and focus on the fact that when a manager is paid solely from capital gains, the manager will strive to maximize those gains, pos­sibly to the detriment of current yields. Current yields are the vast majority of the State's invest­ment income, which in turn accounts for approx­imately 13 percent of the State's total revenue. To compound this problem, market risk must be factored in. If there is no profitable position in the prevailing market for what is being held in the portfolio, then the owner of the portfo­lio could be "stuck" with less than optimal cur­rent returns.

This entire scenario runs counter to the appar­ent intent of the permanent funds, which is to maximize asset values and provide for a predic­table income stream in lieu of mineral revenue. In a situation where trading gains were the major source of income, then the predictability of that income is negated. This type of financial arrangement would only seem prudent if the State were in a position where it did not have to rely on investment income to meet current financial obligations and, thus, trading gains would only be a "bonus." In this situation, the compliance to the principle of fiduciary respon­sibility may need to be re-examined. The alter­native to enticing a financial advisor to manage in the present tense for capital gains is to estab­lish an incentive for a manager to increase the assets of the portfolio and, thus, manage for the long-term. This might be accomplished in several ways, one of which would be to consider the total net assets under management. Ideally it would be to the benefit of the manager to actively manage to increase the asset valuation of the portfolio.

Because of the tremendous ramifications rela-

tive to the use of investment managers, the selec­tion of a manager(s) must not be politicized. Perhaps the most favorable and equitable selec­tion process would include a request for bids with the five elected officials having responsi­bility for reviewing bids and making the final decision with respect to the best interests of the State of Wyoming.

IN SUMMARY

With the assistance of both Shearson Lehman Hutton and Merrill Lynch, the analysis of Wyoming's Investment and Cash Management programs leads to several conclusions which are believed to be extremely important to Wyoming policymakers. These conclusions, in no partic­ular order of significance are:

a) Broadening the permissible investment instruments could aid in increasing the Treasury's rate of return. b) The lack of an investment strategy or formulation of a state investment policy has hampered the State Treasurer's ability to maximize yields: 17

''4) Without a detailed report of what the State of Wyoming's investment objectives are, it is impossible to deter­mine the quality and appropriateness of the current investment structure. It appears there is an undefined invest­ment strategy. This is the largest impediment to maximizing return on the portfolio, and must be corrected."

c) Shearson Lehman Hutton: "The high percentage of repurchase agreements (43 percent of Pooled Fund marketable secu­rities) is very conservative and reduces yield.'' d) The performance of Wyoming's invest­ment portfolio has not been optimum; as compared to six other states, Wyoming's rate of return ranked last for other perma­nent funds and fifth for school fund per­formance on the yield to maturity basis. The current yields for these funds were: schools, 5.66 percent, and minerals, 4.83 percent. There is certainly an opportunity cost asso­ciated with these less than optimal returns. e) The overall Wyoming yield calculated and reported to the Joint Legislative­Executive State Government Efficiency Committee on the questionnaire to state

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Treasuries for Fiscal Year 1987 is 105 basis points above the yield utilized to determine the loan rates for Clean Coal Technology, possibly in violation of W.S. 9-4-701(a)(iv) (C)(IV). The Treasury later revised this rate down to 6.87 percent. f) The State Treasurer's policy of placing deposits in Wyoming's financial institutions rather than purchasing marketable securi­ties resulted in a loss of interest income of approximately $2.7 million in Fiscal Year 1988 (this is not a legislatively mandated program). g) Estimates of potential enhanced interest income possible through utilization of a professional investment manager(s) and expansion of legislatively permissible invest­ment instruments are between one and one­half and three percent increased current yield on the State's marketable securities or between $28.5 million and $57 million annu­ally over the long term. Based on previous history, the General Fund's share of poten­tial increased income ranges between $10.2 million and $20 million annually. h) The current policy of not trading secu­rities has also restricted the rate of return. According to Shearson Lehman Hutton, the current "no realized loss" or "loss made up in one year'' policies are not realistic in the modern investment world. " ... (it is) short-sighted and can only work if the port­folio is constantly downgraded. Fifteen to twenty years ago, many portfolios had the policy of loss made up." i) There is no comprehensive cash manage­ment system in place. Shearson Lehman Hutton: "A formalized cash management system must be devised."

OVERALL RECOMMENDATIONS

Perhaps one of the most important tasks the Legislature can undertake is to outline a defini­tive investment strategy. The overall objective of the portfolio must be established as to the desired mix of current yield and capital appreci­ation, keeping in mind safety and liquidity con­siderations.

a) Establish a cash management system inclusive of the optimum level of electronic funds transfer. This is not the sole respon­sibility of the Treasurer's Office; however, the office is integral in the process.

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b) The Treasurer's Office communicated its desire to increase the array of permissible investments to include bankers acceptances, commercial paper (rated P-1 or A-1), and national certificates of deposit. This enhancement should also extend to all local political subdivisions. c) Provide for and engage the services of a professional investment advisor. These services can range from either purely advi­sory functions or to allowing the firm to manage and invest the funds themselves. This arrangement is currently occurring in the Retirement System and the Deferred Compensation System. d) A new software system to account for investments is also needed. When the Wyoming Retirement System utilized the Treasury's Investment Accounting System to account for its securities, the independent audit reports contained comments relative to the inaccuracies of the software. These inaccuracies pertained to: a) incorrect amor­tization of premiums and discounts; and b) incorrect accrual of interest income. e) The Treasurer's Office suggested that an accounts payable system (perhaps included in a new accounting software package) would enhance the ability to forecast cash available for investments. f) The Treasurer's Office suggested that to insure the utmost protection for public funds, the ratio of collateral value to public funds collateralized ( collateralization ratio) for mortgages should be increased. Cur­rently, when deposits are collateralized with mortgages, the pledged mortgage must total one and one-half times the value of the deposit. As this type of collateral tends to be riskier, perhaps the ratio of collateral to deposit should be increased. g) The Treasurer's Office should continue to sell municipal bonds to entities which can take advantage of their tax-exempt status. h) The Treasurer's Office communicated its desire to utilize reverse repurchase agree­ments as a cash management tool. This is a form of short-term debt. i) With a total portfolio of roughly $2.6 bil­lion, the Treasurer's Office should be audited annually by a CPA firm, as in the case of the Wyoming Retirement System with a portfolio of less than half this size.

The State Examiner's Office should write the proposal and outline the objectives for the audit.

The Wyoming State Treasurer conveyed to the St~dy Committee his desire to have the ability to Issue short-term debt. The vehicle he wishes to employ is tax anticipation notes. The Legis­lature may wish to consider the potential of this instrument; however, there are several problems ass?ciated :With this method of debt financing which are Important. As there has been wide spread abuse of municipal debt on a national scale, the Internal Revenue Service has tightened regulati.ons :elative to municipal (tax-exempt) debt. Fust, m order to qualify for tax-exempt status, the entity (State of Wyoming) must have a total ~eficit ~excluding permanent funds) at some pomt durmg the year. It will probably be II_Iany years before the State of Wyoming expe­nences a true deficit inasmuch as a great por-

tion of the State's operating revenues are being channeled into the Earmarked and Trust and Agency.Funds. These revenues would likely also be considered by an underwriter when assessing a General Fund deficit. Second, the cost of issu­ance of the bonds relative to audits and legal fees, credit rating, and underwriting of the bonds would partially offset the advantage of being able to borrow on the tax-exempt market. Addi­tionally, great care would have to be taken in assessing the profitability of each potential trans­action since each could result in a true expense to the State, rather than enhanced earnings resul­tant fr~m arbitrage. For these reasons, the Study Committee does not recommend the utilization of tax anticipation notes at this time, but rather advises that an immediate benefit could be achieved via a good cash management system and the use of reverse repurchase agreements (a form of short-term debt).

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FOOTNOTES - CHAPTER Ill

1. Department of Administration and Fiscal Control, Division of Research and Statistics, November 3, 1988.

2. Ibid., p. 471. 3. Telephone conversation with Earl Kabeiseman, July

22, 1988. 4. Wyoming State Treasurer's Office Year-End Master

File, June 30, 1988. 5. Telephone conversation with Sharon Garland,

Department of Public Lands, July 22, 1988. 6. National Association of State Treasurers, State Treas­

ury Activities and Functions, 1988, pp. 66-69. 7. State of Wyoming, Executive Budget, p. xiv. 8. Wyoming State Treasurer, Annual Report of the

Treasurer of the State of Wyoming, 1987, p. 16. 9. Investment Fund Committee, Minutes of Meeting,

October 7 and 8, 1987, p. 1.

10. Wyoming State Treasurer, Annual Report of the Treasurer of the State of Wyoming, 1986, p. 15.

11. Cohen, Zinbarg, Zeikel, Investment Analysis and Portfolio Management, Homewood, Ill. Irwin, 1987, p. 444.

12. Frank Reilly, Investments, New York, NY, The Dryden Press, 1986, P. 718.

13. Wyoming State Treasurer's Office, Year-End Master File, June 30, 1988.

14. Facsimile transmittal from Merrill Lynch, October 17, 1988, p. 2.

15. Ibid. 16. Dennis E. Logue, Handbook of Modern Finance,

Warren, Gorham & Lamont, Inc., Boston, Mass., 1984, p. 5-22.

17. Facsimile transmittal from Merrill Lynch, October 17, 1988, p. 3.

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CHAPTER ow A FOUNDATION

FOR RESTRUCTURING "The surest way to mishandle a problem is to avoid facing up to it."

It was noted in Chapt-er I that Wyoming's administrative structure has undergone limited change, with the most significant and effective reforms probably occurring between about 1967 and 1973. The most notable reorganizations involved the consolidation of various adminis­trative functions, i.e., Budget Office, Personnel Office, Purchasing, Buildings and Grounds, etc., into the Department of Administration and Fis­cal Control in 1973. Another significant reor­ganization occurred during the 40th Legislative Session when the Departments of Health and Welfare and the Division of Vocational Rehabili­tation of the Department of Education were merged into a single agency, the Department of Health and Social Services. Other reorganization efforts during that era involved the Department of Economic Planning and Development, the State Planning Coordinator, the Department of Fire Prevention and Electrical Safety, and the Department of Environmental Quality.

WHY REORGANIZE?

Perhaps the most common questions encoun­tered during the course of this study have been: "Why?"; "Why reorganize?"; "What's wrong with the structure we have?'' The responses to these questions have been consistent. It has been shown in Chapter I that the Governor, who is held responsible by the citizens for the perfor­mance of all state government agencies, boards, commissions and entities, has very little direct authority over 60 of the 79 Executive Branch

Anonymous

departments because of the interdiffusion of the multitude of boards, commissions and councils which possess administrative and executive au­thority. Albeit the Governor appoints individuals to the boards, commissions and councils, he has no direct authority over the operating agency or activity under that board, commission or coun­cil. Thus, policy handed down by the Governor often becomes lost in the maze through which it must travel before finally reaching the agen­cy administrator. This is particularly trouble­some in the case of part-time boards, commis­sions and councils, of which there are many.

Most of these boards, commissions and coun­cils are part-time entities, meeting only infre­quently, such as once a year, once every six months, or once a quarter. Many function with­out a clear definition of their purpose, role or responsibility. Unfortunately, many function without an adequate understanding of the State's policy or objectives with regard to their partic­ular program or function. Thus, coordination of activities and efforts with those of other agen­cies is often difficult.

These problems, though difficult, are not in­surmountable. And, in fact, the structure, which is so dependent on citizen input through the in­teraction of boards, commissions and councils, has served the State well during its first 100 years. There is a perception, however, that the State needs to re-examine itself; to take a close look at its operations in an attempt to identify ineffi­ciencies, waste or duplication. This need was ex­pressed very clearly in the legislation which created this study.

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PREVAILING TYPOLOGY OF STATE EXECUTIVE BRANCH REORGANIZATION

Most writers and students of state government reorganization recognize that comprehensive reorganizations fall into three general adminis­trative categories. These three types are referred to as the Traditional or Standard, the Cabinet, and the Secretary-Coordinator.

George Bell, former Director of Research for the Council of State Governments, and com­monly known as the country's leading authority on state government reorganizations, has described these three types of reorganization efforts. 1

"1. STANDARD TYPE '(The standard reorganization involves

the) regrouping of existing departments into something like 20 or 25 departments, main­taining much of the existing types of top structure like boards and commissions and elected officers, with various degrees of authority transferred to the heads of these new departments from having very strong management control to very little of it.'

2. CABINET TYPE '(These reorganizations are) cabinet in the

sense that all the department heads are responsible to the governor, usually serv­ing at his pleasure. In the cabinet type states you tend to have agencies grouped into broader functional groupings than under the so-called standard one. There may be 10 to 15 departments.'

3. SECRETARY-COORDINATOR TYPE '(This type of reorganization occurs

when) existing departments are grouped into very broad functions, four to six maybe; with no change in authority, however. The existing department heads maintain the authority that they have had before. The secretaries are appointed by the governor and serve primarily in a coordinating role.' ''

KEY ACTIVITIES

In choosing one of these three types of designs, it is of course necessary that the key activities of the State be assessed. It is not neces­sary, however, that we know all of the activi­ties which might conceivably have to be housed

in the organization structure. What we do need to know are the major activities, the key activ­ities.

It is generally recognized that organizational design starts with three very important ques­tions:2

a) In what areas is excellence required to obtain the State's objectives? b) In what areas would lack of performance endanger the results, if not the survival, of the enterprise (organization)? And, finally, c) What are the values which are truly important to us in this company (State)?

These three questions will identify key activi-ties and those identified will be the fundamen­tal structural elements of the organization. According to Peter F. Drucker, ''The rest, no matter how important, no matter how much money they represent, no matter how many peo­ple they employ, are secondary.'' 3

These secondary activities, obviously, will need to be analyzed, organized and incorporated into the structure, but the first concern has to be one of addressing those activities which are absolutely essential to attaining the State's major goals and objectives. It should also be pointed out that very few programs in government "dis­appear." It seems once programs are funded, their elimination rarely occurs.

WYOMING CONSTITUTION

In assessing or defining the State's major goals and objectives, this analysis begins with an examination of the State's Constitution as it relates to the establishment of officials, offices, agencies or departments, or to the provision of services for the State's citizens.

Article 1, Section 16 " ... The erection of safe and comfortable prisons, and inspection of pris­ons, and the humane treatment of prisoners shall be provided for.''

Article 1, Section 23 " ... The legislature shall suitably encourage means and agencies calcu­lated to advance the sciences and liberal arts."

Article 4, Section 11 ''There shall be chosen by the qualified electors of the state ... a secre­tary of state, auditor, treasurer, and superinten­dent of public instruction . . . ''

Article 4, Section 12 ''The powers and duties of the secretary of state, of the state auditor, treasurer and superintendent of public instruc­tion shall be as prescribed by law.''

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Article 4, Section 14 "The legislature shall provide for a state examiner, who shall be appointed by the Governor and confirmed by the senate. His duty shall be to examine the accounts of the state treasurer, supreme court clerks, district court clerks, and all county trea­surers, and treasurers of such other public insti­tutions as the law may require . . . ''

Article 7, Section 1 "The legislature shall pro­vide for the establishment and maintenance of a complete and uniform system of public instruc­tion, embracing free elementary schools of every needed kind and grade, a university with such technical and professional departments as the public good may require and the means of the state allow, and such other institutions as may be necessary.''

Article 7, Section 14 ''The general supervision of the public schools shall be entrusted to the state superintendent of public instruction, whose powers and duties shall be prescribed by law.''

Article 7, Section 15 ''The establishment of the University of Wyoming is hereby confirmed, and said institution, with its several departments, is hereby declared to be the University of the State of Wyoming ... "

Article 7, Section 18 "Such charitable, refor­matory and penal institutions as the claims of humanity and the public good may require, shall be established and supported by the state in such manner as the legislature may prescribe. They shall be under the general supervision of a state board of charities and reform, whose duties and powers shall be prescribed by law.''

Article 7, Section 20 "As the health and morality of the people are esssential to their well­being, and to the peace and permanence of the state, it shall be the duty of the legislature to pro­tect and promote these vital interests by such measures for the encouragement of temperance and virtue, and such restrictions upon vice and immorality of every sort, as are deemed neces­sary to the public welfare."

Article 8, Section 2 "There shall be con­stituted a board of control, to be composed of the state engineer and superintendents of the water divisions; which shall, under such regula­tions as may be prescribed by law, have the supervision of the waters of the state and of their appropriation, distribution and diversion, and of the various officers connected therewith ... "

Article 8, Section 5 ''There shall be a state engineer who shall be appointed by the Gover­nor of the state and confirmed by the senate;

... He shall be president of the board of con­trol, and shall have general supervision of the waters of the state and of the officers connected with its distribution . . . ''

Article 9, Section 1 "There shall be estab­lished and maintained the office of inspector of mines, the duties and salary of which shall be prescribed by law . . . "

Article 9, Section 6 ''There shall be a state geologist, who shall be appointed by the Gover­nor ... with the advice and consent of the senate . . . His duties and compensation shall be prescribed by law ... "

Article 14, Section 6 "Whenever practicable the legislature may, and whenever the same can be done without detriment to the public service shall consolidate offices in state, . . . "

Article 15, Section 9 "The legislature shall provide by law for a state board of equaliza­tion."

Article 15, Section 10 ''The duties of the state board shall be to equalize the valuation on all property in the several counties and such other duties as may be prescribed by law . . . "

Article 18, Section 3 ''The Governor, secre­tary of state, state treasurer, state auditor and superintendent of public instruction shall con­stitute a board of land commissioners, which under direction of the legislature as limited by this constitution, shall have direction, control, leasing and disposal of lands of the state ... "

These provisions of Wyoming's Constitution generally highlight the State's areas of desired performance and the areas of excellence required, but perhaps even more clearly accen­tuate the values which are truly important. These provisions must be considered in light of further direction which is provided in state statutes. Additionally, they must be reviewed in conjunc­tion with the goals, objectives and priorities as defined by the State's Chief Executive and other key state policymakers.

Most management experts agree that an anal­ysis of key activities is needed in organizations which have been going for some time, and par­ticularly in those organizations which have been going well. According to Drucker, in such cases: 4

'' ... the analysis will invariably reveal that important activities are either not provided for or are left hanging in midair to be per­formed in a haphazard fashion ... activi­ties that, once important, have lost most of

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their meaning but continue to be organized as major activities ... historical meaning­ful groupings no longer make sense but have, instead, become obstacles to proper

. performance. And it will certainly lead to the discovery of unnecessary activities that should be eliminated."

The changing directions of the State's bureau­cracy, though not reflected in the organizational structure, are evidenced with every change in administration. Every governor, newly elected, begins his term of office with priorities, pro­grams or changes he wants to implement. These initiatives generally reflect the will of the State's citizenry as perceived at least by the new chief executive; yet without a review or some adjust­ments to the organizational structure, changes may be difficult if not impossible to effectuate. This is not to suggest that the entire state bureau­cracy needs to be completely overhauled to accommodate the whims or desires of every new governor. What it does suggest is that the struc­ture, if too far outdated, cannot be used effec­tively to respond to current objectives without major modifications.

49TH WYOMING LEGISLATURE

Governor Sullivan, in his message to the 49th Wyoming Legislature, outlined his priorities for the State. Among them were diversifying and strengthening the State's economy through increased promotion and advertising of the State's parks and recreational areas, attracting new industry, creating jobs, and maintaining and enhancing the State's business climate through better coordination and funding; education of Wyoming's youth at the elementary and secon­dary levels, the community colleges and the University; and strengthening the family unit, reducing personal hardships and social problems through implementation of the Unemployed Parent's Program and greater leveraging of fed­eral funding through expansion of Medicaid options.

The Governor also addressed other issues, including strengthening cities, towns and coun­ties through replacement of lost revenues, enhancing the State's tax collection effectiveness through expansion of the Mineral Audit Pro­gram, and enhancing government efficiency through improving the plight of state employees and managers.

These objectives, as outlined by the Governor, were largely endorsed by the 49th Wyoming Legislature as most were in fact implemented or addressed through appropriation support. However, program effectiveness and the attain­ment of organizational goals are not necessar­ily assured through the availability of certain levels of financial support. This also requires strong effective leadership, good coordination of effort, and an administrative structure through which all programs can be directed, con­trolled, monitored and measured. 5

"Hierarchy, control, and predictability are essential for organizational effectiveness. Managers must structure organizations, allocate people to jobs, fill communication links, and determine goals .... In short, formal organization and structure are neces­sary to maintain a sense of direction and momentum for the acheivement of struc­tural goals.''

WYOMING'S ORGANIZATIONAL STRUCTURE

It was stated in Chapter I that Wyoming state government is a mish-mash of boards, commis­sions, councils, agencies, departments, offices and institutions. There are 79 of these Execu­tive Branch entities; however, only 19 of these report directly to the Governor (excluding those persons appointed by the Governor within his own office). Some 15 entities report to a board, of which the Governor is a member; the remain­ing majority report to a citizen board, commis­sion or council. In other words, even though there is a semblance of organization in state government, clearly there is no "hierarchy, con­trol or predictability" which is essential for effec­tiveness. Thus, Wyoming's structure is dramat­ically different from the model recommended by the Council of State Governments which limits the number of executive agencies to 20. 6

Under the current state structure, the board, commission or council often has more authority than the Governor to direct, control and moni­tor the activities of the agency or program. Coor­dination of activities, if it occurs, comes about through cooperation and/ or choice of the board, commission or council, rather than by directive or as a result of any type of hierarchy. This problem was described in an earlier study of Wyoming government reorganization: 7

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"It is paradoxical to acknowledge that the State will not entrust the governor, its highest elected official of the executive branch, with full authority to manage state government as a direct representative of the people but will on the other hand endow enormous authority to lay, frequently non­professional, appointees to boards and commissions for the purpose of overseeing vast programs. Most of the people who di­rect state government operations - agency heads - are not responsible to the gover­nor but to another hierarchial level, a board or commission. Without the authority to appoint and remove agency heads, the abil­ity to initiate new policies and programs is jeopardized; the cohesive factor influenc­ing state government for 'more together­ness' is lost. The governor can exercise his public trust only if he can rely upon agency heads to carry out his policies."

APPOINTMENT OF AGENCY DIRECTORS

An analysis of the Governor's appointment authority identifies those agencies which fit into a hierarchy (one in which the Governor is in

charge) and those agencies which do not. This analysis does not include the multitude of advi­sory boards and commissions which the Gover­nor appoints, but which are not state agencies, per se.

In Chapter I, we discussed the difficulties associated with management of executive agen­cies due to the vast number of individual agen­cies, the proliferation of boards, commissions and councils, and the varying degrees of direct authority which the Governor wields over each agency, as influenced by legislative structuring of each board, commission or council.

It was noted that the Governor appoints the agency director in only 19 of the 79 Executive Branch agencies. These are shown in Table IV-1, and it is also noted that nine of these 19 appoint­ments require Senate confirmation. This list does not include appointment of positions in the Governor's Administrative Office.

In addition to the 19 positions appointed by the Governor, as shown in Table IV -1, there are two directors appointed by the Governor from a list of candidates submitted to him by a board or commission. The Director of the Wyoming Water Development Commission is chosen from a list of candidates recommended by the com­mission, and the Director of the Economic

TABLE IV-1

GOVERNOR APPOINTMENT OF AGENCY DIRECTORS

Governor Appointment Title and/or Agency

Director, Admin. & Fiscal Control Adjutant General Commissioner, Agriculture Attorney General Director, Environmental Quality Director, Industrial Siting State Inspector of Mines State Examiner State Fire Marshall State Geologist Insurance Commissioner Manpower Planning Administrator Commissioner, Labor & Statistics State Engineer Commissioner, Public Lands Director, Health & Social Services Director, Recreation Director, Probation & Parole Admin. Law Judge, Workers' Camp.

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Senate Confirmation? Yes No

X X

X X X X

X X X X

X X X

X X

X X X

X

TABLE IV-2

GOVERNOR APPOINTS BOARD, COMMISSION OR COUNCIL WHICH APPOINTS AGENCY, DIVISION OR PROGRAM DIRECTOR

Board, Commission or Council

Aeronautics Commission Tax Commission* AMH AMH Arts Council Barber Examiners Board Real Estate Commission Cosmetology Board Employment Security Commission Pari Mutuel Commission Game & Fish Commission Highway Commission Livestock Board Medical Licensing Board Nursing Board Oil & Gas Commission Board of Speech Pathology Board of Pharmacy Board of CPA's Board of Hearing Aid Specialists Board of Psychologists Board of Nursing Home Admin. Community College Commission Travel Commission Retirement Board Police Officers Stdrds. & Training Occupational Health & Safety University of Wyoming

* Full-time commission.

TABLE IV-3

Position(s) Appointed by Board, Commission or Council

Director Director of Revenue Director State Librarian Director Staff Director Executive Director Executive Director Director Director Highway Superintendent State Veterinarian Staff Executive Director Administrator Staff Director Staff Staff Staff Staff Director Director Director Director Administrator President

GOVERNOR APPOINTS BOARDS

Board Name

Board of Radiology Technicians Board of Podiatrists Board of Embalmers Board of Optometrists Board of Physical Therapists Board of Professional Counsellors

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Positions Appointed

No Staff No Staff No Staff No Staff No Staff No Staff

Development and Stabilization Board is chosen from a list of candidates recommended by the board. Both appointments require Senate con­firmation. The Governor also appoints adminis­trators of the four divisions within Health and Social Services, without Senate confirmation. These four divisions are Community Programs, Health and Medical, Vocational Rehabilitation, and Public Assistance and Social Services.

There are a number of boards, commissions and councils which the Governor appoints. Sub­sequently, the board, commission or council, as a body, appoints the agency, division or program director. These appointments are shown in Table IV-2.

There are several other boards which are appointed by the Governor. However, unlike those listed in Table IV -2, none of these at the

present time employ personnel. The adminis­tration of the activity is handled by the board members themselves. These are shown in Table IV-3.

We have identified the state officials and/ or employees whom the Governor appoints directly, as well as those who are appointed by a board, commission or council. In addition, there are two other types of appointments worthy of men­tion here as we examine the hierarchial structure of authority and power in the Executive Branch of government: other appointments made by boards, commissions and councils, and appoint­ments made by the State's five statewide elected officials. The first group includes those boards, commissions and councils which can hire staff other than the director. These are shown in Table IV-4.

TABLE IV-4

BOARDS, COMMISSIONS AND COUNCILS WITH HIRING AUTHORITY BELOW THE LEVEL OF AGENCY DIRECTOR

Board, Commission or Council

Agriculture Commission Agriculture Commission Agriculture Commission Public Service Commission* Recreation Commission Travel Commission Board of Architects Board of Chiropractors Board of Dental Examiners

• Full-time commission.

TABLE IV-5

Positions Appointed

State Entomologist State Fair Director State Seed Analyst Various Various Various Clerical Clerical Clerical

APPOINTMENTS MADE BY THE FIVE STATEWIDE ELECTED OFFICIALS Agency

Liquor Commission Public Lands Workers' Compensation Board of Charities & Reform Women's Center Honor Farm Children's Home Girls' School Boys' School Pioneer Home State Hospital State Training School Veterans' Home Retirement Center Penitentiary

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Positions Appointed

Commissioner State Forester Director apptd. by Treasurer Executive Secretary Warden Superintendent Superintendent Superintendent Superintendent Superintendent Superintendent Superintendent Commandant Administrator Warden

Table IV -5 shows those positions which are appointed by the five statewide elected officials. Included in this group is the Director of Work­ers' Compensation, a position appointed exclu­sively by the State Treasurer.

Clearly, these tables point out that the appointment authority of boards, commissions and councils is widespread in Wyoming govern­ment, probably to a much greater degree than commonly perceived by either Wyoming's cit­izens or its Legislature. It is not suggested that board, commission or council input is not good, for it is necessary to have citizen input if state government is to be responsive to the needs of its people. However, such fragmentation of authority and control makes it impossible to hold the Governor or anyone else responsible for the effectiveness of all government operations. If the Governor does not have the authority, then he clearly does not have the responsibility.

If a reorganization of Wyoming's state gov­ernment is to be considered, it must be designed in such a way that this citizen input is not only maintained, but enhanced. This can occur by insuring the mission of boards, commissions and councils is clearly defined to exclude executive authority, and to emphasize the advisory or policymaking role of these entities. Citizen input must be garnered in such a way that it does not diffuse the ability to coordinate state activities and it must not result in an absence of respon­sibility or accountability. As citizen input is maintained, accountability must be interjected into each government agency or department and in each program or activity. If the Governor is to be held accountable for the performance of every government program or activity, then he must be given the authority to effectively manage them.

THE PRINCIPLES OF ORGANIZATIONAL STRUCTURE

A number of principles of organizational structure have been developed over the years which have helped explain why organizations take the form they do and what purposes the structures serve. Among the most important of these principles, according to McFarland, 8 are the principles of scalar levels, departmentation, unity of command, span of control, organiza­tional balance, and organizational simplicity.

It is important to examine each of these prin­ciples briefly in an attempt to assess the degree to

which the State's current organizational struc­ture is compatible with these principles and, if not, what organizational changes may be desir­able to improve the structure. McFarland stresses that the key to exploiting organization potentials for excellence is the organization recognizing where its shortcomings are and identifying what it wishes to become in comparison to what it cur­rently is, or historically has been.

It should be noted, too, that these traditional management principles have been around for years and though they are widely embraced by both industry and government throughout the world, they are also subject to question and criti­cism, especially of late, because they tend to emphasize the mechanistic concept of authority, i.e., structure, controls, departmentalization, etc., and ignore the human relationships in organizations. Influenced by rapid technologi­cal advancements and the development of com­plex specializations, the traditional bureaucratic organization theory came under rather intent question in the late 1960's and early 1970's by a host of management writers. Recently, Tom Peters, co-author of In Search of Excellence and A Passion for Excellence, in his latest work, Thriving on Chaos, also questions centralized systems and excessive layers of middle managers which he argues are typical of today's organi­zations.

These traditional principles, nonetheless will be used, supplemented by the latest management attitudes, as advanced by Mr. Peters, in an attempt to define what an efficient and appropri­ate organization structure for Wyoming govern­ment ought to be.

The Scalar Principle holds that the structure consists of two or more levels of authority arranged in a hierarchy from the chief executive at the top to the worker at the bottom, with "each successively lower level in an organization representing a decreasing amount of authority, a decreasing scope of authority, and frequently, a variation in the kind of authority. " 9

The relationship of one level to another can be diagrammed depicting the system of commu­nication by which authority is transmitted. This relationship is commonly referred to as a chain of command and for an industrial organization, it is shown in Figure IV -1. 10

The same scenario can be shown for a govern­ment organization with a few minor modifica­tions. A typical government chain of command is shown in Figure IV -2.

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FIGURE IV-1

CHAIN OF COMMAND INDUSTRIAL ORGANIZATION

• Establishes objectives • Overall accountability to stockholders

• Operates business to accomplish objectives • Accountable to Board of Directors

• Overall coordination of activities necessary to accomplish objectives

• Accountable to Chief Executive Officer

• Supervision of non-supervisory employees • Accountable to Operating Management

• Non-supervisory employees • Accountable to Operating Supervision

FIGURE IV-2

CHAIN OF COMMAND EXECUTIVE BRANCH ORGANIZATION

• Establishes objectives through constitution, statutes, election outcomes

• Operates government to accomplish objectives • Accountable to Electorate

• Overall coordination of activities necessary to accomplish objectives

• Accountable to Governor

• Supervision of non-supervisory employees • Accountable to Department Directors

• Non-supervisory employees • Accountable to Operating Supervision

Board of Directors

I Chief Executive

Officer

I Operating

Management

I Operating

Supervision

I Non-Supervisor

Employees

Electorate

l Governor

I Department

Directors

I Operating

Supervision

l Non-Supervisory

Employees

The scalar principle is a very simple but impor­tant concept; it is a universal phenomenon which explains how an organization is created and defines the relationships of authority in an organization. It, in fact, provides the framework for the transmission of authority.

Reflecting on the State's current set-up of boards, commissions and councils and consider­ing the dispersed authority as evidenced by the number of these boards, commissions and coun­cils which appoint the agency director or other staff, it is obvious that the scalar principle has

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played a varying role in the formulation of the current organizational structure of state govern­ment. In the above diagram, each board, com­mission or council with appointing authority would have to be substituted for the Governor. Since the appointees are not elected, they are not accountable to the electorate. In fact, it is difficult to determine to whom, if anyone, they are accountable. Are they accountable to the Governor? Are their appointees accountable to the Governor if he did not appoint them? The chain of command can break down immediately.

The Unity of Command Principle dictates that at every level in an organizational structure there can be only one "boss." An organization must have a single head, e.g., a corporation has but one president; a senate, but one president; a house of representatives, but one speaker; and a state, but one governor. "In the top leader is concentrated all of the authority and responsi­bility which permeates the organization ... More than one leader results in unsatisfactory perfor­mance of responsibility by subordinates ... Dual leadership results in a confusion of authority." 11

Without a single "boss" to whom subor­dinates are accountable, employees are unfairly forced to choose which particular superior they will follow, consult or report to. Again, turn­ing to the various boards, commissions and councils, it is unclear to whom many agency administrators report. Is it to the board, and if so, to which board member? Is he responsible to all board members? Or, is he accountable to the Governor?

Clearly, the unity of command principle has been criticized from time to time. Some have questioned how a single individual, e.g., a gover­nor or a corporate president, can possibly oper­ate an extremely large organization; others have argued large organizations should be run by committees or groups to gain broader input and to divide the responsibilities. Unfortunately, however, entities run by committees leave the organization with no one individual being responsible.

If we are to enhance accountability in state government, we must abide by the unity of com­mand principle. We cannot have individual accountability under the current structure of government.

The Principle of Span of Control simply holds that there is a limit to the number of people that one individual can supervise. 12

"The larger the number reporting directly to an executive, the more difficult it tends to be for him to supervise and coordinate them effectively. The number of persons who can be effectively supervised is a func­tion of the ability of the supervising execu­tive and of the executives being supervised."

Tom Peters, in Thriving on Chaos, reported that James O'Toole, professor of corporate strategy at the University of Southern Califor­nia, in a study of "span of control," observed that in the United States, one supervisor for every 10 non-supervisors was the norm. He com­pared this to Japan, where the ratio was approx­imately one supervisor to 100 non-supervisors and often ran as high as one supervisor to 200 non-supervisors. In comparison, O'Toole con­cluded that American workers were "oversuper­vised."13 Mr. Peters concluded that the span of control should be no smaller than one supervi­sor for every 25 to 75 people. 14

This general assessment seems to be in agree­ment with other management experts, e.g., Drucker says that a small span of control: 15

'' ... leads to that deformation of manage­ment: Levels upon levels which impede cooperation and communication, stifle the development of tomorrow's managers, and erode the meaning of a manager's job."

However, Drucker acknowledged that the size of the span of control differed, depending on where the level of authority resided within the organization. 16

''The president of a company who has reporting to him a number of senior execu­tives, each concerned with a major function, should indeed keep the number of direct subordinates to a fairly low number -between eight and twelve is probably the limit. For these men - the chief financial officer, the head of manufacturing, the head of marketing, and so on - have to work every day with each other and with the company's president. If they do not work together, they do not work at all. Therefore, the president is engaged in a great many relationships even though the number of direct subordinates may be quite small."

McFarland also shed further light on the size of the span of control, in the following obser­vations: 17

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''These large spans of control are not 'exceptions' to the principle, nor do they disprove the validity of the principle if it is correctly understood. Large spans of con­trol are feasible where: (1) the capacity and ability of the supervising executive are very great; and where (2) the subordinates can carry out their responsibilities with a mini­mum of direct supervision by a higher executive. The capacities of executives, both superiors and subordinates, are limited. Human beings are limited as to the time, energy, intelligence, training, experience, and other factors which they bring to the job."

We have observed that in Wyoming govern­ment there are 79 Executive Branch agencies with various responsibilities. Nineteen of these report directly to the Governor. The remaining 60 report to a board, commission or council. If you conclude that most of these boards, commissions or councils ultimately also report to the Gover­nor, then it is apparent that the Governor's span of control encompasses almost 300 individuals. It is arguable that this span of control at the top level of management in a very large, complex organization is far too broad. The position of Governor in a government organization is at least as demanding, if not more so, than that of president of a large company. A case can cer­tainly be made for limiting this span of control to a size similar to that found in private indus­try, i.e., 8 to 12.

The argument for a smaller span of control for the Governor is not necessarily in conflict with the thoughts advanced by Peters. There are roughly 7,000 employees in the Executive Branch of state government. Out of these 7,000 posi­tions, approximately 1,000 are managers, policy­makers or supervisors according to the Person­nel Division's classifications of all positions. This, then, calculates to be a supervisor to non­supervisor span of control of roughly one super­visor to seven non-supervisory positions - a considerably smaller span of control than the average O'Toole found in corporate America of 1 to 10, and a far cry from that found in Japan of 1 to 100. This would indicate that there are, in fact, too many "layers" in the state bureau­cracy; that Wyoming employees are indeed ''oversupervised.'' However, this oversupervi­sion is occurring at levels considerably below the top level of state government - the Governor.

The occurrence of oversupervision (too many middle managers) should be assessed on an agency-by-agency basis as the State examines and considers a reorganization of state government. It can be noted, however, that one of the major reasons for an apparently heavy concentration of supervisors, or middle managers, is probably due to the fact that the State's personnel clas­sification system incorporates supervision as one of the determinants of higher pay. Over the years, agency management has purposely designed supervisory responsibilities into posi­tions in an effort to improve salaries for their management personnel.

According to the Principle of Organizational Balance, "each portion and function of an enter­prise should operate with equal effectiveness in making its allotted contribution to the total pur­pose."18 There is a tendency to subdivide the work at hand into very small pieces. If this is carried to an extreme, what results is a problem of timing and coordination. Integrating the out­put of one unit with the output of all of the others becomes increasingly difficult as the num­ber of pieces increases. "Under such conditions, balance is difficult to maintain and efficiencies sought from subdividing the work are lost." 19

The growing imbalance of most organizations is a natural outcome of expansion and time. Over time, as new programs or activities are added to an organization, the natural tendency is to merely create another department, agency or office, rather than merge such expansion with an existing entity. The consequence of such "add-ons" is a deterioration in efficiency in the common administrative functions required in the operation of any activity; most notably, account­ing, budgeting, personnel, housekeeping func­tions, etc.

Wyoming state government, since its state­hood in 1890, has indeed experienced the imbal­ance brought on by time and expansion. This is perhaps best illustrated by the great diversity in agencies, departments, boards, commissions and councils. As an example, as previously noted, there are six boards (see Table IV -3) which have no staff. Compare these boards to the Wyoming Highway Department, which employs over 1, 700 people, or to the Department of Health and Social Services, with over 650 employees. In the present organizational struc­ture, all entities reside on the same plane (at the same level) in the scheme of administrative things. Yet, clearly, the importance of one

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agency or department to the citizens of the State can far outweigh the importance of many of the others.

It is difficult to maintain balance in an organi­zation, however, if it seems inefficiencies have been deliberately designed in the current struc­ture through the prolonged maintenance of fairly insignificant activities which take on the stature of a full-fledged agency or department, in spite of the fact the program is so limited it has no full-time staff to carry out goals or objectives.

There seems to be no argument as to the relevance of the Principle of Organizational Sim­plicity. ''The simplest organization structure that will do the job is the best one. " 20

" ••• simplic­ity is an objective of organizational planning . .. It means that an organization will strive for the simplest structure which will still fulfill the purpose intended and provide the company with economical and effective means for accomplish­ing its ends." 21

Clearly, the current organizational structure appears to be simple, i.e., every board, commis­sion, council, or department or institution direc­tor reports either to the Governor or to a board, commission or council. What this structure does not show, of course, is the hierarchy of govern­ment. It does not show any definition of authority; does not distinguish between line and staff agencies; does not define the interrelation­ships of any functions; and clearly does not define the organizational structure as it is intended or, as it is actually administered.

The organizational structure is, in fact, so complex that it is not clear who is accountable to whom. No one knows for sure who is respon­sible for what. Is the Governor responsible? Are the boards, commissions and councils respon­sible? If so, to whom are they responsible? The Governor? The Legislature? The citizenry?

The final organization principle which will be discussed as particularly relevant to the assessment or reorganization of the structure of Wyoming state government is that of the Principle of Departmentation. This term sim­ply refers to "particular groupings of both people and functions within an organiza­tion. " 22

There are a number of ways an organization can departmentalize, but the most common is probably by "function." In a commercial enter­prise, departmentation may be designed by geographical area, by product, or by process as well. However, in government, it is commonly

departmentalization by function, such as edu­cation, health, welfare, defense, etc.

Wyoming is not unique in its current depart­mentalization. Its structure reflects, in part, functions. However, with 79 Executive Branch agencies, in spite of the Highway, Health and Social Services, Game and Fish, Administration and Fiscal Control, and other large departments, it is clear that the principle of departmentation has not been a factor in the structuring of the organization.

The fact the State has some 21 professional and commercial licensing boards as separate agencies reflects that the State has been reluc­tant to organize along functional lines. This is also reflected in the fact that the State has three different agencies involved in education, i.e., the Department of Education for elementary and secondary education, the Community College Commission for the two-year college programs, and the University of Wyoming for the four-year college programs and advanced degree pro­grams. A number of examples of non-functional departmentation can be illustrated. There are several different agencies involved in tourism, i.e., the Travel Commission, the Recreation Commission, Archives, Museums and Histori­cal Sites, Game and Fish, etc. In the area of natural resources, there are at least 9 different agencies which are at least partially responsible: Agriculture, Water Development, Game and Fish, Geological Survey, Livestock Board, Oil and Gas Commission, Public Lands, State Engineer, and DEQ-Industrial Siting. The labor function in Wyoming is attended to by Workers' Compensation, Employment Security Commis­sion, OSHA, Manpower Administration, Labor and Statistics, Vocational Rehabilitation and Mine Inspector.

The lack of departmentation clearly contrib­utes to the difficulty in the management of state government. But, perhaps equally important, this lack of functionalization creates confusion for the State's citizenry. Though it is generally recognized that government exists to serve the people, the current structure makes it difficult for the people to receive this service. Often, peo­ple do not know which of the many boards, com­missions, councils or agencies to contact if they have a problem. As an example, a citizen with a problem dealing with water might need to con­tact as many as six different agencies before find­ing the one which can resolve his question or problem, e.g., Water Commission, State Engi-

- 98-

neer, DEQ, etc. Clearly, a reduction in the num­ber of agencies could serve to streamline a citizen's access to, and understanding of, the bureaucracy.

It really does not matter what kind of depart­mentation occurs so long as the end result allows for good communications, cooperation and interrelationships among the units or depart­ments which are established. For it is in this area that the greatest potential for economy, effi­ciency and effectiveness is. An organization which is departmentalized is also one which is easier to manage. According to McFarland: 23

" ... it channels the efforts of management to direct and control the work being done. The departmentation focuses executive skills on logical and interrelated problems and provides a basis for top management to coordinate and control the effort of those departments. It provides a logical basis for the assignment of duties and responsibili­ties to individuals."

APPLYING ORGANIZATION PRINCIPLES TO REORGANIZATION IN WYOMING

It was shown in the brief examples described, that the organizational structure of Wyoming state government is largely in conflict with most recognized organizational principles. Histori­cally, what has been universally accepted as absolute minimum requirements for sound, effi­cient organizational effectiveness, has been almost completely ignored in the formulation of Wyoming's agency structure. In spite of this, Wyoming government has performed surpris­ingly well in the minds of many over the years. But this good performance was perhaps more a function of abundant financial resources than it was a function of a particularly effective struc­ture of government. A strong case can be made for government reorganization in view of the conflicts cited herein. Perhaps of even more relevance though is that abundant financial resources are a thing of the past, at least for the present and forseeable future.

The fact that resources are scarce now and all public sectors in the State must learn to cope with less, means that it is critically important that state government be structured in such a fashion as to maximize its effectiveness. This cannot be done with a bureaucratic structure which is frag­mented, disjointed and uncoordinated. The reor-

ganization proposal which follows has been designed with the organizational principles previ­ously discussed being used as guiding principles.

STANDARDS OF ADMINISTRATIVE REORGANIZATION

The standards of administrative reorganiza­tion, based upon the actual experience in anum­ber of other states, are enumerated as follows: 24

a) Concentration of authority and respon­sibility; b) Departmentalization or functional inte­grating; c) Undesirability of boards for purely administrative work; d) Coordination of the staff services of administration; e) Provision of an independent audit; and f) Recognition of a Governor's cabinet.

These standards, though set forth several years ago, are still extremely relevant today, particu­larly in a structure such as Wyoming's which has not undergone much change over the years.

CURRENT STRUCTURE - AN EXAMPLE

In order to point out an example of the kind of structure which results when an organization is formed without adherence to the principles of management and without applying the standards of administrative reorganization, the Board of Charities and Reform was chosen.

The Board of Charities and Reform consists of the five statewide elected officials and this group has "general supervision and control, " 25

of the State's 11 institutions. The .board appoints a "secretary" whose duties, according to W .S. 25-1-104, are to countersign all documents approved or made by the board and report to the Governor and the board respecting the con­dition of all institutions.

Traditionally, the secretary has served as an arm of the board with unclear and undefined authority. Statutes do not specify the degree of authority possessed and in the past, the secre­tary assumed a level of authority which matched his/her personal management style. What resulted was a very confused administrative structure because neither the board, the secre­tary, nor the 11 institutions ever really knew how much authority the secretary possessed.

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-0 0

PENITEN­TIARY

SECRETARY OF

STATE

HONOR FARM

WOMEN'S CENTER

AUDITOR

BOYS' SCHOOL

GIRLS' SCHOOL

FIGURE IV-3

ELECTORATE

GOVERNOR

YOUTH CENTER

PIONEER HOME

CURRENT STRUCTURE BOARD OF CHARITIES & REFORM

TREASURER

VETERANS' II RETIREMENT HOME CENTER

SUPT. OF PUBLIC

INSTRUCTION

HOSPITAL TRAINING SCHOOL

-0 - CORRECTIONS

I I I I PENITEN- HONOR WOMEN'S BOYS'

TIARY FARM CENTER SCHOOL -

FIGURE IV-4

ELECTORATE

I GOVERNOR

I

I I I GIRLS' YOUTH PIONEER

SCHOOL CENTER HOME - - --~

STRUCTURE BASED ON PRINCIPLES OF ORGANIZATION

HUMAN SERVICES

I I I VETERANS' RETIREMENT

HOSPITAL TRAINING I

HOME CENTER SCHOOL I

The secretary's authority was constantly challenged by one or more of the institutions. Often, the board supported the secretary's posi­tion on a particular matter, but just as often, the institutions' challenges won out and the secretary's authority was pulled back or res­trained. This constant uncertainty as to who was in charge lead to conflict, disruption and ineffi­ciencies.

The administrative structure appears to be working effectively at the present time, given the five individuals presently serving in their elected capacities, and the current encumbent in the Executive Secretary position. Authority has been defined by the Governor, enabling the Execu­tive Secretary to discharge his duties consistent with board intent. Unfortunately, this efficient management structure may last only as long as the terms of the current elected officials or the longevity of the individual serving as Executive Secretary. The current structure will perform effectively only if all board members are in agreement. Should dissention occur, the chain of command and existing lines of authority and responsibility could deteriorate.

The structure for the Board of Charities and Reform violates every principle of organization, as reflected in Figure IV -3. As shown, there is no hierarchy; there is no unity of command; the span of control is too broad; there is no balance in the structure; the structure is very complex; and, there is no departmentation.

REVISED STRUCTURE USING PRINCIPLES OF ORGANIZATION - AN EXAMPLE

Contrast the structure depicted in Figure IV-3 to that shown as an example in Figure IV-4. Using the principles of organization, it is possi­ble to develop a meaningful structure which is designed to greatly reduce the inefficiencies which currently exist. Strong, clear lines of authority and responsibility are demonstrated, as well as a chain of command which removes all doubt as to who is in charge.

If the State is to become more efficient, then its administrative structure must be altered for all functions. The Board of Charities and Reform is but one example of organizational inefficiency which greatly hampers the State's ability to render efficient, effective services.

IN SUMMARY

Although several reorganization efforts have occurred over the years, 60 of the 79 boards, commissions, councils, agencies, departments and offices still do not report directly to the Governor, in spite of the fact the Governor is held responsible for the entities' performance. Many of the boards, commissions and councils function without a clear definition of their pur­pose, role or responsibility. Coordination of activities and efforts with those of other agen­cies is often difficult.

The Joint Legislative-Executive Efficiency Study Committee examined the current adminis­trative structure of state government and assessed its efficiency in terms of compliance with traditional organizational principles. Gener­ally, these principles include:

a) The Scalar Principle - holds that the structure be arranged in a hierarchy from the chief executive at the top to the worker at the bottom, with a clear line of authority, responsibility and chain of command. b) The Unity of Command Principle -holds that at every level in an organizational structure there can be only one boss. c) The Principle of Span of Control- holds that there is a limit to the number of peo­ple one person can supervise. d) The Principle of Organizational Balance - holds that each portion or function of the organization should operate with equal effectiveness in making its contribution to the total purpose. e) The Principle of Organizational Simplic­ity - holds that the simplest structure is the best structure. f) The Principle of Departmentation - holds that groupings of both people and functions within an organization should be done according to common elements.

The Committee concluded the reorganization of the State's administrative structure should be conducted using these principles as guidelines, as it was noted that the current structure is largely in conflict with these principles.

The "Cabinet Type" reorganization, which groups agencies into broad functional groupings of from 10 to 15 departments, was accepted by the Committee as the most appropriate adminis­trative structure for the State of Wyoming. The

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department heads would be responsible to the Governor, serving at his pleasure.

A review of the Wyoming Constitution provided guidance to the Committee in deter­mining the broad functional categories to make up the departments, and the Standards of Administrative Reorganization advanced by A.E. Buck in Reorganization of State Govern­ments in the United States were endorsed. These standards include: a) concentration of authority and responsibility; b) departmentation or func­tional integrating; c) undesirability of boards for purely administrative work; d) coordination of

staff services of administration; e) provision of an independent audit; and f) recognition of a governor's cabinet.

Finally, the Committee examined the role of citizen boards, commissions and councils and concluded that the input and involvement of these citizens should be maintained and enhanced through direct participation in advi­sory and policy capacities. Boards, commissions and councils should not be burdened with administrative and executive duties and powers which should be handled by trained, paid and responsible state government personnel.

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FOOTNOTES - CHAPTER IV

I. George Bell, "Executive Reorganization and Its Effect on Budgeting," Proceedings of the 29th Annual Meeting of the National Association of State Budget Officers, August 1973, pp. 90-91.

2. Peter F. Drucker, Management: Tasks, Responsibil­ities, Practices, Harper & Row Publishing, Inc., 1974, pp. 530-531.

3. Ibid., p. 531. 4. Ibid., p. 531. 5. David R. Hampton, Charles E. Summer, and Ross

A. Webber, Organizational Behavior and the Prac­tice of Management, Scott, Foresman and Company, 1968, p. 197.

6. Council of State Governments, Reorganization in the States, 1972, p. 6.

7. Department of Administration and Fiscal Control, A Proposal for the Reorganization of the Executive Branch of Wyoming State Government, 1974, p. 4.

8. Dalton E. McFarland, Management Principles and Practices, The MacMillan Company, 1962, p. 164.

9. Ibid., p. 165. 10. Ibid. 11. Ibid., p. 172. 12. Ibid., p. 174. 13. Tom Peters, Thriving on Chaos, Alfred A. Knopf,

1987' p. 356. 14. Ibid., p. 359. 15. Drucker, op. cit., p. 412. 16. Ibid. 17. McFarland, op. cit., p. 174. 18. Ibid., p. 178. 19. Ibid. 20. Drucker, op. cit., p. 601. 21. McFarland, op. cit., p. 179. 22. Ibid., p. 166. 23. Ibid. 24. A.E. Buck, Reorganization of State Governments in

the United States, Columbia University Press, 1938, pp. 14-28.

25. Wyoming Statutes, 1977, W.S. 25-1-104.

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CHAPTER w SURVEY, QUESTIONNAIRE

AND INTERVIEW RESPONSES "You can observe a lot just by watching."

The Government Efficiency Study Commit­tee believed an assessment of state government by those persons involved with government would lend insight into areas perceived to be problematic, and might provide some sugges­tions on where and how the system could be im­proved. To this end, multiple surveys, question­naires and interviews were conducted by both the staff and the University of Wyoming. From the results of these efforts, one can obtain a broad perception of how effectively state govern­ment is serving the general public and the busi­ness sector, how state managers and supervisors view government and its problems, and how members of the Legislature perceive the Execu­tive Branch. All sectors contributed suggestions on changing government procedures to improve efficiencies and many specific problem areas were identified. For research purposes, the com­pilation of actual survey, questionnaire and in­terview responses are on file in the Legislative Service Office. Due to their bulk, they are not included with this document.

SURVEY OF WYOMING BUSINESSES

The business survey was conducted by the University of Wyoming's Government Research Bureau. Businesses were selected from the Department of Revenue and Taxation's sales and severance tax files, the Economic Development and Stabilization Board's Directory of Mining and Manufacturing, and members of the Wyo­ming Association of Trade Executives.

Questionnaires were sent to 1 ,277 businesses

Yogi Berra

and 38 percent (489) responded. The respondents classified their businesses as:

TABLE V-1

PERCENT AGE OF RESPONDENTS BY STANDARD INDUSTRIAL CLASSIFICATION

Oil - Gas - Mining 26 % Retail Trade 16 Construction 15 Services 15 Manufacturing 13 Agriculture 6 Transportation, Communications,

Public Utilities 4 Wholesale Trade 3 Finance, Insurance, Real Estate 2

The average length of time the firms had been located in Wyoming was 20.4 years and the aver­age number of persons employed by each was 38.1. Respondents indicated approximate annual sales as follows:

TABLE V-2

PERCENT AGE OF RESPONDENTS BY AMOUNT OF ANNUAL SALES

Under $500,000 $1 to $5 million $500,000 to $1 million $10 to $50 million Over $50 million $5 to $10 million

53% 16 10

5 5 4

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TABLE V-3

RESPONSE TO BUSINESS SURVEY GENERAL PERCEPTIONS

Area

Promptness of the agency Courteous treatment from employees Quality of information Government's general response to the public Competency of state employees Feeling of someone being in charge Requirements for duplicate information Frequency of forms, reports, applications Simplicity of forms, reports, applications Attitude toward state regulations

General Perception of State Government

Businesses were asked to express their percep­tion of government through multiple questions, both specific and general. In general, their per­ception of government was positive.

In only two general question areas did busi­nesses respond negatively. Of the respondents, 44 percent generally felt they were required to fill out too many forms, and 47 percent felt state government was not run efficiently.

The questionnaire asked the firms to identify state government agencies with which they do business. Not surprisingly, the most frequently contacted agency was Revenue and Taxation (25 percent), followed by the Department of Envir­onmental Quality (13 percent), the Highway Department (nine percent), Workers' Compen­sation (eight percent), the Employment Security Commission (seven percent), and Game and Fish (six percent). Businesses contacted agencies for numerous reasons, with permit application and general information requests being the most usual (10 percent each), followed by sales tax (six percent), then property tax, drivers' licenses, required reports, specific questions on forms/ reports, and employee benefit claims (all at three percent each).

Businesses seemed generally pleased with their contacts with state agencies and employees, and rated the overall promptness, courtesy and qual­ity of services good to extremely good. The Governor's Office and the Oil and Gas Com­mission were identified as the agencies which responded best to the public, while the Public Service Commission and the Insurance Depart­ment were rated the worst.

Positive

71% 81 73 59 61 39 39 39 62 61

Negative

12% 7

13 27 28 31 25 33 23 17

Most respondents reported they had no difficulty locating the correct agency (60 per­cent), and of the minority whose contact required the cooperation of multiple state agen­cies (21 percent), 43 percent stated the agencies seemed to cooperate well with each other.

The Committee was interested to ascertain if the business community perceived areas of state government were either overfunded or under­funded. The majority of the respondents were not sure if there were areas which were over­funded or overstaffed (57 percent); 38 percent, or 186 businesses, thought there were. These areas are identified in Table V -4.

TABLE V-4

AGENCIES IDENTIFIED AS OVERSTAFFED OR OVERFUNDED

Agency Percent

Highway Department Environmental Quality Education Government in general Game & Fish Highway Patrol University of Wyoming Administration & Fiscal Control Public Assistance & Social Services Economic Development Labor Revenue & Taxation

13% 11 10

9 8 7 7 4 3 3 2 2

When asked to identify understaffed or under­funded agencies, again the majority was unsure of specific areas (59 percent), but 14 percent of

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the respondents did identify particular agencies. These were: (Agencies one percent or less are not shown.)

TABLE V-5

AGENCIES IDENTIFIED AS UNDERFUNDED OR UNDERSTAFFED

Agency

Game & Fish Highway Patrol Economic Development Education Public Assistance & Social Services Travel Commission Revenue & Taxation UW Research & Development Tax Audit Agriculture Highway Department Labor Workers' Compensation

Percent

10% 9 8 7 6 6 5 5 3 3 3 3 3

Of the 68 businesses which believed there were undersupported agencies, 41 percent replied they would be willing to pay more taxes to fund or staff the agencies (no - 38 percent; unsure - 21 percent). It is interesting to note that nine agen­cies appear in both tables.

Finally, businesses were asked to identify where they would prefer to increase or decrease state spending. These responses are shown in Table V -6; as can be seen, no area identified was heartily supported by more than 50 percent of the respondents for either increased or decreased funding.

Analysis of Negative Responses

Although the majority of businesses seemed generally satisfied with state government serv­ices, in order to improve the State's effective­ness and efficiency, negative responses were ana­lyzed in detail and some very specific problems were isolated and identified.

Locating Correct Agency. Those persons experiencing difficulty in locating the correct agency (17 percent) to deal with their prob­lem/inquiry most often stated they were trans­ferred between agencies and there seemed to be too many agencies with similar functions. The second most common complaint was that they were transferred too many times within a single agency. Respondents stated they were unable to determine before placing a call what agency per­formed what service and some suggested the tele­phone listing of agencies should be expanded and made more complete.

Interagency Cooperation. Of the 21 percent of businesses which reported having a problem which required the cooperation of multiple state agencies, the Department of Environmental Quality (DEQ) was by far the most frequently named single agency. The top four agencies iden­tified as having to work together to resolve problems or inquiries were (in order of fre­quency):

DEQ - State Engineer DEQ - Land Quality Division -

Water Quality Division DEQ - Industrial Siting DEQ - Game and Fish

TABLE V-6

INCREASE OR DECREASE IN GOVERNMENT EXPENDITURE AREAS (BUSINESS SURVEY)

Area

Water Development Public Schools Streets & Highways Community Colleges Economic Development Corrections/Law Enforcement University of Wyoming Public Health Care/Hospitals Parks & Recreation Welfare - aid to the poor

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Increase

36% 31 19 27 33 17 18 15 12

9

Decrease

12% 15

7 18 24 10 21 19 23 35

This implies functional overlap occurs between DEQ, the State Engineer, Industrial Siting, and Game and Fish. Most of this overlap is related to permitting requirements in general (DEQ -Industrial Siting) and to water regulation in par­ticular. The perception that the Land and Water Quality Divisions of DEQ are separate depart­ments possibly speaks to some interdepartmen­tal problems - lack of communication and coordination, and divisional autonomy.

Too Many Forms. It was stated earlier in the report that 44 percent of the responding busi­nesses felt they had to fill out too many forms for state government. Again, the agency most heavily criticized for excessive reporting require­ments was DEQ. Businesses expressed the need to have a common permit to meet the require­ments of DEQ, the State Engineer, and Indus­trial Siting. Some pointed out that federal reports asked the same information as DEQ, especially emissions standards.

The second most commonly mentioned reporting problems occurred between "labor" agencies (ESC, Workers' Compensation, and Labor and Statistics). Businesses report wage information to all three and claims for Workers' Compensation and Unemployment Insurance were troublesome. Reports containing similar information are filed by the oil and gas indus­try with Public Lands, Revenue and Taxation, the Oil and Gas Commission, and the federal government. Businesses in trucking complained about multiple reporting requirements to the Public Service Commission and Revenue and Taxation.

Respondents felt much duplicate information was required on the forms of various agencies and expressed their opinion that little thought went into designing forms with existing report­ing requirements of other entities taken into con­sideration. For example, the federal government will not allow a company to round figures when reporting oil and gas production/sales, but the State requires rounding. Some complained forms changed too frequently. New businesses expressed their confusion in trying to find out all the agencies they need to contact.

Forms Required Too Frequently. One-third of the businesses felt they had to report infor­mation to the State too frequently. Most wanted to be able to file Workers' Compensation employee payroll data quarterly, instead of monthly. The second most common comment

came from businesses who operate only seasonally, but must still file sales and lodging tax forms with Revenue and Taxation.

Forms Needing to be Simplified. The follow­ing forms were identified as being too complex (in order of frequency):

TABLE V-7

FORMS IDENTIFIED AS TOO COMPLEX

Severance Tax Vehicle Apportionment Fuel (Diesel) Tax Sales Tax

Regulations Which Interfere With Busi­ness. Only 17 percent of the respondents stated Wyoming state government regulations inter­fered with their ability to operate successfully. The most commonly identified problem was delay in permit issuance. Others felt the process for obtaining a business loan took too long and was too complicated. Some questioned why the State had environmental regulations more strict than the federal government or neighboring states.

Suggestions from Businesses

The questionnaire solicited ideas from the bus­iness community on how to cut the cost of government and/ or increase its efficiency, and suggestions of changes to regulatory require­ments which would simplify dealings with the State. Eighteen percent of the respondents sug­gested the following regulatory changes (in order of frequency):

a) Streamline the permitting process at DEQ and between DEQ, Industrial Siting, and the State Engineer. b) Have the State provide to business, through publications or seminars, detailed instructions on reporting requirements in the following areas:

i. Labor; ii. Loan programs;

iii. Sales tax (especially out-of-state). c) Combine similar functional areas into one agency:

1. Mine regulation; ii. Mineral reporting;

iii. Labor.

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d) Involve the business community more when rules and regulations are promul­gated; include them in the process; insure public meetings are held and well adver­tised. e) Review the State's environmental laws so they are more in line with requirements of the federal government and the sur­rounding states. f) Combine fuel tax and compensatory fee report. g) Install an information hotline and/ or an information service to direct the public to the correct agency/person. h) Define only one tax for minerals; do away with the multiple taxes of severance, ad valorem and conservation. i) For new businesses, compile a compre­hensive general information packet, with a single checklist of all state agencies they need to contact.

Fifty-one percent of those surveyed responded to cutting the cost of government and increas­ing government efficiency by (also in order of frequency):

a) Reduce the number of state employees; combine positions:

i. Get rid of non-performers, retain only the best and pay them well;

ii. Too many administrators; top heavy; cut from the top and the middle, not the bottom;

iii. Too many people employed who are not producing.

b) Consolidate departments along func­tional lines (eliminate most boards):

1. Licensing; ii. Investment;

iii. Promotion; iv. Tourism; v. Transportation;

vi. Labor; vii. Economic development;

vm. Tax. c) Review agency performance for ineffi­ciencies (sunset audit):

i. University; ii. Education;

iii. Highway (too autonomous; put under Governor);

iv. Workers' Compensation (get more fraud investigators);

v. Water Development Commission;

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vi. Administration and Fiscal Control; vii. Revenue and Taxation.

d) Privatize more government functions, primarily highway construction and main­tenance. e) Consolidate forms across agency lines; reduce paperwork. f) Cut educational funding at the local level:

i. Number of students declining; ii. Too many "cadillacs" across the

State; iii. Require teachers to live in the State; iv. Require performance review of

teachers. g) Stop funding special studies, surveys, committees. h) Institute merit pay. i) Schedule regular, formal discussions between departments to share information and encourage communication, coopera­tion. j) Pay higher salaries to reduce turnover, training costs. k) Have on board only competent, honest administrators willing to make tough decisions. 1) Stop putting stamps on Revenue and Taxation return envelopes; no other state or agency does this. m) DEQ:

i. Consolidate divisions/groups; cross-train; get rid of "little fiefdoms;"

ii. Eliminate administrative layers; iii. Put field operations under one

manager, not four. n) Put aside traditions and look at geo­graphic placement of state capitol and insti­tutions; place centrally; reduce travel costs. o) Set goals, objectives and measurable work units of performance. p) Cut welfare spending; too many people on it who should not be; require people to work. q) Do not make bad loans (Agriculture, Amendment IV). r) Make all agency heads accountable to the Governor. s) Change budget process; move away from "add on" procedure; go to Zero Base Budget. t) Reduce travel overseas and to confer­ences, conventions. u) Cut back on state services; insure no duplication of services.

TABLE V-8

INDUSTRIAL SECTORS WHICH SHOULD RECEIVE STATE ECONOMIC DEVELOPMENT SUPPORT

Industry

Manufacturing Oil - Gas - Mining Agriculture Retail Trade Transportation, Communications,

Public Utilities Wholesale Trade Construction Services Finance, Insurance, Real Estate

Economic Development

Inasmuch as the State of Wyoming has experienced a dramatic decline in the health of its economy, the Committee felt it was impor­tant to ask the business community what per­ceptions they had of the success or failure of the State's economic development efforts and to provide input as to what programs should be supported with the limited amount of economic development dollars available.

The survey asked a variety of questions in this area. One of the questions asked was whether or not the business planned to move from the State in the near future. Eighty percent of the respondents said they would not, or probably would not, move from Wyoming. Unfor­tunately, 20 percent were not so positive, and of these, five percent reported they probably will or almost certainly will move from the State. Listed in priority order below are the reasons businesses are considering leaving the State:

a) The poor state of the economy. b) Depressed oil and gas prices directly affect the business. c) Difficulty in obtaining financing, either from banks or from the State. d) Not enough work, especially in the con­struction industry. e) Too difficult to compete with out-of­state businesses.

Should Should Not

66% 3% 41 23 30 18 28 18

28 19 25 10 24 13 20 18 13 42

f) Other states have a better attitude toward business and provide attractive incentives. g) Climate. h) Negative atttitude of Wyoming govern­ment toward business. i) State is encouraging too much competi­tion through attracting new businesses. j) Not enough local interest in developing existing business.

When asked if they thought state government spending to support economic development had been effective, only 26 percent of the respon­dents replied positively. The majority (34 per­cent) thought the spending not too effective and 22 percent stated it was not at all effective. Yet despite this negative response, 63 percent of the businesses thought the State should continue to finance economic development; only 23 percent said they would be willing to pay more taxes to support the endeavor.

If a business responded the State should con­tinue to support economic development, that business was asked to identify which indus­trial sector should be the primary recipient of these incentives. Their selection is shown in Table V-8.

Finally, the respondents were asked who should make decisions on how economic development funds should be allocated. To this, they identified:

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TABLE V-9

PREFERRED ALLOCATOR OF ECONOMIC DEVELOPMENT MONIES

Area

Business Community Economic Development Agency Independent Board/Committee Legislature Governor Local Representatives Joint effort - business and

state government People of Wyoming Board/Committee representative of the people Persons with banking background Special blue ribbon committee Board appointed by Governor, approved

by Legislature Experts Local economic development councils Lending institutions

If all responses mentioning a board or com­mission were combined, this entity would be the preferred allocator, at 19 percent.

Tax Issues Respondents overwhelmingly agreed taxes

paid in Wyoming were reasonable (84 percent).

Percent

13% 8 8 8 8 6

6 5 5 4 3

3 3 3 3

At the same time, a large majority stated they would not want taxes increased even if it meant reducing government services (71 percent).

Businesses were asked if they believed non­compliance with tax laws in Wyoming was a problem. One-fourth of the firms believed it was, and one-third were unsure. When asked to iden­tify problem areas and what needed to be done to correct these problems, they replied:

TABLE V-10

PRACTICES USED BY BUSINESSES TO AVOID PAYING TAXES

Practice (In Order of Frequency)

Underreporting of mineral production/valuation Selling goods/services without a license Underreporting retail sales volume Understating real property/asset value Understating value of vehicles Incorrect proration of mileage to other states

(commercial vehicles)

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Percent

74% 48 37 21 10

9

/

TABLE V-11

MOST EFFECTIVE METHOD OF ELIMINATING NON-COMPLIANCE WITH TAX LAWS

Method (In Order of Frequency)

Impose more severe penalties for violators Increase audit efforts Change laws to eliminate loopholes Change rules and regulations Increase reporting frequency Move collection efforts to other agency

Privatization

The business community did not agree on whether private enterprise could provide govern­ment services more cheaply. Thirty-nine percent responded they were unsure; 24 percent dis­agreed; and 37 percent thought business would be more successful than government in provid­ing services.

Of those who believed business could not necessarily provide services more cheaply, the reasons they offered were that government pro­vides a large number of services which business was not able, or was not interested in pro­viding, that private business delivery would cost more than government because business had to make a profit, and that the private sector could not easily be made accountable to the public.

Those who responded positively to the inquiry cited the following reasons: a) competition and profit motive demanded efficiency; b) private business was more helpful and responsive to the public; c) the State's budget process provided no incentives to save funds and encouraged spend­ing; d) business was more flexible in getting rid of non- performing employees; e) government could not hire competent people because of poor wages; and f) some agencies could not deliver a quality product because of understaffing and/ or defective legislative mandate. Others com­mented local governments could perform (state) services more efficiently, that politics had a strong but negative impact on efficiency, and that some of the services the State delivered may not need to exist. When asked to identify specific services which could be privatized, businesses named the following, shown with the most com­monly cited first:

TABLE V-12

Percent

23% 11 11 8 3 2

GOVERNMENT SERVICES WHICH COULD BE PRIVATI ZED

Highway Maintenance DAFC functions:

Computer Services Printing Custodial - Maintenance Vehicle Repair - Maintenance Statistical Support Services

Highway Construction Workers' Compensation Employment Security Commission Accounting - Audit Prisons Public Lands

SURVEY OF WYOMING CITIZENRY

Wyoming citizens were surveyed by telephone by the staff of the Government Research Bureau of the University of Wyoming in July 1988. A total of 723 persons were interviewed. For a sam­ple of this size, one can be 95 percent certain that sample values are within four percent of the population values.

The majority of persons interviewed had lived in Wyoming more than 20 years, were married, had completed at least some college and did not have children under 18 at home, even though 42 percent were aged 18 to 40.

General Perception of State Government

Slightly more than one-third of the survey population had been in contact with a state agency during the past year. Most contacted a state agency to obtain a driver's or other license

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or permit, to obtain general or business infor­mation, or to get information on taxes. The most commonly contacted agencies were Revenue and Taxation, Game and Fish, and the Highway

Department. The persons interviewed were pleased with their dealings with state govern­ment, and responded positively to questions con­cerning the following:

TABLE V-13

RESPONSE FROM CITIZEN SURVEY GENERAL PERCEPTION

Area

Promptness of the agency Courteous treatment from employees Quality of information Attitude toward state regulations Government's general response to the public Competency of state employees Simplicity of forms/applications Efficiency of state government Feeling of someone being in charge Ease in locating correct agency Feeling of getting the "run-around"

Analysis of Negative Responses

Only 13 percent of those surveyed believed citizens were overregulated. When asked to iden­tify specific examples, hunting and fishing regu­lations were the most unpopular, followed by speed limits, seat belt and helmet laws, and the drinking age.

Forty-one percent of the citizens interviewed expressed problems in locating the correct agency when contacting state government. Twenty-eight percent felt they had received the "run-around" when dealing with a state agency. Most cited problems with Revenue and Taxation, which was the most commonly contacted agency. Other agencies which rated high in citizens' perception of receiving the "run-around" were not agen­cies identified as frequently contacted (three per­cent or less of all interviewees), but were: DPASS; Workers' Compensation; Administra­tion and Fiscal Control; Employment Security Commission; and Labor and Statistics. When asked to identify "run-around" problems they encountered, the following responses were the most common:

a) Employees were not familiar enough with their jobs and more than one person did not know answers.

Positive

73% 84 69 81 75 69 55 59 52 44 28

Negative

15% 7

15 13 16 19 20 27 30 41 55

b) Quality of employees poor in general. c) Employees needed more training. d) Too many departments to go through; no single person in charge - reorganize. e) Local telephone listing inadequate.

Those who responded negatively (27 percent) to the statement, "state government is efficient," identified the following problems:

a) Too many employees. b) Agencies waste money. c) Organization. d) Business development efforts.

Only 20 percent thought state government forms were difficult to understand and fill out. By far, the single form most frequently identi­fied as being too difficult was the State's job application.

Problems Facing Wyoming

The Committee felt it was important to ascer­tain from the general citizenry what they believed to be the greatest problems facing the State. These responses are shown in Table V-14.

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TABLE V-14

MOST IMPORTANT PROBLEMS WYOMING FACES

Problem

Poor economy - lack of employment Too much oil dependency; prices too low Drought, lack of water in general Poor management of state government Too few people Too much government spending

Seventy-four percent of these persons thought Wyoming government could help solve these

Percent

69% 6 5 3 2 1

problems and suggested the following ac­tions:

TABLE V-15

POTENTIAL GOVERNMENT ACTION TO SOLVE PROBLEMS

Suggestion Percent

Promote new businesses; provide business incentives More help from congressional delegation

33% 3

More advertising of Wyoming 3 Government should be more attentive to public input Government and business need to cooperate better Government and people need to cooperate better Business and labor need to cooperate better

3 3 3 2

More pay for state workers Cut government's spending Raise state taxes Get better political leadership Help small business Restructure Legislature

Tax Issues/Government Services and Spending

Eighty-five percent of the citizens surveyed thought taxes in Wyoming were reasonable. The general population was more willing to pay addi­tional taxes than the business sector, but still preferred government services be reduced before taxes were increased (57 percent). When asked if the level of services provided by government was adequate or inadequate, 12 percent thought government provided too many services, and 11 percent thought government provided too few.

Citizens were asked to identify areas where they would prefer to increase or decrease state spending. The general population was much more willing to increase and much less willing to decrease spending than the business sector. Response is shown in Table V-16.

2 2 2 2 2 2

As with the business sector, citizens could not agree on which agencies/programs spent too lit­tle or too much money. Welfare/social services, education, and highways were identified as the top three agencies/programs both over and underfunded. However, more citizens believed there were underfunded agencies/programs (42 percent) than overfunded agencies/programs (27 percent). Some programs were identified only as being underfunded. These were programs for aged, disabled and children, mental health serv­ices, law enforcement, recreation/tourism, and economic development. Programs or agencies identified as only being overfunded were water development, unemployment, and the Gover­nor's Office.

Most citizens (46 percent) indicated they did not know whether or not businesses avoid the payment of taxes; one-fourth believed they did,

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TABLE V-16

INCREASE OR DECREASE IN GOVERNMENT EXPENDITURE AREAS Area

Economic Development Corrections & Law Enforcement Local Public Schools Public Healthcare/Hospitals Water Development University of Wyoming Streets & Highways Community Colleges Parks & Recreation Welfare - Aid to Poor

and 29 percent thought they did not. Of those who believed businesses do avoid paying taxes, big oil companies were identified as the primary offender. Nonetheless, 90 percent of those inter­viewed thought the State should better enforce its tax laws so that everyone pays legally required taxes.

Economic Development

Citizens perceived the State's economic development efforts in a much more positive light than the business community, with a major­ity responding that the efforts were very, or somewhat, effective (53 percent). Forty percent of the general population thought these efforts favored new over established businesses, and 33 percent disagreed. Citizens surveyed were also asked to identify which types of business should receive economic development monies. Their response is shown in the following table.

TABLE V-17

BUSINESSES WHICH SHOULD RECEIVE ECONOMIC DEVELOPMENT SUPPORT

Business

Large industry, big business Oil - Gas - Mining Small businesses Business in general New businesses Established businesses Agriculture Tourism High-Tech Clean, light industry Service industry Healthcare/Hospitals Construction Education

Percent

15% 14 13 10

9 8 6 5 4 4 2 2 1 1

Increase Decrease

53% 10% 44 4 48 9 43 8 43 8 43 10 38 7 39 10 25 10 30 20

Privatization

Forty-four percent of the citizens surveyed thought private business could not perform serv­ices more cheaply than government; one-third of the respondents thought it could. These per­sons identified the following as potential areas for privatization:

TABLE V-18

SERVICES WHICH COULD BE PRIVATIZED

Highway Construction & Maintenance Prisons Mail Service Custodial - Maintenance Services Accounting - Auditing - Bookkeeping Printing Welfare Recreation Facilities

STATE AGENCY MANAGERS/SUPERVISORS

Questionnaires were sent to 950 persons iden­tified as agency managers and/ or supervisors by the State's Personnel Office and the Government Efficiency Study staff. The survey was extensive and contained almost 100 questions concerning agency management standards, staffing levels, training, personnel issues, planning, cash man­agement, budget, finance, accounts payable, and organizational structure; it solicited suggestions from state employees on how to improve govern­ment efficiency and asked them to identify problem areas. Forty-one percent (389 persons) responded to the survey.

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Problem Identification/Suggestions

Managers were asked to express their opinions about numerous areas of management within their purview. Their opinions lend insight into the problems which managers and supervisors face in running their programs within the govern­ment structure, and problems inherent in the structure itself.

Managing Government Like a Business. They were first asked if their agency or depart­ment could be run more like a business, then to elaborate why or why not. The majority thought they could manage in a more businesslike fashion and cited the obstructions which prevented this from occurring. The basic hindrance perceived was their inability to fully manage their areas of responsibility because of so many factors out­side their control. They are unable to provide incentives for good performance; mandate, budget and personnel resources are controlled outside the agency; and it is difficult to obtain legislative permission to initiate or increase fees. Some felt the service they provided was not appropriate for a business atmosphere. Others reported the agency had no articulated, agreed upon mission statements, goals, objectives, poli­cies, rules or regulations, and no identified sin­gle authority responsible for carrying out func­tions. A large number of respondents thought the Legislature or their agency commission was too involved in agency management. Thirty-nine percent of the respondents identified specific sta­tutes which promoted and/ or encouraged ineffi­ciency in their operations.

Policies/Regulations of Other Agencies. When asked if policies or regulations of other state agencies hindered effectiveness/ efficiency, 48.3 percent said yes and 40.6 percent said no. Those who did feel hindered commonly identi­fied problems with the Department of Adminis­tration and Fiscal Control (DAFC) and the Wyoming Uniform Accounting System. Gener­ally, DAFC was criticized for being too regula­tory, taking too long, being unaccountable, not providing clear procedures for agencies to fol­low, and not giving training on such. Some of the complaints centered around limitations which are actually statutory but perceived to be DAFC regulations; this particularly occurred in the area of budget. Managers expressed strong feelings of wanting to be independent of DAFC

and thought they could be more efficient and save more dollars outside the structure.

Other than DAFC, the State's accounting sys­tem (WUAS) was most frequently cited as being problematic, especially the year-end closeout which caused all transactions to come to a halt. They criticized WUAS as being unusable, too complex, unadaptable, and providing too few management reports. Problems with DAFC and/or WUAS is not surprising inasmuch as these are the only agencies in state government with which all other agencies must do business. The Attorney General's Office was perceived as taking too long to resolve referrals, but respon­dents also felt the office was understaffed and hindered by lack of needed subpoena power.

All other policies/regulations cited as problematic to an agency dealt specifically with interjurisdictional problems. These areas of functional overlap included motor carrier laws, water well permitting, oil and gas regulation, juvenile issues (including education), home­makers, water in general, labor in general, train­ing programs (Work Incentive, Vocational Reha­bilitation, Job Service), 21-year old handicapped students, facility licensure, and archival/storage space.

Changes in Legislative Procedure, State Regu­lations. Managers were asked to specify needed changes in legislative procedures, state regula­tions or management philosophy which would enable them to be more effective. The number one problem identified was the budget process. Again, managers expressed their frustration at not being able to manage their programs and suggested: a) Move from line item to program budgeting; b) allow movement of funds between line items and accounts; c) when funding for a program is eliminated, also eliminate the statu­tory mandate to operate it; d) allow agencies to retain fees collected; e) stop footnoting; and f) stop end-of-biennium reversion to the General Fund. Problems associated with the incremen­tal budget process used by the State will be dis­cussed further in Chapter VI. Other changes sug­gested were the ability to provide incentives to employees, and the need for Executive Branch agencies to work more closely with the Legisla­ture. Managers expressly stated they wanted more flexibility to manage their programs and cited too much specificity in statutes as a signifi­cant hindrance to managing effectively. At the same time there is too much "micro-legislation,"

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some agencies complained they were operating significant programs without specific statutory authority. They felt the Governor should have more control over the Executive Branch and should be directly involved in policy decisions anc~ the formulation of goals and objectives. Some managers stated there were too many agen­cies operating without clear rules, regulations or policies, or, the agencies were not adhering to such.

Procedural Changes. The need most com­monly identified to promote efficiency was the establishment or expansion of computer and information systems. Second, managers expressed the need for more staff training, both general and agency-specific. Cross-training between divisions/units would provide better public service, promote job satisfaction, and give employees a broader perspective. Managers and supervisors thought paperwork requirements were out of hand and suggested the initiation of forms management within agencies and across agency lines. A large number of respondents believed procedures were much less a problem of inefficiency /ineffectiveness than ''turf'' atti­tude.

The feeling of not being able to manage their own programs also surfaced again in response to this question. Managers felt they could bet­ter negotiate contracts outside DAFC, proposed circumventing the Personnel Division, and men­tioned wanting to manage their own budgets. Some pointed out it was impossible to adminis­tratively change agency procedures when the finite procedures were enumerated in statute, complaining again of micro-legislation.

Communication Problems. The majority of respondents felt communication problems within their own agency or with other agencies inhibited their job effectiveness (51.7 percent). When asked to elaborate, the complaints primarily cen­tered around problems within their own agency. Management was heavily criticized as not involv­ing and/or communicating with subordinates. Management was accused of not listening or responding to employee concerns and not com­municating policy decisions to staff. This com­plaint takes on even more serious consideration since managers and supervisors, not line staff, responded to the questionnaire.

The second most common problem with com­munication was identified as resulting from too many agencies with similar and overlapping

duties and functions. They proposed that con­solidation of agencies would reduce the need to maintain elaborate and cumbersome communi­cation systems.

Other problematic areas existed between field and central offices, personality conflicts and turf protection, divisional autonomy within single agencies, lack of clear lines of authority, too many administrative layers, lack of policy and procedures in writing, and agencies having more than one "boss" (commissions and Governor, commissions and agency director, commissions with no single director, state and county, direc­tor and district clerks, etc.).

Tax A voidance. Like the business commu­nity and the general citizenry, agency managers were asked if they were aware of practices which were used to avoid the payment of taxes. Only 14.4 percent of the respondents replied posi­tively, and similar to the other surveys, identi­fied severance and ad valorem taxes as the most problematic. From their perspective, some of these taxes were going unpaid due to lack of audit staff, inadequate reporting requirements, poorly defined rules and regulations, and incon­sistent application of evaluation/assessment techniques. The second most commonly identi­fied problem was with companies incorrectly utilizing contract labor to avoid payment of unemployment insurance. Payments of sales and use tax were being avoided by very little follow­up on out-of-state use tax collection, understat­ing the purchase price of used vehicles, and proprietors not ringing up all sales. Many stated the true volume of unpaid taxes was unknown due primarily to the fact too many agencies/pro­grams did not have audit in place.

Personnel Issues

State government employs approximately 7,000 persons, not counting the University or community college employees. During Fiscal Year 1988, according to the State Auditor, a total of $227.5 million was spent on personal services (salaries and benefits). Managing such large resources is time consuming and demand­ing. In times when fiscal resources are diminish­ing, effectively managing human resources becomes critical to agency operations. If admin­istrators are asked to do more with less, the effi­ciency of the workforce and managers' ability to manage the workforce must be increased and fine-tuned.

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Training. When asked to identify strengths and weaknesses of the State's current personnel system, the large majority of managers and su­pervisors cited their frustration in being unable to discipline and/or dismiss poor or non-per­forming employees. Survey results indicated a significant lack of training in this area. Seventy­eight percent stated they had never received train­ing in the State's requirements for reduction-in­force (RIF); almost half have not been trained in discipline/ grievance procedures; 62 percent did not receive supervisory or management train­ing of any sort within a year of assuming super­visory responsibilities. This lack of exposure to basic supervisory skills or tools is serious, espe­cially in today's fiscal environment. First, the State could face direct costs in financial claims against the State and in the amount of staff time devoted to grievance and court procedures. The State currently has a single case pending which if lost, could cost approximately $190,000. Sec­ond, the indirect costs of improper management of human resources are potentially even higher and result in excessive absenteeism, turnover, poor performance, cynicism, and insubordina­tion. At a time when salaries are frozen and the workforce is being reduced in size, it is impera­tive that managers know how to manage, moti­vate, communicate and direct their workforce.

Those surveyed were asked if they believed certain types of training should be mandatory for supervisors. Eighty-one percent said yes. Currently, the only mandatory training in the State is for defensive driving, and this was origi­nally begun to keep insurance costs low. Now that the State is self-insured, this benefit is not as direct. The State has apparently placed little value in staff development or grooming its managers for leadership. It is doubtful a com­pany which employed over 7,000 persons would place such small emphasis on management development. Indeed, the lack of management grooming/development in the public sector is one of the few fundamental differences between the public and private sector.

Managers identified the following types of training which would enable them to perform their job more effectively: a) motivational tech­niques; b) discipline/grievance; c) employer/ employee relations; d) performance evaluation; e) reduction-in-force procedures; f) supervi­sory/management skills; g) personnel rules and regulations; h) communication skills; i) WUAS - Budget. Respondents requested that multiple

levels of training be established, especially upper level courses. While this should certainly be a goal for the future, it would appear the broadest immediate need is for basic training on how to use current systems effectively. Managers also suggested that training be provided with no charge to the agency, that it also be offered out­side Cheyenne, and that certain types should be made mandatory for elected officials and appointees. Some stated that one of the most unfair practices the State perpetuates is to pro­mote someone into a supervisory or management position, then never give them the tools to deal with their new responsibilities.

Other Personnel Management Concerns. Respondents to the survey also criticized the per­sonnel system as being inflexible, unresponsive, and unable to conform to new and changing needs. Managers and supervisors thought the hir­ing process took too long. Indeed, this process was slowed as state government attempted to reduce its numbers through attrition. Filling of all vacancies required gubernatorial approval through June 1988, and job reclassification and filling of early retirement vacancies still go through this approval process.

One of the most significant complaints about the personnel system was the perception that rules, regulations and policies were being incon­sistently applied, and employees were generally treated unequally. Respondents stated special concessions and "exceptions" to the rule hurt employee morale and destroyed the compensa­tion/ classification plan. They perceived many areas where because no policy existed, elected officials too often intervened personally in per­sonnel decisions. They are angry with new appointees being brought in at significantly higher salaries than older employees, and the fact that some agencies/ employees have received raises while the majority of the workforce has not. Employees of Game and Fish, the Highway Department, and the Oil and Gas Commission receive better benefits than the rest of the Execu­tive Branch employees; field personnel do not get the same "perks" as those in Cheyenne, e.g., snow days, Cheyenne Day. They perceived the applicant qualification process was applied inconsistently and/ or unsatisfactorily and that classifications across agency lines were unequal. The perception of unequal treatment seems to play as serious a part to employee morale problems as frozen pay.

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Managers and supervisors did specify strengths of the current personnel system. In pri­ority order, these were fringe benefits, an at­tempt to promote fairness and equity, job secur­ity, employee protection, and working con­ditions.

Suggestions for Change. The survey asked respondents to suggest changes which could be made to the personnel system to make it more effective. The most common suggestion was to include the agency more in job classification, applicant screening and systems development. The second most prevalent suggestion was to decentralize personnel functions and to let agen­cies do more of their own personnel manage­ment.

Supervisors and managers requested to be trained how to effectively use the system, to be made more familiar with personnel rules and regulations in general, and in disciplinary proce­dures in particular. They suggested streamlining the hiring process by expanding testing into more job classifications and testing applicants for more than entry level positions.

Implementing pay for performance was sug­gested, followed by establishing career ladders across agency lines, and the elimination of "automatic" pay raises, pay for longevity, etc. They stated raises or bonuses should be given only for performance. Respondents also request­ed a probationary period be put into place for ''tenured'' employees when they are promoted or move to another agency.

They proposed streamlining the grievance and hearing process, replacing the lay board with professionals who serve for a specified period of time and allowing the State to appeal decisions. Managers further suggested when no pay raises are available, that the State could provide other types of incentives, e.g., training, certificates of appreciation, award ceremonies, daycare, job sharing, educational leave, sabbaticals, etc.

Other proposals included installing a toll-free number for field locations, establishing a job skills bank, centralizing annual and sick leave records, creating an intern program, giving Per­sonnel stronger authority to identify underpaid job classifications and adjusting pay accordingly, and establishing a formal process to identify and eliminate unneeded positions, then retraining dis­placed persons for jobs in demand.

Performance Appraisal. Most supervisors/ managers believed the newly instituted perfor-

mance appraisal system had merit. Only 27.5 percent of the respondents did not think the sys­tem accurately assessed employee performance. Fifty-three percent stated they would like to see a similar system put in place for all state employees.

Even though most believed the system had merit, nearly all respondents commented on the system's weaknesses. Their major complaint was that the appraisal was not specific enough to an employee's full range of duties. Many thought the system still had the potential to be too sub­jective, and was a waste of time since the process could not now be tied either to incentives or dis­missal/discipline. Managers frequently com­plained training for the process was inadequate, no hearing process was in place, and perfor­mance documentation requirements were unclear.

To improve and/or streamline the process, managers suggested rating once yearly instead of twice, having employees rate themselves and their supervisors, instituting a team approach with input from peers, other agencies or super­visors, etc., allowing the use of percentages or half points in rating, and including evaluation of agency directors.

Organizational Structure

The questionnaire revealed some significant flaws in the State's current organizational struc­ture. Fifty-five percent of the respondents stated employees are responsible to more than one individual; 39 percent stated programs were managed by either more than one person or across division or agency lines; almost one­fourth stated their organizational structure was to some degree based on personality rather than logical groupings; 28 percent claimed reporting lines between employees and supervisors were not totally clear, and 40 percent responded nega­tively to their agency being of sufficient size to benefit from economies of scale. Forty-nine per­cent of the managers stated there was not a log­ical series of promotions within their agency due primarily to small agency size.

Consolidation. Most respondents did not feel they could operate their programs more effectively if programs or agencies were consoli­dated (62.2 percent), and said what was needed was more interagency cooperation and coordi­nation among those with similar missions. Those who thought consolidation would be helpful

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mentioned the following functional areas (in order of frequency): mental health; law enforce­ment; agencies which deal with juvenile issues; aging; labor; motor carriers; recreation/tourism; audit; water; and facility health inspection. Managers also suggested placing Data Service programmers in user agencies and eliminating the department structure of the Board of Char­ities and Reform, combining institutions with their community counterparts.

Changes to Department/ Agency Structure. Managers first declared in order to be more effi­cient, they must have more staff. Second, they stated there were too many administrative layers within their agency and that the agency needed to be internally reorganized with more delega­tion of authority and responsibility. Other struc­tural problems which encouraged inefficiency were directors not having clear lines of authority over division heads (could not hire and/or fire) and the resulting divisional autonomy, and the added layer and diffused responsibility of a com­mission managing the agency. Many managers suggested state government needed to be reor­ganized and a cabinet structure established.

Staffing Levels. Most persons in supervisory positions supervise four to six individuals. Thirty-two percent believed their agency was adequately staffed; four percent thought they were overstaffed; and 59 percent complained of inadequate staffing levels. One-fourth of the respondents stated the caliber of their workforce was not sufficient in terms of education and experience to do an effective job.

Program Objectives. The majority of man­agers stated their programs had clearly defined objectives (over 60 percent), that their budgets reflected these, and that their organizational structure supported program objectives. This is not necessarily in conflict with complaints of no clearly articulated, agreed upon mission state­ments, goals, etc. The latter pertains more to broad agency direction, while the former is program-specific. Seventy-seven percent stated they had written policy in place which encom­passed their major programs, but almost half stated their written procedures were not ade­quate.

Program Supervision. One-third of the respondents said their program or agency was supervised by one or more boards/commis­sions/councils (B/C/C). Some reported interact­ing with more than three such entities. While 67 percent thought the group was effective in providing citizen input to program operation, 78 percent stated the program could be continued without their supervision. Of those managers who reported B/C/C supervision of programs, 43 percent of them thought the entity acted in an executive (versus advisory) role.

Planning

Although the State has no formal planning process in place, the large majority of managers reported the existence of informal procedures. Seventy-two percent of the respondents thought their agency would benefit from a strong plan­ning process. When asked to identify what procedures would be necessary or helpful in establishing such a process, they designated: a) the process must involve all levels of personnel within the agency; b) time to plan was not cur­rently available; c) the procedure must be artic­ulated, mandated, and training provided; d) there must first be in place State and agency mis­sion statements, goals, and objectives which state priorities; e) a different managerial attitude of working together must be cultivated; and f) the process must have commitment from the top (Governor) down.

Fees

Forty-one percent of those surveyed stated their agency was able to charge fees; of these, 64 percent thought the fees currently charged were inadequate to cover the cost of services. Half the agencies which do not now charge fees believed there were areas where fees would be appropriate. Of those who reported approach­ing the Legislature to initiate or increase fees, two-thirds reported being unsuccessful.

It appears agencies would be more aggressive in capturing user fees if they received legislative support. They cited earlier one of the reasons their agency was unable to operate more like a business was due to the fact it was so difficult to obtain legislative permission to charge or change fees. Now the State is facing a fiscal dilemma, the pursuit of user fees may become more important. Managers were asked to iden­tify additional revenue which could be generated

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TABLE V-19

SERVICES FOR WHICH FEES COULD BE CHARGED OR INCREASED

Agency/Area

DAFC bid list AML bid list - DEQ Promotional merchandise - Travel Commission PSC application fees Penitentiary programs Institutions - third party collections Agriculture - inspection, licensing AMH - research, site admissions, etc. Fire Prevention & Electrical Safety - permits,

inspection, plan reviews H&SS - Public Health Nursing H&SS - facility inspection and licensure

Estimated Revenue

$ 12,500 11,000 22,500 50,000

775,000 1,500,000

171,300 91,500

H&SS- DPASS - interest on overpayments Probation & Parole- pre-sentence investigation,

222,500 112,500 80,000 45,000

supervision fees Workers' Compensation - quicker phase-in time Labor & Statistics - bonds, licensing,

publications, complaints, permits

200,000 3,000,000

30,500 Secretary of State - almost all office

functions

TOTAL

from increasing and/or initiating fees. Not all respondents enumerated dollars along with pro­posed changes, but managers conservatively identifed $8,400,000 to this end; $5.4 million of this is a recurring annual amount. These sugges­tions are shown in Table V-19.

Administrative Functions

Approximately one-third of all respondents did not answer questions concerning accounting practices as this area was beyond their scope of responsibilities. Of those managers who did reply, most reported the accounting unit had an organizational chart and that policies and proce­dures for financial functions were set forth in writing. Financial reports to management were not routinely accompanied by an analysis of the information presented. The large majority reported their programs were audited annually by the State Examiner. Some reported they had performance audits completed, but most stated the audits were either financial and/or compli­ance. The Executive Branch does not have a per­formance audit program in place, and the major-

2,100,000

$8,424,300

ity of respondents did not indicate the Legisla­tive Service Office audited their programs. It is doubtful agencies have undergone a performance audit unless such was performed by the Legis­lative Service Office.

Although most stated controls over cash com­ing into the agency did not need to be strength­ened, almost 29 percent of those responding to cash management questions stated checks were not remitted to the Treasurer's Office for deposit until five or more days after being received in the agency. This practice could cost the State lost interest earnings, and was discussed further in Chapter III. Only half reported the preparation and use of long and short-term cash requirement plans.

Most managers stated attention was given to collection policies to assure prompt submittal of receivables, taxes and fees. A large majority of the respondents said their agency was unable to assess late fees or penalties; of those who said they were able to assess such, 35 percent stated the penalties were rarely or never assessed, and 60 percent said remittances were occasionally or routinely granted.

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Managers reported routinely verifying invoices for charges, quantities, etc. and matching in­voices to purchase orders to verify accuracy. Nearly all managers who responded to the ques­tions stated they contracted for services. Only a small number reported making contract pay­ments in advance or not auditing contracts. Most contracts were audited by the originating depart­ment or program, or another department or pro­gram within the agency.

INTERVIEWS WITH LEGISLATORS

Members of the State Senate and House of Representatives were interviewed to ascertain their views on state government's effectiveness and to solicit from them suggestions for change and improvement. Unfortunately, time limited the number of interviews, and the views of only 20 percent of the total membership of the Legis­lature are represented here.

Boards, Commissions and Councils

The broad consensus of legislators relative to boards, commissions and councils (B/C/C) was that these entities should serve in an advisory role only and not be involved in day-to-day manage­ment of the agency. They should not appoint agency directors or other personnel. It is appropriate for them to monitor rules and regu­lations and set policy. As the appointment process occurs, members should be given an orientation or informational packet explaining their role, responsibility, liability, potential for conflict of interest, etc.

Some of the legislators believed there were cur­rently too many B/C/C, that their number needed to be reduced, that their structure, size, purpose, per diem, etc. needed to be made uni­form, and that the administrative functions of the regulatory and licensing agencies should be consolidated. It was recognized these bodies do provide for citizen input, which is important. They can lend objectivity and oversight to pro­gram management.

Some legislators believed it was an appropri­ate function for B/C/C to act as a hearing body; others did not agree, pointing to inconsistent statutory mechanisms, the absence of objectivity and due process, lack of independence, etc. These respondents felt the hearings and appeals process should be as consistent as possible among and between all agencies, and at some point should be a single, consolidated function.

Structure of the Executive Branch

Sixty-three percent of the legislators inter­viewed thought the number of agencies in the Executive Branch needed to be reduced. Some stated it now is fragmented and disjointed with overlap of programs and responsibilities. Half suggested moving to a cabinet structure of government with few broad agencies and direct lines of authority to the Governor.

Others did not define any structure, but emphasized the importance of a strong chain of command with clear accountability, articulated goals and objectives, and the appointment of persons with strong management skills. The structure needs to be modernized; no one should report to boards and boards should not make appointments. The structure should have con­sistent nomenclature, and this should be simple and easily understood. Department directors should hire/fire their division managers, and the appointees should be exempt employees. Some legislators pointed out the State would have to pay good salaries to attract strong directors but thought this was essential.

Two or three legislators suggested establish­ing a secretary-coordinator type of government. This would place positions in the Governor's Office to coordinate the efforts and programs of multiple agencies, and agencies would gener­ally remain intact.

A number of interviewees discussed the High­way Department and Game and Fish, believing these agencies needed more legislative oversight. Some pointed out the employees of these agen­cies were treated differently from the rest of Executive Branch employees. Ideally, the Gover­nor, not a commission, should appoint the agency directors; if this could not occur, at least the appointees should have Senate approval.

Duplication/Consolidation Possibilities. Nearly all interviewees identified one or more areas where program duplication currently existed, or where agency consolidation would provide cohesiveness to program delivery.

Areas most frequently named for potential consolidation were labor agencies, DEQ -Indus­trial Siting, Recreation - Travel - AMH, and Agriculture - Livestock Board - Veterinarian. Also mentioned were corrections agencies and institutions, transportation, education, economic development, and BCR - Health and Social Serv­ices. Multiple program administration was iden­tified for commercial vehicle registration.

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BCR and the Institutions. Although there was no particular question relating to the Board of Charities and Reform, almost half those inter­viewed commented on the Board/agency. The majority thought the Board should be abolished; if it were to be maintained, they thought the elected officials should not make up the Board. Others thought the concept of a department of institutions had outlived its time, that the agency should be dissolved and the institutions moved into their particular service area. Indeed, only three or four states, including Wyoming, have such a structure. Institutions in the vast majority of the states are incorporated with their com­munity counterparts. After South Dakota abol­ishes their department of institutions, only Wyo­ming will have a structure with the term "charity" associated with its institutional deliv­ery system.

If the BCR is to remain in place, legislators suggested the institutions report to the Execu­tive Secretary of the BCR and no longer stand as independent agencies. This would facilitate the formulation of mission statements, goals and objectives, the uniform utilization of fed­eral dollars among the institutions, budget preparation and management, and enhance ac­countability.

Current System of Elected Officials

Of those who responded to this subject, most stated the practice of electing the Superintendent of Public Education should be re-examined and appointment of the position should be consi­dered. Legislators pointed out the State Audi­tor and Treasurer particularly required techni­cal expertise and qualification criteria for the offices should perhaps be established. One­fourth of the respondents thought the practice should remain as it is now. One legislator pointed out the salaries of the elected officials should probably be raised as there are superintendents of local school districts who are paid more than the elected officials.

Responsibilities of Elected Officials

By far, the majority of those commenting on this topic believed the elected officials should not serve on so many boards and their primary responsibilities were too diffused with these "side" duties.

Appointment Authority

Nearly all legislators who commented on this subject thought the Governor and other elected officials should have broader appointment authority and "at will" employment needed to be expanded. This procedure was perceived to enhance accountability; the excuse 6f not being able to effectively manage the personnel resource would be eliminated.

Budget Process

General dissatisfaction with the budget process was expressed by almost all legislators. Although a few legislators stated they like the detail of the line item budget, the majority of those inter­viewed believed the State should move from line item to program budgeting. They expressed the opinion the Legislature was currently too involved in budget detail; total programatic dol­lars should be appropriated, but attention should not be given to line items or individual jobs. It was perceived the incremental budgeting process encourages management by perpetuation and could be replaced with Zero Base Budgeting; PTE's (full-time equivalencies) could be utilized instead of specific jobs being detailed.

Nearly all who were interviewed discussed the appropriation process, and most felt the whole legislative body did not have enough input into agency budgeting. Although it was recognized the Appropriations Committee did a very good job of managing the State's fiscal resources, the majority of legislators felt too left out of the process.

While most did not advocate moving the entire budget responsibility to standing committees, there was general consensus that these commit­tees did need to be more involved in the process. It was suggested members or chairmen of the standing committees be informed of the Appropriation Committee's scheduled hearings and be required (and paid) to attend. This might help alleviate the problem of the general body not being more informed of budget intricacies, and not being privileged to testimony only the Appropriations Committee hears.

Some emphasized the Governor is and should be the State's chief budget officer. He or his managers, not the Appropriations Committee, should decide where to cut personnel if dollars are not appropriated. It was perceived the Legis­lative and Executive Branches of government currently do not have an effective partnership;

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the result is a stalemate which results in no for­ward movement.

Other suggestions from legislators included: a) footnoting should be ceased, or at least used with much more discretion; b) earmarking should be discontinued or be greatly reduced; c) accounts need to be consolidated; and d) pooled interest should be diverted to the General Fund.

Personnel Issues

Performance Appraisal. There was no clear consensus on the effectiveness of performance appraisal. Some thought it was essential and pay should be tied to it, while an almost equal num­ber thought it time consuming and counter­productive, and that pay should not be tied to such a system. Other pertinent comments were: a) establish an incentive for management to dis­cipline/ dismiss non-performers - currently it is risky and there is no incentive to accept such risk; b) before the process can be effective, clear lines of authority must be in place; and c) pro­vide only good performers with a bonus, not a pay raise which follows them forever.

Salary. There was general agreement that state employees needed raises and that turnover was problematic, largely due to inadequate salar­ies. Some perceived the compensation plan was too generous at the top and too restrictive at the bottom. Others commented again that if the State wanted to attract strong management per­sonnel, attractive salaries would have to be offered.

Privatization

Legislators were mixed in their views towards privatization, although most thought some government services could be contracted to the private sector. Those not supportive of the idea thought the process could lead to a "spoils" sys­tem; the unavailability of competition in some areas would be problematic; the private sector already greatly profited from government; con­tracts would go to out-of-state firms; and it was an illusion that privatization decreased cost -it only shifted costs to contract dollars.

Those who thought privatizing services should be expanded cited potential areas as institutions, printing, janitorial services, data processing, and the State Veterinarian.

Audit Amost half of those interviewed thought audit

functions should be combined into one agency. There was no agreement as to exactly which agency should perform this function, but those who commented on this stated the agency should be under the control of the Governor. Some thought education should undergo audits of ADA, ADM, handicap and vocational counts. Others stated local political subdivisions should not hire their own CPA firms, that the State Examiner should contract these firms. Finally, legislators commented Legislative Service Office performance audits do not have enough "teeth" and the Legislature does not respond to audit recommendations.

Education Legislators who commented on education bas­

ically believed the State needed more oversight of local school districts, that if education costs the State as much as it does, the State needs more voice in how money is spent. They thought the Legislature should set more standards for edu­cation and make the system more accountable. Teachers and students should be evaluated.

Suggestions relative to higher education were: a) once funding exceeds 50 percent for commu­nity colleges, they are no longer "community" but are "state;" b) bring community colleges under the University; and c) have the commu­nity colleges adopt the same course numbering system as the University.

Role of the Legislature The large majority of those interviewed

thought the Legislature needed to move to a broader scope of setting policy through legisla­tion and have less involvement in specific progra­matic delivery mandates. The separation of powers is not clearly defined, and it was sug­gested legislators need an orientation (and refresher) which provides an overview of this basic issue, as well as exposure to the workings of government and agency responsibilities.

Some articulated the fact the Legislative and Executive Branches of government will always be in conflict and that this tension can result in positive outcomes. While a large number of legis­lators stated they believe the Legislature tres­passed too much on the role of the Executive Branch, some pointed out this has resulted from a basic distrust of the ability of the Executive Branch to effectively manage its own affairs.

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IN SUMMARY

The agencies most frequently contacted by business and the private sector are relatively few in number. Out of the six agencies identified by the. business community as those with whom they most often do business, only one is under the direct supervision of the Governor (DEQ). The remaining five are managed by appointees named by a commission or other elected official: Revenue and Taxation, Highway, Game and Fish, ESC, and Workers' Compensation. Two of the six agencies are also outside the purview of the Legislature (Game and Fish and Highway). If policymakers agree service to the public is a high priority for state government, thought may need to be given to the fact so many of the pub­lic contact agencies are outside the direct man­agement of the Executive Branch, and two are outside the direct management of both the Legis­lature and the Executive Branches of government.

The majority of businesses and citizens sur­veyed were pleased with their contacts with state government and rated quality, promptness and courtesy of employees high. Despite satisfaction with their contact with government, 47 percent of the business community did not feel govern­ment was run efficiently, and their most com­mon complaint was they had to deal with too many government forms.

Approximately 20 percent of the businesses had particular complaints about state govern­ment and identified the following common troublesome areas:

a) Overlap of functional areas between multiple agencies; multiple reporting requirements due to this problem. b) Unclear definition of areas of responsi­bility within single agencies. c) Not enough information supplied to government users (both general and spe­cific). d) Lack of communication, cooperation and coordination among and within agen­cies; autonomy, "turf" protection. e) Not enough involvement of the public in government's decision-making process. f) Government's deficiency in critically scrutinizing its own activities:

i. Lack of (performance) audit. ii. Lack of clear goals and objectives.

111. Proliferation of paperwork. iv. Growth of unwieldy processes (li­

censing and permitting).

g) Perception that government was over­staffed and/ or not staffed with quality employees.

Some suggestions made by the business com­munity to improve government efficiency should be heeded and/ or explored for implementation. Their most common proposals, in order of fre­quency, were:

a) Streamline the permitting process (DEQ - Industrial Siting - State Engineer). b) Have the State provide detailed instruc­tions on specific reporting requirements; provide general information packet for new businesses; install an information hotline and/ or information service to direct the public. c) Combine multiple agencies with similar functions. d) Involve the business community more in the promulgation of rules and regula­tions. e) Review the State's environmental laws and bring them in line with the federal government and surrounding states.

To cut the cost of government, businesses most often recommended:

a) Downsize government by reducing the number of employees, especially at the management level (too many supervisors); insure high quality of employees. b) Consolidate departments along func­tional lines. c) Review- audit agencies for inefficiencies. d) Privatize more government functions. e) Consolidate forms across agency lines; reduce paperwork.

Some of the proposals put forth by the busi­ness community are addressed specifically by the Government Efficiency Study, particularly over­lap of functional areas between multiple agen­cies and the consolidation of such. Inherent in this process is the scrutiny of multiple layers of supervision, a redefinition of responsibilities within proposed agency structures, and a reduc­tion of autonomy and "turf." Unwieldy pro­cesses are encouraged in a structure which is incoherent with diffused responsibilities; realign­ment of government functions should improve current processes and discourage the future growth of uncoordinated processes.

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Survey of Wyoming Citizenry

The very large majority of citizens surveyed were pleased with their contact with state govern­ment agencies. Of the negative responses, the most common complaint was difficulty in locat­ing the correct agency.

Particular complaints relative to state govern­ment efficiency revealed persons surveyed thought there were too many state employees, state employees were not familiar enough with their jobs and needed more training, there were too many departments to go through to accom­plish a task; and government needed reor­ganizing.

Citizens identified the poor economy and lack of employment as the single biggest problem fac­ing the State, and believed state government could help solve this problem by promoting and providing incentives to business. The majority of respondents believed the State's economic development efforts were very, or somewhat, effective and 53 percent thought state govern­ment should increase spending in this area.

Eighty-five percent of the respondents thought taxes in Wyoming were reasonable, but the majority (57 percent) preferred to reduce govern­ment services rather than increase taxes. However, when asked if they perceived whether agencies/programs were funded adequately, 42 percent identified underfunded areas while only 27 percent identified overfunded areas.

Survey of State Agency Managers/Supervisors

Managers and supervisors frequently expressed their frustrations in not being able to fully manage their areas of responsibility due to so many managerial functions being outside their control. They generally cited such problems as inability to manage their human resources, ina­bility to control their budget, too much statu­tory specificity and/ or restriction, and inability to increase or initiate fees. Policies perceived to negatively affect or hinder agency performance were those of DAFC, the State Auditor, or other specific agencies where interjurisdictional con­flicts existed.

A negative morale problem is currently per­vasive among state employees. This is due to more than one factor: a) lack of pay for perfor­mance and frozen pay; b) perception of unequal treatment of employees; c) no evidence on the

part of the State's leaders to provide any other job incentives in lieu of pay; d) no training; e) criticism from the Legislature; f) perception by state employees that they are a fiscal problem rather than an asset or a solution.

Communications within and among state agencies are deficient. Management was criti­cized for not involving and/ or responding to staff. Multiple agencies with overlapping duties and functions necessitate elaborate and complex informal communication systems and encourage and perpetuate feelings of ''turf'' and ''turf'' protection.

The State's current organizational structure does not provide for clear lines of authority or responsibility; employees are too often respon­sible to more than one individual; programs are managed across divisional and/ or departmen­tallines; multiple administrative layers have been allowed to develop; directors in some agencies do not have strong authority over division heads; the majority of agencies are managed by a board, commission, or council (B/C/C) or the appointee of such, which leaves no single per­son absolutely responsible for agency per­formance.

Many respondents indicated their agency had no formally articulated, agreed upon mission statement, goals or objectives. As long as there is an absence of these basic management guide­lines, success or failure of programs, and agency or individual performance cannot be realistically or effectively assessed.

Because human resource management is so critical to the delivery of services to the public and to the effectiveness and efficiency of organizational operations, the survey posed numerous questions relative to this issue. The responses indicated a pervasive lack of exposure to basic supervisory/management skills, and absence of any emphasis from the State on development of good managerial skills. When excellence is not expected or encouraged, and no tools provided to build toward such, excellence will not be achieved. Now the State is at a criti­cal point where managers are asked to do more with less, but managers are not prepared to lead, motivate, discipline, or in general, effectively manage their employees within the restraints of the government system. The basic do's and don't's of the system are not even clearly under­stood, much less the broader, more abstract aspects of effective personnel management. The tangible and intangible costs of this ignorance

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are high and will continue to climb until the State reverses its attitude toward employee training and development.

Managers offered numerous suggestions to improve government operations. They felt the Governor should have more control over the Executive Branch and be more directly involved in policy decisions and the formulation of goals and objectives. Expansion and/or establishment of computer systems was identified as a need in numerous agencies. Cross-training between divi­sions/units within agencies was suggested, to provide better service to the public, promote job satisfaction, and lend employees a broader per­spective of their agency. Forms management within and across agencies was seen as a poten­tial solution to burgeoning paperwork require­ments.

Respondents identified a lengthy list of needed statutory changes to enable them to operate their programs more effectively. These largely dealt with eliminating specific statutory language directing program management to allow the agency more flexibility and responsiveness to the public. Multiple suggestions to improve the budget process were offered, as were suggestions to close "loopholes" to reduce problems of non­payment of taxes. Survey respondents also sub­mitted numerous proposals to encourage the effectiveness of the State's personnel system.

Areas of functional overlap and potential con­solidation were described as: motor carrier laws; oil and gas regulation; juvenile issues; labor; facility inspection; mental health; law enforce­ment; aging; recreation/tourism; audit; and water.

Survey of State Legislators

The majority of legislators interviewed be­lieved the number of agencies in the Executive Branch needed to be reduced and that the cur­rent structure was fragmented and disjointed

with overlap of programs and responsibilities. Areas most frequently identified for potential consolidation were labor agencies, DEQ - Indus­trial Siting, Recreation - Travel - AMH, Agricul­ture - Veterinarian - Livestock Board. They also voiced the opinion that boards, commissions and councils served a good purpose of including citizen input into program management but that these entities should not appoint agency person­nel and not be involved in day-to-day agency management.

Of those who commented on the subject, the majority believed elected officials should not serve on so many boards, that this practice too diffused their primary responsibilities. The Board of Charities and Reform was most fre­quently cited as an example of a board on which the elected officials should not serve.

Nearly all legislators interviewed expressed general dissatisfaction with the State's budget process. Their major complaints were: a) the Legislature was too involved in budgetary details, and attention should be directed more to program funding than line item detail; and b) the budget process did not include the whole legislative body and was too delegated to a sin­gle committee. Many emphasized that the Gover­nor was the State's chief budget officer, and he or his managers should decide where to cut per­sonnel, not the Legislature.

Finally, a number of those interviewed dis­cussed their perception that the Legislative and Executive Branches of government currently do not have an effective partnership. The large majority thought the Legislature was probably too involved in specific statutory programatic delivery mandates, and some pointed out this has resulted from a basic distrust of the Executive Branch's ability to effectively manage its own affairs. While some legislators pointed out this tension is basic and can result in positive out­comes, others felt the State was currently in a stalemate which results in no movement.

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CHAPTER WD CONCEPTUAL REORGANIZATION

STRUCTURE FOR WYOMING ''Our plans miscarry because they have no aim. When a man does not know what harbor he is making for, no wind is the right wind."

There are a number of alternatives available to Wyoming policymakers in the reorganization of state government. However, no one single plan of organization will address all of the needs of the State nor satisfy all of the desires of the special interest groups or the State's bureaucrats. Any plan, regardless of its makeup or design, can be met with resistance, chiefly because it represents change and it is an unproven alter­native to the status quo.

A reorganization plan which addresses the principles of organization and management will, by its very nature, require structural changes in government if it is to result in an organization based upon a hierarchial scheme, unity of com­mand, functional departmentation, and manage­able span of control - in other words, if it is designed in a manner the Governor can ad­minister. Altering Wyoming's structure to this degree must be done before full efficiency and optimum economies in operations can be at­tained. However, it is optimistic to hope to ef­fect a complete reorganization plan in a short period of time. Such an attempt would create confusion in an already shaken bureaucracy which is still reacting to budgetary and person­nel cutbacks and reductions.

As a first step in reorganization, the State must establish a mechanism which will facilitate a smooth, gradual transition from the structure now in place to that of a cabinet type of adminis­trative plan which effectively transfers the authority and reponsibilities from the various ad­ministrative boards, commissions and councils

Seneca

to the Governor's Office, leaving these entities with clear and direct channels to provide advice and counsel to the operating agencies and programs.

PROCESS OF REORGANIZATION

The process of reorganization must be an on­going procedure whereby the State's administra­tive structure can be adjusted or modified to meet technological, political and socioeconom­ic changes in the State and national environ­ments. Many states have addressed this need through establishment of permanent commis­sions or councils, generally with joint legislative and executive membership, whose charge is to constantly monitor the State's administrative structure, review and assess conditions which im­pact the state bureaucracy, and propose or­ganizational changes which are necessary to address current and future challenges.

Wyoming was served by such an entity begin­ning in 1967 when Governor Hathaway appoint­ed a commission on governmental reorganization and constitutional revision. In 1969, the Legis­lature, in Chapter 196, authorized the Legisla­tive-Executive Commission on Reorganization of State Government. This commission was ac­tive in proposing and securing legislation to streamline, consolidate and modify the adminis­trative structure of government; such efforts were designed to provide a more efficient and economical state government which was thought to be more viable and responsive to the people

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of Wyoming. The commission ceased existence in 1982 with the recodification of Title 9. Its demise was at least partially attributable to the creation of the Legislative Service Office and the fact the Governor, during the late 1970's and early 1980's, chose alternate ways to address organizational issues, primarily through formu­lation of joint staffing from both the Legisla­tive and Executive Branches of government. These special teams were formed to study prob­lems and recommend solutions and then were disbanded upon project completion.

The Joint Legislative-Executive Efficiency Study Committee recommends a joint council be reestablished on an on-going basis to imple­ment this reorganization proposal and assess continuing proposals to streamline the bureau­cratic structure. Appropriate staffing and fund­ing should be addressed in the 1989 Legislative Session. Legislation to achieve this end will be submitted to the 1989 Legislature along with legislation to create a cabinet form of govern­ment. Such enabling legislation will define the overall "conceptual" administrative structure, the departments, powers and duties of the department directors, the method of reorganiz­ing, and appointment and removal power of the Governor in forming and staffing the organi­zation.

Clearly, a reorganization effort resulting in a cabinet form of government, in which functional departments are created and formed by merg­ing existing agencies, programs, personnel and activities into them, must be designed and care­fully scheduled to be implemented over time in an orderly, deliberate fashion. The Committee has concluded a minimum of three years will be necessary to effect the total reorganization prescribed herein, with approximately one-third of the 79 boards, commissions, councils, depart­ments, agencies and institutions being impacted each year. A gradual phase-in of this nature can be handled without a major disruption of government services and will provide adequate time for the Governor, the Legislature and all parties affected to assess both the future reor­ganization components of this proposal, as well as enable an evaluation of each accomplished departmentation. Thus, adjustments, alterations and modifications can be addressed.

Other states have successfully implemented reorganization efforts. Some involved complete restructuring, while others were partial modifi­cations. Legislation from several of these states

was examined and that deemed most appropri­ate for Wyoming was assessed, modified and tailored to meet the needs of this study. What follows is excerpts of legislation from various states, including Idaho, Georgia, Florida, Michi­gan, Hawaii and South Dakota. It is recom­mended that the language which follows, under each of the following headings, become a part of the legislative language: Purpose, Definitions, Reorganization Concept, Structure of the Execu­tive Branch, Directors of Departments - Powers and Duties, Appointment and Removal Power, and Method of Reorganization.

SUGGESTED STATUTORY LANGUAGE

Purpose a) The State has experienced changes in societal attitudes, values and emphasis, as well as rapid developments in technology. These changes have produced new issues requiring new programs and new ap­proaches for their resolution. The state gov­ernment has sought to meet these new issues and to implement new programs and ap­proaches within the framework of its present structure. However, programs which essentially are intended to meet com­mon needs have been dispersed among several agencies and they have not received the coordination they require. b) The State Constitution contemplates the separation of powers within state govern­ment among the Legislative, Executive and Judicial Branches of the government. The Legislative Branch has the broad purpose of determining policies and programs and reviewing program performance. The Exec­utive Branch has the purpose of executing the programs and policies adopted by the Legislature and of making policy recom­mendations to the Legislature. The Judicial Branch has the purpose of determining the constitutional propriety of the policies and programs and of adjudicating any conflicts arising from the interpretation or applica­tion of the laws. c) Within constitutional limitations, the agencies which comprise the Executive Branch should be consolidated into depart­ments consistent with executive capacity to administer effectively at all levels. The agen­cies in the Executive Branch should be integrated to achieve maximum efficiency

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and effectiveness as intended by the State Constitution. d) Structural reorganization should be a continuing process through careful execu­tive and legislative appraisal of the place­ment of proposed new programs and the coordination of existing programs in response to public needs. e) The responsibility within the Executive Branch of government for the implemen­tation of programs and policies should be clearly fixed and ascertainable. f) Departments should be organized along functional or program lines. g) The management and coordination of state services should be improved and over­lapping activities eliminated. h) When this reorganization of state gov­ernment abolishes non-exempt positions (those covered by the Personnel Rules), the individuals affected, when otherwise quali­fied, should be given priority consideration for any new positions created by reorgani­zation or for other vacant positions in state government.

Definitions a) To provide uniform nomenclature throughout the structure of the Executive Branch, the following definitions shall apply in this and all future acts.

i. "Cabinet" means collectively the At­torney General, the Department of Employment, the Department of Commerce, the Department of Edu­cation, the Department of Administra­tion, the Department of Family Serv­ices, the Department of Health, the Department of Natural Resources, the Department of Public Safety, and the Department of Transportation.

n. "Department" means the principal administrative unit within the Execu­tive Branch of state government.

iii. "Examining and licensing board" means a board authorized to grant and revoke licenses to engage in regulation occupations.

iv. "Director of the department" means the individual or board in charge of the department.

v. ''Administrator'' means the individual in charge of a division within the de­partment.

v1. "Council" means an advisory body created by specific statutory enactment and appointed to function on a con­tinuing basis for the study of the problems arising in a specified func­tional or program area of state govern­ment and to provide recommendations and policy alternatives.

vn. ''Committee'' means an advisory body created without specific statutory enactment for a time not to exceed one year or created by specific statutory enactment for a time not to exceed three years and appointed to study a specific problem and recommend a solution or policy alternative with respect to that problem. Its existence shall terminate upon the completion of its assignment.

viii. "Coordinating council" means an interdepartmental advisory body created by law to coordinate programs and activities for which one depart­ment has primary responsibility but in which one or more other departments have an interest.

ix. "Commission," unless otherwise required by the State Constitution, means a body created by specific statu­tory enactment within a department, the Office of the Governor, or the Executive Office of the Governor and exercising limited quasi-legislative or quasi-judicial powers, or both, independently of the director of the department or the Governor.

x. "Agency," as the context requires, means an official, officer, commis­sion, authority, council, committee, department, division, bureau, board, section or another unit or entity of government.

xi. "Board of trustees" means the Univer­sity of Wyoming Board of Trustees.

Reorganization Concept

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a) All executive and administrative offices, boards, agencies, commissions, councils and instrumentalities of the state govern­ment and their respective functions, powers and duties, except for the Office of the Governor, Attorney General, Secretary of State, Auditor, Treasurer, and Examiner shall be allocated by law among and within

not more than 12 principal departments organized as far as practicable according to major purposes by no later than July 1, 1991. Subsequently, all new programs or functions shall be assigned to administra­tive offices, agencies and instrumentalities in such manner as will tend to provide an orderly arrangement in the administrative organization of state government. Tem­porary agencies may be established by law and need not be allocated within a principal department; however, such temporary agen­cies may not exist for longer than two years. b) Except as to elected constitutional offi­cers, the Governor may, within 18 months of the effective date of this Act, make such changes in the organization of offices, boards, commissions, councils, agencies and instrumentalities, and in allocation of their functions, powers and duties, as he considers necessary for efficient administra­tion. If such changes affect existing law, they shall be set forth in executive orders, which shall be submitted to the Legislature within five legislative days after it convenes, and shall become effective, and shall have the force of law, within 90 days after sub­mission, unless disapproved by a resolution concurred on by a majority of all the mem­bers of either house.

Structure of the Executive Branch a) The Executive Branch of state govern­ment is structured as follows:

i. The department is the principal admin­istrative unit of the Executive Branch. Each department shall bear a title beginning with the words "State of Wyoming" and continuing with "Department of."

ii. For field operations, departments may establish district or area offices which may combine division, program, sec­tion and subsection functions.

iii. For their internal structure, all depart­ments shall adhere to the following standard terms: A) The principal unit of the depart­ment is the "division." Each division shall be headed by an "adminis­trator.'' B) The principal unit of the division is the "program." Each program shall be headed by a "manager."

C) The principal unit of the program is the "section." Each section shall be headed by a "supervisor." D) If further subdivision is necessary, sections may be divided into units which shall be known as "subsec­tions'' which shall be headed by "chiefs."

b) Unless specifically authorized herein, the director of the department shall not reallo­cate duties and functions specifically assigned herein to a specific unit of the department. Those functions or agencies assigned generally to the department without specific designation to a unit of the department may be allocated and reallo­cated to a unit of the department at the dis­cretion of the director of the department.

i. Within the limitations of this subsec­tion, the director of the department may establish additional divisions, programs, sections and subsections of the department to promote efficient and effective operation of the depart­ment. After July 1, 1993, no new divi­sions, programs, sections and subsec­tions of departments may be estab­lished until approved by the Executive Office of the Governor or by law.

ii. The Executive Office of the Governor shall adopt and apply specific criteria for assessing the appropriateness of all reorganization requests from agencies. Such criteria shall not only be applied to future agency requests for reorgani­zation, but shall also be utilized to review the appropriateness of pro­grams currently in existence. Any cur­rent program which does not meet the criteria for a program shall be reor­ganized into a section or other appro­priate unit.

c) The exemptions from the Wyoming Per­sonnel Rules shall include the appointed directors of the departments and the divi­sion administrators established herein.

Directors of Departments -Powers and Duties

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a) Each director of a department, except as otherwise provided herein, shall:

i. Except as provided by law or within this Act, with the approval of the Governor, be authorized to establish

the internal organization of his/her de­partment and allocate and reallocate duties and functions to promote eco­nomic and efficient administration and operation of the department. The directors of the departments appointed by the Governor under this Act shall review all statutes relative to the con­solidation or elimination of the several agencies or parts of agencies herein combined and prepare a plan of amendment and revision of relevant statutes. The revision of statutes shall be presented to the Governor and the Legislature on or before January 1 of the succeeding calendar year.

ii. Plan, direct, coordinate and execute the powers, duties and functions vested in that department or vested in a divi­sion, program or section of that department; powers and duties assigned or transferred to a division, program or section of the department shall not be construed to be a limita­tion upon this authority and respon­sibility.

m. Have authority, without being relieved of responsibility, to execute any of the powers, duties and functions vested in said department or in any administra­tive unit thereof through said adminis­trative units and through such assis­tants and deputies as shall be designated by the director of the department from time to time, unless the director of the department is explicitly required by law to perform the same without delegation.

iv. Compile a comprehensive program budget covering such period as may be required reflecting all program and fis­cal matters related to the operation of the department, each program, sub­program and activity therein, and such other matters as may be required by law.

v. Reimburse the members of advisory bodies for their actual necessary and reasonable expenses incurred in the performance of their duties in accor­dance with the provisions of law.

vi. Have existing authority to promulgate rules pursuant and limited to the powers, duties and functions trans-

ferred herein and have authority to promulgate rules pursuant and limited to the powers, duties and functions enacted hereby.

vii. Have authority on behalf of the department and the State to accept gifts, grants, bequests, loans and endowments for purposes consistent with the powers, duties and functions of the department.

viii. Make recommendations deemed desirable and necessary by the depart­ment concerning more effective inter­nal structuring of the department to the 1990 session and ensuing sessions of the Legislature.

Appointment and Removal Power a) Each principal department shall be under the supervision of the Governor and, unless otherwise provided by law, shall be headed by a single executive. Such single executive, unless provided otherwise by the Constitu­tion, shall be nominated and, by and with the advice and consent of the Senate, appointed by the Governor and shall hold office for a term to expire at the end of the term for which the Governor was elected, unless sooner removed by the Governor. The Governor shall have power to nominate and make interim appointments requiring Senate confirmation during recess of the Legislature except that such nominations and interim appointments shall extend only to the end of the Governor's term or until acted upon by the Legislature.

i. Any person may be removed without cause by the Governor, at the Gover­nor's pleasure, if appointed by the Governor to serve as head of a state agency, department or division, or as a member of a state board, council, coordinating council, or commission.

ii. Any division administrator may be removed by the department director, at the pleasure of the department director.

Method of Reorganization

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a) The Executive Branch of state govern­ment shall be reorganized by transferring the specified agencies, programs and func­tions to the departments, commissions or offices created or referred to herein. Types

of transfers used herein are defined as follows:

i. Type One Transfer - A type one trans­fer is the transferring intact of an exist­ing agency or of an existing agency with certain identifiable programs, activities or functions transferred or abolished so that the agency becomes a unit of a department. Any agency transferred to a department by a type one transfer shall henceforth exercise its powers, duties and functions as prescribed by law, subject to review and approval by, and under the direct supervision of, the director of the department.

ii. Type Two Transfer- A type two trans­fer is the assigning to any department of an examining and licensing board which has as a function the setting of standards for, or the regulation of, a profession or the examination, licens­ing or certifying of practitioners of such profession.

iii. Type Three Transfer - A type three transfer is the merging of an identifi­able program, activity or function of an existing agency into a department. Any program or activity transferred by a type three transfer shall have all its statutory powers, duties records, per­sonnel, property and unexpended balances of appropriations, allocations or other funds transferred to the department to which it is transferred. The transfer of segregated funds shall be made in such manner that the rela­tion between program and revenue source as provided by law is retained.

b) Rights and Obligations of Succeeding Department - The department into which a program or organizational segment is transferred by this Act ("succeeding depart­ment") shall assume all of the rights and powers exercised, and all of the duties and obligations incurred by the office or depart­ment from which the program or organiza­tional segment is transferred ("former department") in the administration of the programs and organization segments trans­ferred, whether such powers, duties and obligations are mentioned in or granted by any law, contract or other document. All references in any such law, contract or

document to the former department in con­nection with the programs and organiza­tional segments transferred shall apply to the succeeding department as if the latter were named in such law, contract or docu­ment in place of the former department. c) Federal Aid, Bond Obligations; Not Impaired - It is the intent of this Act not to jeopardize the receipt of any federal aid nor to impair the obligation of the State or any agency thereof to the holders of any bond issued by the State or by any such agency, and to the extent, and only to the extent, necessary to effectuate this intent, the Governor is authorized and empowered to modify the strict provisions of this Act, but shall promptly report any such modifi­cation with his reasons therefor to the Legis­lature at its next session thereafter for review by the Legislature. d) Amendment of Conflicting Laws - All laws and parts of laws heretofore enacted which are in conflict with the provisions of this Act are hereby amended to conform herewith. All acts passed during this Regu­lar Session 1989, whether enacted before or after the passage of this Act, shall be amended to conform to this Act, unless such acts specifically provide the Act relat­ing to the "State Government Reorganiza­tion Act of 1989" is being amended.

OVERALL STRUCTURE

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a) The Committee considered various alter­natives for the overall organization struc­ture and embarked on a proposal based on the principles of organization expressed in Chapter IV and the Standards of Adminis­trative Reorganization, also outlined therein. Briefly, the overall structure which follows: i. Concentrates authority and responsibil­

ity for the management of state govern­ment in the Governor, through the department directors and division ad­ministrators;

ii. Integrates functions throughout govern­ment through departmentation;

iii. Changes the function of boards, com­missions and councils from administra­tive or executive to advisory responsi­bilities;

IV. Coordinates administrative and staff services in either staff agencies report­ing directly to the Governor or, in a department of administration, the direc­tor of which reports directly to the Gov­ernor;

v. Provides for an independent audit of state government on a routine, regular basis; and

vi. Recognizes a Governor's cabinet. b) Additionally, the structure recom­mended recognizes the limitations imposed by the Wyoming Constitution, identifying those provisions which will need to be sub­mitted for amendment.

Governor's Office

Although the Governor has access to any function, activity or staff in state government, the formal organizational structure currently in place can make this access cumbersome, awk­ward and disruptive. Theoretically, each of the nearly 7,000 state employees work at least indirectly for the Governor and it is perceived that each of the 79 Executive Branch board, commission, council, department, agency and institution directors work directly for the Gover­nor. In reality, however, this simply is not the case. As has been previously noted, most of the 79 Executive Branch entities do not work for the Governor, but instead report to a board, com­mission or council. Additionally, the Budget Division administrator works directly for the Governor, but due to current organization flaws,

reports to a department director who serves at the Governor's pleasure. It is the purpose of this proposal to correct this organizational deficiency which will serve to streamline and clarify the lines of authority and responsibility and remove the existing conflict with the principle of unity of command. This division administrator should not be asked to serve two different masters -the Governor and the department director.

The Budget Division should be removed from the Department of Administration and Fiscal Control (DAFC) and placed as a division within the Governor's Office. It is commonly known that the Governor is the State's Chief Budget Officer and W.S. 9-2-1004 through 9-2-1015 generally provide for the administration of the budget through the Budget Division. Nearly all budgetary activities contained in statutes either direct or infer the Budget Division is acting on behalf of the Governor.

The budget activity is too important a func­tion to be removed from the Governor's Office. Most state policy is addressed through the state budget inasmuch as most policy carries with it financial or budgetary implications. Budgeting is the preeminent management tool and execu­tive decision-making process in the public sec­tor. It is not an administrative, housekeeping or support function and should not be treated as such. Thus, the Committee recommends Budget become a division of the Governor's Office along with a Planning and Coordination Office; the Budget Administrator should report directly to the Governor. The resultant structure would appear as shown in Figure VI -1.

FIGURE Vl-1

GOVERNOR'S OFFICE

GOVERNOR

CENTENNIAL STAFF

COMMISSION

2 positions 6 positions

I I PLANNING DIVISION I

BUDGET & MANAGEMENT DIVISION

9 positions 1 0 positions 2 part-time positions

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Secretary of State

The Secretary of State is a constitutional office with State statutes prescribing duties and respon­sibilities for the office in the areas of corpora­tions, elections and securities. Additionally, the Secretary of State serves on eight state boards and commissions:

a) Board of Charities and Reform; b) Board of Deposits; c) Capitol Building Commission; d) Canvassing Board; e) Land Commission; f) Farm Loan Board; g) Liquor Commission; and h) Board of Wills and Trusts. The Committee, in assessing the duties and

responsibilities of this agency, recommends the agency's functions remain intact. However, par­ticipation by the Secretary of State in an adminis­trative capacity on these eight boards and com­missions would be gradually eliminated. Upon conclusion of the reorganization proposal ad­vanced, most of the activities of these boards and commissions would be altered or phased out and the responsibilities and authority for adminis­tering the programs transferred to the proposed cabinet departments. The organizational struc­ture of the Secretary of State's Office remains virtually as is, as shown in Figure VI-2.

State Auditor

The State Auditor, also a constitutional posi­tion, is responsible for administration of the State's accounting system, pre-audit of travel and expense vouchers, issuance of warrants, administration of the State's bad debt law, and processing of claims against the State.

W.S. 9-l-403(a)(iv) provides the State Audi­tor is '' ... authorized to cooperate with the fed-eral government ... regarding federal royalty ... audit activities ... '' This function, opera-tionally, has been segregated into a separate divi­sion within the office. The State Auditor, along with the Governor, Secretary of State, State Treasurer, and Superintendent of Public Instruc­tion, serves on the following boards and com­missions:

a) Board of Charities and Reform; b) Capitol Building Commission; c) Canvassing Board; d) Land Commission; e) Farm Loan Board; f) Liquor Commission; g) Board of Will and Trusts; h) Financial Advisory Council; and i) Group Health Insurance Board. As noted, the administrative authority of these

boards, for the most part, will be phased out, reducing the State Auditor's responsibilities with

FIGURE Vl-2

SECRETARY OF STATE

SECRETARY OF STATE

SECRETARY

DEPUTY

I I DIVISION OF DIVISION OF DIVISION OF

CORPORATIONS ELECTIONS SECURITIES

8 positions 4 positions 4 positions 1 part-time position 1 part-time position

- 136-

FIGURE Vl-3

STATE AUDITOR'S OFFICE

STATE AUDITOR

SECRETARY

DEPUTY

I DIVISION OF

ACCOUNTING & FINANCIAL REPORTING

12 positions

regard to these areas. In addition, the Audit Division of this office, if this proposal is implemented, would be removed from this office and merged with the audit efforts of other agen­cies, leaving the State Auditor with responsibil­ities limited to the State's accounting, pre­auditing of vouchers, payroll, bad debt adminis­tration, and claims processing.

The audit functions are more fully discussed under the Department of Audit; what remains of the State Auditor's Office is shown in Figure VI-3.

State Treasurer The State Treasurer, one of five current state­

wide elected officials, is responsible by statute for receipting all revenue into the State; invest­ment of all State funds, excluding those of the Retirement System; collateralization of state de­posits; distribution of revenues to various funds and accounts; administration of the State's Deferred Compensation Plan; accounting for all escheat property; and administration of the Workers' Compensation Division. Additionally, the State Treasurer serves on 15 boards and com­missions:

a) Board of Charities and Reform; b) Capitol Building Commission; c) Land Commission; d) Farm Loan Board; e) Liquor Commission;

I DIVISION OF

VOUCHERING & PRE-AUDIT

5 positions

f) Board of Wills and Trusts; g) Retirement Board; h) Board of Deposits; i) Wyoming Community Development

Authority; j) Investment Advisory Council; k) Deferred Compensation Board; 1) Group Health Insurance Board;

m) Investment Fund Committee; n) Financial Advisory Council; and o) Medical Liability Compensation Fund

Board.

The Workers' Compensation Division, by statute, is administered by the State Treasurer. Recommendations for formulation of a cabinet level Department of Employment include a transfer of this program from the State Treas­urer to that department. Following implemen­tation of this proposal, the State Treasurer would remain responsible for cash management, state investments and other cash receipts and investment related activities. Recommendations to expand the State's permissible investments, employ the services of an investment advisor or manager, and enhance the State Treasurer's cash management activities are also incorporated in another section of this proposal.

The Committee sees no change in the State Treasurer's organizational structure, as depicted in Figure VI-4.

- 137-

FIGURE Vl-4

STATE TREASURER'S OFFICE

STATE TREASURER

SECRETARY

DEPUTY

CASH MANAGEMENT AND INVESTMENTS

6 positions

Superintendent of Public Instruction Article 4, Section 11 of the Wyoming Consti­

tution provides this position shall be chosen by the electorate and Article 4, Section 14 provides the Superintendent shall be entrusted with the general supervision of the public schools.

It has been noted in recent reports that the public schools in Wyoming represent approxi­mately 30 percent of all spending for government services in Wyoming, with total outlays of roughly $535 million annually. Approximately 30 percent of the state budget, according to the State Auditor's Annual Report, was expended last year for public schools, community colleges, and the University of Wyoming.

As was noted in Chapter II, public school finance has required increasing attention from both the Governor and the Legislature during the past few years because the Wyoming School Foundation Program revenues have been inade­quate to meet the program's outlay. Supplemen­tal appropriations and authorizations to the account have had to be made during the past three years and will continue to be necessary to meet projected outlays over the next several years. In fact, the Legislative Service Office has projected the account will be short by $40.5 mil­lion in Fiscal Year 1990 and $46.8 million in Fis­cal Year 1991. Clearly, these shortfalls must be made up from other state funds, impacting all other areas of state government during a time when all programs are in competition with each other for scarce resources.

The Committee believes significant advantages can be gained by restructuring, merging elemen­tary and secondary education, community col­leges, WICHE, and the University of Wyoming into a cabinet level department, the director of which reports directly to the Governor. Such action would serve to streamline the budget process inasmuch as all educational funding could be reviewed, together with some attention being focused on the allocation of resources to each education sector on more of an equitable basis. The Governor and Legislature could then obtain a more meaningful assessment of the effectiveness of funding at each level and the possibility for a continuum of services would be enhanced. The transition of each student's progress from elementary through higher edu­cation would be a smoother and more appropri­ate educational program provided through enhanced coordination of programs at all levels.

Wyoming is one of 15 states in which the Con­stitution calls for an elected chief state school officer. In one other state, Indiana, the official is elected, as required by state statute. In 22 states, the top education official is appointed by the State Board of Education, requiring no fur­ther approval; however, in four other states the board appointment requires the Governor's approval, and in two other states the board appointment requires Senate approval.

The Governor appoints the chief state school officer in only five of the 50 states. In one case, the Governor's appointment requires a legisla-

- 138-

tive committee approval, as well as the Senate's. In two of the states, the Governor's appointment has to be approved by the Senate and in one state, the Governor's appointment must be approved by both Legislative Houses. In only one case could the Governor make the appoint­ment without further approval of another body being required.

Finally, in yet another state, Nebraska, the responsibilities for education are shared by the Education Commissioner, Department of Edu­cation, and President of the State Board of Edu­cation.

The selection process of the State's chief state school officers is summarized in Table VI-1.

The Committee recommends constitutional amendments be submitted to a vote of the peo­ple whereby the State Superintendent of Public Instruction is no longer elected. Instead, legis­lation would provide for appointment by the Governor with Senate approval. Legislative action of this nature enacted by the 1989 Legis­lative Session would enable the question to be put before the voters in the general election in 1990. The current encumbent's term of office would be completed by the end of calendar year 1990 and this component of the restructuring could be implemented at that time.

THE CABINET

The Governor's cabinet would consist of 10 departments; one, the Attorney General's Office, would remain a "staff" office to the

Governor as opposed to the nine "line" agen­cies. Another "staff" agency not included in the Governor's cabinet is the Audit Agency (State Examiner). The nine principal line departments would be created by the transfer of various agen­cies, boards, commissions, councils, depart­ments, activities and programs now represented by the current 79 Executive Branch entities. The objective of this action is to merge entities which are performing similar, related or interdependent services into a department whose functional goals and objectives are compatible. This will enable enhanced coordination of activities, better utilization of resources, improved access to serv­ices for the State's citizens, and clear and dis­tinct delegation and lines of authority and responsibility. The possibility of elimination of duplication of activities should be measurably improved and the opportunity for cost reduc­tion, revenue enhancement, and performance efficiency should be realized.

The cabinet departments created by this pro­posal include the following agencies: Employ­ment, Commerce, Health, Family Services, Ad­ministration, Transportation, Education, Agri­culture and Natural Resources, and Public Safe­ty. A brief explanation of the anticipated make­up of these agencies follows. The organizational structure recommended, showing the relation­ships of existing agencies, the programs included in each, and the lines of authority are depicted in Figure VI-5. Detailed descriptions of the de­partments recommended for implementation in 1989 are contained in Chapters VII, VIII, and IX.

TABLE Vl-1

SELECTION OF CHIEF STATE SCHOOL OFFICERS

Elected by Public Appointed by a Board/with no further approval Appointed by a Board/approved by Governor Appointed by a Board/approved by Senate Appointed by Governor/with no further approval Appointed by Governor/approved by Senate Appointed by Governor/approved by both Houses Appointed by Governor/approved by Leg. Committee and Senate Responsibility shared by Commissioner, Dept. of Education

and President, State Board of Education

TOTAL

Source: The Council of State Governments, Book of the States, 1988-89 Edition, 1988, pp. 54-56.

- 139-

No. of States

16 22

4 2 1 2 1 1

50

FIGURE Vl-5

PROPOSED ORGANIZATION FOR THE STATE OF WYOMING

ELECTORATE

I I SECRETARY STATE

GOVERNOR STATE

OF STATE AUDITOR TREASURER

• Corporations • Accounting • Investments • Securities • Pre-Auditing • Cash Management • Elections I I

GOVERNOR'S ATIORNEY STATE GOVERNOR'S CENTENNIAL OFFICE GENERAL EXAMINER RESIDENCE COMMISSION

• Planning • DCI • Public Funds -.j:>.. • Budget • POST • Finance 0 • Office • Academy • Minerals

• Criminal • Excise Taxes • Civil

I I I I l Dept. of Dept. of Dept. of Dept. of Dept. of Dept. of Dept. of Dept. of Dept. of

Commerce Employment Health Family Administrn. Transportn. Education Agriculture & Public Services Natrl. Resrcs. Safety_

- -- L_

• Prof. Licens. • Empl. Secur. • Health & Med. • Youth Center • DAFC (part) • Aeronautics • Public Schls. • Agriculture • Penitentiary Boards • Wkrs. Comp. • Hospital • Boys' School • Archives • Highway • BOCES • Water Devel. • Women's Cent.

• EDSB • Labor & Stat. • Trng. School • Girls' School • Library • Ports of Ent. • Comm. Colleges • Engineer • Honor Farm • Inti. Trade • Manpower Adm. • Vets. Home • DPASS • Retirement • Drivers & • WICHE • Geological • Community • Travel • Voc. Rehat?. • Pioneer Home • Juvenile Ofr. • Liquor Vehicle Lie. • University Survey Corrections • Recreation • OSHA • Retrmt. Center • Rev. & Tax. & Titling • Oil & Gas • Prob. & Parole • Museums • Mine Inspect. • Comm. on Aging (part) • PSC Motor Comm. (adult) • Hist. Sites • Visually • Community • Group Ins. Vehicle • Public Lands • Dist. Attys. • Arts Council Handicapped Programs • Pub. Serv. • Game & Fish • Adjut. General • SBDC Admin. Comm. (part) • Livestock • Emerg. Mgmt. • Loan & Grant • Off. of Adm. Board • Fire Preven.

Programs Hearings • DEQ - lndust. • Hwy. Patrol • Insurance Siting • Parole Board

Department of Employment There are a handful of agencies and programs

in the state structure which provide services related to the employment function in Wyoming. Included in this group are Employment Security Commission; Department of Labor and Statis­tics; Occupational Safety and Health; Manpower Administration; Workers' Compensation Divi­sion of the State Treasurer's Office; Division of Vocational Rehabilitation from the Department of Health and Social Services; State Inspector of Mines; and Services for the Visually Han­dicapped from Education.

Department of Commerce This agency would be created in an attempt

to concentrate into one agency the multiple and diverse programs which encourage the State's economic development, prosperity and stabili­zation. Policy and funding decisions which must be made to promote Wyoming's economic health would be located in this agency, thereby elim­inating the separate and independent commit­ments currently being made on funding and pro­gram emphasis.

This new structure consolidates: a) the oper­ation of the State's cultural and recreational resources; b) the promotion of the State's mul­tiple resources; c) outreach and technical assis­tance to communities and businesses; d) busi­ness permitting, licensing and registration; and e) financial support of the State's businesses and infrastructure (political subdivisions).

Included in this department would be the fol­lowing agencies and programs: Travel Commis­sion and information centers; State Parks, Museums, and Historical Sites (Recreation Com­mission and part of Archives, Museums and Historical Sites); Arts Council; International Trade Office; the administration of the Small Business Development Center network; Eco­nomic Development and Stabilization Board; professional licensing boards; infrastructure and business loan and grant program review and administration from the Department of Public Lands and the Farm Loan Board; and Business Permit Coordinator.

Department of Health This department would consolidate all the

State's public health, mental health, and aging efforts. Included are: Division of Health and Medical Services from the Department of Health

and Social Services; Commission on Aging; Homemaker Services from Public Assistance; Veterans' Home; Retirement Center; and Pioneer Home. (The latter two institutions might be considered for privatization.) In addition, the Division of Community Programs from the Department of Health and Social Services would be merged with the State Training School and the State Hospital to make up this department.

Department of Family Services This department would consist of the Division

of Public Assistance and Social Services (less the Homemaker Services Program) from the Depart­ment of Health and Social Services; the juvenile portion of Probation and Parole; and Children's Home, Boys' School, and Girls' School which are currently under the Board of Charities and Reform.

Department of Administration All administrative functions of state govern­

ment would be consolidated here. The major agency is DAFC, less the Budget Division; Revenue and Taxation, less Audit, Drivers and Vehicle Licensing, Ports of Entry; and other related programs: State Library; Archives, from Archives, Museums and Historical Sites; Group Insurance; Retirement; Liquor Commission; Public Service Commission, less motor vehicle responsibilities; Office of Administrative Hear­ings; and Insurance Department.

Department of Transportation This new department consists primarily of the

current Highway Department, less Highway Patrol. Also included is Aeronautics; Driver, Vehicle Licensing and Titling; and Ports of Entry from the Department of Revenue and Taxation, plus various other functions related to licensing, titling, prorate and compensatory fees, etc; and motor vehicle responsibilities from the Public Service Commission.

Department of Education The existing Department of Education, under

this proposal, would become answerable to the Governor and would be merged with all other education systems in the State. Included, in addi­tion to public schools, is: BOCES; Community College Commission; WICHE; and the Univer­sity of Wyoming.

- 141 -

Department of Agriculture and Natural Resources

This new department would be comprised of all of the State's current natural resource agen­cies. Included would be: Agriculture Depart­ment; Water Development Commission; Game and Fish; Geological Survey; Oil and Gas Com­mission; Livestock Board; Public Lands; State Engineer; and DEQ - Industrial Siting.

Department of Public Safety Included in the Department of Public Safety

is Public Defenders; Adult Probation Program from Probation and Parole; District Attorney Offices; Women's Center; Honor Farm; Peni­tentiary; Highway Patrol; Community Correc­tions; Emergency Management; Fire Protection; Adjutant General; and Parole Board.

IMPACT ON STATEWIDE ELECTED OFFICIALS

A major responsibility of each of the five elected officials has traditionally been their serv­ice to the people of Wyoming through their par­ticipation on various boards and commissions. The State Constitution provides the five elected officials must serve on only one board, the Board of Land Commissioners (Article 18, Section 3). Wyoming statutes provide these elected officials shall also serve together on five additional boards and commissions: Farm Loan Board, Capitol Building Commission, Board of Charities and Reform, Liquor Commission, and Board of Wills and Trusts. It should be noted the Con­stitution provides, in Article 7, Section 18, the charitable, reformatory, and penal institutions shall be under the general supervision of a state board of charities and reform. However, the Constitution does not prescribe what the mem­bership on the board shall be. This membership is defined by statute. This means, of course, that a constitutional amendment would be required to remove the five elected officials from the Board of Land Commissioners and statutory amendments or repeals would be necessary to remove them from the remaining boards and commissions.

The Joint Legislative-Executive Study Com­mittee believes the functions of each elected offi­cial's office are far too important to continue to divert their attention away from the office and toward board and commission activities. As an example, the State Treasurer is responsible for

a $2.7 billion portfolio and roughly 13 percent of the State's income. Such an important func­tion requires the attention of a full-time Treas­urer. Additionally, the Secretary of State has a variety of important responsibilities associated with management of the office which administers laws pertaining to elections, securities, corpora­tions, limited partnerships, trade names and trademarks, some Uniform Commercial Code financing statements, and notaries public. The State Registry of Rules of state agencies is main­tained here. This office publishes the Wyoming Official Directory, State Constitution, and Elec­tion Code. The Secretary of State is the custo­dian of the Great Seal and also stores all legis­lative enactments and journals. This is a full-time job which should not be interrupted through requirements to serve on administrative or execu­tive boards and commissions.

Finally, the State Auditor, who in reality is the comptroller of state government with respon­sibilities for statewide accounting, payroll processing, and pre-auditing of the State's bills prior to approving payment, has extremely heavy responsibilities in the area of financial manage­ment, reporting and control. These responsibil­ities should not be diluted nor diminished through outside service requirements. In fact, if the Legislature authorizes the new statewide accounting system, as requested by the State Auditor and recommended by the Joint Legislative-Executive Study Committee, it is likely an intensive, prolonged effort in design, implementation and training will be required, further demanding the State Auditor's attention.

It is expecting too much from the State's dedi­cated elected officials to manage the very impor­tant functions of their offices and at the same time be held responsible for the administration of the 11 state institutions, the Liquor Commis­sion, and the Capitol Building Commission which they currently administer.

Clearly, input from the State's elected offi­cials on all activities of state government is desirable, beneficial and necessary to the effi­cient operation and monitoring of state govern­ment activities. Therefore, by converting the role of the five elected officials from that of adminis­trative and executive to primarily that of advice and counsel, with direct and clear lines of com­munication to the Governor and to the newly­formed departments as appropriate, the tradi­tional channels of communication, from the State's citizens to the elected officials can be

- 142 -

maintained and enhanced. Recommendations to accomplish this are included in the discussions concerning the implementation schedule.

provide input to the various departments of state government in the way of advice, counsel, exper­tise, policy formulation, etc. Not all of these enti­ties are appointed by the Governor, although the vast majority of them are. In fact, membership to 106 of the 130 bodies is determined by Guber­natorial appointment. This represents 776 of the 1,027 members. A listing of these boards, com­missions, councils and committees is contained in Table VI-2, which also shows the department affiliation, if any, the number of members, whether or not Senate confirmation is required, and the page number in the 1988 Wyoming Offi­cial Directory where a description of each entity's function can be found.

IMPACT ON BOARDS, COMMISSIONS AND COUNCILS

According to the 1988 Wyoming Official Directory compiled by Secretary of State, Kathy Karpan, there are 130 different boards, commis­sions, councils and committees associated with the Executive Branch of state government. These entities contain a collective membership of 1 ,027 citizens from throughout the State. The primary function of the majority of these entities is to

TABLE Vl-2

GUBERNATORIAL APPOINTMENTS TO BOARDS, COMMISSIONS, COUNCILS AND COMMITTEES

Senate Affiliated No. of Confirm. Agency Members Required?

Board of CPA's Board of CPA's 5 No Career Service Council DAFC 3 No Aeronautics Commission Aeronautics 7 Yes Aging Commission DH&SS 7 Yes St. Aging Advisory Council DH&SS 14 No Board of Agriculture Agriculture Dept. 5 Yes Board of Certif., Environmental

Pesticide Control Act Agriculture Dept. 3 No Agriculture, Interstate Compact

on Marketing Grain Agriculture Dept. 3 No Agriculture Mediation Board Attorney General 3 No Board of Architects Brd. of Architects 3 No Council on the Arts Arts Council 10 No Peace Officers Standards &

Training Commission Attorney General 7 No Crime Victims Compensation

Commission Attorney General 3 No Board of Barber Examiners Barbers Board 3 Yes Wyoming Lean Beef Committee Agriculture Dept. 11 No Beef Council Agriculture Dept. 5 No Centennial Commission Governor 10 No Board of Chiropractic Exmrs. Chiropractic Brd. 3 No Community College Commission Comm. College Comm. 7 Yes Wyoming Community Development

Authority N/A 7 Yes Board of Control Engineer 4 No Board of Coroner Standards N/A 6 No Board of Cosmetology Cosmetology Board 3 No Data Processing Advisory

Council DAFC 12 No

- 143 -

Page Reference

5 6 7 7 8 8

9

10 10 10 11

13

13 14 14 15 16 17 21

21 22 22 23

23

Senate Affiliated No. of Confirm. Page Agency Members Required? Reference

Board of Dental Examiners Dental Board 6 Yes 24 Planning Council, Developmental

Disability Governor 13 No 25 Statewide Drug Policy Board Attorney General 20 No 26 Economic Development &

Stabilization Board EDSB 9 Yes 26 Economic Development Council EDSB 18 No 27 Board of Education Education Dept. 9 Yes 27 Education Commission of the

States Governor 7 No 28 Board of Embalming Embalming Board 5 Yes 28 Emergency Response Commission Emergency Mgmt. 7 No 29 Employment Security Commission ESC 3 Yes 29 Groundwater Advisory Commission Engineer 12 32 Board of Registration for Prof.

Engineers and Prof. Land Surveyors Engineer 7 No 33

Environmental Quality Council DEQ 7 Yes 34 Advisory Boards - DEQ (4) DEQ 15 No 34 Collection Agency Board Examiner 3 No 36 Financial Institutions Board Examiner 7 Yes 36 Investment Fund Committee EDSB 5 ( +2) Yes N/A Advisory Council on Fire

Prevention, Electrical Safety & Energy Efficiency Fire Prevention 5 No 37

Electrical Board Fire Prevention 3 No 38 Game & Fish Commission Game & Fish 7 Yes 38 Geological Survey Advisory

Board Geological Survey 5 Yes 39 Governor's Commission for

Employment of Handicapped DH&SS 12 No 40 Advisory Council of the Dept. of

Health & Social Services DH&SS 11 No 43 Advisory Council of the Div. of

Public Assistance & Social Services DH&SS 13 No 43

Advisory Council of the Div. of Community Programs DH&SS 14 No 44

Advisory Council of the Div. of Health & Medical Service DH&SS 9 No 44

Advisory Council of the Div. of Vocational Rehabilitation DH&SS 9 No 44

Child Care Certification Board DH&SS 6 No 44 Early Intervention Council/

State Interagency Coordinating Council DH&SS 13 No 45

Advisory Committee on Emergency Medical Services DH&SS 17 No 46

Advisory Committee for Medical Assistance & Services Act DH&SS 15 No 46

Brd. of Hearing Aid Specialists Hearing Aid Brd. 5 No 47

- 144-

Senate Affiliated No. of Confirm. Page Agency Members Required? Reference

Highway Commission Highway Dept. 7 Yes 47 Industrial Siting Council DEQ 7 Yes 48 Board of Insurance Agents

Examiners Insurance Dept. 6 Yes 50 Insurance Board of Administration

- State Employees Insurance Dept. 7 No 50 Private Industry Council Job Training Adm. 18 No 52 Fair Employment Commission Labor Dept. 5 Yes 53 Law Enforcement Communications

Commission DAFC 8 No 55 Library, Archives, Museums &

Historical Sites Board AMH 9 No 56 Livestock Board Livestock Board 7 Yes 57 Local Government Self Insurance

Policy Board Insurance Dept. 4 No 57 Board of Medical Examiners Medical Exam. Brd. 5 Yes 58 Medical Liability Compensation

Fund Board Insurance Dept. 6 Yes 58 Board of Mines Mine Inspector 11 Yes 60 Consulting Committee on

Nominations to National Register of Historic Places AMH 11 No 61

Natural Gas Pipeline Authority Oil & Gas Comm. 5 Yes 61 Board of Nursing Nursing Board 7 No 62 Board of Nursing Home Admin. Nursing Home Adm. 5 No 62 Occupational Health & Safety

Commission OSHA 7 Yes 63 Oil & Gas Conservation Comm. Oil & Gas Comm. 5 Yes 64 Oil Impact Commission,

Interstate Governor 2 No 64 Board of Examiners in Optometry Optometry Board 3 No 65 Pari Mutuel Commission Pari Mutuel Comm. 7 Yes 65 Board of Parole Parole Board 7 Yes 65 Board of Pharmacy Pharmacy Board 6 Yes 68 Board of Physical Therapy Phys. Therapy Brd. 5 No 68 Board of Registry in Podiatry Podiatry Board 3 No 69 Professional Counselors

Licensing Board Counselors Board 6 No 69 Board of Psychologists

Examiners Psychology Board 5 No 69 Public Service Commission PSC 3 Yes 71 Board of Radiologic Techs. Radiology Board 3 No 71 Real Estate Commission Real Estate Comm. 5 Yes 72 Tax Commission - Reciprocity &

Prorate Rev. & Tax. Dept. 3 No 72 Recreation Commission Recreation Comm. 9 Yes 72 Retirement System Board Retirement System 11 Yes 73 Tax Commission/Board of

Equalization Rev. & Tax. Dept. 3 Yes 74 Rocky Mountain Low Level

Radioactive Waste Board University No 75

- 145 -

Senate Affiliated No. of Confirm. Page Agency Members Required? Reference

School District Organization Committee Education Dept. 10 75

Science Technology & Energy Authority EDSB 11 Yes 76

Speech Pathology & Audiology Board Speech Path Board 5 No 77

Travel Commission Travel Commission 7 Yes 78 National Conference of

Commissioners on Uniform State Laws Governor 3 No 79

University of Wyoming Board of Trustees University 12 Yes 79

Veterans' Affairs Commission N/A 5 No 83 Board of Veterinary Medicine Vet/Livestock Brd. 5 Yes 83 Council on Vocational Education Education Dept. 13 No 84 Volunteer Firemens' Pension

Fund Board Retirement System 6 Water Development Commission Water Dev. Comm. 9 Yes 85 Western Interstate Commission

for Higher Education University 3 No 85 Wheat Marketing Commission Agriculture Dept. 7 No 86 Commission for Women Labor Dept.

TOTAL 106

Source: Secretary of State, 1988 Wyoming Official Directory, 1988.

It is interesting to note that of the 106 enti­ties shown in Table VI-2, only two are full-time activities: the Board of Equalization (Tax Com­mission) and the Public Service Commission. Both these entities consist of three members, which are salaried state officials. Of the remain­ing 104 entities, 37 are designated as "state agen­cies" with some administrative and/or executive responsibilities. The remaining 67 entities are "advisory" type entities, some of which were created by statute, others by executive order, and some merely at the request of a department of state government. All entities, regardless of their function, have an opportunity to provide input to state government.

In addition to the 106 entities with member­ship appointed by the Governor, there are 24 boards, commissions, councils and committees serving various departments of state govern­ment. These are shown in Table VI-3. Eight of these entities are made up of three or more of the five statewide elected officials and in these cases, the board or commission has specific

27 No 86

776

administrative responsibilities .. As suggested earlier, this Efficiency Study recommends these functions be changed from administrative to advisory. The remaining 16 entities serve vari­ous departments; their membership and appoint­ment process varies and for the most part, they were created to provide advice and council to state officials.

In relation to the total 130 boards, commis­sions, councils and committees in state govern­ment, recommendations for a cabinet structure of government alter the function of only a minor number of these entities. The 37 boards, com­missions and councils with appointment authority for the director of the agency or other personnel would be changed to provide that the Governor, or agency director where appropri­ate, makes the appointment. Most of these boards, commissions or councils would not be abolished; however, their composition and name may change, and their function would change from administrative to advisory.

The roles of the five elected officials in their

- 146 -

TABLE Vl-3

BOARDS, COMMISSIONS, COUNCILS AND COMMITTEES NOT REQUIRING GUBERNATORIAL APPOINTMENT

Personnel Review Board State Canvassing Board Capitol Building Commission Board of Charities & Reform Deferred Compensation Board Board of Deposits Advisory Board on Drugs &

Substance Control Employee Suggestion Award

Control Area Advisory Board

Financial Advisory Board Fire Service Training

Advisory Committee Investment Advisory Council Occupational Information

Coord. Committee Child Labor Commission Land Commission Farm Loan Board Fire Advisory Board

Forest Advisory Committee Liquor Commission Mental Health Boards Assoc. Brd. of Mines Examining Brd.

Advisory Council to Health & Safety Commission

Board of Wills & Trusts Advisory Council to Commission

for Women

TOTAL

Affiliated Agency

DAFC Sec. of State DAFC Institutions Treasurer Treasurer

Pharmacy Brd. DAFC

Engineer

Auditor

Fire Prev. Treasurer

Labor Dept. Labor Dept. Public Lands Public Lands Public Lands

Public Lands Liquor Comm. DH&SS Mine lnspec.

OSHA Governor

Labor Dept.

24

Source: Secretary of State, 1988 Wyoming Official Directory, 1988.

capacity when serving on boards, commissions and councils would change significantly. The elected officials would no longer appoint institu­tional superintendents or the director of the Liquor Commission. The Liquor Commission "agency" would be consolidated into the De­partment of Administration and the institutions would be moved into their respective functional

No. of Members

3 4 5 5 5 3

3 3

15

11

9 5

8 5 5 5 5

12 5 3 3

11 5

10

146

Membership

varies 4 elec. off. 5 elec. off. 5 elec. off.

appt. by Treas. 3 elec. off.

Gov., Auditor, DAFC Director

elec. by property owners appt. by Auditor

Fire Marshall appt. by Treas.

5 elec. off. 5 elec. off. elec. from counties

5 elec. off.

appt. from Brd. of Mines

5 elec. off.

appt. from Comm. for Women

Page Reference

6 15 16 16 24 24

26

29

33 36

38 51

53 53 54 54

54 54 56 58

61

63 86

87

departments (Public Safety, Health, and Family Services). After these changes are effected, the responsibility for these programs would be vested in the respective agency director appointed by the Governor.

Most of the boards, etc. which the elected offi­cials serve could remain intact with their func­tions altered to advisory, policy-setting only,

- 147 -

with the following exceptions. The Capitol Building Commission should be abolished and its functions assumed by the Department of Administration. The existing duties of the Farm Loan Board should remain basically intact. Dis­cussed under the Department of Commerce in Chapter IX are the complexities of the interrela­tionship of farm loans and public lands. That chapter recommends the retention of the Farm Loan Board; it recommends changing their review authority for loans to include agriculture revolving loans and irrigation loans to indi­viduals, and to exclude the review of loans and grants to political subdivisions. The Board of Land Commissioners is charged in the Consti­tution to oversee the use of the State's public lands. The leasing of public lands by the agricul­tural community which also obtains real estate loans from the State links public lands manage­ment to the Farm Loan Board function.

The biggest impact of conversion to a cabi­net form of government involves the State Superintendent of Public Instruction. The State Superintendent would no longer be elected and would not be required to serve on these non­educational boards and commissions. The posi­tion in charge of administering public schools education would serve at the pleasure of the director of the new Department of Education.

IMPACT ON THE STATE'S PERSONNEL SYSTEM

The duties of the Personnel Division, adminis­trator of the State's personnel system, are out­lined in W.S. 9-2-1019 through W.S. 9-2-1023. These statutes provide for personnel appeals, a career service section, a Career Service Coun­cil, and duties and responsibilities of the Per­sonnel Division. The duties of the Personnel Division are varied, but statutes generally pro­vide responsibility for the following:

a) Classification of all positions; b) Equitable compensation plan; c) Employer/employee benefit plans; d) Information roster on all employees; e) Register of applications with ratings; f) Recruitment programs; g) Staff development programs; h) Personnel standards, e.g., leave time, at­

tendance, grievances, terminations, etc. Clearly, a reorganization effort as outlined

here will have an impact on personnel manage­ment in state government. However, the impact

will vary, lightening the effort in some areas and increasing the required efforts in others. The duties impacted the most are believed to be: cre­ation of a separate classification and compen­sation plan for "at will" appointees; reclassifi­cation of positions; and staff development programs. A brief discussion of each follows.

Creation of a Separate Classification and Compensation Plan for Exempt Positions

Under the State's new organizational struc­ture, the use of positions considered "exempt" from civil service requirements needs to be clearly identified. The State's Personnel Office currently recognizes approximately 75 positions to be subject to "at will" removal authority of their appointing body (a board, commission or council, or the Governor). The reorganization would establish approximately 80 "at will" posi­tions and would include the Governor's immedi­ate staff, agency directors, division administra­tors, and other positions such as the State Examiner, Attorney General, etc. The 1979 Intergovernmental Personnel Act allows exemp­tions from civil service protection for posts which determine and publicly advocate substantive pro­gram policy, provide legal counsel, or have a direct confidential working relationship with a key exempt official. 1 The positions proposed to be "at will" are in keeping with these allowances.

The State of Wyoming currently has one of the most conservative approaches to the use of exempt employment, with only top-line level managers identified. Table VI-4 shows the use of this tool throughout the 50 states. 2

As can be seen, the most widely applied use of exempt employment permeates into the third layer of management, plus staff. The proposal for the use of this tool in Wyoming is second­line management (not staff), still a conservative approach.

Many people argue the pros and cons of the use of political appointees and exempt positions. Indeed, if the process is too widespread, havoc can result and programs and the public can potentially suffer. Political executives care about partisan policy objectives, immediate results, and response to short-term objectives. Career civil servants are by definition, bureaucrats. Their perspective is longer-term; their goals are often program related, and responsiveness is often defined in terms of statutory and institutional constraints. 3 An inherent tension exists between

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TABLE Vl-4

STATE GOVERNMENT LEVELS HELD BY POLITICAL APPOINTEES, EXEMPT MANAGERS, OR CAREER EXECUTIVE SERVICE

Top-line only Wyoming, Colorado, Nebraska, South Carolina

Top-line, plus staff Alabama, Oklahoma, Rhode Island

Second-line Arkansas, Connecticut, Hawaii, Idaho, Nevada, New Hampshire, North Dakota, Texas, Utah

Second-line, plus staff

Third-line

Delaware, Missouri, Montana, New Mexico, West Virginia

Maine, Maryland, Michigan

Third-line, plus staff Georgia, Illinois, Indiana, Iowa, Kansas, New York, North Carolina, Ohio, Pennsylvania, South Dakota, Vermont, Washington, Wisconsin

Fourth-line, plus staff Arizona, Alaska, Florida, Louisiana, Minnesota, Mississippi, New Jersey, Tennessee, Oregon, Virginia

More than four levels California, Kentucky, Massachusetts

the predictability and stability of administrative theory and the democratic theory, which values openness and change. When these two theories are merged and the roles and functions of both political servants and career servants are blended, the resultant system can be dynamic and still preserve important traditional values.

In order to attract the type of individual needed to effectively manage the cabinet depart­ments, special incentives may be necessary. First, one or two of these positions may, dependent upon market demand, need to draw more in salary than the Governor. This is not an unusual practice in other states, and currently occurs in Wyoming for a limited number of positions. Second, the State may need to provide more "perks" to these employees since their job tenure is tenuous. Additional benefits could include educational leave, the payment of moving ex­penses and severance pay, advanced managerial and administrative training programs, a vehicle, etc. The Personnel Division should prepare for the Governor's approval, a separate classifica­tion and compensation plan for these managers and specifically identify each position to be included in the plan. Furthermore, the Person­nel Division should consult with the other elected officials to define which positions within their agencies should be included in this system.

Positions in the system should be classified to the extent necessary to provide the Governor and agency directors with broad salary guidelines. The division should further identify and make recommendations to the Governor on which

positions, if any, should require specific qualifi­cations, e.g., the division administrator appointed to manage the State's public health system may need to be a medical doctor. These specific qualification requirements should be few, but eventually they should be included in statute.

Reclassification of Existing Positions It was noted in Chapter IV that the State has

between 950 arid 1,100 supervisors out of a total workforce of some 7,000 employees, or a super­visor to non-supervisor ratio of approximately one to 6.5. Compared to American industry, with a supervisor to non- supervisor ratio of one to 10, and Japanese industry with a ratio of one to 100, this one to 6.5 ratio appears to be low. It is fully recognized these 1, 100 supervisors in state government do not spend 100 percent of their time supervising. Clearly, their jobs require performance of many other duties and tasks. However, this low ratio does point to an area in state government management which should be more closely examined.

If there are too many supervisors in an organi­zation, it does not necessarily follow that there are too many people on the payroll. What it does mean, though, is there are too many "layers" in the organizational structure. According to Tom Peters, "Good intentions and brilliant proposals will be dead-ended, delayed, sabotaged, mas­saged to death, or revised beyond recognition or usefulness by the overlayered structures at most large and all too many smaller firms. " 4

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When this reorganization plan is put into oper­ation, as the new departments and divisions are formulated and personnel put into place with assigned duties and responsibilities, management should take a close look at the number of super­visors and the number of layers created within each division. Both must be kept to a minimum. Peters insists these layers should total no more than five. Recent studies in dozens of American firms indicate "less" is actually "more." For example, in a 1985 study of 41large companies, conducted by management consultants A. T. Kearney, it was found that ''winning'' con­trasted to "losing" companies (on the basis of long-term financial performance) had 3.9 fewer layers of management (7.2 versus 11.1) and 500 fewer central staff specialists per $1 billion in sales. 5

It will likely not be easy for the State to shift from its current structure which has many departments and divisions, which have evolved over many years with little attention being focused on efficient organizational structures, to streamlined organizational structures contain­ing fewer layers of management and reduced numbers of supervisors. However, one of the benefits of this reorganization proposal is these negative trends which have been built into the state system over the years can now be reversed through increased emphasis on efficient depart­ment and division structures.

This proposal does not recommend the lay­off or firing of any managers and supervisors. No one needs to lose his job. In fact, the State has a problem because of too few employees. During the past three years, the State has had a turn-over rate of roughly 15 percent. This equates to approximately 1 ,050 vacated positions on the average each year. In 1987 alone, 383 peo­ple in ranges 40 and above terminated from state employment (out of a total of 2,883 positions). This is evidence the State needs to find a way to keep its employees on the payroll and if any "down-sizing" is desirable in the management ranks, it can and should be handled through attrition.

Implications of this on the classification pro­gram are obvious. As positions are classified, supervision responsibilities (of few subordinates) should be de-emphasized, resulting in a broader span of control at all levels in each department and division. Incentives for creating additional management layers and consequently additional supervisors over few subordinates should be

eliminated where possible. Five management layers (from top to bottom in each department) should be the goal, with seven management layers the maximum.

Staff Development Programs

In the survey of the State's managers and supervisors, 81.2 percent of those responding said certain types of management training should be mandatory, and they identified the training subjects they felt were the most important. The subjects most commonly identified were:

a) Employee motivational techniques; b) Handling grievances/ disciplining prob-

lem employees; c) Employee/employer relations; d) Employee performance evaluations; e) Reduction-in-force (RIF); f) Supervisory skill development; g) Management skill development; h) Personnel rules and regulations; i) Communication techniques; j) Wyoming Uniform Accounting/Budget

systems; k) Computer applications and training; 1) Time management.

With a reorganization plan, many of these training needs must be met to provide a smooth transition from the current structure to the pro­posed cabinet structure. Additionally, and at the top of this list, another subject should be added, that of reorganization itself, including the design, purpose and benefits of the reorganization effort. Every state employee, as well as each manager and supervisor, should be included in a training session so that they understand why the changes are being made, what the benefits of the new structure will be, what the implemen­tation schedule is, and how the changes impact them and their jobs. Resistance to change is a normal human reaction. Most resistance can be overcome by education and training. Every state employee should be afforded this opportunity.

The Personnel Division currently has a train­ing program staffed by three persons. Seminars offered to state employees are generally along the lines of records management, managerial communications, negotiation, coping with dif­ficult people, etc. The State has not emphasized career development or managerial skills, nor has it provided adequate "technical" training on issues such as the State's personnel rules and

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regulations, grievance procedures, etc. Budget and accounting training at one time were offered by their respective agencies, but even these basic skill courses have not been offered to employees for quite awhile. Training has not been funded directly by the Legislature; DAFC's training pro­grams recover costs through billing agencies.

Wyoming is not alone in its failure to make a commitment to developing the management skills and expertise of its public employees. It is a malady which accompanies public service everywhere. In defining the differences between the public and private sectors, John B. Olsen and Douglas C. Eadie identified as two of only five differences, the lack of well planned and fi­nanced staff development programs in the pub­lic sector, and government's lag in the applica­tion of modern management principles and techniques. 6 If we want more productivity and effectiveness from the public sector, its employees must be given the skills to be more productive and effective. The seriousness of the widespread lack of training currently obvious in state government is discussed in more detail in Chapter V under the section on managers and supervisors. The Committee recommends the State of Wyoming begin immediately to fund and provide its employees with a wide range of training and career development opportunities.

IMPACT ON THE STATE'S BUDGETING SYSTEM

Earlier comments focused on the Budget Divi­sion's role as an "arm ofthe Governor" and the desirability of transferring this unit to the Gover­nor's Office under his direct supervision. This will become an increasingly important function in state government under the reorganization concept. The mechanics of merging departments, programs, personnel, funding and related ele­ments can be cumbersome and confusing. The budget system ultimately must reflect these changes and the expertise of the Budget Divi­sion must be called upon to work with the new departments and affected divisions each year to set up new budget structures, employee (posi­tion) counts, funding sources and dispositions, and other administrative procedures.

Another function which the Budget Division should perform is that of assisting the Gover­nor, department directors, and division adminis­trators in structuring the new agencies. Empha­sis must be placed on management efficiencies

when the new structures are designed. Program managers and other technical experts, though extremely knowledgeable about their areas of specialization, do not necessarily possess management expertise and would not necessar­ily have a grasp of principles of organization. Budget's role in this area would be to assure these principles are used in organizational development.

Discussed in Chapter V was the broad feel­ing of both Executive Branch managers, as well as legislators, that the State's current budgeting system is not effective. The State utilizes what is known as an "incremental" budgeting process. By definition, the process focuses atten­tion on proposed line item spending by operat­ing agencies, accepting as largely unquestioned the prior period's allocation.

The use of incremental budget is widespread among the states, and as more attention has been given to innovative and progressive planning in a no-growth or reduced-growth era in govern­ment services, the technique has become viewed as woefully inadequate. 7 It is hostile toward innovation; critical policy issues cannot surface in its process; and it inherently builds in moder­ate but sure growth. It is still widely used, primarily because it is easy.

When the size and/ or operations of govern­ment must be reduced, the absence of goals, pri­orities and strategies becomes glaring. At the same time, if goals, priorities and strategies are in place, but no mechanism exists to carry out such, they are meaningless. It is the budget which is the single most important policy and planning document available to managers and the Gover­nor.8

Wyoming cannot effectively enter the 21st Century with 50-year old management tools. The State must develop, through an organized, for­mal, planning mechanism, its mission, goals and objectives, and a plan to reach such. Priorities in program funding must be set, for the State may need to soon make hard financial decisions on which programs will be funded at what levels. It is recommended the Budget Office develop a proposal for the Governor and the Legislature to establish a formal planning mechanism which will eventually include all programs and all agen­cies. The proposal should, to the degree feasi­ble, include as many aspects as possible of the Legislature's proposed management audit pro­gram now under consideration. Finally, the Bud­get Office should explore alternative budgeting

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procedures with the goal of eventually abandon­ing the incremental process. This could be initiated on a "pilot" agency basis, whereby the Legislature, the Governor, budget analysts, and agency directors could all be exposed to, and aid in the selection of, the most effective planning and budgeting tool.

THE IMPLEMENTATION SCHEDULE

In order to minimize the disruption to state government services, the Efficiency Study Com­mittee recommends the reorganization plan pro­posed be implemented gradually over a three­year period. This phased in approach will pro­vide the opportunity to evaluate each component of the proposal to assure it is designed and implemented in the most efficient manner. Addi­tionally, an assessment should be made after each year of the reorganization implementation which measures the costs, benefits and other implications of each phase and a report written and submitted each session to the Legislature. In this way, adjustments can be made in a timely manner and the problems or inefficiencies can be eliminated.

The State Government Reorganization Act of 1989

The Committee proposes reorganization begin with passage of the "State Government Reor­ganization Act of 1989. '' This legislation will set the reorganization process in motion and pro­vide for a reasonable transition from current sta­tutes and structures to the cabinet type structure. Between legislative sessions, the new department directors, Attorney General, and Legislative Service Office should review existing statutes related to the boards, commissions, councils and agencies which were merged into the new depart­ment, and legislation to amend, repeal and, in general, "clean up" the statutes should be pre­pared and ready for submission.

Constitutional Amendments

Amendments should be prepared which will pave the way for full implementation of the cabi­net structure. The deletion of reference to enti­ties in the Constitution is not designed to neces­sarily abolish the existence of the entities. It is intended to provide the Governor and the Legis­lature with more flexibility to manage the struc-

ture of state government. The Committee believes many or most of these entities were prescribed in the State's Constitution to address problems or potential problems in existence 100 years ago. Changes in the needs of the State's citizens, ample case law, and other state and fed­eral statutory provisions have precluded the need to enumerate particular offices and the appoint­ment processes of such.

These proposals can be grouped into three categories: a) changes in election of a state officer, the Superintendent of Public Instruction; b) deletion of reference to specific individual job titles in the Constitution (statutory reference remains); and c) deletion of reference to specific boards, commissions or councils in the Consti­tution (statutory reference remains).

The first amendment should remove the Superintendent of Public Instruction from an elected position. All constitutional reference to the position and its duties should also be removed and instead, specified in statute.

Article 4, Section 11 Repeal reference to the Superintendent of Public Instruction.

Article 4, Section 12 Repeal reference to the Superintendent of Public Instruction.

Article 7, Section 14 Repeal reference to the . / duties of the Superintendent of Public Instruction.

Article 18, Section 3 Repeal reference to the Superintendent of Public Instruction.

The second amendment is designed to eliminate constitutional reference to specific job positions. All these positions will remain intact in statute.

Article 4, Section 14 Repeal reference to the State Examiner.

Article 8, Section 5 Repeal reference to the State Engineer.

Article 9, Section 1 Repeal reference to the State Inspector of Mines.

Article 9, Section 6 Repeal reference to the State Geologist.

The final amendment removes from the Con­stitution the enumeration of particular boards. As with the individual job positions above, statu­tory duties assigned to these boards remains intact.

Article 7, Section 18 Delete the last sentence which states the institutions are to be under the supervision of the Board of Charities and Reform.

Article 8, Section 2 Repeal reference to the Board of Control.

- 152-

Article 15, Section 9 Repeal reference to the Board of Equalization.

Article 15, Section 10 Repeal reference to the duties of the Board of Equalization.

Article 18, Section 3 Repeal reference to the creation, composition and duties of the Board of Land Commissioners.

Constitutional amendments need to be approved by the Legislature in the 1989 or 1990 session in order to be voted on by the public in the next general election in 1990.

Departments to be Implemented in 1989

The Committee recommends the State begin the structural reorganization with the Depart­ment of Employment, Department of Com­merce, and Office of Audit (State Examiner) in 1989. These departments are explained in Chap­ters VII, VIII and IX. Minor changes to the Governor's Office, DAFC, State Auditor's Office, Department of Revenue and Taxation, and Public Lands Office will also be necessary in 1989 to accommodate the Employment, Com­merce, and Audit Departments.

Governor's Office/DAFC

Legislation moving the Budget Division from DAFC to the Governor's Office should be approved in 1989. This will provide the State with a mechanism to strengthen and enhance its management efficiencies. The Budget Division's emphasis should be broadened to incorporate management analysis, particularly in the area of organizational development and design, and the Governor should use the division as a tool to coordinate organizational development with the new department directors and division adminis­trators.

State Auditor's Office

Legislation should be approved in 1989, mov­ing the federal mineral audit program from the State Auditor's Office to the expanded State Examiner's Office in order to allow for enhanced coordination of mineral and royalty audits, and the elimination of duplication between severance tax, ad valorem tax, and royalty audit efforts.

Department of Revenue and Taxation

The impact on this agency in 1989 will be the removal and transfer of audit functions from this department to the State Examiner's Office.

Departments to be Implemented in 1990 and 1991

The Committee recommends the second and third phases of this reorganization plan be implemented in 1990 and 1991. Departments to be created in 1990 include:

Department of Health Department of Family Services Department of Administration Department of Transportation

Departments recommended for implementa­tion in 1991 include:

Department of Education Department of Agriculture and Natural

Resources Department of Public Safety

IN SUMMARY

The Joint Legislative-Executive Efficiency Study Committee recognized the process of reor­ganization of state government must be ongoing and permanent to enable the State to respond to future changes through its administrative structure. Creation of a Joint Legislative­Executive Council on Government Reorganiza­tion is recommended to oversee implementation of a three-year program which will result in the transition from the current administrative struc­ture to a cabinet structure. The cabinet struc­ture recommended consists of 10 departments, each directed by an appointee of the Governor. Departments recommended include the Attor­ney General's Office, and Departments of Employment, Commerce, Health, Family Serv­ices, Administration, Transportation, Educa­tion, Agriculture and Natural Resources, and Public Safety.

In addition to the cabinet level agencies, the Committee envisions an Audit Department con­sisting of the State Examiner's Office, as well as certain audit functions transferred from the State Auditor's Office, Public Lands, and the Department of Revenue and Taxation. The director of this agency would also be appointed by the Governor, and as with the cabinet depart­ments, the appointee would require Senate con­firmation.

The State Auditor, State Treasurer, and Secre­tary of State would continue to be elected by statewide vote and each would retain the cur­rent administrative responsibilities for the respec-

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tive offices, exclusive of removal of the federal Mineral Royalty Audit Program from the State Auditor's Office, and the removal of Workers' Compensation from the State Treasurer's Office. The Superintendent of Public Instruction, under this proposal would be replaced, inasmuch as the responsibilities for public schools would be trans­ferred to a cabinet level Department of Educa­tion, along with responsibilities for community colleges and the University of Wyoming.

The administrative structure recommended by the Committee embraces the principles of man­agement and the standards of administrative reorganization. These principles and standards are designed to enhance efficiency and control through concentration of authority and respon­sibility with the Governor and the integration of programs and activities through functional departmentation. Thus, the administrative and executive responsibilities currently imposed on various boards, commissions and councils would be removed, leaving these entities comprised of dedicated part-time public servants, with more time for policy, advisory and review activities.

Duties and responsibilities of the statewide elected officials would also be lessened with respect to board or commission activities, free­ing their time for devotion almost exclusively to the business affairs of their respective offices. Continuing advisory input from these elected officials could be maintained through conver­sion of current administrative boards and com­missions to advisory entities.

The reorganization proposal will also impact

the State's budgeting and personnel systems to some extent. The Committee recommends the transfer of the State's Budget Division from the Department of Administration and Fiscal Con­trol to the Governor's Office, and the expansion of the division's charge to include greater empha­sis on management. Structural efficiencies to be developed at the department level should have the guiding hand of the Governor through his budget staff.

Personnel changes, particularly as they relate to department directors and division administra­tors, are also desirable to streamline the appoint­ment and removal process of the State's top management staff. Such enhancements should be supplemented by substantial emphasis on staff development programs directed at and made available to management personnel throughout state government. Efficiency in state government can be attained only through the efforts of adequately trained and motivated per­sonnel.

In order to minimize disruption to state government programs and insure services to the State's citizens are not interrupted or diminished, the Committee recommends a three-year phase­in of the reorganization plan, beginning in 1989 when the Departments of Employment, Audit, and Commerce are proposed. The Departments of Health, Family Services, Administration, and Transportation are recommended for implemen­tation in 1990, with the Departments of Educa­tion, Agriculture and Natural Resources, and Public Safety following in 1991.

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FOOTNOTES-CHAPTER VI

1. Deborah D. Roberts, ''A New Breed of Public Execu­tive: Top Level Exempt Managers in State Govern­ment," University of South Carolina, Bureau of Governmental Research and Service, May 1988, p. 23.

2. Ibid., p. 22. 3. Patricia W. Ingraham and Carolyn Ban, "Politics and

Merit: Can They Meet in a Public Service Model?," University of South Carolina, Bureau of Governmen­tal Research and Service, May 1988, p. 14.

4. Tom Peters, Thriving on Chaos, Alfred A. Knopf, Inc., New York, 1987, p. 356.

5. Ibid., p. 360. 6. John B. Olsen and Douglas C. Eadie, The Game Plan,

Governance With Foresight, Council of State Govern­ments, 1982, p. 103.

7. Ibid., p. 94. 8. Ibid., p. 92.

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CHAPTER woo THE DEPARTMENT OF EMPLOYMENT

"Nothing is easier than spending public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody."

There are currently several state agencies per­forming services in the area of labor, employ­ment, training and related functions. Those departments involved include the Employment Security Commission, Workers' Compensation Division, Manpower Administration, Labor and Statistics, Occupational Safety and Health, Vocational Rehabilitation, and State Mine In­spector.

The Committee believes numerous efficiencies and economies can be realized through greater coordination of these activities. The major benefits are believed to include:

a) Elimination in duplication of reporting data (primarily payroll information) from pri­vate industry to the various agencies; b) Elimination of duplicate data entry and computerized processing of information; c) Elimination of duplication of audit efforts, primarily between the Employment Security Commission and Workers' Compensation Di­vision, including staff time, travel and related costs; d) Enhanced market information and statisti­cal gathering capacity; e) Enhanced labor compliance; f) Better coordination of job training and placement efforts; g) Reduced requirements for labor bonding for new businesses; and h) Reduced numbers of, and effort related to, employee grievances, investigations and hearings.

Calvin Coolidge

EMPLOYMENT SECURITY COMMISSION

There are three divisions within the Employ­ment Security Commission (ESC), including Ad­ministrative Services, Employment Services, and Unemployment Insurance. Administrative Serv­ices is comprised of two sections. The Research and Analysis Section compiles and publishes statistics and labor market information, while the Business Management Section is responsible for federal grants and office services.

The Employment Services Division operates 16 Job Service Centers throughout the State and their function is to find suitable jobs for workers and to match workers with employers. Workers also submit claims for unemployment compen­sation at these offices, which are staffed by per­sonnel of both the Employment Services Division and the Unemployment Insurance Division.

The Unemployment Insurance Division has three sections. The Benefit Section is responsi­ble for paying unemployment compensation claims; the Contributions Section is responsible for registering employers, collecting payroll tax information, and maintaining records relating to contributions. The third section, Field Tax Audit Section, audits payroll records, and collects reports and payroll taxes from delinquent em­ployers.

Other functions performed by the ESC include unemployment insurance appeals and equal em­ployment opportunities. An organizational draw­ing prepared by the commission, showing all functions and their relationships is shown in Figure VII -1.

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.... ~

VI 00

I

UNEMPLOYMENT INSURANCE

DIVISION

-CONTRIBUTION 1/ ' BENEFIT

TAX " I PAYMENT

MANAGEMENT I/ ' BUDGET ANALYSIS "

, ANALYSIS

INTERNAL ./ ' QUALITY SECURITY ' / CONTROL

TAX [.; ' FIELD AUDIT [' 'I OPERATIONS

' IJ'

APPEALS

FIGURE Vll-1

EMPLOYMENT SECURITY COMMISSION ORGANIZATIONAL UNITS

GOVERNOR

1 ESC I I ESC COMMISSION( ADVISORY J/ COUNCIL

EXECUTIVE 1------,-------, ~----i DIRECTOR

PUBLIC ATIORNEY ATIORNEY INFOMATION

EMPLOYMENT SERVICES

BUSINESS ~ I ~ RESEARCH MANAGEMENT & ANALYSIS

MANPOWER ~ I ~ JOB SERVICES SERVICE

..JL PERSONNEL

E.E.O.

"' FIELD OPERATIONS

DEPARTMENT OF LABOR AND STATISTICS

This agency is responsible for the enforcement and compliance of all Wyoming labor statutes. In addition to the Administration Division which oversees the daily activities of the agency, there are four divisions: Labor Standards, Statistics and Research, Wyoming Fair Employment Commission, and Wyoming Commission for Women.

The Labor Standards Division is responsbile for many segments of state law, including:

a) Non-resident employer wage bond pro­visions; b) Wage payment, collection and hours of work; c) Minimum wage; d) Prevailing wage; e) Female and child labor; f) Wyoming Preference Act; and g) Wyoming contractors residency certifi­cation.

The Division of Research and Statistics col­lects statistics relating to the industrial and eco­nomic conditions as they relate to the workforce. These research and statistics activities are primar­ily in three areas:

a) Labor statistics, reflecting various employ­ment characteristics, labor directories and indexes, etc.; b) Occupational injury and illness statistics, including fatalities, injuries and illness; and c) The Wyoming Occupational Information Coordinating Committee (WOICC) which is charged with eliminating duplication of effort in collecting occupational information from employers.

Wyoming Fair Employment Commission

This commission was created to receive, inves­tigate and pass upon complaints alleging dis­crimination in employment based upon a per­son's race, creed, color, sex, national origin, ancestry, age or handicap. The commission con­sists of the Commissioner of Labor and Statis­tics and four members appointed by the Gover­nor. A staff of four is assigned to the function and during Fiscal Year 1988, a total of 121 inves­tigations were initiated and 113 were closed. Additionally, the staff participated in five employer seminars in an effort to educate the private and public sectors in the area of fair

employment laws and labor standards. The com­mission's work is primarily carried out through the department staff. The commission itself heard no complaints last year, and has not met formally as a group for quite a few years. All actions have been carried out by mail.

Wyoming Commission for Women

This division of the Department of Labor and Statistics is charged with focusing on women's issues in four areas:

a) Legal rights and responsibilities; b) Home and community; c) Employment practices; and d) Educational opportunities. The commission consists of 27 members, one

from each county and four at-large appointed by the Governor, and is staffed by an executive director (Public Information Specialist II, per the Personnel Division) and one part-time secretary.

During Fiscal Year 1988, the commission was active with various publications and reports involving women's issues, including:

Publications • Women and Credit • Non-traditional Employment • Divorce • Wyoming "Firsts" • Sexual Harassment • Child Care in Wyoming • Labor Laws • "Commission Comments" • Reentry • Appointments Packet Reports • Teenage Pregnancy in Wyoming • Child Care in Wyoming • Pay Equity in Wyoming • Annual Reports

A drawing prepared by the agency depicting its organizational structure is shown in Figure VII-2.

JOB TRAINING ADMINISTRATION

This agency is responsible for the administra­tion and operation of the Job Training Partner­ship Act (JTPA), the objective of which is:

" ... to establish programs to prepare youth and unskilled adults for entry into the labor force and to afford job training to those

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.... 0'1 0

(2)

(1)

Statistical Analyst II

Statistical Analyst I

Statistical (1)1 Development

Technician

Records & (1)1 Communication

Assistant I

Statistics and

Research

I Wyo. Occup. Info. Coord. Committee

(1)l ~abor Statisti~s/ F1scal Superv1sor

..... ~ -..;;;:

........

FIGURE Vll-2

DEPARTMENT OF LABOR AND STATISTICS ORGANIZATIONAL CHART

(1) Labor Standards State Program

Director

Commission Labor Standards

(1 )I Program Manager

Fair Employment/ (1)1 Labor Standards

Compliance Super . /

/ /

........ -- ........

I Analyst II I (I) ~blic Information

//

/ /

(1)

WOICC

Specialist II /

......_ ... I / '..J....../ Records &

// /

/

(S)I Labor Standards Compliance Off.

"

(1)1 Communication Assistant

Records & (1)1 Communication

Assistant I

Wyo. Commission For

Women

Records & (3)1 Communication

Assistant I Records & (1)1 Communication

Technician I

Labor Standards/Fair Employment Compliance Division

( ) Number of positions

economically disadvantaged individuals and other individuals facing serious barriers to employment, who are in need of such train­ing to obtain productive employment."

Delivery of training and employment services are rendered using two different approaches. The first involves the use of a public/private part­nership designed to provide services to low­income individuals in a service delivery area. The second approach involves set-aside grants given to the Governor for special target populations or for specialized services. The services for both approaches include intake, testing and assess­ment, remedial education, on-the-job training, classroom training, relocation and interview assistance, and support services such as job related day care and transportation. The Job Training Administration utilizes a contract deliv­ery system to provide services to eligible Wyo­ming residents. During Fiscal Year 1988, the JTP A entered into service agreements with approximately 20 prime contractors which include state agencies, local government school districts, and community colleges. '

DU:ri?g F~scal ~~ar 1988, the Job Training AdmmistratiOn utlhzed 1,617 different employ­ers, of which 85 percent were non-governmental employers. A total of $3,026,886 was transferred to these employers; $2,174,251 went to the pri­vate sector. The program provided services to a tota.l o~ ~,536 individuals. During the year, 2, 725 md1Vlduals ended their participation in the program; 1 ,232 entered unsubsidized employ­ment and another 470 had terminations which the agency classified as "other positive termi­nations.''

The agency i.ndicated in its Annual Report, in order to effectively conduct rapid response and worker adjustment efforts, access to the State's Unemployment Compensation records was needed. The agency recommended amendments to the Wyoming Unemployment Insurance Laws to enable release of information in the Unem­ployment Compensation system. This agency's structure is shown in Figure VII-3.

DIVISION OF WORKERS' COMPENSATION

This program is currently under the supervi­sion and control of the State Treasurer. Work­ers' Compensation in Wyoming is a no-fault insurance program which provides protection from legal suits against the employer and a

timely remedy to the injured worker for lost wages, medical care, permanent disability or death for job related incidents. The Workers' Compensation Act provides payments to work­ers who incur injuries in the course of their employment in those occupations designated as extra hazardous by Wyoming statutes.

The agency is structured with three divisions: Administration, Compliance, and Claims. Bas­i~ally, the Administrative Division provides over­sight and management of the agency. This divi­sion has been streamlined and reduced during the past year as a result of the transfer of four positions to the Claims Division and the dele­tion of a public information officer position by the 1988 Legislature.

The Compliance Division consists of two sec­tions: Internal Compliance and Field Compli­ance. Personnel in the Internal Compliance Sec­tion are responsible for receiving, reviewing and accounting for employer premium payments. This involves setting up new accounts, determin­ing classifications, making certain all bonding and extra-territorial requirements are complied with, and maintaining computer and manual files on all employers.

Field Compliance efforts include the collec­tion of delinquent premiums, auditing of em­ployer records, and assisting employers with any related problems they may have.

The Claims Division is responsible for han­dling claims submitted by injured workers for lost wages, medical care, permanent disability or death. This division is structured with the for~ mation of four case management teams· each . . ' team consistmg of four case workers. These per-sonnel are responsible for auditing all medical claims to insure the medical treatment claimed is appropriate and related to the injury and all medical charges are paid in accordance with the fee schedule adopted by the agency. Addition­ally, this division computes and audits all disa­bility claims submitted.

The Workers' Compensation Division has seven Field Compliance officers stationed around the State in the following cities and towns: Casper, Cheyenne, Evanston Gillette Laramie, Lovell, and Pavillion. The di~ision hact an average of 9,700 active employer accounts with the average number of employees covered at 12?,763 last year. Collections of employer premmms last year totalled $27.8 million, while total medical and disability claims paid were $44.8 million. According to the division's

- 161 -

..... 0\ N

EMPLOYER SECRETARY I I RELATIONS

SPECIALIST

FIGURE Vll-3

JOB TRAINING ADMINISTRATION

MANAGEMENT INFORMATION COORDINATOR

PROGRAM DATA ENTRY

OPERATIONS SPECIALIST

SPECIALIST

I I I

DATA ENTRY ASSISTANT

(SUMMER YOUTH)

JOB TRAINING ADMINISTRATOR

1

EXECUTIVE SECRETARY

SECRETARY

ADMINISTRATIVE SERVICES MANAGER

I I I I

FISCAL COMPLIANCE AUDITOR PROCESSING REVIEW

SPECIALIST SPECIALIST

COMPLIANCE AND EVALUATION

MANAGER

I I MONITORING, FOLLOW-UP

PERFORMANCE SYSTEM STANDARDS, TECHNICIAN EEO OFFICER

I I I

MONITOR INTERN

(SUMMER ONLY)

Annual Report, major data for the year included the following:

"Cases Number of new injuries reported = 18,814 Number of new injuries accepted = 15,318

Temporary Total Disability Claims Number of initial temporary total disabil-

ity claims processed = 2, 729 Number of temporary total disability cases

paid on during the year = 3,535 Number of temporary total disability pay­

ments made during the year = 12,950

Permanent Disability Claims Number of initial permanent disability

claims processed = 999 Number of permanent disability cases paid

on during the year = 1,221 Number of permanent disability payments

made during the year = 13,594

Medical Cases Number of active medical cases = 64,698 Number of medical cases paid on during the

year = 20,051 Number of medical claims paid on during

the year = 99,299

Percentage of FY 1988 Total Claims Costs by Category Medical Costs 49.62 OJo Temporary Total Disability

Costs Permanent Partial Disability

Costs Permanent Total Disability

Costs Fatality Costs Court Costs All Other

26.02%

16.95%

3.25 OJo 2.51% 1.40%

.24 %"

The agency began an audit program in the last fiscal year in which employer accounts were audited. According to the Annual Report, 82 audits were conducted at a cost of $6,085. Col­lections amounted to $35,071 out of total audit findings of $62,129 in unreported premiums. The agency has seven auditors assigned to this func­tion on a part- time basis.

It was also noted in the Annual Report, that the audits of employer records in 9 out of 10 cases will reveal additional unreported premiums due. However, due to budget restraints, out-of-

state employers, who generate hundreds of thou­sands of dollars, will not be audited. It was noted that most larger employers in Wyoming main­tain their records at headquarters out of state. Figure VII-4 reflects the administrative structure of the agency.

OCCUPATIONAL SAFETY AND HEALTH DEPARTMENT

The primary objective of this agency is to pro­vide protection to employees from safety and health hazards. These services are provided through two programs: Administration and Consultation Private Sector. The Administration Program provides training, education and con­sultation to both the public and private sectors. Inspection and investigation activities are car­ried out to determine compliance with state rules and regulations.

The Consultation Private Sector Program is designed to provide both on-site and off-site con­sultation, training and eduction to private sec­tor employers only.

There are 22 full-time and 1 part-time posi­tions in the agency, and during the past year, all operations have been administered by the Commissioner of Labor and Statistics. During Fiscal Years 1986 and 1987, the agency conduct­ed 1,487 safety inspections covering 13,579 em­ployees, including 24 facilities and 12 discrimina­tion complaints. In addition, during this two-year period, 186 health inspections were performed covering 1,698 workers. A number of technical assistance educational training courses were provided to both employers and employees, as well as hundreds of on-site and off-site consul­tations with both public and private employers.

During the past year, the agency, through its Administration Program, conducted four hear­ings through the OSHA Commission, promul­gated updated rules and regulations and admin­istered the Integrated Management Information System (IMIS) which involves approximately 2,000 case files during a biennium period. The organizational structure of this agency, as it existed last year, is shown in Figure VII-5.

DIVISION OF VOCATIONAL REHABILITATION

The overriding mission of the Division of Vocational Rehabilitation (DVR) is to advance opportunities for persons in Wyoming with dis-

- 163 -

FIGURE Vll-4

WORKERS' COMPENSATION DIVISION

I Director I I I R&C Asst. Ill I

I I Asst. Director

I Legal Prosecutor I ~ Public Into. Officer I I CLAIMS COMPLIANCE ADMINISTRATIVE I--····---

Claims Supervisor I !compliance Supervisor! I Mgmt. Serv. Offer. I

-0'1 ~

I I I Case Reviewer I I Case Reviewer I I R&C Asst. I I Fisc. Cont. Offr. II I I I I I I Fisc. Cont. Offr. I

I R&C Tech I I I R&C Tech I I I Compliance Officer I Comp. Tech II I I

I I II Comp. Tech II ~ Fisc. Cont. Tech II I R&C Asst. I I Compliance Officer I I I Comp. Tech II

I Claims Claims Claims Claims I I Compliance Officer I Tech II Tech II Tech II Tech II Comp. Tech II I Fisc. Cont. Tech II I I I I I I Comp. Tech I

I Claims Claims Claims Claims I Compliance Officer I Tech I Tech I Tech I Tech I Comp. Tech I

I I I I I I I R&C Tech I

I Compliance Officer I Data Trans Data Trans Data Trans Data Trans Comp. Tech I I Tech I Tech I Tech I Tech I

I I I I I Data Trans. Tech I I I I Compliance Officer I Mail Dist. Wrkr.

Rec. Tech I Rec. Tech I Rec Tech I Rec. Tech I R&C Tech I I

rart-time Records Tech., I Compliance Officer I Data Trans. Tech I

..... 0\ VI

I

I I

I I

FIGURE Vll-5

OCCUPATIONAL SAFETY AND HEALTH

I GOVERNOR J

I COMMISSION (7) I I INTERIM ADMINISTRATOR* l

I ASST. ADMINISTRATOR I I IMIS MANAGER I 0002 - 0536/60 I R & C ASSISTANT Ill I 0009 - 1136/37 0004 - 1173/30

RECORDS ANALYST j I RECORDS ANALYST I I BUDGET/FISCAL CONTROL I 0005 - 1136/26 0006 - 1135/26 I OFF. II 0015- 2012/45

I R & C TECHNICIAN II I I STANDARDS SPECIALIST I

0017 - 1152/22 I oo23 - 2256129

I T.A. MANAGER I I COMPLIANCE MANAGER I 0013 - 5225/54 0012- 5207/54

SAFETY CONSULTANT I I I.H. CONSULTANT I I COMPLIANCE OFFICER I I COMPLIANCE OFFICER I 0021 - 5222/45 0024 - 5222/45 0011 - 5201/38 0003- 5207/45

SAFETY CONSULTANT I I S/H CONSULTANT I I COMPLIANCE OFFICER I I COMPLIANCE OFFICER I 0025 - 5222/45 0014- 5222/45 0020- 5201/38 0019- 5202/45

I COMPLIANCE OFFICER I 0022 - 5202/45

I COMPLIANCE OFFICER I 0008 - 5202/45

I COMPLIANCE OFFICER I 0007- 5201/38

I COMPLIANCE OFFICER I 0016 - 5202/45

abilities to be employed and independent. Accomplishement of this mission is strived for through eight job-related programs:

a) General Rehabilitation; b) Independent Living; c) Business Enterprise Program; d) In-Service Training; e) Governor's Committee on Employment of

the Handicapped; f) Living Skills; g) Disability Determination Services; and h) Supported Employment.

The organizational structure of the DVR is shown in Figure VII-6. The division's staff totals 80 positions; 50 of these are located in 19 field offices throughout the State. The Disability Determination Services Program is staffed by 15 positions. The Independent Living Rehabilita­tion Program and the Living Skills Program are administered through grants and contracts with private providers; the remaining programs are staffed by single program consultants. The Administrative Section handles personnel, fis­cal and support services of the other programs. It is staffed by four positions.

General Rehabilitation

The General Rehabilitation Program is the lar­gest in the division, representing approximately 73 percent of the division's total resources. General Rehabilitation Services are delivered through 19 field offices staffed by 26 DVR coun­selors, 2 technicians and 18 assistants, managed by regional managers through five service regions. Vocational counseling and guidance is a core service provided all clients. Other major services include maintenance, physical and men­tal restoration, training, diagnoses, evaluation, job placement and transportation. Services are tailored to the needs and vocational goal of each client by use of an individualized written rehabili­tation plan.

During Fiscal Year 1988, the division reported the following data for the General Rehabilita­tion Program:

Total Persons Served Persons Rehabilitated Persons Severely Disabled, Rehabilitated Average Weekly Earnings at Referral Average Earnings after Rehabilitation Average Length of VR Services (days)

FY 1988

4,069 601 252

$ 51 $ 206

538

Independent Living

The purpose of this program is to continue the availability of services, through contracted agreements, to individuals for the purpose of improving their ability to function independently within the home and community. Persons eligi­ble for these services are those who are too severely handicapped to benefit from other rehabilitative services but who can be assisted by either eliminating or reducing their depen­dence on others or by bringing the individual up to a level that they would be eligible for other vocational rehabilitation services.

Business Enterprises

The Business Enterprises Program provides food service training for people with disabilities which lead to employment in the food service industry. There are three vending sites in the pro­gram: Emerson Building Cafeteria, Hathaway Building Cafeteria, and Herschler Building Cafeteria. Each site is operated by a contracted manager who has a disability.

In-Service Training

Through training, all staff members are given the opportunity to enhance their capabilities to serve persons with disabilities. The needs of all staff are assessed, identified and prioritized. Then appropriate training is provided to meet these needs. Some training focuses on the over­all rehabilitation process, while other very spe­cific disabilities and issues are covered in special­ized courses.

Living Skills

The Living Skills Program provides highly specialized services through a contractual arrangement with Goodwill Industries, Inc. The purpose of this program is to evaluate an indi­vidual's ability to live independently of institu­tional care, then to train the client towards acquiring functional and social skills necessary to live apart from an institutional setting. Liv­ing skills training can include instruction in self­care, academic skills, social and communication skills, and vocational skills development.

The target population is that of individuals with multiple rehabilitation problems related to mental retardation, emotional disabilities, and/ or physical disabilities who have had little or no success in living independently.

- 166-

-0\ -....)

I

FIGURE Vll-6

VOCATIONAL REHABILITATION DIVISION

Administrative Assistant Janet

Records and Communication Assistant Velta Wilkinson

Personnel

SSDI and SSI Programs

Positions Supervised

Principal Disability Evaluator Disability Evaluators (6)

Ellen Lewis

Council

Disability Evaluation Specialists (2) Management Information Systems Tech Fiscal Control Technician Records and Communication Assistant Medical Records Transcriber Records and Communication Tech (3)

Direct Client Services {17 Field Offices)

Community Relations

Positions Supervised

Regional Field Managers (5)

Region #I Bill Delo

Region #II Jim Mcintosh

Region #Ill Carl Shapard

Region #IV Jack Offerle

Region #V Vacant

Client Assistance Program Social Security Relationships Interagency Agreements Program Evaluation Quality Assurance Affirmative Action Space Contracts Compliance Reports

Program Initiatives Special Services Staff Development

Blind Business Enterprise Program Chronically Mentally Ill Deaf/Hearing Impaired Independent Living Living Skills Program Native Americans Projects with Industry Rehabilitation Engineering Supported Employment Transition Traumatic Brain Injured

Positions Supervised

Program Consultant for Special Initiatives/Services

Program Specialist for Staff Development & Business Enterprise

Budget

Fiscal Reports

Payments Unit

Management Information Systems

Positions Supervised

Data Systems Coordinator Fiscal Technicians (2)

September, 1988

Social Security Disability Determination Services

The Social Security Disability Determination Services (SSDDS) makes decisions of disability and blindness under both the Social Security Dis­ability Insurance (Title II) and Supplemental Security Income (Title XVI) Programs of the Social Security Act. Following preliminary claims preparation, the SSDDS completes development and adjudication of the applica­tion. Application for benefits is made at the local Social Security District Office and approximately 3,700 claims were processed in Fiscal Year 1988.

Governor's Committee on Employment of the Handicapped

The primary function of the Governor's Com­mittee is to create and maintain an employment climate favoring equal opportunity for persons with disabilities.

Supported Employment

Supported employment is a new work option offering competitive work in an integrated work setting for individuals with severe handicaps who require on-going support services.

DEPARTMENT OF EDUCATION VISUALLY HANDICAPPED SERVICES

Included among this agency's programs is the Visually Handicapped Services Program. The goal of this program is ''to help people cope with being visually impaired." Visually impaired individuals of all ages have historically been served; however, in 1987 the State Board of Edu­cation's responsibilities, in W.S. 21-2-501, were limited to "school age children."

Approximately 2,200 individuals are receiv­ing services through field offices in Casper, Cheyenne, Rawlins, Riverton, Sheridan, and Thermopolis. About 1,800, or 82 percent, of the clients are adults who are provided various serv­ices, including living skills, counseling, referrals, braille books, braille instruction, magnifying devices, and white cane training.

The placement of this program within the state rehabilitation agency is recommended inasmuch as the field offices for the Visually Handicapped Services Program could be combined and the Vocational Rehabilitation Living Centers could also be utilized. It is likely that federal funds

under Title VII, Part C of the Rehabilitation Act could also be obtained to assist with the financ­ing of this program.

STATE INSPECTOR OF MINES

The primary function of this agency is the administration of the health and safety standards at mines and related facilities throughout the State. Investigation of complaints advanced by miners are performed and a continuing effort is made to educate mine operators of the new regulations imposed by the Federal Mine Safety and Health Administration. Approximately 1,200 to 1,300 routine health and safety inspec­tions are conducted each year.

THE NEED FOR CONSOLIDATION

For the most part, programs established in the labor and employment areas were created in re­sponse to initiations of the federal government, i.e., Employment Security, Vocational Rehabili­tation, Manpower Administration, OSHA, etc. In order to administer the federal program, the State responded by creating additional and sep­arate departments. As a result, the current struc­ture represents fairly specialized organizations to deal with specific aspects of the labor train­ing, or employment initiatives. In analyzing the several departments' objectives, many functions can be categorized into broad program areas.

Labor Law Compliance

In order to protect workers from unfair employer practices, several laws have been enacted by either the federal or state govern­ment. Agencies are then charged to assess employers' compliance to these standards or statutory provisions. Additionally, in the rela­tionships or interactions with employers, train­ing efforts are necessary to assure the employers are familiar with these requirements. At present, there are four agencies involved with labor law compliance issues:

Labor and Statistics -wage and hour compliance

-equal employment -labor standards

Occupational Safety and Health -job safety

Mine Inspector -job safety Employment Security

Commission -migrant workers

- 168 -

Payments to Individuals

Both the ESC and Workers' Compensation Division provide payments to individuals; Wor­kers' Compensation for work related injuries, and the ESC for employment layoffs. Both col­lect payroll reports and premiums from the same employers in order to make these payments.

Job Training

Job training functions performed by the several labor agencies are intended to provide basic skills to enable the individuals to obtain employment. The following training efforts are underway:

Manpower Administration

Vocational Rehabilitation

Employment Security Commission

-training for income eligible

-training for displaced workers

-training for handicapped

-training for public assistance

-training for trade readjustment

Labor Market Information

Multiple agencies in state government are involved in gathering labor information and developing statistical information for the oper­ation of labor programs. The agencies involved have traditionally developed good coordination in an attempt to avoid duplication. However, certain benefits would derive if these efforts were under the direction of a single agency:

Employment Security Commission

Labor and -labor statistics

Statistics -labor statistics State Occupational

Information Coordinating Committee

DAFC - Research

-coordination of occu­pational supply and demand statistics

and Statistics -employment data

One of the benefits of combining several different agencies which are performing the same or similar services is not only an improved qual­ity of services, but also an expected reduction in overall expense. The major expenses in all of these agencies, of course, are in salaries and benefits. No estimate is offered as to the mag­nitude of the savings which are possible. However, clearly, considerable duplication or overlap is evident among the 462 positions, as shown in Tables VII-1 and VII-2.

Table VII-1 shows the current staffing asso­ciated with administration and closely related efforts in each of the agencies under discussion. Because of the complexities with the Employ­ment Security Division total staffing rosters, it is impossible to decipher without considerable research, the exact nature of each position. However, from the analysis conducted, it appears the seven employment agencies are cur­rently dedicating approximately 64 full-time positions to administration, statistical or busi­ness services. Included in this number are 9 accountants or fiscal staff, 10 secretarial or cler­ical staff, 16 statisticians or statistical staff, and 13 management services officers or business and/ or office management personnel. Addition­ally, there is a total of 16 other positions which do not fit within these categories. The Commit­tee believes several of these positions could be reassigned or eliminated with the reorganization plan, as duplicate efforts would likely be iden­tified once the restructuring was concluded.

After segregating the 64 positions in the administrative, statistical and business areas, the remaining 398 full-time positions were grouped into like categories. The result is a total of 17 data entry or data technician/transmission posi­tions, 10 fiscal staff, 63 secretarial or clerical positions, 87 positions assigned to claims han­dling or eligibility efforts, 51 assigned to com­pliance tasks, and another 170 positions, primar­ily job service employees, grouped in the "other" category. These breakdowns are shown in Table VII-2. Again, the Committee believes the con­solidation of agencies would provide substantial opportunities for the State to either reassign posi­tions, or cut back on staffing as attrition and other factors dictate or allow. To continue to perform these interrelated services in the present fashion results in unintentional costs, duplica­tion and overlap. Many of these agencies spend considerable time trying to insure the coordina-

- 169-

TABLE Vll-1

AGENCY STAFFING ADMINISTRATIVE/STATISTICAL/BUSINESS SERVICES

Secre- Statis- Mgmt. Total Fiscal tarial tical Serv. Other

Workers' Compensation 5 0 1 0 1 3 Employ. Security Commission 31 5 4 10 3 9 Manpower Administration 6 1 0 2 2 Labor & Statistics 8 0 1 6 1 0 Vocational Rehabilitation 9 2 0 4 2 State Mine Inspector 1 0 0 0 0 Occupational Safety & Health 4 1 1 0 2 0 -

TOTAL 64 9 10 16 13 16

TABLE Vll-2

AGENCY STAFFING OTHER

Secre- Claims Compli-Total Data Fiscal tarial Elig. ance Other

Workers' Compensation 47 6 3 9 13 15 1 Employ. Security Commission 243 9 5 27 64 14 124 Manpower Administration 7 1 0 1 1 1 3 Labor & Statistics 9 0 0 0 0 9 0 Vocational Rehabilitation 71 1 2 23 9 0 36 State Mine Inspector 3 0 0 0 0 3 0 Occupational Safety & Health 18 0 0 3 0 9 6

TOTAL 398 17 10 63 87 51 170

TABLE Vll-3

STATES WITH A SINGLE AGENCY FOR WORKERS' COMPENSATION AND UNEMPLOYMENT INSURANCE

Alabama Illinois Montana Alaska Iowa New Mexico Colorado Kansas North Carolina Delaware Louisiana Pennsylvania Florida Massachusetts South Dakota Hawaii Michigan Wisconsin

Missouri

tion of their programs, an activity which should be greatly reduced after consolidation.

The Committee also briefly assessed how other states have reacted to this need to coordinate employment agencies and found 19 states have combined their job service and unemployment programs with their workers' compensation pro­gram. These states are shown in Table VII-3.

A consolidation of this nature in Wyoming will not only result in possible cost reductions and enhanced efficiencies, but should also ena­ble the State to make more and better services available to Wyoming citizens throughout the State. As shown in Table VII-4, currently both the ESC and Vocational Rehabilitation maintain numerous separate field offices. Additionally,

- 170-

TABLE Vll-4

ESC Vocational

Rehabiliation

FIELD OFFICES Dept. of

Education/Visually Handicapped

Workers' Compensation

Workers Camp­Clerks of Court

Basin Buffalo Casper Cheyenne Cody Douglas Evanston Gillette Green River Jackson Kemmerer Lander Laramie Lovell Lusk Newcastle Pinedale Rawlins Riverton Rock Springs Sheridan Sundance Thermopolis Torrington Wheatland Worland

• • • • • •

• • • •

• • • •

•

•

• • • • • •

• • • • •

•

• • • •

• • •

Workers' Compensation also has seven field representatives stationed in different Wyoming communities and the Department of Education maintains six field offices across the State. Clearly, services to the State's workers could be enhanced through consolidation of these offices at the local level.

It was noted in the business survey discussed in Chapter V that employers throughout the State complained of the duplicate payroll report­ing required by the ESC and Workers' Compen­sation. The ESC requires a quarterly report of wages paid and Workers' Compensation requires monthly reporting of employees paid who are covered under the State's "extra hazardous" occupations. Both agencies print different forms to be completed by the employer; both mail the report out, incurring postage costs; both capture the data for computer processing; and both have computer runs of the data (reports) once the information has been collected. All of these costs represent at least partial duplications and an attempt was made to quantify these expenses.

• •

• •

•

•

• •

• •

• •

•

• • • • • • • • • • • • •

• • • •

• • • • • •

Costs of processing payroll information occurs in the ESC, Workers' Compensation, and DAFC- Data Services. The ESC processes pay­roll information quarterly for approximately 15,400 employers, while Workers' Compensa­tion processes monthly for about 9,500 employers. A summary of these processing costs is shown in Table VII-5. Combined reporting of this information should result in some level of cost savings.

THE HEARINGS AND APPEALS PROCESS

The agencies proposed to be consolidated within the Department of Employment have in place hearings and appeals processes. The proce­dures vary across agency lines, and the complex­ity of the cases heard also varies considerably. Except for Workers' Compensation, each agency has the administrative capacity to resolve the majority of complaints informally, without a great deal of expense. Also except for Workers' Compensation, attorneys are not appointed by

- 171-

TABLE Vll-5

ANNUAL COSTS ASSOCIATED WITH PAYROLL REPORTING EMPLOYMENT SECURITY COMMISSION AND WORKERS' COMPENSATION

Cost of Report Form DAFC - Data Capture DAFC - Computer Update DAFC - Reports

Total DAFC Data Services Charges

Postage Costs - Mail Out: (15,415 quarterly at 36¢) (9,500 monthly at 25¢)

Data Capture at Agency: (2 full-time) (1 full-time)

TOTAL

any agency to represent an outside party; only Workers' Compensation pays for attorneys to represent a private party.

The basic hearings and appeals procedure for each agency is shown in Table VII-6. The first party listed files or receives the initial complaint or objection to a claim. The last party listed has final decision authority in the case; any decision can be appealed first to a District Court, then to the Supreme Court. The party shown in parentheses is an optional level, but usually is not utilized. Where numbers are shown, they represent the number of cases filed, referred and completed last fiscal year.

A number of observations can be made from Table VII-6. First, it appears the internal infor­mal processes in place at both the ESC and Labor and Statistics work effectively to resolve most complaints or objections, so they do not need to be appealed to a higher level. The ESC redetermination and hearing process resolved 91.5 percent of the objections; Labor and Statis­tics' compliance officers resolved 99.5 percent of their complaints.

The due process allowed to the public varies greatly throughout the agencies. In some instances, a person (or business) is allowed only one appeal level before going to a District Court, and in other cases, four appeal levels are avail­able before the District Court. Final decisions are made by individuals and lay boards.

In three of the processes, the final decision is

- 172-

Workers' ESC Compensation

$ 9,216 $ 1,700 3,400 4,260 5,154 21,024

11,488 13,200

$29,258 $40,184

22,198 28,500

30,000 15,000

$81,456 $83,684

TABLE Vll-6

HEARINGS AND APPEALS PROCESS

ESC

Agency, Employer 2,264 Redetermination

850 Hearing Officer 194 Commission (ESC)

Labor & Statistics, Labor Standards

1 ,053 Compliance Officer (Compliance Officer #2)

6 Labor Commissioner

Labor & Statistics, EEOC

113 Compliance Officer 0 Commission (FEC)

OSHA

Compliance Officer Agency Assistant Director Labor Commissioner Private Attorney Commission (WOSH)

Workers' Compensation

Agency, Employer Independent Hearing Officer

made by a commission. In turn, the commissions also have executive and/or advisory powers to the agency. None of these commissions are required by federal law. Of the three, the ESC is the most actively involved in hearing appeals (194); OSHA heard four appeals last year; and the Fair Employment Commission heard none.

There are two basic types of hearings occur­ring among these agencies. One primarily in­volves compliance to labor standards, safety regulations, and discrimination laws (OSHA, Labor and Statistics), and the other involves the right of an employee to insurance benefits. These two functions are segregated into two separate divisions in the proposed agency structure (Figure VII-7). The hearings and appeals pro­cesses in each division should be as similar as possible. At this point, the two major obstacles to a more homogenous approach are: a) the var­iance in the final decision-making authority; and b) the absence of an informal administrative procedure in Workers' Compensation.

In the Labor Standards Division, the hearings and appeals process can be made uniform by slightly modifying the EEOC process and redesigning the OSHA procedure to reflect the following:

TABLE Vll-7

PROPOSED LABOR STANDARDS HEARINGS AND APPEALS PROCESS

Compliance Officer Division Administrator Independent Attorney (Contract) District Court OR Office of Admin. Hearings

The proposal provides at least three levels of hearings before the case is appealed to the final decision-maker. The policy of not involving attorneys in these hearings except on an optional basis should remain intact.

The final decision could rest with either a Dis­trict Court (appealable to the Supreme Court) or an independent administrative law judge. The caseload on either would be negligible. Commis­sions which act in an advisory or executive capac­ity to the department should not hear cases involving the rules and regulations or policies they approved; the Fair Employment Commis­sion and OSHA Commission should no longer act in a hearing capacity.

Establishing a uniform hearing process be-

tween the ESC and Workers' Compensation claims will be more impactive, and may not be feasible. As with labor standards hearings, the final decision should not rest with a lay commis­sion. Particularly in the case of Workers' Com­pensation cases, a lay commission would be hard pressed to determine complex medical and/or vocational impairment issues. The hearing process in place at the ESC is effective and should remain as is, except for the removal of the commission as the final decision-maker; the hearing officers for the ESC do not need to be attorneys.

Workers' Compensation is one of the few agencies in state government which does not have the administrative authority to informally resolve complaints or objections. This is a rather curi­ous situation for an agency which is to protect an employer trust, insure employee rights to insurance benefits, and which paid $44.8 million in medical and disability claims in the prior fis­cal year. The authority to resolve objections needs to be allowed to the agency.

Workers' Compensation statutes should be changed to remove the Clerks of the District Courts from the Workers' Compensation claim objection process. The Clerks of the Courts are not empowered by law to negotiate claims set­tlement and the filing requirement is costly, cum­bersome and unnecessary. Hearing officers or claims adjusters should be budgeted for the Wor­kers' Compensation claim process. Due to the complex medical elements of Workers' Compen­sation claims, some of these employees should be attorneys. Providing the agency with broader administrative authority to resolve objections could conceivably reduce the appeals workload by as much as 50 percent. This could ultimately allow the Office of Administrative Hearings to greatly reduce its budget request.

The assumption that Workers' Compensation can reduce the number of claims appealed to a final decision authority is based on the ideal of an informal process. Current statute mandates Workers' Compensation to pay for attorneys appointed to injured workers by the Office of Administrative Hearings. Regardless of whether a contested claim is frivolous or what the out­come of the ruling, the Workers' Compensation Trust Fund pays for these attorneys. As long as this provision exists, there is no incentive for a claim to be settled without appeal. This is a stipu­altion rather peculiar to Wyoming statute; many other workers' compensation funds do not have

- 173 -

such a liberal provision and it is certainly not required in the hearings and appeals process of the other agencies in the Department of Employ­ment. The current law, combined with the impli­cation of the Office of Administrative Hearings serving as the trial de novo, has resulted in the appointment of attorneys to injured workers in the majority of cases.

Statute should be changed to eliminate or limit the fund's liability to pay for attorneys if the contested case is lost. This will discourage the potential abuse of the system for frivolous claims or for claims for small amounts. Unless the ques­tion contested is a compensible injury issue, the fund should not pay for attorneys when a med­ical claim is under $1,000. The hearings process for Workers' Compensation also needs to be simplified to allow for such remedies as tele­phone depositions to reduce unnecessary travel and personnel costs. Consideration also needs to be given to amending current statutes to hold hearings in either Cheyenne or a central loca­tion, unless this presents an undue burden on the worker.

BOARDS, COMMISSIONS AND COUNCILS

The agencies proposed to constitute the Department of Employment have associated with them 16 boards, commissions or councils. These are shown in Table VII- 8.

Clearly, the large number of these entities is not easily manageable for a single department. The creation of the department itself and the streamlining of the hearings and appeals processes alone may reduce the need for some of these bodies. In keeping with the guidelines utilized in establishing a cabinet structure of government, the executive authority of these entities is also no longer desirable. However, because of the multiple special interests represented by the department, advice is needed to provide input to the department for its promulgation of diverse rules, regulations and policies, and as noted in Table VII-8, at least three of these entities are required by federal law.

The Independent Living Advisory Council is currently serving in the dual capacity as the advi­sory committee to the "Part A" portion of the 1986 Rehabilitation Act. The Occupational

TABLE Vll-8

CURRENT BOARDS, COMMISSIONS, COUNCILS OF THE PROPOSED DEPARTMENT OF EMPLOYMENT

No. of Entity Members Primary Role

ESC* 4 Hearing, Executive ESC Advisory Council 10 Advisory Job Service - State Emp. Comm. 15 Advisory WOICC* 7 Advisory Commission for Women* 27 Advisory, Executive Child Labor Commission 3 Advisory Fair Employment Commission 4 Hearing, Advisory Private Industry Council 25 Advisory, Executive Board of Mines 10 Advisory Examining Board (Mines) 3 Licensing OSHA* 7 Hearing, Executive WOSH Advisory Council 10 Advisory Governor's Comm. on Employment

of the Handicapped 12 Advisory DVR Advisory Council 7 Advisory Independent Living Adv. Council 7 Advisory Veterans' Affairs Comm. 5 Advisory, Executive

* Authority to hire agency director.

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Required by Federal Law

No No No Yes No No No Yes No No No No

No ?

Yes No

--...) VI

I

Division of Statistical Support

ESC DAFC- R&S OSHA Labor & Stats.

Division of Economic Assurance

Workers Comp. ESC- Ul Audit/Compliance

FIGURE Vll-7

DEPARTMENT OF EMPLOYMENT CONCEPTUAL STRUCTURE

(460)

DIRECTOR

Division of Standards/ Compliance

Labor & Stat. OSHA Mine Inspector

Administration: Budget Personnel Purchasing

Division of Vocational

Rehabilitation & Training

____J

Vocational Rehab. JTPA Veterans Visually Handicapped

Division of Labor Market

Services

L__

Job Service Referral Placement

Information Coordinating Committee is required by the federal Perkins Vocational Edu­cation Act. Its membership is currently com­posed of representatives from Labor and Statis­tics, ESC, Research and Statistics Division of DAFC, Job Training Administration, EDSB, Department of Education, and Community Col­lege Commission. The Private Industry Coun­cil functions in the dual capacity of the Private Industry Council and the State Job Training Coordinating Council. Both its executive and advisory functions are dictated by federal law. Its name should be changed from "council" to "commission" to reflect its dual advisory and executive role, in keeping with the definitions of councils, committees, etc. prescribed in the Reor­ganization Act of 1989.

Three of these entities currently have full-time employees: the Commission for Women, the Governor's Committee on Employment of the Handicapped, and the WOICC. These em­ployees should be assigned to divisions within the department and the employees should be hired by division administrators through a com­petitive process.

THE DEPARTMENT'S PROPOSED ORGANIZATIONAL STRUCTURE

The proposed organizational structure for the Department of Employment is shown in Figure VII-7. As reflected, five operating divisions are suggested, including: Statistical Support, Eco­nomic Assurance, Standards and Compliance, Vocational Rehabilitation and Training, and Labor Market Services.

IN SUMMARY

The Department of Employment is recom­mended for implementation in 1989 and is designed to include those agencies currently per­forming services in the area of labor, training, and related functions. Included in this new department are the Employment Security Com-

mission (ESC), Workers' Compensation, Man­power Administration, Labor and Statistics, Occupational Safety and Health, Vocational Rehabilitation, the State Mine Inspector, and Services to the Visually Handicapped.

The efficiencies and economies strived for through this functional consolidation are believed to include elimination of duplication in the reporting, capturing and processing of pay­roll information; elimination of duplication in audit efforts between the ESC and Workers' Compensation; enhanced labor market informa­tion and statistical gathering activities; enhanced compliance to both state and federal labor laws; better and more effective job training and place­ment efforts; reduced labor bonding require­ments for new businesses; and, reduced and more streamlined procedures for dealing with grievances, investigations and hearings.

The Committee believes services to Wyoming workers will be greatly improved through expan­sion of the ESC job service field offices to include provision of services to Workers' Com­pensation and Vocational Rehabilitation clients as well, and the proposed consolidation of pay­roll reporting and auditing efforts currently undertaken independently by the ESC and Workers' Compensation will substantially reduce the effort of and disruption to Wyoming employers. The Committee found that 19 of the other 49 states have combined their unemploy­ment and workers' compensation programs.

The recommended creation of the Department of Employment also advances recommendations for streamlining and defining the hearings and appeals processes which currently represent diverse and sometimes unwieldy systems in the various agencies.

Overall, the Committee believes the Depart­ment of Employment outlined herein offers an opportunity for the State to vastly improve serv­ices to Wyoming workers and employers. Opti­mism is expressed that these improvements can be engineered through consolidation at reduced costs.

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CHAPTER w 0 0 0

THE DEPARTMENT OF AUDIT (STATE EXAMINER'S OFFICE)

"However well-conceived and well-intentioned the program of ... government may be, its value ... will depend upon the frequency with which accomplishment is checked against standards of possible results, and misdirection of effort and other waste is detected and diverted into channels of needed activity."

One of the recommendations from the 1987-88 Revenue and Expenditure Study was to increase accountability statewide. Increased accountabil­ity entails insuring all public entities are fully responsible for the funds they receive and those funds are expended with compliance to all legal guidelines. The generally accepted method of in­suring compliance to predescribed guidelines is the audit process. This process involves engag­ing independent auditors to perform compliance and substantive testing in order to render an opinion relative to the entity's adherence to generally accepted accounting principles and any other designated legal constraints. Additional­ly, protection over the utilization of public funds must be tested to establish the consistency of a fraud-free environment. Ideally, auditing can also be used to make recommendations rela­tive to streamlining expenditure procedures and to establishing improved operational perfor­mance.

Creating this department will undoubtedly be the easiest to facilitate of any of the three depart­ments slated to go on line in Fiscal Year 1989. The existing staff, which will be relocated, gener­ally believes the move is a positive one, as they feel independence will be enhanced. This restruc­turing of the State's audit functions will not eliminate administrative positions, but rather combine existing audit programs or groups (in­tact) within a single department.

George J. Washin

FEDERAL/STATE REQUIREMENTS

There are both federal and state requirements for audits. Federal regulations, as of October 1979, require single agency audits, rather than individual program audits, of entities which received more than $25,000 in federal funds. Various Wyoming statutes empower the Ex­aminer's Office, Auditor's Office, Department of Revenue and Taxation, Public Lands, Insur­ance, Public Service Commission, Highway Department, Workers' Compensation, and Em­ployment Security Commission (ESC) to per­form numerous audits during Fiscal Year 1988.

CURRENT AUDIT EFFORTS

At this time, nine agencies with approximately 80 auditors are attempting to fulfill various au­diting requirements. In addition to the State's effort to fulfill these auditing requirements Cer­tified Public Accountants (CPA's) are also au­diting local governments, school and special districts, as well as some state agencies.

With this massive but disjointed audit effort, there exists an overt possibility the initial objec­tives of auditing may not be realized. Essential­ly stated: although the audits are being per­formed, the chances of assuring the public its funds are collected/managed judiciously, or operational and legal compliances are being met, are limited.

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THE NEED FOR A CONCENTRATED AUDIT EFFORT

In the absence of an effective audit effort, Wyoming has suffered undetermined amounts of losses. Examples of these losses are: a) uncollected severance taxes and mineral royal­ties; b) uncollected sales and use taxes, gas taxes, cigarette, and commercial vehicle taxes; and c) fraud and misuse. The greatest loss pertains to unaudited severance taxes. Only recently has there been an emphasis on auditing severance taxes. The Mineral Royalty Audit Program in the State Auditor's Office has demonstrated that a well run audit effort can produce millions of dollars in revenue with very little cost. As the Mineral Royalty Audit Program received a 205 Delegation of Authority from the Mineral Management Service (MMS) to perform audits, approximately 93 percent of the group's expenses are reimbursed by the federal government. This arrangement falls into the "too good to be true" category as with very little expenditure, the State has collected $45 million.

Estimates on the potential income relative to a concerted severance tax audit effort are difficult, if not impossible, to assess. A tremen­dous amount of uncollected taxes relates to either the ambiguity or the omissions in the poli­cies of the Department of Revenue and Taxa­tion. Therefore, a determination cannot be made until the department's policies are reviewed. In any event, there is no doubt a very real poten­tial for increasing revenue exists. This is evi­denced by the success of private contractors who are presently contracting with counties around the State to identify any unreported ad valorem taxes.

Additional costs associated with this lack of audit effort relate primarily to inappropriate expenditures, which could be the result of inade­quate systems or training on the part of employees or outright fraud. In recent years, fraud or misuse of funds has been documented at all levels of government, e.g., Western Wyo­ming Community College, the Teton Music Fes­tival incident; the Natrona County Treasurer; Park County Hospital District; Health and Social Services, 1983 Low Income Energy Assistance Program.

The instance listed above which most directly impacted state government was the 1983 Low Income Energy Assistance Program (LIEAP). This audit was performed by the State Auditor's

Office and was one of several interface (auto­mated systems generating payments) audits per­formed between 1982 and 1986. The reasoning behind performing these audits was to assess the controls of the systems which interfaced with the Uniform Accounting System (UAS). These sys­tems generated warrants via a magnetic tape interface with the UAS; otherwise warrants were resultant from vouchers, leaving a paper audit trail in the Auditor's Office.

The audit of the 1983 LIEAP revealed approx­imately 31 percent of the payments made were possibly fraudulent. This program was a $6.8 million federally supported welfare program which was aimed at aiding income eligible per­sons with their heating bills. However, a system "devoid of controls" was exposed where as much as $2 million was paid to people who were ineligible or had misrepresented their situation in order to receive benefits. 1 The major welfare program, AFDC, was also audited and for a test period, Fiscal Year 1985; eight percent of the cases were found to be potentially fraudulent. 2

There is currently within the State no group organized to assess the integrity of automated systems.

The benefits of auditing are exemplified by this review of the Fiscal Year 1983 LIEAP sys­tem. Following the audit, the program manager undertook an effort to tighten controls over the system. The system software was redesigned, which significantly simplified the program manager's workload, as well as aided in insur­ing only those individuals who were eligible received these payments. The workload of the program manager decreased by at least 50 per­cent after the system changes were made. This manager who previously managed only the LIEAP, now also administers the Emergency Assistance, General Assistance, and Interim Assistance Programs. Her comment relative to the new system: " ... it runs itself. " 3

In 1983, there were approximately 14,300 cases which received payments on an average of $470 each with a total expended for grants of $6.7 million. After controls had been instituted in the automated system and the program manager initiated other manual controls, the Fis­cal Year 1988 program reached 10,616 house­holds with an average payment of approximately $284 for a total expenditure of $3 million. This 26 percent decrease in LIEAP caseloads occurred at a time when the AFDC caseload increased by about as much, which is somewhat of an anom-

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aly as approximately 90 percent of the AFDC caseload is also eligible for LIEAP. In fact, as utility companies were paid directly in 1988 as opposed to paying the welfare recipients in 1983, the utility companies actually returned to the State credit balances on many recipients' accounts. The benefits of these tighter controls are twofold: a) not only was this money now reaching more of the people who were indeed eligible; but, b) the workload at the state level in terms of processing the paperwork and war­rants has been greatly simplified and stream­lined. Additionally, the utility companies are overwhelmingly in support of the modified sys­tem. Previously, Cheyenne Light Fuel & Power Company had estimated it received only about one-half of the LIEAP payments it was due. After the direct vendor payments began in Fis­cal Year 1988, the company realized its estimate of 50 percent was too high and it had actually been receiving far less than that proportion of the block grant monies. 4 Success stories such as this can only occur when the entity being audited, in this case the program manager, chooses to view the audit as a positive tool and not simply a "necessary evil." This is a success story in auditing the State and the program manager can be proud of. These reviews can be attributed solely to the concept of independence and the charge of the Auditor's Office to insure all payments were made appropriately. Had an independent agency not been pushing this type of in-depth review, these problems would likely have never been brought to light and thus, the enhancements to the LIEAP system may not have occurred. This is confirmed in that the first LIEAP block grants were initially received in 1981, however, the enhanced controls were not implemented until 1986.

THE NEED FOR INDEPENDENCE

A key component of the audit process is independence. The independence of auditors tends to insure a more objective analysis of the audit performed, if not in fact, at least in the opinion of other agencies/individuals who are assessing the audit. It is not uncommon for a report to be issued and to have its objectivity questioned simply because of the mere appear­ance of the relationship between the auditee and the auditor. The federal government issues stan­dards for audit procedures which are based on the AICP A professional standards in which

independence is specifically addressed. The independence of the auditor is so critical, this issue is the second point addressed in these guidelines: 5

" ... whether government or public, must be free from personal or external impair­ments to independence, must be organiza­tionally independent, and shall maintain an independent attitude and appearance. Audi­tors should consider ... whether there is anything about their situation that might lead others to question their independence.''

True independence is extremely difficult to achieve. One method to enhance independence is to engage a CPA firm to perform the audit, rather than utilizing in- house auditors. Unfor­tunately, this arrangement does not completely assure independence. The CPA firm will provide a third party perspective to the review; however, the CPA firm has a vested interest in keeping the relationship as cordial as possible. Since the firm's livelihood depends on keeping auditing contracts, they naturally want to keep their employer (contractor) satisfied. Th.is could lead to audit exceptions being negotiated out of the audit report. The CPA review of Health and Social Services for Fiscal Year 1983 made no mention of the very serious problems with the integrity of the LIEAP system, as the State Audi­tor's report did. If audit firms refuse to com­promise their professional integrity and audit dis­crepancies cannot be negotiated away, the government entity may simply change audit firms. When a company registered with the Secu­rities Exchange Commission (SEC) changes audit firms, there is a requirement the reason for the change be documented. There is no such require­ment when auditing governmental entities. A governmental entity may change CPA firms at will and owes no explanation to anyone. There­fore, a differing opinion relative to audit find­ings may never be brought to the public's atten­tion. Public entities also tend to seek the least amount of audit for the least amount of money; considering an audit a necessary evil. The lowest bid may be accepted by the government entity without regard for the thoroughness of the work product. The more professional approach is to view the audit as a management tool to help improve and strengthen the organization and in fact, some governmental entities realize this and seek a quality audit product.

If audits are not conducted within the scope

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of independence, their usefulness is greatly mitigated. If there is a chance that information resultant from the audit may not be brought to light, the audit expense becomes simply a cost and not a cost benefit. This issue of indepen­dence is the most difficult to overcome in out­lining an effective audit effort for Wyoming.

PROPOSED EXAMINER GENERAL'S OFFICE

To coordinate and consolidate the audit effort, the Examiner General's Office should be created. As the State Examiner's Office is a con­stitutional entity and such entities tend to be difficult to change, it would be expeditious to build on the existing structure of the office. Con­solidation will occur, but not entirely within this office.

In formulating this coordinated audit effort, some shifting of positions and responsibilities needs to occur. There are five groups of audi­tors who will not be included in the formation of the Examiner General's Office, primarily as few efficiencies would result from their inclu­sion. They are:

a) Public Service Commission - The Public Service Commission employs nine auditors who perform rate increase analysis. They usually travel in teams, along with other mem­bers of the commission, to perform these ana­lyses. Because of this structured team approach, they should be excluded from the Examiner General's Office as it is possible no efficiencies could accrue to the office. b) Insurance Examiners - The Insurance Examiners perform specialized audits and, as with Bank Examiners, are required to have a CFE (Certified Financial Examiner) Certifi­cation. The primary reason for not including these three examiners in the Examiner General's Office is the vast majority of their work is out of state. This group is responsi­ble for examining the eight insurance compa­nies which are located in Wyoming, which are only performed on a triennial basis. Because one of the primary reasons for establishing this agency is to coordinate the audit effort and pool information, this group of basically out­of-state examiners would not substantially add to this objective. c) Highway Internal Audit - The Highway Internal Audit Department should be excluded because of the nature of its audit work. The Highway Department works very closely with

the U.S. Inspector General's Office in order to fulfill the requirements for receiving fed­eral highway funds. These six auditors, with very few exceptions, audit their own depart­ment's operations, therefore requiring more operational expertise than the auditor per­forming primarily financial audits. d) Both the ESC and Workers' Compensation have audit field staff who will be consolidated, but not in the Examiner General's Office. A detailed explanation of their duties and strategy for their consolidation follows. The Examiner General's Office should include:

i. Current State Examiner's staff; ii. State mineral royalty staff;

iii. Department of Revenue and Taxation audit staff; and

iv. Department of Public Lands Loan and Grant Examiner.

There are three issues of major relevance per­tinent to the creation of the Examiner General's Office. First, the practice of accepting CPA reviews of government entities, rather than hav­ing the staff on board perform this quantity of audits is an excellent effort at privatization. However, great care must be taken to insure the work produced is comprehensive enough to meet the needs of the both the state and federal governments, and to insure control over public funds. Strengthening audit guidelines and re­quirements to be adhered to in all CPA reviews is a positive step towards insuring audits are use­ful tools rather than a cost associated with a "necessary evil." To go even further towards insuring these CPA audits are thorough, perhaps the Examiner General could write the engage­ment letter (requirements of the audits) for all entities utilizing a CPA review. In this way, the CPA firm would need to satisfy the Examiner General's demands and not the entity being audited.

Second, this agency needs to have the ability to enforce its audit findings. Currently, when the State Examiner reports an audit exception, they do have the ability to enforce their recommen­dations by either going to the affected county attorney and requesting the person responsible for the action be removed from office, or stop­ping the flow of state funds to the entity. This appears to be sufficient enforcement authority to support the Examiner's audit recommen­dations.

Third, as the dependence upon automated sys­tems grows, so grows the need to insure the

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TABLE Vlll-1

STATISTICS PERTINENT TO CURRENT AUDIT EFFORT (FISCAL YEAR 1988 OAT A)

Costs Billed or Dollars

Audit No. of FY 1988 Identified Agency Staff Audits Audit Scope Cost in Audits

State Auditor 15 25 State and federal mineral $ 30,139 $4,557,814 royalties

Revenue 7 140 Sales and use taxes; gas 578,014 2,430,438 -Taxes and special fuels taxes;

motor vehicle taxes

Revenue 3 26* Severance taxes; 277,988* 4,533,039 - Minerals ad valorem taxes

Workers' Comp. 7 82 Workers' Comp. premiums 6,000 62,000

Employ. Security 10 608 Unemployment Ins. premiums 151,911 45,671

State Examiner 13 799 All public entities 540,985 -0--Banking 15 66 All financial institutions 578,821 578,821

Public Lands 1 74 Farm Loan Board grant and 34,661 337,343 loan recipients

UCCC Audit 3 203 Credit granting 132,265 132,265 businesses, banks, pawn shops

*Amounts are since inception, November 1987 to November 1988.

integrity of the controls pertinent to the data processing function. So much of most organi­zations' accounting records are automated, it seems almost incomprehensible that a complete audit of any entity would not include documen­tation relative to the soundness of the internal data processing controls. It is standard proce­dure, according to the American Institute of Cer­tified Public Accountants, to assess the integrity of any automated system.

IDENTIFIABLE EFFICIENCIES

The impetus for any change in the present audit structure must be related to increased col­lections of revenue or enhanced accountability of public funds. Table VIII-1 details all current audit functions which would be affected by shifts to consolidate. The staffing, number of audits performed, audit universe, costs, and monies identified through audit for Ficscal Year 1988 are also included in this table.

All of these auditors are involved in external, compliance audits with the exception of the Pub-

lie Funds Division of the State Examiner's Office. Their function is also a third party com­pliance review but it is not entirely external as one state agency is examining another. The objective of all other audit groups is to deter­mine compliance to tax, royalty, social insurance premiums or financial institution laws and regu­lations. When non-compliance is found, an assessment/refund is made for any error in remittance of taxes, royalties or premiums. It is therefore easy to assess the cost benefit of these groups by comparing the cost associated with auditing the firms and the resultant collections. Financial institutions are responsible for the cost of their examinations, making the Banking Divi­sion of the State Examiner's Office self-support­ing. The Public Funds Division is not a revenue generating division but rather insures public funds are not inappropriately handled or expended. While objectives may vary between these groups, there are certain areas where their work is duplicative. The goal is to eliminate the duplication of effort, resulting in increased effi­ciency and effectively increasing the number of

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auditors and thus, the number of audits per­formed. The major portion of any duplication identified exists between the mineral audit effort of the State Auditor's Office and the Depart­ment of Revenue and Taxation. Along with these benefits pertinent to a more efficient audit effort, a reduction of cost could also be experienced. These reductions in cost would occur within two categories: training expense due to turnover, and travel. However, the primary objective here is to enhance revenues and accountability, not reduce staff.

WORKERS' COMPENSATION AND EMPLOYMENT SECURITY COMMISSION

Presently, there are seven labor-related agen­cies, two of which actively audit payroll data, Workers' Compensation, and the ESC. The scope of ESC reporting includes almost all employers, some 15,000 exclusive of agriculture. Employers who report to Workers' Compensa­tion are limited to those who employ people in extra hazardous occupations or who elect to be in the system, approximately 9,500 employers. With only one significant difference, these audit groups generally review similar data relative to payroll and general expenses. Workers' Com­pensation has only begun auditing within the last year, while the ESC has been auditing for several years. ESC audits to confirm payroll is being reported in the correct amount for each employee, as well as to verify any contract labor actually qualifies as such. Additionally, the ESC attempts to locate businesses which are either new or already existing, but which are not pay­ing taxes. Currently, there is a federal require­ment of the ESC that at least four percent of employers be audited every year, which equates to between 600 and 700 audits per year for their 10 auditors. The Workers' Compensation audit effort is relatively new, but successful. In Fis­cal Year 1988, the first year of an organized audit effort, they performed 82 audits, representing only .8 percent of the employers who report to the agency. The staff of seven compliance officers discovered that 89 percent of the employers were under-reporting their premium liability. This 89 percent definitely demonstrates the need for good audit coverage in this area. The audits identified $62,000 in unpaid premiums, while $30,000 of this amount has actually been collected. The cost of collecting this $30,000 was only $6,000. 6

In performing on-site review, these two groups of auditors look at identical documentation resulting in a duplication of effort between these two groups of almost 100 percent. The only difference in the effort is in the audits performed by Workers' Compensation, a determination is made as to the extra hazardous status of certain jobs. A decision will need to be made by the department director as to which is the most effi­cient approach - cross-training all auditors for determination of extra hazardous status, or care­fully planning audits so that a Workers' Com­pensation expert is always present on audits which might require that specialized training. Given the significant similarity, it is logical these two groups of auditors should be combined to streamline the audit effort for both the State and the employers. As audits tend to be disruptive to the normal flow of business, decreasing the number of audits a business is involved in should be favorable to them.

Generally, both groups of auditors conduct audits singularly. Increasing the number of audi­tors will yield at least two benefits: a) it will now be possible for a team to work on an audit of a larger employer, expediting the examination; and b) the total number of audits performed will be increased. This is particularly important for Workers' Compensation as the potential collec­tions for this agency are larger than for the ESC. As can be seen in Table VIII -1, dollars identi­fied relative to the number of audits performed is far smaller for the ESC than for Workers' Compensation. This is most likely a result of a strong enforcement effort on the part of the ESC, which acts as a deterent to underpaying taxes. Additionally, in the federal mandate for auditing, delinquent employers are not to be included in fulfilling the four percent require­ment. Thus, only those employers who are com­plying to law are audited, which reduces the likelihood of collections. The high proportion of dollars identified relative to the number of audits performed at Workers' Compensation is indicative of a system which previously had not been audited, therefore predisposing examina­tions to contain more exceptions than would be expected in a routinely audited system. The abil­ity to audit out-of-state employers is also neces­sary to insure their compliance to guidelines as well. With the Workers' Compensation declin­ing fund balance, an audit effort which returns $10 for every dollar spent appears to be the best and most efficient allocation of resources.

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The auditors in both of these present agen­cies, ESC - Unemployment Insurance contri­bution auditors and Workers' Compensation­field compliance officers, have other responsi­bilities as well. These responsibilities are simi­lar between the two agencies and include giving seminars, disseminating information, and col­lecting delinquent taxes. While it would be highly unlikely a company would be audited by both Workers' Compensation and the ESC within the same year as the Workers' Compensation audit effort is relatively new, it is possible a represen­tative from each agency could call the same firm to answer questions or collect delinquent taxes. Combining the collection efforts would result in an employer being visited only once by a representative of the new Employment Depart­ment. A slight cost savings may materialize as costs pertinent to travel and staff time, as well as impact on the business community, could be reduced. As the majority of the compliance officers/auditors currently work out of their homes or field offices, the magnitude of savings is difficult to project. Additionally, staff time relative to legal proceedings (researching and fil­ing liens) which impact local governments could also be reduced.

The increase in audit coverage will also aid in insuring all employers are treated equitably. Presently, employers who are honest and/ or well informed are subsidizing those employers who are not contributing their fair share to the ESC and Workers' Compensation. For ease of access to confidential payroll records and because a portion of their duties relate to compliance issues, this group of auditors would not join the centralized audit agency, but would be housed in the newly created Department of Employ­ment.

MINERAL AUDITS

The auditing area in which the most interest has been created is mineral auditing. The possi­bility of enhanced severance and ad valorem tax receipts is the focus of this interest. This area of audit also has a very significant amount of duplication and overlap between the four agen­cies currently involved in either regulation or administration of the mineral taxes and royal­ties and thus, is "ripe" for consolidation. These four agencies and their respective functions are as follows:

a) State Auditor's Office - audit of federal and some state mineral royalties; b) Department of Public Lands - administra­tion of leases and royalties for state lands; c) Oil and Gas Conservation Commission -regulation and conservation of oil and gas resources; and d) Department of Revenue- formulate policy, administer and audit severance and ad valorem taxes.

Royalties, whether state or federal, pertain to an ownership interest payment for the privilege of extracting minerals. Severance and ad valorem taxes are applied to all minerals extracted, regardless of the owner of the property. The basis for establishing the value of minerals for royalty purposes is different from the valuation established for tax purposes. These valuations vary with the deductions allowed from the sales price of the minerals. The sales price is the base for the valuation for both royalties and taxes. For example, when computing a taxable basis for severance or ad valorem taxes, the federal, state or tribal royalties paid are an allowable deduction from the sales price. Conversely, in determining the valuation for royalty purposes, severance and ad valorem taxes paid are not an allowable deduction. Many other differences exist and the entire process is extremely techni­cal. Various reports submitted by oil companies are filled out by different departments within the company or possibly by a tax service completely independent of the firm. Therefore, it is entirely possible data reported to the Departments of Revenue and Public Lands, Oil and Gas Con­servation Commission, and the federal govern­ment is conflicting. A portion of mineral audit­ing relates to the cross- checks of these records for mistakes such as these. Other data examined relative to the various audit efforts is signifi­cantly similar for royalty, severance and ad valorem audits. Oil and Gas Conservation reporting primarily deals with gross production and, therefore, is not nearly as complicated as royalty or tax reporting.

The audit group in Wyoming with the most oil and gas experience is the State Auditor's Office, having audited federal and state mineral royalties since 1981. Around 1981, the Depart­ment of Public Lands began performing desk audits of all royalty payments it received. These desk audits entail reviewing settlement data (sales data) provided by companies, along with their

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royalty payments. The Oil and Gas Commission checks, as much as possible, the data reported to it. However, the commission is in a peculiar position of administering a tax which is so minimal, it is actually not cost effective to audit for payment of it. The Department of Revenue only began auditing severance and ad valorem taxes in late 1987. Of all of these groups, the most successful in terms of bringing money into the State has been the State Auditor's Office by collecting more than $45 million since 1981. There is an additional $20 million which has been identified but is currently entangled in the appeals process.

In performing these audits, there is a certain amount of duplication relative to the documen­tation which is reviewed during the audit. This similarity between the reviews performed by the State Auditor's Office and the Department of Revenue is a pivotal point in promoting the mineral audit effort in Wyoming. The success of the Mineral Royalty Audit Program is indisputable. It makes sense to build on this base and let this expertise enhance severance tax, state royalty, and Oil and Gas Conservation Commis­sion audit effort. The concept is irresistible when the amount of duplicative work performed among these groups is examined. In comparing the documents requested for an audit by the severance tax group and the official audit pro­gram of the mineral royalty group, an amazing similarity was revealed. Of the total documents reviewed for each of these two audits, approxi­mately 90 percent were common to both audit efforts. This similarity or duplication exists in other states as well. In Utah, for example, the mineral audit manager estimated 90 percent of the documents utilized for the royalty audits were also reviewed in the severance tax audits. The manager of this unit also estimates 90 per­cent of the total work performed applies to both royalty and severance tax audits. 7 A similar sit­uation is found in Colorado where the oil and gas audit supervisor estimates a 70 percent dupli­cation of work in auditing for various taxes and royalties. 8 An overlap of effort of 70 percent is extremely high in consideration of the fact that the valuation basis for Colorado's severance tax is very similar to an income tax and therefore unlike a royalty valuation basis. Both Colorado and Utah audit concurrently for federal and state, severance, and conservation taxes. Addi­tionally, the Colorado group. audits for ad valorem taxes. Both of these states also have the

added advantage of the 205 Delegation of Authority from the MMS and thus, have their expenses pertinent to audit of federal royalties reimbursed by the federal government.

Neither of these two states encompasses the magnitude of federal land Wyoming does, hav­ing 6,149 federal leases while Colorado and Utah have 2,103 and 1,981leases respectively. Thus, these two states spend more time auditing lands which are not federal and thus would not qualify for reimbursement than Wyoming perhaps would. In any event, Colorado is reimbursed 70 percent of its total audit expenditures, while Utah is reimbursed at a rate of 50 percent. Cur­rently, Wyoming's mineral audit section is reim­bursed for approximately 93 percent of its expen­ditures. It appears as though work utilizing common workpapers to the point where the valu­ation basis is different for the various taxes is possible. At this point, a second set of support­ing workpapers could be developed to document audit work performed on state royalties and taxes. This work must be kept separate and along with accurate allocations of staff time expended on it as it would be improper to bill the federal government for this work. To better explain how these audit efforts can mesh together, an ex­ample from the Colorado audit group is of­fered. When the group is auditing for tax reim­bursements (to be included in gross proceeds), they necessarily audit for the payment of sever­ance and ad valorem taxes and thus, have completed their severance and ad valorem test work.

Estimates of the duplicative work between severance, ad valorem, royalties and conserva­tion tax audit work in the State of Wyoming range from 30 percent to 90 percent. The lack of an official audit program for severance tax audits makes the exact duplication difficult to pinpoint. However, there is substantial dup­lication and the exact amount will only be de­termined after the audit efforts have been merged.

The merging of these audit efforts will not only reduce duplicative work, but also reduce the impact of audits on the mineral companies. For instance, in the same year Amoco's Whit­ney Canyon field was audited by both the mineral royalty and the severance tax groups. It is not surprising that personnel at Amoco would think the State was not cooperating or communicating well between agencies. In com­piling data for this research, the Study Commit-

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tee staff found duplication in a severance tax audit it had been involved in and was, to date, unresolved, and a currently on-going state royalty audit the Department of Public Lands was conducting on the same property for the same audit period. The involved companies had to furnish requested documents for both of these audits, unduly impacting their workload. The audit manager for Colorado estimated, with their consolidated audit effort, they had reduced the impact on energy companies by 25 percent. 9

Energy companies will no doubt favor this con­solidation as a measure which will save both the companies and the State money. Estimates of increased income pertinent to this consolidated audit effort are difficult, if not suicidal, to make. As the duplication between the audit programs will be eliminated, the audit coverage (number of audits) will increase. As previously stated, that duplication extends from 30 to 90 percent of the audit work; therefore, the number of audits per­formed should increase by from 30 to 90 per­cent, most likely 70 to 90 percent, under the con­solidated audit approach. And, as the number of audits performed increases, the potential for collections also increases. Time, however, is of the essence. Given the statute of limitations, the years of high production and high value will soon be lost and unavailable to audit. The MMS has already taken steps to limit the access to these higher valuation years for royalty audits by dic­tating that audits for these years (1980 - 1983) pertinent to the largest royalty payors be com­pleted by September 30, 1989. Given the mag­nitude of the potential for audit findings, it is fortunate the mineral royalty group has been auditing since 1981. However, the Department of Revenue's only recent interest in an audit pro­gram may have precluded the State from access­ing the documents necessary to perform these potentially rewarding audits. For this reason, it is of the utmost importance to act upon this con­solidation immediately before anymore of these high valuation years are lost.

QUANTIFYING EFFICIENCIES

If the mineral audits were to be combined and only 70 percent of the audit work eliminated, thereby increasing the work output of the exist­ing severance tax group, approximately $3 mil­lion more in unreported taxes could be identi­fied when the 70 percent factor is projected to Fiscal Year 1988 audit findings. This projection

makes no provision for an increase in the audit staff. However, if the $3 million in enhanced assessments is not sufficient to generate support for this consolidation, the fact that costs perti­nent to the current severance tax auditing could drop by 70 to 90 percent is also of major rele­vance. For clarification, the State expended $30,000 for the royalty audit group and actual­ly received $2,352,308, a return of $78 for every dollar expended. In the first year of auditing severance taxes, the Revenue Department ex­pended $277,988 to collect $1,398,000, or are­turn of $5 for every dollar expended. As a by­product of auditing severance taxes, findings pertinent to ad valorem taxes also surfaced and receipts at the county level have totalled $1,036,861 to date. This combined audit effort will also provide a "bonus" for the Oil and Gas Conservation Commission in that it will provide an economical means of auditing the Oil and Gas Conservation taxes. It simply makes good sense to direct effort in the direction which is most productive.

The Department of Public Lands does not cur­rently perform field audits, but rather performs desk audits on all royalty payments received and, therefore, would contribute no staff to the new agency. However, work performed by this group should be incorporated, when possible, with the audit work of the newly created Mineral Divi­sion to eliminate any possible duplication of effort.

SEVERANCE AND AD VALOREM STATUTES AND POLICIES

Along with the establishment of a consoli­dated audit effort, there is a strong need for clearly defined statutes, rules and regulations pertinent to the valuation of minerals. Because the current statutes are so vague with rules and regulations also unclear, many audit findings are being disputed. This course of action is to be expected from the mineral companies. However, there is a possibility these companies may win their appeals even though they were not adher­ing to statutory guidelines because prevailing administrative practice in the department (prior to the issuance of rules in 1986) allowed such non-adherence to statute. Before auditors can effectively audit, statutes, rules and regulations must be clearly defined so that an audit program can be developed which tests for adherence to the statutes, rules and regulations. Without a clearly defined audit program, audit efforts may

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be inefficiently directed in pursuing audit find­ings which will be disallowed in court. Thus, there is no point in pursuing such work during an examination. Jim Petry, former Director of the Department of Revenue, supplied the Com­mittee with his perception as to the clarity of the statutes pertinent to taxes administered by the department. This data is detailed in Table VIII-2 and illuminates the potential problems with statutes.

STRUCTURE OF THE EXAMINER GENERAL'S OFFICE

As previously mentioned, the State Examiner is a constitutionally created office and as such, would be difficult to materially alter. The present statutorial strengths of this office should be built upon and enhanced to create an office which strengths and purposes are audit and accounta­bility. It is apparently a natural tendency to only place substantial importance upon audit when

accountability is the primary function of the entity. Accounting and audit tend to be a "neces­sary evil" to many organizations unless the expressed purpose of the entity is audit/account­ing. This is a fundamental reason behind creat­ing an agency which has the primary objective of insuring compliance and accountability throughout government.

Independence is also a key factor in insuring the integrity of the office, but is extremely difficult to achieve in the political arena. Polit­ical pressures always seem to center around money - either expending it or accounting for it, and the latter is the concern of the Examiner General. The current State Examiner is appointed by the Governor and approved by the Senate, which somewhat mitigates the politicism of the office. If this office were to be held by an elected official, the accountability of all governmental entities in the State would be sub­jected to the political pressures associated with this one individual. To enhance the independence

TABLE Vlll-2

CLARITY OF THE WYOMING DEPARTMENT OF REVENUE AND TAXATION'S STATUTES

Mineral Mineral Trans. Com pre-Tax Contrac- lntst. Pro- Com- Util- Whole- hensible Imposed tors Owners ducers panies ities Vendors salers Statute*

Ad Valorem • • • • 3 Ad Valorem-

Minerals • • • 3 Excise- Minerals

Severance • • • 3 Excise - Sales • • • • • • 2 Excise - Services • • • 3 Excise- Use • • • • • • 2 Excise-

Contractors • 3 Cigarette • Gasoline • Special Fuels • • Commercial Vehicle -

Registration • • • • 2 Commercial Vehicle -

Highway Use • • • • 2

* Comprehensible statute classification: 1 Very clear 2 Definitive 3 Ambiguous

Source: James Petry, former Director, Wyoming Department of Revenue.

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of the office, the selection process might be altered to incorporate the Secretary of State and State Treasurer, along with the Governor. All audit reports would then also go to this commit­tee, therefore making it much more difficult for any audit findings to be concealed or minimized. As with all audit agencies, schedules should be made along with the budget and presented to the committee. The committee can then anticipate w~ic~ audit reports it should receive, and any m1ssmg reports should be noticeable. The premise being that, were there any data which one of the three officials preferred to have sup­pressed, the remaining two officials would be cognizant of the missing report. The Examiner General would still be confirmed by the Senate enabling the Legislature to also have input to thi~ very s!gnificant department. Additionally, the Exammer General would serve a six-year term and could only be removed for cause. This should circumvent any retaliatory action taken against the office for performing thorough and objective audits which may generate revealing audi~ reports. Presently, the only statutory reqmrements for the position of State Examiner are:

a) Skilled in accounting; b) Five years banking experience; or c) Three years experience as a bank examiner.

As the proposed Examiner General's Office will have a much broader focus than regulating financial institutions and public funds, the qualifications to hold this office should also be broadened. The proposed office should require the following qualifications:

a) Degreed in accounting or finance; and b) Five years experience in business or accounting. When this consolidation occurs, auditors from

three "donating agencies" will arrive on the scene at the Examiner General's Office. These new, as well as existing, auditors will be organized into four divisions. These divisions will be delineated as follows:

a) Financial and Consumer Credit Insti­tutions; b) Governmental Accountability and Com­pliance; c) Minerals; and d) Excise Tax.

Each division will be discussed relative to staff­ing and audit scope. An organizational chart appears in Figure VIII -1.

Financial and Consumer Credit Institutions Division

The current State Examiner is charged with the regulation of all financial and credit institu­tions within the State. The office charters licenses and audits all banks, savings and loa~ institutions, collection agencies, and any insti­tutions (banks) or businesses providing credit to consu~ers: None of these duties will change; they will simply be delegated to the Financial Division of the Examiner General's Office. Incorporated in this division will be:

a) Bank examiners - 15 positions; b) Uniform Consumers Credit Code- 4 posi­tions; c) Financial Institutions Board- 0 positions; and d) Collection Agency Board - 0 positions. This division will be partially self-supporting

as fees are charged to banks and consumer credit agencies for audits. Fees charged by the Finan­cial Institution Board and Collection Agency Board for charters and licenses, respectively, will also go to this division.

Minerals Division

Having no existing base to build on in the cur­rent State Examiner's Office, the Minerals Divi­sion will be a completely new creation. This divi­sion will be comprised of the following:

a) Royalty auditors (State Auditor's Office) - 15 positions; b) Support staff - 1 position; and c) Severance tax auditors (Department of Revenue and Taxation) - 3 positions. This group will be charged with auditing sever­

ance, ad valorem, state and federal royalties, and conservation tax. To facilitate this coordinated effort, there will need to be provisions allowing for the sharing of information between the Department of Revenue and Taxation, State Auditor's Office, Oil and Gas Conservation Commission, and Department of Public Lands. Additionally, provisions need to be made for transfering the MMS 205 Delegation of Authority from the State Auditor's Office to the new Examiner General's Office.

The Ad Valorem Division of the Department of Revenue and Taxation has already initiated an effort to share a data base with the Oil and Gas Conservation Commission. The coordina­tion and consolidation will eliminate the need for the Department of Revenue and Taxation to

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manage and update the manual files pertinent to changes in ownership and status of oil and gas wells. This change will not only benefit the department, but also the industry in that it eliminates the need for the industry to file three different forms with the Ad Valorem Division: ATD-1, ATD-2, and ATD-3. While this is not a major workload reduction (10 to 15 percent of one person's responsibilities), it is very timely in that beginning in March 1989, severance taxes will be due monthly rather than quarterly. This change in reporting could increase the workload of the division by approximately 400 percent. If merely communicating between agencies can accomplish such benefits, certainly consolidation will enhance communication and efficiencies.

Governmental Accountability and Compliance Division

This division will be built upon by the exist­ing Public Funds Division of the State Examiner's Office. The staffing for this division will be derived from:

a) State Examiner's Office - Public Funds -13 positions; b) Support staff- 2 positions; and c) Department of Public Lands - farm loans and grants - 1 position.

This group will be charged with auditing or reviewing audits of all public entities and spe­cial districts, just as the current State Examiner does. However, there is a duplication of work pertinent to audits of small towns by the State Examiner and audits performed by the Farm Loan Board auditor on those same small towns. Possibly, the Examiner General's audit could simply include a more detailed section on farm loans and grants than was previously included. As many of the loans and grants are given to counties, cities and joint powers boards which are audited by CPA's, the Farm Loan Board auditor will still need to review those entities. This is an area which will need to be assessed once the Examiner General's Office is created. Upon detailed review, combination of this audit function may generate no efficiencies and could possibly be excluded from consolidation. Deci­sions such as this will probably be best made by the department management once the depart­ment is on line.

Sales and Use, Gas, Special Fuels, Cigarette, Commercial Vehicle Taxes- Excise Tax Division

There are presently 12 auditors in the Depart­ment of Revenue and Taxation who are respon­sible for insuring compliance to sale, use, gas, special fuels, cigarette, and commercial vehicle taxes. Bringing these into the Examiner General's Office would possibly only enhance efficiency if severance taxes were audited in con­junction with these other excise taxes. It is pos­sible that work in, for example, severance taxes would illuminate problems in another area, perhaps sales and use taxes. These efficiencies are extremely difficult to project and could only be effectively assessed after the agency was com­bined and all workloads and audits were assessed. The major benefit to including these auditors in the Examiner General's Office is independence.

As previously stated, independence is the essence of auditing and is one of the standards set forth by the AICP A for auditing. Achiev­ing independence is difficult in a state as small as Wyoming where it is possible to know many of the people involved in any or all aspects of promulgation of policy and/ or enforcing it. The Department of Revenue is in a unique position of creating policy and then auditing business' compliance to such, which in essence ultimately examines its own adherence to statute when authorizing that policy. The mineral royalty auditors audit to policies promulgated by the MMS quite effectively. This separation of the audit function from the group promulgating that policy has worked very well. It can be deduced from the level of success of this program that the policymaking functions need not be directly associated with the auditing function for the pro­gram to be successful.

The Excise Tax Division will also be a newly created division staffed from the following:

a) Department of Revenue and Taxation- 12 positions; and b) Support staff - 1 position. Additionally, the Comptroller General of the

United States specifically states that internal auditors: 10

''. . . should report to the head or deputy head of the government entity and should be organizationally located outside the staff or line management function of the unit under audit. Auditors should also be suffi-

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-00 \0

Financial & Consumer Credit Institutions

Division

Bank Examinations Financial lnst. Board Consumer Credit Protection Collection Agency Board

FIGURE Vlll-1

ORGANIZATION OF THE EXAMINER GENERAL'S OFFICE

Government Accountability &

Compliance Division

Public Funds

EXAMINER Administration GENERAL

Minerals Division

Federal & State Mineral Royalties

Severance & Ad Valorem Conservation Tax

I

Excise Tax Division

Sales/Use Cigarette Special Fuels/Gasoline Commercial Vehicle

ciently removed from political pressures to insure that they can conduct their audits objectively ... without fear of censure.''

The December 1988 Legislative Services Audit of the Department of Revenue indicated that with the audit function located in Field Services, there was a question as to the unit's indepen­dence and effectiveness. After reviewing the report, the agency relocated the Audit Division directly under the division which generates policy rather than having the audit supervisor report to the Tax Commission or the agency director. The willingness to change is to be applauded; however, the resulting structure is not optimal with regard to independence, nor is it within the independence guidelines established by the U.S. Comptroller General. It is for reasons such as this that it is recommended the excise tax audit functions of the Department of Revenue be com­bined with the Examiner General's Office. The 1988 Legislative Services Office audit dealt with these independence issues and further discussion is available in that text. Audits performed by this group are of an entirely different scope, perfor­mance auditing, than has previously been dis­cussed here.

PERFORMANCE AUDITING

The Legislative Service Office has the respon­sibility of reviewing the management, efficiency and effectiveness of various programs through­out state government. These program reviews are aimed at determining if prevailing management is complying to legislative intent in the most expeditious manner. This review has not addressed performance auditing and has focused only on financial and compliance auditing. However, performance auditing is an integral part of government efficiency. The major differ­ence between a performance audit and a finan­cial audit is its emphasis on the management of the entity and this is what makes performance auditing such a useful tool. Financial and com­pliance audits do not generally include manage­ment reviews within their scope. This is addi­tional reasoning for not including previous reference to performance auditing - educating the staff for each of these functions could be sig­nificantly different. A degreed accountant is preferred for the financial auditing; however, education in another field may yield a more well

rounded performance auditor. It is apparent that if efficiency is the goal, a review of management is necessary.

According to Jim Geringer, Senator-elect from Platte County: 11

"The performance audit function has the greatest potential for efficiency in any of our reorganization plans because it sets up a method for evaluating programs and pri­orities. The present accomplishments in this area are done only by the Legislative Serv­ice Office. That area should be expanded. The executive branch does nothing for short-term and efficiency evaluation."

If performance auditing were to be incorporated into the Executive Branch of state government, perhaps the State Auditor's Office is an appropriate location. State Auditor, Jack Sidi, however, warns that: 12

"The Auditor cannot be truly independent, and function as an auditor, so long as he serves on numerous boards and com­missions.''

A strong, effective performance audit effort would greatly enhance the continuance of any efficiencies created by this reorganization ef­fort.

IN SUMMARY

There are approximately 80 auditors scattered throughout state government who are charged with insuring either compliance to statutes and regulations or accountability of public funds. Duplication in audit efforts between various departments is as high as 90 percent.

The State is losing significant amounts of revenue due to insufficient audit efforts in sever­ance, sales and use, cigarette, gasoline and spe­cial fuels taxes, and Workers' Compensation premiums.

Building on the present statutory strengths of the State Examiner's Office, the newly created Examiner General's Office will house auditors from the State Auditor's Office, Department of Revenue and Taxation, and possibly the Loan and Grant Auditor from the Department of Pub­lic Lands, in addition to the existing State Examiner's staff.

Workers' Compensation compliance officers

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and ESC auditors should be consolidated in the Department of Employment.

The greatest benefit to the State will be in increased returns relative to mineral audits. Without adding additional staff but eliminating duplication between severance and royalty

audits, tax assessments could be enhanced by at least $3 million. Preceding an effective mineral audit effort must be a clarification of the sta­tutes, rules and regulations pertinent to mineral valuation. Enhancements to collections of excise taxes are difficult to project until the office is established and audit plans have been written.

- 191 -

FOOTNOTES-CHAPTER VIII

1. Low Income Energy Assistance Audit for Fiscal Year 1983, Wyoming State Auditor's Office, 1985.

2. Aid to Families with Dependent Children Audit for Fiscal Year 1985, Wyoming State Auditor's Office, 1986.

3. Telephone conversation with Joyce Grandstaff, December 6, 1988.

4. Telephone conversation with Joe Colvin, Cheyenne Light Fuel & Power, November 18, 1988.

5. Comptroller General of the United States, Standards for Audit of Governmental Organization Programs, Activities and Functions, 1981, p. 18.

6. Telephone conversation with Steve Sommers, Novem­ber 30, 1988.

7. Telephone conversation with Brad Simpson, Manager, Utah Oil and Gas, November 22, 1988.

8. Telephone conversation with Dave Loomis, Senior Revenue Agent, State of Colorado.

9. Ibid. 10. Comptroller General of the United States, Standards

for Audit of Governmental Organization Programs, Activities and Functions, 1981, pp. 19-20.

11. Letter from James E. Geringer, Platte County Senator-elect, November 1988.

12. Letter from Sylvia Lee Hackl, Chairman, Audit Advisory Subcommittee, November 28, 1988.

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CHAPTER 0~

THE DEPARTMENT OF COMMERCE

"He who deliberates fully before taking a step will spend his entire life on one leg."

The Department of Commerce is designed to incorporate into one agency the diverse programs which encourage the State's economic prosperi­ty, development, and stabilization. This reor­ganization will greatly facilitate policy and funding decisions which must be made to pro­mote Wyoming's economic health. Instead of evaluating the proposals and demands of mul­tiple agencies and programs, and making separate and independent committments on funding and programs, decision-makers will be able to see in one agency budget the major com­ponents which work together to move the State in the direction the Governor has proposed for Wyoming's economic well being.

This new structure consolidates: a) the oper­ation of the State's cultural and recreational resources; b) the promotion of the State's mul­tiple resources; c) outreach and technical as­sistance to businesses and communities; d) coordination of business permitting, licensing and registration; and e) financial support of the State's businesses and infrastructure (political subdivisions).

To insure a responsive administrative struc­ture, the Department of Commerce is to be managed by a director appointed by the Gover­nor; the director serves at the pleasure of the Governor and is subject to removal at will. The director appoints division administrators who serve at the pleasure of the department director.

Except for the Investment Fund Committee (IFC) and the professional licensing boards, all other boards, commissions and/ or councils cur-

Unknown

rently associated with the existing agencies should have their duties redefined so that they have no executive powers and serve in an advi­sory capacity only. These entities are shown in Table IX-1.

The current responsibilities of the Economic Development and Stabilization Board (EDS Board) should be modified to remove any responsibility for water development, any loan/ grant approval (CDBG), and any executive/ administrative capacity. The EDS Board is now appropriately charged to (W.S. 9-2-1404):

a) Prepare and update plans for economic de­velopment and stabilization; b) Establish state objectives, including goals for state agencies and economic development; c) Institute programs to attract new, and to preserve and expand existing, industry; d) Consider plans and draft legislation to reduce the adverse effects of railroad monop­oly on coal and trona industries; e) Identify secondary effects on economic de­velopment, of legislation, regulations, policies and programs; f) Plan and direct plans for improving trade with other states and foreign countries, and expand and develop markets for Wyoming products; g) Cooperate with the Wyoming Communi­ty Development Authority; h) Act as the public agency to apply for for­eign trade zone authority. Presently, the EDS Board consists of nine

members, including the Governor; it has two

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TABLE IX-1

EXISTING BOARDS, COMMISSIONS AND/OR COUNCILS OF THE PROPOSED DEPARTMENT OF COMMERCE

(EXCLUSIVE OF PROFESSIONAL LICENSING BOARDS)

No. of Required by Entity Members Role Federal Law

Econorpic Develop. & Stabil. Brd. * 9 Advisory, Executive No Economic Development Council 10 Advisory No Travel Commission* 7 Executive No Recreation Commission* 9 Executive No ** Recreation Comm. Advisory Brd. 23 Advisory No Lib., Arch., Museums & Hist. Brd. * 8 Executive No ** Records Committee {AMH) 3 Advisory No Arts Council* 10 Advisory, Executive Yes Investment Fund Committee 7 Executive No

* Authority to hire or submit recommendations for agency director OR other personnel.

* * Agency currently administers federal programs; delegation of authority to the Department of Commerce needs to occur.

representatives from business and finance, and one representative each from agriculture, tourism, minerals and the general citizenry. Slightly modifying its membership to include higher education and a representative from local economic development agencies would make it almost exactly reflect the membership of the Economic Development Council which was created by executive order to coordinate the activities of the various state agencies involved in economic development efforts.

It is not proposed the Governor continue to be a member of the EDS Board. This recommen­dation is largely based on an assessment of the EDSB and staff made in 1988 by the National Association of State Development Agencies (NASDA). This report stated, in part: 1

" ... the Governor's direct participation on the EDSB and IFC (Investment Fund Com­mittee) may inhibit the members of these boards from functioning in an advisory and fiduciary capacity and otherwise perform­ing their responsibilities. First, the Gover­nor appoints members of the EDSB and the IFC which places them in an awkward posi­tion if they oppose him or vote differently from him ... Second, when the Governor attends or chairs a meeting, the other mem­bers of the board become advisory to him because of his political and leadership posi­tion in the state. As such other members of

these boards may feel ineffective and powerless as well as unable to participate on these boards in a meaningful way . . . ''

The EDS Board has recently delegated the responsibility of making Community Develop­ment Block Grant (CDBG) loan decisions to the IFC. Responsibility for making grant decisions for the CDBG Program should also be delegated to the IFC. When loan/grant decisions are no longer a responsibility of the EDS Board and after the development of state economic develop­ment plans, the EDS Board could begin to meet quarterly instead of monthly, saving approxi­mately $20,000 to $25,000 annually.

When statutory changes to completely amend existing law to reflect the structure of the Depart­ment of Commerce is submitted by the depart­ment's new director to the Governor and the Legislature in January 1990, the title of the EDS Board should be changed to "council" (perhaps the Wyoming Commerce Council) to reflect the general definitions contained in the 1989 Reor­ganization Act. Consideration should also be given to limiting the ability of a member appointed to the council to succeed his/her appointment, and limiting the maximum num­ber of terms served.

The following narrative discusses a potential administrative structure for the Department of Commerce. The functions of other boards, com­missions and councils are described within their appropriate structural area. This structure is

- 194-

meant to serve as a guideline only, and is not meant to be rigid or final. It is not recommended the actual division structure be included in sta­tute in the upcoming legislative session. Rather, the department director should have the flexi­bility to organize the department in the manner which seems most appropriate. In keeping with proposed statutory language put forth in Chap­ter VI, the legal restructuring should occur the session immediately succeeding the passage of the creation of the department. Some of the fol­lowing concepts may be desirable for statutory adoption in the upcoming session. Figure IX-1 showing a conceptual structure for the agency is also found at the end of this chapter.

DIVISION OF PROMOTION AND RESEARCH

This division combines the multiple market­ing, promotional and publication efforts of the Travel Commission (less management of the in­formation centers), the International Trade Of­fice, EDSB, Recreation Commission, and De­partment of Archives, Museums and Historical Sites.

All research, marketing, publication, and li­brary functions of the agencies incorporated into the Department of Commerce are to be consoli­dated, making available professional expertise and resources to all promotional and research efforts, instead of these resources being rather limited to one or two agencies as they are now. Because the Centennial Commission is scheduled to dissolve by 1992, it is not recommended to be included in the Department of Commerce and should remain in the Governor's Office. The in­formation centers currently supervised by the Travel Commission should be moved to the Divi­sion of Recreational and Cultural Resources as field sites. Any promotional/marketing func­tions currently being performed by either the Recreation Commission or the Department of Archives, Museums and Historical Sites should be delegated, with staff and resources to this division.

The role of the proposed division is twofold: a) to promote Wyoming throughout the U.S. and worldwide as an ideal state for business and tourism; and b) to provide economic and mar­keting information/analysis to business clients and local economic development organizations. The Legislature seems to have envisioned most of these charges for the EDSB by allowing or

mandating the agency or board to (Title 9, Arti­cle 14):

a) Conduct research and investigate any mat­ters related to economic development or stabilization (W.S. 9-2-1404(b)(iii)); b) Act as the public agency to apply for for­eign trade zone authority (W.S. 9-2-1404(c)); c) Establish and specify the duties of an inter­national trade office located in a Pacific rim country (W.S. 9-2-1406(c)); d) Conduct educational and advertising cam­paigns to encourage new manufacturing enter­prises to locate in Wyoming (W.S. 9-2-1408(a)(i)); e) Aid in the promotion and development of existing manufacturing in Wyoming (W.S. 9-2-1408(a)(ii)); f) Acquaint people in Wyoming with indus­trial, manufacturing and agricultural oppor­tunities in the State (W.S. 9-2-1408(a)(iii)); g) Collect, assemble and disseminate informa­tion on the business opportunities and possi­bilities of the State (W.S. 9-2-1408(a)(iv)); h) Foster and promote the development and expansion of existing industries, new manufacturing, business and professional enterprises, and the agricultural development and economic welfare of the State (W.S. 9-2-1408(a)(v)). Thus, the division would carry out the exist­

ing statutory mandate of promoting nationally and internationally the State's agricultural, manufactured and other business products, the State's attractive business climate, and encourage visitation (tourism) through marketing the State's natural, cultural and recreational resources. A future addition which should be considered is the incorporation of the market­ing functions of the Game and Fish Commis­sion and the Department of Agriculture. Game and Fish promotion of the non-consumptive use of the State's wildlife is oriented toward encouraging tourism and other service industries. If Agriculture and Game and Fish marketing efforts are not included within the Department of Commerce, a memorandum of agreement should quickly be put into place between these agencies and the Department of Commerce to insure that consistent, complimentary and unduplicated marketing efforts occur and that resources are shared.

The incorporation of the marketing effort of the Department of Agriculture is also controver­sial. Statutory language under both the Depart-

- 195 -

ment of Agriculture and the EDSB mandates mutual cooperation between these two agencies to market Wyoming agricultural products. As long as the marketing efforts of the State are vested in multiple agencies, complex communi­cation procedures will have to remain intact (memoranda of agreement, council representa­tion, consultation, coordination of activities), and budgeting will not be streamlined along functional categories. A unified, unduplicative effort will not be as probable as if all these pro­grams are located within one agency and one budget. Competition for funding will still exist without a single, responsible administrator; and requests for marketing dollars will continue to be dispersed among more than one agency as is now occurring. The process of setting priorities through funding will continue to be problematic as programs are fragmented across agency lines. Maximum utilization of resources cannot occur when one program is operated by more than one manager in more than one agency. If policy­makers choose not to combine all marketing efforts (including Game and Fish and Agricul­ture) into one, decision-makers should recognize there could be adverse effects of additional costs, diffused administrative responsibility and the resultant lack of clear accountability, and the perpetuation of complex and cumbersome com­munication networks.

Regardless of where agriculture marketing remains, some discussion of the Beef Council and Wheat Commission is appropriate. These two entities are currently budgeted with the Department of Agriculture. Consideration should be given to eliminating these "agencies" from the state government structure. They serve no regulatory function and operate only on fees they assess. Their ability to lobby on their own behalf is questionable as long as they remain in the state structure. If it is decided they should remain associated with the government structure, the State should assess overhead charges for managing their administrative functions.

This Division of Promotion and Research should also be responsible for identifying poten­tial growth industries in the economy, analyz­ing the State's business climate, developing resource inventories, maintaining state socioeco­nomic information, examining economic impact of financial programs, and providing statistical support to the EDS Board to aid its planning function. Data should be gathered and main-

tained not only on a statewide basis, but community-specific profiles should ultimately also be developed.

As noted in the recent analysis of the EDSB by NASDA, a pro-active economic development effort is research driven. 2 However, the staff's research capabilities are currently limited. Due to the critical role research plays in economic enhancement, additional funding for training and staffing needs to be made available.

Publication efforts of all agencies incorpo­rated into the department should be centralized in this division. Presently, individual publica­tions promoting specific aspects of the State's resources or services are produced by nearly every agency proposed to move to Commerce (with the possible exception of the professional licensing agencies). The total cost of all these publications is difficult to isolate since bro­chures, etc. are often contracted. However, AMH, Recreation, and Travel spend at least $500,000 annually on publications. Many of these could be combined; e.g., both the Travel Commission and AMH publish a document titled, "Wyoming Facts"; AMH and Recreation publish separate publications for historic sites and state parks, and Travel publishes a vacation guide; Travel publishes a summer and winter calendar of events and Recreation produces sum­merfest tabloids and schedules, and fliers for the filmfest, fishing derby, and Volksmarch; news­letters are published by multiple agencies. Com­bining and consolidating these efforts could modestly save $50,000 annually in publishing costs.

The division administrator should look care­fully at staffing requirements once consolidation has occurred. The Travel Commission currently has one supervisor for every two employees, an unacceptably high supervisor/employee ratio. If positions do not need to be eliminated, some will probably need reclassifying into non-supervisory positions.

As noted in Table IX-1, the Travel Commis­sion currently serves in an executive capacity and also appoints an agency director. The duties of the commission should be modified to be advi­sory only and its name changed to "council" to reflect its new role. The commission's authority to designate state matching funds to local tourism promotion organizations is an executive function and should be examined for placement elsewhere in the agency, perhaps with the IFC.

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DIVISION OF BUSINESS AND COMMUNITY DEVELOPMENT

This division will provide technical assistance to communities and businesses, helping them to develop their own skills and resources to become self-reliant, viable enterprises. Technical assistance is largely an educational process, and demands close coordination and cooperation. It is a public/private partnership, an integrating process, whereby the Department of Commerce can serve as the chief facilitator to link needs and demands together, and to tie the State's numer­ous economic development efforts into a cohe­sive network. The program should not subor­dinate the efforts of local organizations, but should supplement and compliment these local efforts by providing professional planning and consultation, or by locating the resources to pro­vide such.

Local government is involved in economic development whether or not it actively chooses to be involved. Local regulations and permitting procedures obviously affect the business com­munity. In addition, the quality and availabil­ity of roads, utilities, water and sewer affect a community's attractiveness. Housing, schools, healthcare, social and recreational amenities, supplies and services, and local attitude all con­tribute to the community's quality of life for both its residents and its businesses.

Technical assistance to communities involves educating leaders in how to identify their com­munity's strengths and weaknesses; to under­stand how local decisions relative to regulation, development, taxation, etc. affect a business cli­mate; how to gather information from existing and prospective businesses on what their needs are; and how to capitalize on available financ­ing opportunities, both for the community and for business, and how to market their resources. Technical assistance helps communities accom­plish these goals by aiding them to establish basic processes, such as: forming a local development corporation or committee; developing its budget; compiling a community data base for informa­tion on workforce, transportation, land and site availability, wages, tax burden, community amenities, etc.; conducting community and bus­iness needs assessments; and setting long and short-range plans, goals and action plans. The assistance should also involve educating local interests in understanding how their community can promote regional, as well as local, attrib-

utes and should provide information on private and public programs designed to encourage bus­iness and community development.

The division should utilize existing EDSB staff to research the availability of federal dollars for community programs and to aid communities in writing and reviewing grant proposals. The department should evaluate the effectiveness of Main Street programs to assure staff resources are being best utilized in keeping with goals and objectives developed by the EDS Board (Wyo­ming Commerce Council).

The health of Wyoming's small business enter­prises is critical to the health of the State's econ­omy. According to SRI International in their Executive Summary of Building a Stronger Wyoming, 94 percent of all Wyoming firms employ less than 50 people. 3 The prosperity of these firms is directly related to the prosperity of the energy industry. Needless to say, these businesses in 1988 are not in the best of health. The Futures Project challenged the State to find ways to develop and support small businesses so that this sector could prosper even when the energy industry declines.

Other than disseminating information to prospective businesses (promotion) or referring businesses to other entities, the existing EDSB staff does not heavily emphasize or concentrate on providing technical support to small business. This task has appropriately been performed over the last two to three years by the Small Business Development Center network of the community colleges and the University of Wyoming.

The Small Business Development Center net­work is jointly funded by local colleges, the State, and the Small Business Administration (SBA). The SBA contributes approximately 31 percent ofthe network's budget; the State 62 per­cent; local colleges four percent; and counties three percent. Total "local" dollars amount to $241,000 for the year; however, the large majority of dollars contributed by the commu­nity colleges is originally obtained from the State. The SBDC's current annual budget is $638,700. Local colleges contribute more than dollars to the effort; they provide additional sup­port resources and some indirect services which do not necessarily surface in a budget request.

There are five full-time development centers; these are located off-campus in Casper, Powell, Rock Springs, Douglas, and Lander. Three part­time contact centers are housed on-campus in Cheyenne, Laramie, and the extension campus

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of Sheridan College in Gillette. The State's lead center is designated through contract with the SBA to be Casper College.

The SBDC network provides small businesses with access to the expertise and experience of persons associated with higher education facili­ties; economic development organizations, trade associations, banks, chambers of commerce, and professional firms and individuals. A large part of the SBDC program is educational. Seminars and workshops and one-on-one counseling pro­vide potential and existing entrepreneurs with information on financing options, technical, managerial and personnel problems, accounting, bookkeeping, planning, marketing, and adver­tising. The centers also provide access to pub­lished technical information and refer businesses to potential sources of financing.

Because small businesses are, and have the potential to be even more beneficial to the State's basic economic structure, the State should assume a more visible role in their development and attraction. Currently, the EDSB staff coor­dinates activities with the SBDC network, but the State essentially does not appear to be as involved in this effort as it could be. The State Government Efficiency Study recommends the Department of Commerce become the lead center for the SBDC network. This change will emphasize the State's participation in this endeavor, and further the coordination of the multiple economic development resources of the State. Furthermore, the active participation of the State in the network could result in more equitable allocation of funding to the centers. Currently, two of the full-time centers are car­rying a workload equal to the part-time centers, but they still maintain a full-time staff. This has largely occurred due to the location of commu­nity college districts, and the decision to main­tain staffing at these levels may be more politi­cal than practical.

The staff and funding currently dedicated to the lead center should be moved to the Division of Business and Community Development ($104,300 Fiscal Year 1989 budget). No addi­tional funds would be necessary, but dollars would need to be moved from the budgets of Casper College and the Community College Commission. A new contract with the SBA would have to be negotiated, naming the Depart­ment of Commerce as the lead agency. Two posi­tions, the SBDC network director, and a secre-

tarial position, should accompany the program and be moved to the department.

It is not recommended the entire SBDC net­work be moved to the Department of Commerce at this time. The community colleges and the University provide excellent resources to the pro­gram and have historically contributed substan­tially and successfully to the development of small businesses throughout the State. Because so much of the assistance given to business is educational in nature, this component should remain associated with and located within the State's higher education system.

The third primary aspect of the Division of Business and Community Development is the enhanced role of the existing Business Permit Coordinator position. In February 1988, Gover­nor Sullivan created a Task Force on Regula­tory Reform. The primary recommendations of the Small Business Subgroup of this task force centered around the need of small businesses to have access to a single designated person or office which could act as a clearinghouse for bus­iness permit information. 4 This need has been recognized in the past, as the position has been budgeted for a number of years. It is currently appointed by the Governor and funded through the Governor's budget; physically and practically the position is located in the EDSB. The posi­tion has not lately been filled on a full-time basis; its current encumbent essentially fills this role, as well as serving as the State Administrator (Deputy) to the EDSB. The Committee recom­mends the position and its dollars be moved to the Department of Commerce. Because it is pro­posed to be located within the Division of Busi­ness and Community Development, the position should not be an exempt, appointed position; rather the division administrator should hire the position within the normal competitive person­nel process.

This function of the Business Permit Coordi­nator should be to serve as a "one-stop shop" for all business permits and licenses required by the State. A business should be able to obtain all state forms necessary for the business' oper­ations and by contacting only one agency rather than multiple agencies. When permitting problems occur, this position could aid in expediting the process, and act as a coordina­tor between the business and the agency involved. The position should work with the agencies which require licenses/permits to stan­dardize and consolidate forms and resolve prob-

- 198 -

lems. Statewide training seminars should be scheduled with the SBDC network director in order to educate new and existing businesses to the requirements of state agencies. Finally, the coordinator should research and be knowledge­able of local permitting requirements and encourage the uniformity of city and county licensing.

DIVISION OF FINANCIAL SUPPORT

This division adds an important dimension to the Deparment of Commerce - the aspect of financial support to business and local political subdivisions. The State currently finances mul­tiple loan and grant programs. The level of resources dedicated to funding various economic development programs is staggering when taken as a whole. The State has appropriated (or set permissible ceilings for) $1.7 billion for various loan and grant programs; to this amount one can add $15.8 million in Fiscal Year 1988 for feder­ally funded programs.

Table IX-2 itemizes these programs and details their funding limits, the research/recommenda­tion responsibility, and the deciding authority. Basically, these loan and grant programs can be categorized as directly benefitting businesses (including agriculture) or indirectly benefitting business through the development of a strong infrastructure (including water resources). While one can argue some of these programs should not be included, or others should be included as economic development programs, the list at least provides an idea of the degree to which the State has supported its various industries and its infrastructure.

As one looks closer at Table IX-2, some obser­vations can be made. Of the 19 programs listed, the responsibility for researching the feasibility and/or viability of projects involves four differ­ent state agencies, the Wyoming Pipeline Au­thority, banks, and private consultants. Final decisions on funding are made by four differ­ent committees, two federal agencies, two elected officials, the Attorney General, and the State Legislature. A farmer needing to finance his operations could apply for state programs through the Farm Loan Board (FLB) staff to finance real estate, the EDSB staff to finance an irrigation spriakler system, and a bank to obtain operating capital (link deposit loans). A political subdivision could obtain a loan from the FLB under the Joint Powers Act, a ground-

water grant from the Water Development Com­mission, and an irrigation loan from the EDSB. It is obvious the State's multiple loan and grant programs are fragmented and incohesive.

Because of historical "legacy," some of these programs seem illogically placed. The EDSB makes the final decision to loan or grant money for the Federal Agricultural Revolving Loan Program and some Community Development Block Grant (CDBG) Programs (grants to polit­ical subdivisions for human service facilities and planning only grants). The Investment Fund Committee approves CDBG revolving business loans, Amendment IV loans, and advises the State Treasurer on Clean Coal loans. The State Irrigation Loan Program is researched by the EDSB staff, then referred to the FLB for final approval; the EDSB disburses these loan pro­ceeds, but the FLB staff collects the loan pay­ments. Some payments on loans to businesses are collected by the FLB Staff (Hot Springs State Park), others by the Treasurer's Office (Clean Coal), and others are collected by banks, then submitted to the State (Amendment IV, Link Deposit). The FLB collects and/or disburses loans or grants for some large water projects which would seem to come more appropriately under the jurisdiction of the Water Development Commission (WWDC) (Cheyenne Stage II loan; grants to Superior).

To sort out this rather disjointed administra­tion of loan and grant programs, it is necessary to first try to "group" the various programs together. The two basic beneficiaries, business and infrastructure, can logically be broken into two categories. Business can be broken into agriculture and all others; and infrastructure can be broken into major water programs and all others. The programs which should be moved into the Division of Financial Support within the Department of Commerce are "all others" infrastructure and "all others" business loans and grants. The division should be divided into two programs: business and infrastructure. Major water projects should remain with the WWDC and loans to agriculture should remain (with some additions) with the FLB staff.

Considerable discussion was given to the movement of agriculture loans, which are cur­rently administered by the FLB staff of Public Lands and the FLB. Approximately 50 percent of all agriculture loans also involve the leasing of adjacent public lands. When loans are ap­proved, the value of the public lands lease is

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TABLE IX-2

ECONOMIC DEVELOPMENT PROGRAMS as of August 1988

FV 1988 Research & Approximate Recommendation

Federal Programs Annual Amount Responsibility Deciding Authority Direct Recipient

CDBG $ 2,363,000 EDSB Staff EDSB/IFC Manufac. & Wholesale Trade/ Political Subdivisions

Agriculture Revolving Loans 500,000 EDSB Staff EDSB Agriculture

EPA Grants- Waste Water Systems 12,900,000 DEQ - Water Division EPA Political Subdivisions

$ 15,763,000

Total Permissible

Investment or Research & I Appropriated Recommendation

N State Programs Amount Responsibility Deciding Authority Direct Recipient 0 0 Clean Coal Investment $ 30,000,000 EDSB Staff/Private IFC/Treasurer/

Consultants Governor/ Energy Technology/ Attorney General Coal Industry

Natural Gas Pipeline Loan 250,000,000 Wyo. Pipeline Authority/ Legislature Oil & Gas Industry Private Consultants

Wyo. Economic Development Program 15,000,000 EDSB Staff/Private IFC All sectors except construe-Consultants tion, retail trade, professions

Irrigation Loans 60,000,000 EDSB Staff Farm Loan Board Agriculture

Link Deposits Loans 150,000,000 Banks Treasurer Agriculture (approx. 55%)/ most business sectors

Farm Loans 275,000,000 FLB Staff Farm Loan Board Agriculture/Political Subdivisions

Joint Powers Loans 1 00,000,000 FLB Staff Farm Loan Board Political Subdivisions

CT & MR Grants {1} 371 ,000,000 FLB Staff Farm Loan Board Political Subdivisions

I

tv 0 -

Water Development 280,830,000

Groundwater Grants 3,000,000

Small Business 50,000,000

Water Loans - PL (2) 40,000,000

Water Grants (3) 17,500,000

Fontenelle 5,000,000

Buffalo Bill 47,000,000

Miscellaneous Loans - PL (4) 2,300,000

$1 ,696,630,000

(1) Coal Tax- $196 million; Mineral Royalties- $175 million (2) Cheyenne - $40 million (serviced by FLB)

Water Development Staff/ WWDC

Water Development Staff/ WWDC

Banks/SBA

?

?

WWDC/EDSB/Engineer/ Attorney General

WWDC/EDSB/Engineer/ Attorney General

FLB Staff

(3) Gillette - $15 million; Superior - $2.5 million (serviced by FLB) (4) Jackson Ski - $300,000; Hot Springs State Park- $2 million (serviced by FLB)

Legislature Political Subdivisions (65%)/ Agriculture (35%)

WWDC Municipalities

SBA Most business sectors, except oil & gas

Legislature Political Subdivisions

Legislature Political Subdivisions

Legislature Political Subdivisions/ Industry

Legislature Political Subdivisions/ Industry

Legislature Service Industry/State Parks

considered in concert with the value of private lands; staff appraisers appraise both types of land at one time. When there is a default (20 per­cent currently in default), the issue of leasing the adjacent public lands also becomes relevant. Moving the function to the Department of Com­merce would not streamline any processes now in place; indeed, it would necessitate that a for­mal communication procedure be established between the two agencies to inform the other of public land values/availability, etc.

So that the agriculture community can be served as much as possible in one place, it is recommended the Agriculture Revolving Loan program and loans to individuals under the Irri­gation Loan program be moved from the EDSB staff to the FLB staff. Optimally, the responsi­bility of making loans to individuals should be delegated to the FLB staff without the involve­ment of a committee. If it is decided a commit­tee should remain involved in these decisions, the FLB should continue to perform this task. Although this suggestion is not in keeping with the practice of other states and is in opposition to recommendations made by the National Association of Development Agencies, the five elected officials have served the State well in this capacity. The FLB currently relies heavily on staff recommendations in making loan decisions, which is precisely what should be occurring.

Miscellaneous business loans (Hot Springs State Park) should be moved from the FLB to the Department of Commerce. Any major water loans or grants administered by the FLB should be moved to the WWDC. Education capital con­struction grants administration now in the FLB should be moved to Education. The Infrastruc­ture Program within the Division of Financial Support of the Commerce Department should review and administer coal tax and mineral royalty grants, joint powers loans, irrigation loans to political subdivisions, human service grants of the CDBG program, and grants to schools and hospitals for energy conservation retrofit projects. Staff involved in the review and administration of the programs now in the FLB (coal tax, mineral royalty grants, and joint powers loans) should be transferred to the Department of Commerce (four positions). If the State of Wyoming participates in the future in the Environmental Protection Act (EPA) 201 revolving loan programs for sewerage treatment facilities, the Deparment of Commerce should be designated the lead agency, not DEQ. To

insure continuity and harmony in direction between grants or loans made to political sub­divisions for water projects through the Depart­ment of Commerce and the same made by the existing WWDC, a memorandum of agreement should be entered into, explicitly delegating water funding limitations of the two agencies (e.g., the WWDC has responsibility for raw water up to the treatment plant, and the Depart­ment of Commerce is limited to funding projects for the treatment plant and/or delivery system).

It was recommended earlier in this proposal that the Department of Commerce have no responsibility for water development. Currently, one staff person in the EDSB has the responsi­bility to administer appropriations for Fontenelle Dam rehabilitation and the Buffalo Bill Dam enlargement. These programs should be moved to the WWDC, along with the supporting staff (one position).

The Business Investment Program within the division should research, review and administer the State's multiple loan and grant programs for business and industry. This includes Amendment IV, Clean Coal, Hot Springs State Park, CDBG loans and planning grants, and the State Energy Conservation Program. The division should con­tract for specialized expertise when needed. The Minerals Division of the EDSB should be abolished and the person specializing in minerals issues transferred to the research staff of the Bus­iness Investment Program or to the Division of Promotion and Research. Any loans currently administered by banks (Amendment IV) should so remain.

The process of loan/ grant approval in eco­nomic development agencies of other states is typically not vested in committees. Decisions are made by the professional staff of the agency. When a committee is present, its function is usually to approve rules, regulations, policies, etc. of a loan or grant program. It also some­times acts as an appeals body for loans or grants which have not been recommended by staff. It seems to be the general consensus in most states that well-trained, professional full-time staff per­sons are better qualified to make sound recom­mendations on (particularly) business loans than a part-time committee which must be re-educated to the nuances of each loan and which may be politically vulnerable to outside pressures. It is therefore recommended that the best option would be to have an advisory council serve the Division of Financial Support. The council

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would approve rules, regulations and procedures for the loan/ grant programs and act as an appeals body. Its responsibilities would end here.

If this is too radical a departure from tradi­tion, one investment commission should serve the Department of Commerce. The commission would approve rules, regulations and criteria for all loan/ grant programs under the department and approve or disapprove applications based on staff research. Loan and grant decisions should be made based on guidelines set forth by the Legislature and the EDS Board (Wyoming Commerce Council). Applicants should be involved only at the "front" end of the process with the research staff, not in the commission's formal decision-making process. Any ex parte communication with loan/ grant decision-makers should be prohibited. The Investment Fund Committee currently in place could serve this function with modification of its membership and name. To comply with language in the State Government Reorganization Act of 1989, the committee should be renamed the Commerce Investment Commission. The Treasurer and the Governor should not serve on the commission. The five members should serve for a maximum of two four-year terms.

The current Investment Fund Committee reviews loans for the Amendment IV and Clean Coal Programs. The responsibility of the new commission should be expanded to include CDBG human service grants, planning grants and loans, mineral royalty grants, joint powers loans, and irrigation loans to political subdivi­sions. In order to perform these additional duties, the commission may be required to meet more frequently. The additional cost for month­ly meetings would be approximately $13,000 annually.

For all loans and grants made by or through the Department of Commerce, the Governor should have the authority to repeal the decision of the commission when special circumstances so warrant. The process should involve a request from the director of the Department of Com­merce. The Governor should act on these re­quests with the advice and counsel of the Attor­ney General.

DIVISION OF PROFESSIONAL LICENSING

This division will provide administrative sup­port functions to the State's multiple profes­sional licensing boards and act as a central

clearinghouse to the public and to potential professionals for the dissemination of licensing information. The existing boards, commissions and councils are to remain intact and their examining, licensing and hearing functions untouched. It is not the intent of this grouping to adopt an omnibus approach to a single cross­disciplinary board to license and regulate all professions. It is recognized each of these profes­sions differs significantly from the others and that consumers would not be well served by a monolithic board. It is the intent of this "con­solidation" to streamline administrative duties (clerical, budget, personnel, purchasing, publish­ing, etc.) of the multiple entities.

Many of the professional and licensing boards do not have any staff, and four have only part­time support personnel. It is certainly a burden on lay boards to ask them to comply to all the State's rules and regulations concerning budget preparation, purchasing, accounting, contract­ing, personnel administration, etc. As a new secretary-treasurer or president is elected, the administrative functions must be relearned, espe­cially when the entity has no staff. Audits per­formed by the State Examiner point to fiscal problems which inevitably occur when person­nel are not adequately trained to handle adminis­trative functions. Budgeting errors also occur. For example, boards sometimes request and receive more in salary for their board secretary than is allowed in statute. These errors are usually detected, but not always before the fact. Consolidating these functions would provide continuity, streamline audit examination require­ments, reduce errors, and allow the boards and commissions to function more effectively.

There are currently 22 professional licensing entities in the State which act as single agencies with individual budgets; many have the authority to hire their own staff. In addition to these agen­cies, 11 boards are "housed" within other agen­cies, e.g., engineers are licensed through the State Engineer's Office. Of the 11 which are part of other agencies, six are required by statute to be placed under the purview of a specific agency. Since the object of bringing these diverse enti­ties under one management structure is to pro­vide administrative continuity, those boards which are benefitting from the staff support of other state agencies by law are not included in this proposal, with one exception. The Examin­ing Board of Mines is proposed to move into this structure as the functions of the Board of Mines

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TABLE IX-3

AGENCIES/BOARDS TO BE MOVED TO THE DEPARTMENT OF COMMERCE

Agency No. Agency/Board Name

012 Architects 016 Barbers 017 Radiologists 018 Real Estate 028 Podiatrists 030 Chiropractors 031 Mines 033 Cosmetology 034 Dentists 035 Embalmers 038 Pari Mutuel 052 Medical Examiners 054 Nurses 056 Optometrists 058 Speech Pathologists 059 Pharmacists 061 Certified Public Accountants 062 Physical Therapists 064 Hearing Aid Specialists 068 Psychologists 078 Counselors 079 Nursing Home Administrators 037 (Engr.) Engineers & Land Surveyors 051 (Lvstk.) Veterinarians

TOTAL

are proposed to be moved to the Department of Employment. The Department of Employment will have no other licensing functions. The agen­cies and boards proposed to be included in the Division of Professional Licensing are shown in Table IX-3.

Currently, eight of these entities are located outside Cheyenne. Location often depends on where the board's president or secretary reside; thus, location changes upon the election of a new chief officer. Six of these boards are now housed within state buildings. Consolidating the administrative functions of the various agencies should, at a minimum, eliminate all the part-time classified positions currently budgeted for the agencies (eight part-time positions- $43,000 per year, salary and benefits). Other savings may be realized in the future.

When the boards, commissions and councils are brought under an administrative umbrella,

No. of Classified Personnel Full-Time Part-Time

0 1 0 0 0 0 4 0 0 0 0 2 0 1 1 0 0 1 0 0 2 2 2 0 5 0 0 0 0 0 3 0 1 1 0 0 0 0 0 0 0 0 0 0 3 0 .5 0

21.5 8.0

these entities should no longer have the authority to hire their own personnel. This activity would become the responsibility of the division admin­istrator; all positions would go through the nor­mal personnel competitive process. Those per­sons currently working for these boards are considered state employees. Some of them are considered to be "at will" employees, while others are hired through a competitive process. The appointment process of the boards, com­missions and councils themselves would remain intact. The budgets of the various agencies would be consolidated into one budget and be shown as sub-budgets of the division budget.

Within the first year after administrative con­solidation, the Division Administrator should be charged to submit to the Governor and the Legis­lature statutory revisions to streamline, as much as possible, the structures of the multiple boards. Currently, the number of people serving on the

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boards varies from three to seven; some board members receive a salary of up to $75 per day when acting in their official capacity, while others receive none; the secretary-treasurers for some of the boards receive salaries, while others do not; length of years appointed varies from board to board, as does the requirement of Senate approval; some members are paid per diem the same as state employees, some the same as legislators. These differences cause undue administrative cost in determining budget allowances, travel vouchers, appointment proce­dures, and the differences should be minimized as much as possible. Furthermore, consideration should be given to changing all fee structures cur­rently in statute, specifying maximum and mini­mum amounts only so that each entity could be more fiscally flexible in adjusting its rates to meet its costs.

DIVISION OF RECREATIONAL AND CULTURAL RESOURCES

This division would incorporate and consoli­date the operations of the Recreation Commis­sion, Arts Council, information centers of the Travel Commission, and all functions of Archives, Museums and Historical Sites (AMH), except archival duties which should be moved to DAFC. This consolidation would centralize the management of the State's parks, museums, historical sites, and information centers and inte­grate their maintenance, preservation and inter­pretation. In addition to managing recreational sites and programs, the division will assume responsibility for the stewardship of the State's historical, archaeological and cultural resources, including administration of the State Historical Preservation Office.

To anyone slightly familiar with the way the State currently administers its recreational and historical sites, confused and splintered respon­sibility seems to be the rule rather than the excep­tion. Detailed statutory language has been set in place to attempt to delineate specific agency responsibility over the inside or the outside of historical structures and other buildings to avoid "territorial" conflicts and still insure site man­agement; maintenance and operation of single sites is divided among two agencies; Recreation and AMH both manage historical sites. They also both maintain separate interpretive, public information, archaeological, publication and recreational programs; they have separate plan-

ning and administrative functions; yet their mis­sions are very similar and their different special­ized emphases lends support to the other agency. Table IX-4 details the number of sites and staff­ing levels for site administration for AMH, Recreation, and Travel.

AMH and the Arts Council also share some common interests. AMH operates the State Art Gallery in the State Museum, acquires art for the permanent collection, prepares, installs and maintains art exhibits, and inspects commis­sioned works in the Art in Public Buildings Pro­gram. Both agencies emphasize serving local communities and encourage art programs.

The Government Efficiency Study believes consolidating these agencies under single man­agement will enhance the State's ability to effec­tively provide recreational and cultural resources to the public. Competitiveness for program management and funding would be greatly reduced and possibly eliminated as one manager can prioritize needs and coordinate resources more efficiently. The administration of AMH and of the Arts Council are currently not under the direct authority of the Governor, a situation which does not encourage responsibility and lends confusion to those persons appointed by other entities.

Currently, both Recreation and AMH have extremely low supervisor-to-worker ratios, at 3.3 and 3.6 respectively. If seasonal positions are factored in, Recreation's ratio is 5.6 and AMH's is 4.4 for approximately three months per year. Recreation is currently organized in such a fashion that six managerial layers exist within the structure; AMH has five. If these agencies were incorporated into the Department of Com­merce without significant reorganizing, eight managerial levels could result. This seems exces­sive.

A brief analysis of the budgets of these two agencies points to a number of positions which should be carefully scrutinized for necessity; nearly all fall within mid-level management and add to the scalar depths of the agencies. The con­solidation of the agencies may also reduce the need for public information officers. Recreation and AMH have, in total, four full-time and two part-time public information positions. Most of these should eventually be moved to the Divi­sion of Promotion and Research within the Department of Commerce. Some may no longer be needed when all resources are combined, espe­cially in consideration that the Travel Commis-

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TABLE IX-4

STAFFING LEVELS SITE ADMINISTRATION

AMH No. of No. of

County Sites Positions Sites

Albany Big Horn Carbon Converse Crook Fremont Goshen Hot Springs Laramie Natrona Park Sheridan Sublette Teton Uinta

Dept. Level

TOTAL

* District offices.

1 ?

0

2 2FT 1 PT

4 2FT 3 PT

1 3FT 3 PT

2FT 1 PT

9 9FT 8 PT

sion also has public information officers (two full-time and one part-time), and that agency will be housed within the Division of Promotion and Research.

The Recreation Commission is responsible for setting forth plans to acquire and develop state parks, recreation areas, historical and archaeo­logical sites. The entity appoints the State Archaeologist and is empowered to employ other personnel, but does not appoint the agency direc­tor. The commission is made up of nine persons appointed by the Governor; seven are appointed according to statutory district boundaries; and two are appointed at large.

The Library, Archives, Museums and Histor­ical Board (AMH) has eight members appointed by the Governor; seven of these are selected according to the same statutory boundaries as the Recreation Commission, and one is an "at large" member. The AMH Board appoints both the State Librarian and the AMH director, and

1 2 *

3* 2

1 1 3 1 1

1

18

Recreation Travel No. of

Positions Sites Positions

0 1 FT 1 PT 1 FT 1 PT 4FT 0 2FT 3 PT

10FT 9 PT 3FT 12 PT

16FT 13 PT 1 FT 3 PT 4FT 2FT 3 PT

0 0 0

0 1 FT 1 PT 0

10FT 1 FT

55FT 46 PT 5 1 FT

may approve selection of assistants. The board's responsibilities are generally expressed as duties of the AMH director.

The duties of both the Recreation Commis­sion and the AMH Board are largely executive; all executive powers of both entities should be removed and their titles changed to "council." Both entities are statutorily authorized to administer federal funds, but this delegation could easily be changed to the Department of Commerce. The AMH Department is further supported by a State Historical Society and strong local boards. The Recreation Commission Advisory Board does not really "exist," although present in statute. The AMH Records Committee should be reassigned to DAFC to accompany the Archival Program.

The Arts Council must remain intact to meet federal requirements for administering programs of the National Council on the Arts. The coun­cil is made up of 10 members appointed by the

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N 0 -.]

I

I Division of

Recreational & Cultural Resources

{123)

State Parks Museums Historical Sites Info. Centers Arts Council

I Division of Business & Community

Development

(6)

Business Permitting Coordinator

Grants Administrator Technical Asssistance­

Business & Community Small Business Develop.

Network (lead office)

FIGURE IX-1

DEPARTMENT OF COMMERCE CONCEPTUAL STRUCTURE

(200)

I Division of

Professional Licensing

(22)

Architects Barbers Radiologists Real Estate Podiatrists Chiropractors Cosmetology Dentists Embalmers Pari Mutuel Medical Examiners Nurses Optometrists Speech Pathologists Pharmacists CPA's Physical Therapists Hearing Aid Specialists Psychologists Counselors Nursing Home Admin. Engineers & Land Surv. Veterinarians Exmng. Board of Mines

I DIRECTOR ~ Administration Budget Personnel Purchasing

{10)

I Division of Financial Support

{1 0)

I I I

Infrastructure Coal Tax Grants Min. Royalty Grants Joint Powers Loans Irrigation CDBG Energy Conservation

Business Clean Coal Amendment IV Misc. Bus. (Legis.) CDBG State Energy Consv.

I Division of

Promotion & Research

(27)

I 1·- ~ Promotion/Adv. Research/Publications Internal!. Trade Research Tourism Publications (all) Business Library

Governor with Senate approval; the council's function is largely executive and it appoints the agency director. The Committee recom­mends maintaining the Arts Council; consider­ation should be given to reducing its mem­bership. The council should no longer appoint the agency director. This position is not currently an "at will" position. It should remain as such, but should be hired by the administrator of the Division of Recreational and Cultural Re­sources.

The division administrator should study the feasibility of incorporating into the department the museum at the state fairgrounds in Douglas. This is currently administered by the Department of Agriculture. Consideration should also be given to moving the management of the Vete­rans' Cemetary from Recreation to the Veterans' Home. In the future, a memorandum of agree­ment should also be put in place with the High­way Department (Department of Transporta­tion) to specify that agency's role and to insure coordination of resources in projects which require cooperation of the two agencies. At some point, discussion and study should take place to determine if the Highway Department could play a more significant role in maintaining roads and bridges within the recreational areas to avoid duplication of manpower and equipment.

OTHER MOVES SUGGESTED

Once consolidation occurs, an administrative support office should be created to coordinate budgeting, purchasing and personnel functions for the department. These services are currently being handled independently in the various agen­cies. Travel, AMH, EDSB, Arts Council, and Recreation all have management services officers or managers. It would appear some of these posi­tions may be unnecessary in the future. Although a position will need to be established to super­vise the personnel in the administrative support office, savings in salary and benefits should be noteworthy.

THE DEPARTMENT'S PROPOSED ORGANIZATIONAL STRUCTURE

The proposed organizational structure for the Department of Commerce is shown in Figure IX-1. As reflected, five operating divisions are suggested, including: Recreational and Cultural

Resources, Business and Community Develop­ment, Professional Licensing, Financial Support, and Promotion and Research.

IN SUMMARY

The Department of Commerce is designed to incorporate into one agency the multiple and diverse programs which encourage the State's economic prosperity, development, and stabili­zation. This will greatly facilitate policy and funding decisions which must be made to pro­mote Wyoming's economic health. Instead of evaluating the proposals and demands of mul­tiple agencies and programs, and making separate and independent committments on funding and programs, decision-makers will be able to see in one agency budget the major com­ponents which work together to move the State in the direction the Governor has proposed for Wyoming's economic well being.

This new structure consolidates: a) the oper­ation of the State's cultural and recreational resources; b) the promotion of the State's mul­tiple resources; c) outreach and technical assistance to businesses and communities; d) coordination of business permitting, licensing and registration; and e) financial support of the State's businesses and infrastructure (political subdivisions).

The conceptual structure of the Department of Commerce is built around five divisions. The Division of Promotion and Research is proposed to promote Wyoming throughout the United States and worldwide as an ideal state for busi­ness and tourism, and to provide economic and marketing information and analysis to business clients and local economic development organi­zations.

The Division of Business and Community Development will provide technical assistance to communities and businesses, helping them to develop their own skills and resources to become self-reliant, viable enterprises. The programs offered by the division are intended to tie the State's numerous economic development ef­forts into a cohesive network, and should sup­plement and compliment local efforts by provid­ing professional planning and consultation, or by locating the resources to provide such. It should also serve as the "one-stop shop" for all business permits and licenses required by the State.

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The Division of Financial Support would con­solidate many of the loan and grant programs offered by the State and the federal govern­ment to businesses and political subdivisions. While it would not serve as the primary agen­cy to research and service large water proj­ects, loans to agriculture, or loans to businesses made by banks, it would be the primary contact agency for nearly all other loan and grant pro­grams.

The Division of Professional Licensing is pro­posed to consolidate and streamline the adminis­trative duties (clerical, budget, personnel, pur­chasing, etc.) of 24 licensing entities. It is not the intent of this grouping to adopt an omnibus approach to a single cross-disciplinary board to license and regulate all professions. It is the intent of this grouping to provide administra­tive continuity, cohesiveness and accuracy to the multiple lay boards, and to provide the public

with one contact point from which to ascertain professional licensing information.

The Division of Recreational and Cultural Resources is designed to centralize the now splin­tered management of the State's parks, histori­cal sites, museums, and information centers, to integrate their maintenance, preservation and interpretation. The division is proposed to assume the primary stewardship of the State's historical, archaeological and cultural resources.

The Department of Commerce is recom­mended to be implemented in 1989. Included in this new department are the Economic Develop­ment and Stabilization Board, Travel Commis­sion, Recreation Commission, Arts Council, all but the archival functions of Archives, Museums and Historical Sites, International Trade, Busi­ness Permit Coordinator, the lead agency of the Small Business Development Network, 24 professional licensing agencies or entities, and various loan and grant programs.

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FOOTNOTES-CHAPTER IX 1. National Association of State Development Agencies,

"Assessment of the Wyoming Economic Develop­ment and Stabilization Board," August 1988, p. 8.

2. Ibid., p. 12.

3. SRI, Building a Stronger Wyoming, October 1988, p. 9.

4. Small Business Subgroup, Task Force in Regulatory Reform, "Findings and Recommendations," October 1988, p. 1.

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CHAPTER~

STUDY SUM MARY "The surest way not to fail is to determine to succeed."

This study has presented perhaps a mixed mes­sage on the current affairs of the State. On the one hand, emphasis was focused on revenue shortfalls and reserve declines. The Committee believes the fiscal problems which the State must confront during the next three to four years will be serious. On the other hand, solutions to these problems are available to the State's policymak­ers, but implementing many of them may be difficult and politically painful.

The Joint Legislative-Executive Efficiency Study Committee has proposed several options for consideration which could lessen the fiscal difficulties, particularly in the short-term. A more efficient and effective government over the long-term, in the Committee's opinion, can be achieved through a reorganization of the State's administrative structure, which vests authority and responsibility for state government opera­tions in the Governor; merges agencies and pro­grams with similar or related activities into a single department so that duplication, overlap and waste can be addressed; and, sets up an ef­fective professional audit program.

SHORT-TERM REVENUE SHIFTS

In the short-term, the Committee has recom­mended shifting revenue streams and consolida­tion of various account balances, which will involve the transfer of an estimated $99.7 mil­lion to the General Fund in the first year of this proposal. An appropriation from the General Fund of an estimated $19.7 million will be re­quired to replace a portion of this transfer, so the net gain to the General Fund is approximate­ly $80 million.

Sheridan

A good portion of the General Fund gain comes from accrued interest in GnMA accounts which the Committee investigated in the State Treasurer's Office and, through the diligent work of the Attorney General, obtained an opin­ion that these funds should be released for dis­tribution. The expendable portion of the $67.2 million in the two accounts is an estimated $45.5 million. However, because of constitutional pro­visions, some of this total will be distributed to other funds as shown in Table X-1.

TABLE X-1

DISTRIBUTION OF GnMA FUNDS

Fund

General Fund Trust & Agency Fund Permanent Land Income Fund

TOTAL

(millions$) Amount

$40.7 .5

4.3

$45.5

The General Fund will benefit from the $4.3 million destined to the Permanent Land Income Fund as the bulk of this amount will go to pub­lic schools, which should lessen demands on the General Fund by a corresponding amount. In­asmuch as the General Fund is traditionally called upon to make up a portion of the schools' shortfall, increases in local resources ultimately reduce the State's School Foundation payments.

The transfer to the General Fund of the GnMA accounts, as well as the other account balances identified, is a "one-time" resource which will not repeat itself. However, the redis­tribution of pooled interest is recommended as

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TABLE X-2

SUMMARY OF RECOMMENDATIONS IMPACT ON THE GENERAL FUND

Pooled Interest Redistribution Fund Consolidation:

Current Balances Revenue Streams

Less General Fund Appropriation Required to Replace

Subtotal

Investment Program: Total Enhanced Earnings General Fund Share

Audit Program: Total Enhanced Collections General Fund Share

NET IMPACT ON THE GENERAL FUND

an on-going policy which represents a continu­ous revenue source to the General Fund. As previously noted, neither of these recommenda­tions represent new revenue to the State. Rather, they represent a redistribution of resources which the State already has. The objectives are to enhance budgetary controls and enable a more effective utilization of resources.

The Committee has suggested changes which will increase revenue to the State through modifi­cations in the State's investment program and through consolidation of auditing efforts. Changes in the investment program are expected to generate approximately $40 million annually; $26.8 million of this total is estimated to go to the General Fund. Additionally, a consolidated audit program should generate at least $7 mil­lion annually in added revenue; $1.9 million of this should accrue to the General Fund.

A summary of this study's impact on the General Fund is shown in Table X-2 which shows the General Fund should gain approximately $108.7 million during the first full year of implementation. Since roughly $48.8 million of this total was derived from consolidating account balances (mainly GnMA funds), the net annual General Fund gain in the second and subsequent years is thought to be approximately $60 mil­lion. Other funds, however, will also benefit due

$40.0

7.0

(millions$) Amount

$ 32.7

48.8 18.2

(19. 7)

$ 80.0

26.8

1.9

$108.7

to increased investment yields and enhanced tax collections. The total projected amount for all funds is $47 million ($40 million from invest­ments and $7 million from audit consolidation).

LONG-TERM IMPACT

The Committee believes reorganization of the State's administrative structure as outlined will likely yield the greatest benefits to the State over the long-term. Implementation of the cabinet type structure proposed for Wyoming will pro­vide the Governor and department directors with the tools to eliminate waste, duplication and overlap in various agencies performing similar, but separate, services. Duplication in adminis­trative, secretarial, budget, fiscal, training, statistical, and other related areas was demon­strated in the analysis of the proposed Depart­ments of Employment, Audit, and Commerce. Similar duplication is believed to be equally prevalent in the remaining departments sug­gested for future consolidation.

Clearly, the Committee in the few months of work preparing this proposal, could not iden­tify specific areas of state government which should be cut back. Nor did the Committee con­sider this to be within its defined charge. However, the Committee suggests that as the

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new departments are formed and agencies are brought together under one leadership, these areas of excess will surface. The Governor, department directors, and division adminis­trators should be in a good position to iden­tify unnecessary activities, duplication and waste.

The enhanced coordination of state programs brought about by the cabinet type structure should result in vastly improved services to the citizens of Wyoming at reduced costs. There are, of course, those who will argue that reorgani­zation will not assure cost reductions in govern­ment. Recent studies of states which have under­gone substantial reorganization efforts have shown that in most of these states, expenditure and employment levels have not declined.

In the last 23 years, 22 other states have under­gone reorganization and 6 of these 22 states projected savings would result, ranging from a low of $600,000 in Maine to a high of $60 mil­lion in Iowa. Few states could document the sav­ings sought; however, statistically significant long-term employment declines occurred in both California and Wisconsin, and actual savings were claimed in Georgia, Wisconsin, and Iowa. The greatest savings appear to have occurred in the State of Iowa, which was reorganized in 1985-86 to a cabinet structure. Iowa, much like Wyoming, had not previously undergone whole­sale reorganization in its 140-year history and the effect of the conversion was a transition from 258 agencies to a cabinet structure consisting of 22 departments.

As with the thrust of this reorganizational proposal, the principal objectives in the other 22 states were improved administrative effective­ness, efficiency, and economy. The primary methods used to achieve these goals were con­stitutional, structural and procedural changes aimed at shifting the balance of power to the chief executive. The Committee believes a nat­ural by-product of these objectives is enhanced services at reduced costs. Yet, the Committee recognizes that the costs to implement this plan may increase slightly during the three-year implementation phase until such time as the new departments are in place and management takes firm control of the merged activities. Given the State's relatively high employee turnover rate (15 percent), no lay-offs of state employees should occur. Elimination of excess positions should be implemented strictly through attrition and reas­signments.

MANAGEMENT ISSUES The Committee recognizes that the ultimate

efficiency and economy in state government, regardless of the administrative structure in place, can be attained only through the efforts and dedication of the State's officials and employees. It has been noted that the morale of the State's workers is low, primarily due to the lack of salary increases for several years and the absence of effective training programs.

The reorganization proposal should have a positive effect on the morale of state workers after the changes are in place. The consolida­tion of agencies, naturally, will result in substan­tially larger departments and this should ''open up" more career paths for all employees. Job opportunities should be considerably better in a large agency than in a small one with only a handful of positions. Clear lines of authority and responsibility should also help the morale problem. The current structure represents con­fusion and overlap, making it difficult to deter­mine from time to time who is in charge.

The State's priorities are often clouded, leav­ing the employees without a clear signal as to how their program or position is viewed by the State's policymakers. Insecurity, fear and uncer­tainty has a negative impact on morale and, thus, on productivity.

The study has also shown that morale could likely be enhanced through improved and expanded training programs. State managers and supervisors expressed a desire for training pro­grams in the area of supervision and advanced management courses. These programs should be implemented as quickly as possible in an effort to build on this expressed intent to improve abil­ities and skills. Morale could also likely be improved through expansion of agencies' com­puter accessability and capabilities. State man­agers and supervisors clearly expressed the need for expansion in this area.

The Committee believes the State must pro­vide an incentive program for its workers which will motivate them to achieve this ultimate level of efficiency. Unlike private industry, the pub­lic sector is not profit motivated. Thus, the evaluation and measurement of employee per­formance so readily apparent and assessable in private industry (profit) is unavailable as a yard­stick to assess employee performance in the pub­lic sector. The absence of this measurement in government work has made it difficult to accu-

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rately assess the productivity of its workers. Var­ious techniques have been tried and efficiency and effectiveness in performance and activities have been encouraged. Merit pay, pay for per­formance, longevity payments, and other ''incentive'' plans have been instituted in govern­ment toward this end. The results have been mixed and the value of these programs has been challenged. What has not been challenged, however, is the fact that salaries throughout the public sector in Wyoming have been relatively static for the past several years. Increases in employee compensation have been severely re­stricted due to revenue problems associated with

the decline in the State's economy. This has naturally led to a deterioration in employee morale and job satisfaction. The State has asked its employees to do more but has provided no compelling reason to enhance productivity. An incentive should be provided which will mobi­lize state employees to insist on economy and efficiency in state government. Such incentives are being successfully implemented in the pri­vate sector; and although state government is not profit motivated, a modification to certain of these private sector incentive plans is possible and adaptability to the public sector should be considered.

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