Texas Parks and Wildlife Commission
Finance Committee Meeting

August 23, 2006

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

BE IT REMEMBERED, that heretofore on the 23rd day of August, 2006, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission in the Commission Hearing Room of the Texas Parks and Wildlife Department Headquarters Complex, to wit:





COMMISSIONER FITZSIMONS: Thank you. I call the meeting to order. First, Mr. Cook, you have a statement to make?

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

COMMISSIONER FITZSIMONS: Thank you, Mr. Cook. We'll start out with the Finance Committee. Chairman Holmes, call your committee to order.

COMMISSIONER HOLMES: I call the committee to order. Thank you, Mr. Chairman. The first order of business is the approval of minutes of the previous meeting.




COMMISSIONER HOLMES: Second by Friedkin. Any questions or comments about them?

(No response.)

COMMISSIONER HOLMES: Hearing none, I call the question. All in favor, say, Aye.

(A chorus of ayes.)

COMMISSIONER HOLMES: Motion carries. Item Number 1, Land and Water Plan.

MR. COOK: Thank you, Mr. Chairman. I have three items that I want to just touch with you on real quick, one of which we almost went past this year without notice, which in a way, as I think of it, is a really, really good thing. That is that we kicked off our new license year August 15th, where we start selling the new hunting and fishing licenses for the year.

Those of you who have been at this table for several years recognize that in years past that was always a rather exciting event, sometimes to be known not exactly when we were going to hit the ground or when we were going to take off. Thanks to our staff, particularly in Mary's shop and in George Rios' shop, and in their work with the people at Verizon, we have continued to smooth that process out. I mean, those licenses went on sale that morning on a statewide basis and I have not heard one blip. Now, I see some folks in the audience who I'm pretty sure know of some of those little bumps, but it has gone well. It's off to a great start. I appreciate everyone's efforts on that.

In the same connection, as you know, we started about a year ago looking at the issue of the pending deadline coming two years from now of our current contract with Verizon. George Rios and his crew, again Mary and her staff, we looked at potentially taking that process in-house, building our own system. We went out and talked to other companies, other organizations. We've been in constant communications with other states. What we arrived at, and I reported to you back in a meeting or two ago, that we then went into a discussion with Verizon about amending their contract and extending that contract, which currently expires on August 31, '08.

We've been in discussion with them for the last three to four months, a pretty serious discussion with them. It appears, at this point in time, that we will amend and extend that contract with Verizon for our license point-of-sale system. The extension, some of the key points from my standpoint, and I think from the agency's standpoint, we keep our current pricing structure, which is 76 cents per piece, which is a bargain in today's market looking at what other systems do. It increases the annual support hours that we get from Verizon from their specialist team, from 300 hours to 600 hours. It takes care of some system requirements that we need to get done to satisfy auditors and our staff. Possibly most importantly, it replaces the old Hypercom units that we currently use with Thin Client Max Speed equipment, which all ties them to the network. This equipment and technology, we believe, is definitely a step in the right direction and where we want to take our license sales to the future. So that's where we are in that process. Looking at a five-year extension would carry us to 2013. If we continue to get the kind of service at the price we're paying, we believe that is the best of all options.

Finally, we continue to work with the various auditors to review all aspects of our financial systems. Our internal auditors just recently finished up a follow-up audit on payroll and personnel issues. They found that most of the recommendations that had been made had already been taken care of and the remaining recommendations are in progress. They found that overall our payroll and personnel systems are functioning well. The State Auditor's Office, as part of their statewide audit, will be auditing for federal compliance in our research and development grants. They have started to gather their information for this audit.

Finally, the Comptroller's Office has contracted with a private firm to do a third-party recovery audit. This audit searches for overpayments or duplicate payments to our vendors and the private firm seeks recovery of those overpayments if they find any. That audit should start within the next two to three months and we'll keep you posted on the progress of those audits.

That's all I have, sir.

COMMISSIONER HOLMES: Thank you, Mr. Cook. Mr. Montgomery?

COMMISSIONER MONTGOMERY: Bob, does our contract extension with Verizon allow us the flexibility to have both simplified sales over the Internet and to go paperless if we choose to within that time frame of five years?

MR. COOK: Within that time frame, Commissioner Montgomery, I don't think we see that as a possibility. The contract can always be amended if we see that opportunity. This contract and I'll ask Mary or any of those folks to correct me if I'm wrong this contract does not make a marked change in, in other words where you can call in now and get the number and go hunting to be followed up with a paper license, it does not include or envision a change to that extent.

COMMISSIONER MONTGOMERY: Would the amendment require a significant price penalty for us or are you saying we have the flexibility by amending the contract to achieve those objectives if we wanted to do that?

MR. COOK: I believe that that would require a change in price based on what we hear.

COMMISSIONER MONTGOMERY: Sure, a change in price, but the question is whether there's a big penalty?

MR. COOK: I don't Mary?

MS. FIELDS: We would have to pay for hours in programming beyond the 600 support hours that they are offering us. So any major changes we would make to the system, we would need to work with them to see what kind of hours it would take and what the cost would be.

COMMISSIONER MONTGOMERY: Does it leave us captive with them as a sole source provider if we go either Internet or choose other subcontractors to provide those services different ways?

MR. COOK: I can't answer your question right now, sir.


MR. COOK: We'll have to

COMMISSIONER MONTGOMERY: We've had a lot of discussions about providing flexibility and going to other resources.

MR. COOK: And we haven't found the way to do that. I guess that would be my honest answer to you on that.


MR. COOK: We have not found a way to do that under our current selection.

COMMISSIONER MONTGOMERY: So we have to select them for five years and lose that flexibility, if that's what's happening, rather that preserve the flexibility?

MR. COOK: I don't think this contract necessarily locks us in.


MR. COOK: I mean, I think we could make some changes. I think we could, but it will be costly. It will be very costly if we do that, I think.

COMMISSIONER HOLMES: It sounded like we were getting some advice.

MR. RIOS: I don't think we're really locked in as far as the technology. I think as long as the technology continues to develop, which is what we're trying to stay with, we'll continue to work with Verizon on the delivery of how we should do that. I think we'll do that throughout the contract. I don't think it pretty much locks us out. If we see the technology there, and we look at how we can simplify the licenses, I think what we'll do is work with Verizon through this contract and see how they can deliver those, but that probably will change the contract or probably will change the base cost, but right now we don't know.

MR. COOK: George, identify yourself for the record, please.

MR. RIOS: For the record, George Rios, Director of Information Technology.

COMMISSIONER FITZSIMONS: Do I understand that right now you still get a license for bird hunting and small game right off the Internet with your individual ID number or off the phone?

MR. COOK: Yes.


MR. COOK: Yes.

COMMISSIONER FITZSIMONS: So pick up the phone with a credit card and you're done?

MR. COOK: Yes.

COMMISSIONER FITZSIMONS: It's only big game tag

MR. COOK: Well, that would be that your paper license would be fulfilled. It would be provided, sent to you later

COMMISSIONER FITZSIMONS: But you could go hunting?

MR. COOK: — but you could go hunting that afternoon. That is correct.

COMMISSIONER FITZSIMONS: The scenario that I'm always asked about is if the person is either an infrequent, or new hunter, or just got their certification from out of state, they could pick up the phone, as I did once in Nebraska, gave them a credit card, got a license, and went bird shooting that afternoon. We can do that. It's just big game we cannot. Correct?

MR. COOK: (No response.)

COMMISSIONER FITZSIMONS: Something, you're not going to have your bird stamp.

MR. COOK: You don't have a tag.

COMMISSIONER FITZSIMONS: I know, but you're not going to have a bird stamp. You can't go bird hunting.

COMMISSIONER HOLMES: There's no reason you couldn't pay for it.

MR. COOK: I think the number correct me if I'm wrong here. Kim, come forward. Kim or somebody who can speak to this. The number that you're going to get will verify whether you bought a Super Combo or whatever particular type with stamps, with all that sort.

MS. DUDISH: Right.

MR. COOK: Identify yourself and help me out here, Kim.

MS. DUDISH: Kim Dudish, License Manager. Yes, as long as you don't need your tags for the big game, you can go bird hunting.

COMMISSIONER HOLT: So you can go bird hunting.

COMMISSIONER FRIEDKIN: Can you do that online?

MS. DUDISH: You can do that online.

COMMISSIONER FRIEDKIN: And get a confirmation number?

MS. DUDISH: Yes, sir.


MS. DUDISH: Or through our call center.

COMMISSIONER PARKER: And going into the new contract that's not going to change?

MR. COOK: That's not going to change.

MS. DUDISH: There's no change in that.

COMMISSIONER FITZSIMONS: But the call center is no longer 24 hours?

MS. DUDISH: Correct.


MS. DUDISH: Monday through Friday, 9:00 to 6:00.

COMMISSIONER FITZSIMONS: Okay. The reason is obviously funding, I would guess?

MS. DUDISH: Correct.

COMMISSIONER HOLT: But the Internet is 24/7?

MS. DUDISH: Correct.

COMMISSIONER FITZSIMONS: I think we have one constituent who would like to pay the difference so we can have that 24 hours.

COMMISSIONER HOLMES: Commissioner Friedkin and I have heard from that constituent. He needs that 2:00 a.m. call for some reason.

MR. COOK: You know, again, for the volume of licenses and folks that we deal with, and the availability through the Internet 24/7, the availability by phone, I think we're there.


COMMISSIONER HOLT: So we don't think we're missing sales or anything like that? Is this the first year we haven't been on the phone? I can't remember what the

MR. COOK: 24-hour, no.

MS. DUDISH: Our call center phones are only about 2 percent of our business and they have been

MR. COOK: I think we haven't been 24/7. Is this the second year?

MS. DUDISH: Second year.

COMMISSIONER FITZSIMONS: Any rough guess of the cost savings or the cost if you were to go 24/7?

MS. DUDISH: Oh, I don't know that.


MS. DUDISH: I don't believe we've ever been 24/7 on the phone.

MR. COOK: I think we were, like the first year.


MR. COOK: I think we were.

COMMISSIONER HOLT: But over the years, we've decreased it down to where it is today?

MS. DUDISH: Right.

COMMISSIONER HOLMES: May I follow up on that? Excuse me. That 2 percent, is that 2 percent of all licenses?

MS. DUDISH: Yes, sir.

COMMISSIONER HOLMES: So it's 50,000 licenses handled by the call center?

MS. DUDISH: Yes, sir.

COMMISSIONER HOLMES: That's an active call center.

COMMISSIONER MONTGOMERY: Well, yes. Have we given up on the paperless?

MR. COOK: I believe in this cycle we have given up going paperless.

COMMISSIONER RAMOS: I mentioned at a previous Commission meeting one option could be down the road that, just like we get a permanent driver's license, that we could get a permanent Texas hunter number, whatever number that be, and have that reflected with a plastic card with a picture. And then annually, just like you renew your driver's license, you could renew that. I would assume that our game wardens could access that number and know whether you had a Super Combo or whatever. I don't know whether any other state does that, but if we did that, then we could automatically submit it back to the hunter and maybe we wouldn't have people drop through the system. In other words, we would take the initiative to say, By the way, your renewal, based on last year's license, would be x number of dollars. That's just a thought, but I don't know if that's way out in left field. If we did that, then you would have a permanent, just like a driver's license, a permanent hunting license, which you could renew or not renew annually. I'll just throw that out. I mentioned it before.

COMMISSIONER MONTGOMERY: I had convinced myself that sort of as a customer service, the paperless was a good objective. I've never studied it and I've never come up with solutions, but are we sure we're ready to make that move and give it up and lock it in, in five years? Everybody's sure that's the right thing to do?

MR. COOK: Well, I mean, it was studied very, very, very in depth throughout the agency. From the agency's standpoint, I think the major concerns are law enforcement issues, follow-up on animals that are in coolers, in camps, in possession of someone else, the need for that tag. You know, you could go paperless except for that need.

COMMISSIONER FITZSIMONS: I don't disagree with the goal.

MR. COOK: We have monitored it very, very closely. Interestingly, when you bounce that off of most landowners, most landowners do not support going paperless. From a law enforcement standpoint, we believe that it is necessary.

COMMISSIONER FITZSIMONS: Also, remember we're still trying to work out protocols over the long term with Texas Animal Health Commission on the CWD issue. I think until we're really sure where we are on that, that might be something to consider.

COMMISSIONER HOLMES: If I understood it, this doesn't preclude going paperless. It just is a system that is not currently structured to go paperless. So if some technological advance occurs in the next year, or two, or three, this contract would be expanded I presume. Isn't that what I heard you say, George?

MR. RIOS: Well, we'd have to work with Verizon, but just like with any other technical solution, there's probably going to be a cost, and that cost is going to be just through the contract, and we'll have to work with them to see if this contract will allow them to do that.

COMMISSIONER HOLMES: Yes, it wouldn't be without a cost. Right?

MR. RIOS: I would assume not.

COMMISSIONER MONTGOMERY: My understanding is there are states which are paperless now and there are technological providers, multiple ones, who do provide Internet-based systems. It's a question of, I've always thought, law enforcement and then safety issues.

MR. COOK: There are states that are paperless, yes.

COMMISSIONER MONTGOMERY: Yes. I mean, it's out there. It's not a question of whether it's out there. It's a question of whether we choose to use it or not.

MR. COOK: Some of those states, you know, Commissioner, some of those states that are "paperless" as far as licensing systems require that the hunter put some sort of document on the animal, hence defeating the whole purpose of being paperless in my opinion.

COMMISSIONER MONTGOMERY: It's still not paperless.

COMMISSIONER FITZSIMONS: They claimed paperless.

MR. COOK: Now, some states again, depending on how they're structured, get away from it completely in most game birds, but a few even on big game, but almost all of them require some sort of document to be with the animal. From my standpoint, from our standpoint, it would appear to be the most efficient thing to do just to provide that document in the process, but we have looked and looked.

COMMISSIONER MONTGOMERY: Well now, to me, paper in the field is just to make it easier and available to buy hunting licenses.

MR. COOK: Yes, sir.

COMMISSIONER MONTGOMERY: That's the only reason I care anything about it. Thanks.

MR. COOK: Thank you, Kim.

COMMISSIONER HOLMES: Any further questions for Mr. Cook?

(No response.)

COMMISSIONER HOLMES: Item Number 2, Financial Overview, Mary Fields and Bob Cook.

MS. FIELDS: Good morning, Commissioners. For the record, I'm Mary Fields, Chief Financial Officer. I've got several items to cover with you this morning. We're going to start off with the financial overview for 2006. The focus of this presentation is to provide a revenue and budget status through June 30th and to give you our annual update on the progress of our Business Improvement Plan.

Let's start with the revenue and budget status. With state park receipts, gross receipts through June 30th, at $27.2 million, we are up 5.8 percent or $1.5 million over last year's collections. In reviewing the categories of parks receipts, all of the categories exceed the prior year at this time. Facilities and concession revenues are up slightly. Miscellaneous revenue is a smaller category on there, but it is up almost 20 percent. The big revenue increases are in the entrance fees that are up 8.7 percent and park pass sales that are up 22.7 percent. So we're doing well in that category. We've really tracked well all year with the pass sales.

COMMISSIONER HOLT: Did we increase the fees at the gate coming in?

MS. FIELDS: There were a few park fee increases at the beginning of the fiscal year.


VOICE: 22 percent?

MS. FIELDS: Yes. Our boat revenue as of June 30th is at $15.9 million. This is down by 2.1 percent, or $347,000 compared to last year at this time. We've really made a lot of headway though in this category. You all will recall in the last meeting, I was reporting through March, we were 10 percent behind here. So in the last three months, we've gained quite a bit of ground. So I'm actually pleased with this progress. With the water levels and gas prices, we kind of expected this revenue category to be down a little bit.

In the specific categories of revenue, boat registrations are down by 4.3 percent, revenue for titles issued is up slightly, and sales tax revenue is up by 6.7 percent. We continue to transfer the 15 percent of registration and titling revenue to Fund 64. That amounts to $2.1 million based on the revenues through June.

Our license sales revenue is also just slightly down. This has been tracking fairly close to that for the past several months. At $82.6 million, we're down $1.3 million in revenues as compared to last year, of 1.6 percent. Combo revenue is down by 1.8; fishing is down by 5.6 percent; hunting is slightly up at 2.2 percent; and the Other category is up by 3.5 percent. In comparing these numbers to more recent sales, I did look at the report as of August 9th. Again, we're pretty close. We're at 1.4 percent behind, or $1.2 million down. That's pretty close to the close of the year. Even with this slight decline we're seeing, we're still exceeding our revenue estimates. So we're in good shape with the license sales.

In reviewing the number of licenses sold at $2.6 million, we're down .3 percent as of the end of June. Hunting is down 3.1 percent. And that, as you all recall, does not relate to the revenue category because we have had a lot of non-resident licenses were sold. That's what drove that revenue up. Fishing is down 6.2 percent. Total Combo sales are up 3 percent when compared to last year's sales. That includes those military Super Combos, that number. So those are the licenses sold.

COMMISSIONER MONTGOMERY: Do we have any research on why we're seeing declines in hunting and fishing? That's why I keep bringing up paperless and everything else. I worry that we've got declining usage. What's that?


COMMISSIONER MONTGOMERY: Is it purely from Super Combos still? Does it continue to affect the Super Combo or is that including what does that number mean?

COMMISSIONER HOLMES: If you recall, the Katrina-Rita effect

COMMISSIONER MONTGOMERY: Okay. So it's a one-time?

COMMISSIONER HOLMES: — in September put us way, way far behind to start with, particularly in fishing.


COMMISSIONER HOLMES: We've been closing that gap. At one point, Mary, wasn't it about

MS. FIELDS: It was 15 percent.

COMMISSIONER HOLMES: — 14 or 15 percent?

MS. FIELDS: 15 percent.

COMMISSIONER HOLMES: And so, we've closed that gap ever since then, but we've just never been able to catch up.

COMMISSIONER FITZSIMONS: Remember, Katrina-Rita happened when people buy their licenses in August and September. So I wouldn't

COMMISSIONER MONTGOMERY: I hope it's not a long-term trend.

COMMISSIONER FITZSIMONS: — extrapolate that.

MR. COOK: Let me speak to this, too, because Commissioner Montgomery's concern and question is certainly one that those of us that are in the business, and in the profession, have watched forever. As far as research, yes, there are a lot of people who have looked at this thing in different ways. Fewer people are hunting. Fewer people are fishing.


MR. COOK: The structure of the licensing system, if you look across the same states the structure of the licensing system, there is no indication that there's a system out there that is not suffering the same impact. You know, we've looked at that pretty closely because there are different licensing systems out there. You know, some of them are very, very piecemeal. Some of them are very, very combined. Our Super Combo thing being one of the most easiest access to everything. Frankly, that does not seem in any form or fashion to be driving license sales up or down, but it's an area to watch. It's an area to always look for, convenience and ease, but we have not found any indication that there's a problem in our licensing system that's keeping people from buying a hunting or a fishing license.


MR. COOK: This seems to be driven much more by other age and/or time factors.

COMMISSIONER FITZSIMONS: Demographic issues are everything. You'll remember, and those of us who have been on the Commission four or five years, we had a study presented to us maybe four years ago about where we lose hunters and fishermen. The message there was that you lose them just to net it out between the time the parents quit taking the child and paying for everything and the time that person has got their own job and their own family. So you really lose them between 18 and 27. And so, we looked at addressing that through the certification, hunter ed issue, which I think we've made some progress on that. By no means should we give up on making that more of a the debate was, is it a barrier. I don't think it's a barrier, but I don't think it's much of an attraction as it could be to draw people in. Frankly, not to turn every conversation to state park funding, but the fact is, a lot of people get their exposure through our state parks to fishing.

COMMISSIONER HOLT: To fishing, right.

COMMISSIONER FITZSIMONS: With the leadership of Bob, and Inland Fisheries, and licensing people, we've instigated that new plan with fishing without a license for free in state parks. That's really a demographic challenge. There's that gap. Correct me if I'm wrong, we reversed the slide of the '80s and '90s I wouldn't say reversed. We slowed the decline.


MR. COOK: I'm always looking at Gene for this. All right. Gene, help me. We slowed the decline. We didn't reverse it, but it is a long-term demographic trend.

MR. McCARTY: Trend, yes.

COMMISSIONER RAMOS: What's interesting, there is if you look at the total number of licenses sold, it's a negligible drop, .3 percent, but then when you look at your revenues, there's a substantial drop. So can I conclude from that, we're really not losing fisherman or hunters, but for some reason maybe they're not buying the combos? But you look at the Combo and it's up 3 percent. So I'm trying to reconcile it.

MS. FIELDS: What's going on there, and we maybe should do a little bit different presentation in the future, included in those combo sales are the military Super Combo licenses, which we are not charging for. There's about 35,000 of those in there, which equates to roughly $2.2 million of revenue.

COMMISSIONER RAMOS: Which we really have not received?

MS. FIELDS: That's right.

COMMISSIONER RAMOS: Okay. That may be what distorts it because if you look at it and you see the total number sold, you say, Well, that's negligible, .3 percent, that's really not much. Then you look at the revenues and you see down, down, down. That's where I was having difficulty.

MS. FIELDS: We do count it technically as a sale, but there's not revenue. What I could do is pull that number out and footnote it or something. That would maybe give you a truer correlation at the revenue to the sales.

COMMISSIONER RAMOS: Because if you look at that, we're really not losing hunters or fishermen, I don't believe.

COMMISSIONER FITZSIMONS: Not in actual numbers, but in a percentage of the population, we sure are.

COMMISSIONER RAMOS: Yes. We're getting behind in that measure.


COMMISSIONER HOLT: What's the measure of non-resident in the revenue?

MS. FIELDS: There is an issue about that. The number of hunting licenses sold is down, but we've sold more non-resident licenses and they're a lot more revenue than anything else.

COMMISSIONER MONTGOMERY: I see, more non-resident. So one of the things we could kind of footnote that a little bit, too. That's another issue we have. How do we mark, of course, out-of-state and then in-state. Of course, in-state is where we're losing people.

COMMISSIONER HOLT: Yes. I think one of the challenges is once a person buys a license, be it a hunting or fishing license, and they're "in the system," we need to make sure they stay in the system. It seems to me that our licensure should be designed to facilitate their renewals rather than have to take an initiative. Do you see what I'm saying? In other words, once you're in the system, you're always in the system unless you elect to be out of the system, as compared to you're in the system a year, and then you're out of the system unless you take some affirmative action. So I'm thinking more of the initiative should be on our part as compared to the consumer.

MS. FIELDS: It sounds like a marketing issue more so than a license system issue, to me.

COMMISSIONER HOLT: Well, yes, because some people just, you know, I don't want to

COMMISSIONER RAMOS: Are you talking about what they refer to as the last hunter? That was another category they showed us. Who did that study for us?

MR. BERGER: Southwick or something like that.

COMMISSIONER FITZSIMONS: That was three or four years ago. We've got a category of "last hunter," which is what I think you're talking about, the person who hunted for years, then doesn't then never quite comes back.

MR. BERGER: Back into the system.

COMMISSIONER FITZSIMONS: And then, when you're about to just not they haven't been reminded, so to speak.

MR. BERGER: Right.

COMMISSIONER HOLMES: Commissioner Parker had a comment.

COMMISSIONER PARKER: Speaking about this and this is a I realize the great benefit of having this year, last year the benefits of having the information of this year or last year. I asked Gene McCarty a few months ago to draw me up you know, being a little older than the rest of you, I like to look back because, you know, if you don't know where you've been, you don't know where you're going. And so, I asked him to make me up a list of licenses sold both in units and dollars for the past


MR. McCARTY: Was that ten years? No, it was more than that. It was 20, yes.

(Simultaneous discussion.)


MR. McCARTY: Well, we had ten years and then that was what we kept doing with the 20, which was a lot harder to do.

COMMISSIONER PARKER: Right, and it wound up being 20 years. I would like to throw out on the table a proposal that every Commissioner get to see that graph and then, Mr. Chairman, Ned, I would like for you to think about that and see if we really need to talk about that. There is a concerning trend there that I think it is our responsibility to take a look at.


COMMISSIONER FRIEDKIN: I did the same thing during our great catfish debate, last spring when you and I were on different sides of the question for exactly those reasons.


COMMISSIONER FRIEDKIN: Well, I know that, but we're friends.

(Simultaneous discussion.)

COMMISSIONER MONTGOMERY: I do the same thing and John's right on target. There's a very concerning long-term threat that's why I've taken sometimes contentious sides on some of these issues. We have a fundamental problem. That's why I stopped us on this. I do think your point, you really ought to step back and look at that as a marketing proposition. We need to think about how we organize our activity because we do a lot of little things that make it a little harder in a lot of places, for good reasons. We just need to realize that part of this is making it easier for people who do this. Part of it is a demographic shift out of there. I won't talk about that too much, but Mr. Parker is onto something very fundamental. I know we've talked about it. I don't know if we've done all we can. I think the Department, and Bob, has made huge strides to refine what we have, great enormous progress that's been very good, but I think we've got to keep leading and pushing in that department.

COMMISSIONER FRIEDKIN: How can we enable the process?

COMMISSIONER HOLMES: What did you say, Dan?

COMMISSIONER FRIEDKIN: How can we enable it and facilitate the process?

COMMISSIONER HOLMES: Make it easy for people.

COMMISSIONER FRIEDKIN: Make it easy for people?


MR. COOK: We will provide that information in detail and absolutely welcome the Commission's deep involvement in it because it is an important issue.

COMMISSIONER PARKER: What you're going to see is that for the past 20 years, without a few spikes, like when we had the great idea like that Combo idea, but other than a few spikes, you're going to see those numbers as flat as this table in front of you. It is difficult to take it to the next level of how do we not only make this recreational idea of hunting and fishing more attractive to people, and how do we do that, but the other thing that we need to start thinking about is how can we continue to provide goods and services at today's prices when we're still only receiving income, other than a few little spikes, of 20 years ago, both in numbers and in dollars, numbers of people and dollars received from those people. That's something that I think we need to begin to look at.

COMMISSIONER HOLMES: Thank you. I think that's a good point because it's not just having it and selling it. It's not just what that revenue is, but it's what that relationship between the two is versus the cost of it escalating.

COMMISSIONER PARKER: Just because you don't think about all of the increased costs and those increased costs didn't happen this past year or the year before, they didn't happen, they've been inching up forever.


COMMISSIONER FITZSIMONS: It might be a good idea to ask Bob and Mike to show us that study again that was paid for, and was conducted, that addresses this issue. I think it was before you were on the Commission, John. It's enlightening. One of the really troubling things that we're going to see from it is that we're losing it's not just the inability to bring in new customers, we're losing the existing ones, the people who are the sons and daughters of existing men and women who hunt and fish. That is a challenge.

COMMISSIONER HOLMES: Pursuing the goal of finishing this the day we started it, Mary

MS. FIELDS: I would love to. Let's move ahead. When comparing our 2006 revenue collections as of June 30th to the annual revenue estimates, we're progressing as expected in all of the funds. With 83 percent of the fiscal year elapsed, our actual revenue collections are where they should be. Now on Fund 9, typically at this time of the year, we would show about a 92 percent collection rate, but we are behind a little bit on some of our federal draws which are basically reimbursements. So if you take that out of the mix and just look at our true collections for licenses and boats, we're at 93.4 percent. So we'll continue to watch this, but I'm not concerned. We've got 83.9 percent of our State Park funds received, the Local Park Fund is ahead at 101.2 percent, and the Other category is at 72.7 percent.

In reviewing our 2006 budget versus expense, you can see where the budget is at $321.7 million and we have $114.8 million or 35.7 percent of the budget remaining with 83 percent of the fiscal year elapsed here. The salaries and related benefits are basically on track, but our spending on operating is behind. I looked at a couple of prior years just to see where we were at, at this point in time, and we were usually at about 30 percent at this time. So we're running about 5 percent behind the norm in our operational spending here, but we do have the increased gas and utility costs that we'll be incurring this summer and I think we're going to catch up very quickly with these operating expenses. We're also showing, as you can see there, 75.9 percent of the capital projects funding that's still available. When I'm talking about the 2007 operating budget, you'll see that quite a bit of this is going to be carried forward. The unissued bonds that you see there relates to the East Texas Fish Hatchery. We're not going to issue those bonds until 2007, so we'll be carrying that authority forward.

Overall, our budget has increased by $4.9 million since March 31st. Budget adjustments made for April, May, and June are summarized on the slide. The most significant adjustments this reporting period are for the grants. There were actually numerous grants added over this period so I'm not going to highlight any one specifically. And then, there's over a $2 million adjustment relating to Rider 9 and Rider 26. Rider 9 is our construction and local excuse me landowner incentive grants and basically local park construction grants. We did bring in a pretty sizeable grant for our rec trails in the trails grant. So that's what the majority of that is. The Rider 26 portion is fairly minimal. That's where we bring in additional capital equipment and funding. If the Feds say we can spend the money on capital equipment, then we carry it in and we can exceed our limits.

Our Business Improvement Plan, you all will recall we just report on that annually now. Since last August, we've completed two more of the tasks. The two that we completed, basically one of them relates to the contract-monitoring issues relating to our point-of-sale license system and the other one relates to federal funds coordination across the agency. So those two recommendations have been totally completed. The remaining five outstanding items relate to our revenue systems. Basically, they're wanting to see us integrate those systems and interface them. It's going to take us a while to get all of that accomplished. Currently, the plan takes us out to November 2008. So we'll be talking about these last five items for the next couple of years. So that's it on the financial overview.

On the Operating and Capital Budget, we'll get started there, if there's not any questions. Today, I will recap the budget process, discuss how the budget is financed, provide a couple of summaries of the budget, recap the budgeted

full-time equivalents, or I'll be calling them FTEs, review our capital budget, and then wrap it up with a couple of key points.

Let me just start off by saying, for the most part, our process for preparing our operating budget is similar to prior years. Also, since this is the second year of the biennium, we're basically carrying over several of the same issues that we had in 2006 that are still there for us in 2007. As our starting point, we started with 100 percent of our 2006 base budget. Via Rider 27, we added our revenue contingencies and we anticipate that the Comptroller's Office will certify at least the same amount of revenue as they certified in 2006, so we built that revenue contingency into the base. You'll see a little bit more about that.

As in past years, each division built their budget request and they prioritized and justified all of their programs. The only additional budget that we allowed them to add were requests where we receive additional funds that comes with its own authority. Those are things like the federal dollars and the donations.

This next item is a change from prior years. We did not budget salary lapse this year to meet budget demand. You'll recall that salary lapse is generated when the budgeted positions are vacant for a certain period of time. In the past, we estimated our vacancies and we budgeted some of that up front and it would catch up throughout the year. We elected this time to not start off with the salary lapse in the budget.

MR. COOK: I just want to speak to that very briefly. My perspective, that's betting on the come too many times. We will have some salary lapse, we know that, with vacant positions that are funded, but to budget that up front, in my opinion is risky. It restricts your ability to have some flex during the year. Again, if you get a Katrina or something like that that happens to you, you have some needs, and, by booking that lapse up front, it eliminates any opportunity for you to come in mid-year and make adjustments as needed.

You're talking about probably a 3, 4, 5 percent lapse in number that we talked about. That's a few million dollars. It's not a lot, but that gives us an opportunity to look at issues, like I say, if we have something come up that we need to focus on, that we need to point some money to, to solve, to answer, to address, we have that option. If we want to look at something like merits, one-time merits for outstanding employees, it gives us that option in mid-year. So that's something that we've been trying to get to. I appreciate all the division directors and their commitment to go there. It has not been easy. We have notched down on it each year, but we are there in '07 and I think it's a very wise move.


Mary, on Rider 27, could you remind me how much money that amounted to when it was authorized this last budget?

MS. FIELDS: There's a total of $8.5 million, $4.9 of it is Fund 64 and $3.6 of it is Fund 9. That's million.


MS. FIELDS: One other change here from the prior year, that last bullet, we did make the decision, since our capital line items were so small for an agency of this size, we did go ahead and take them to 125 percent maximum at the beginning of the year and we'll talk more about capital as well in the presentation.

So let's review how the budget was financed. We start with the amount of appropriations that we receive from the Legislature via the General Appropriations Act. For 2007, we were appropriated $197.7 million. And then, we build from that amount. The Appropriations Act also includes limits on the amount we can expend for capital items and we are capped at the amount of FTEs that we can have. There are also numerous other restrictions on our appropriations that are highlighted in the agency-specific riders. We have 30 of those rider provisions and we considered those as we built the budget.

As I mentioned, we're in the second year of the biennium here, so many of the highlights we discussed last year are also applicable this year. So we'll run through them quickly. This slide has the additions. You'll recall we received $18.1 million of Prop 8 bond authority for construction and major repairs. Any funds we don't expend in '06, will be UB'd or carried forward into 2007. UBs are unexpended balances. We also received $2.1 million for repairs to the San Jacinto Monument. There may be a little bit of carryforward on these funds, but most of that will be spent in 2006. We received $15 million of revenue bonds for the East Texas Fish Hatchery. As I mentioned, that authority will be carried forward into '07. We are still working with TxDOT and the federal government on the $16.1 million for the battleship. I already mentioned the Contingency Rider. Finally, we received another 3 percent pay raise in 2007. That amount is added to the 4 percent raise that was received in 2006 for state employees.

As far as the reductions occurring over the biennium, you'll recall we took the 5 percent reduction which resulted in divisions cutting their budgets last year by $2.6 million. That carried forward. Local Park Grants were cut by $5 million. We also absorbed an additional $2.1 million for longevity, hazardous duty, and reclassification salary increases that were not funded by the Legislature.

As you know, our strategies have grown from ten to 29 and our ability to transfer funds has been cut in half, basically, to 12.5 percent. This does limit our flexibility to move funds around. We haven't seen this as a major issue except really in the one strategy relating to construction and that's a capital line item with a 25 percent transferability limit. This 12.5 gets into conflict with this. So we will be addressing that in a rider request in our appropriations request.

Finally, we were limited in our land acquisitions to the amount we had available at the end of '05. We moved about $1.7 over into the biennium to spend and we'll be UBing some of that.

This next slide basically crosswalks our budget as it starts with the General Appropriations Act. And then, we make those adjustments to get to our total operating budget. Again, we started with $197.7 million. There are various adjustments that I'll cover that get us to the total of $295 million.

Commissioner Fitzsimons asked about Rider 27. There's that $8.5 million coming into the budget that we talked about. We are applying the increases for the employee pay raises. That total is $11.1 million. We do estimate our benefits replacement pay, and our benefits, and we set the benefits aside for the Employee Retirement System. We're carrying forward unexpended balances. These primarily relate to construction and land acquisition. We'll talk about that more a little bit later. We're adjusting our estimate for federal funds. We are decreasing that amount because we estimated these a couple of years back, when we do the request, and we don't actually pull these into the budget until we have signed grant agreements. So we will be receiving more federal funds throughout the year and you'll see me talk about those in budget adjustments.

COMMISSIONER HOLMES: Mary, those come with their own authority. Right?

MS. FIELDS: Yes, they do.

COMMISSIONER HOLMES: Which means that it sort of automatically increases?

MS. FIELDS: That is correct. This is no real loss to our budget at all. As they get signed, we'll bring them in.


MS. FIELDS: There's no problem doing that. Finally, there was a slight adjustment to the amount that was transferred to the Texas Historical Commission relating to the transfer of the Admiral Nimitz Museum. So that takes us to the $295 million.

This next slide is just a view of our method of finance. We earn close to 50 percent of our funding with Fund 9, our Game, Fish, and Water Safety Fund that has the hunting, fishing and boat revenues at 36 percent, and Fund 64, our State Park revenues, are there at close to 12 percent. The remaining funding comes from General Revenue at over 18 percent. Bonds and other funds are at 14.5 percent and federal funds are at almost 19 percent.

Let's move on to just a couple of different ways to summarize the budget. This first summary gives a broad overview of our budget by object of expense. I've included comparable totals to 2006 up there. Salaries are up, as expected, due to the 3 percent increase in pay and you see the corresponding increase in the benefits. When you consider those two items together, we do spend over 50 percent of our budget on our employees. Our operating expenditures have increased over 2006, primarily to cover the utility and gas costs that we've been talking about. Grants are down some, but they're fairly comparable to the prior year. The debt service increased in '07 due to the debt service that's appropriated for the revenue bonds associated with the fish hatchery. The Capital Budget includes the 125 percent of the line items and the unexpended balances for construction and land acquisition.

The next couple of slides highlight our budget by divisions. You can see the divisions' budgets in millions and the percent of the total agency budget, just to give you a sense of the size of each division. This is how the agency really operates. Each division has a detailed budget that they manage. So this just kind of lays out where the money goes. I'm not going to cover all the numbers on the slide. I will point out that the administrative divisions that support the entire agency only amount to about 11 percent of the agency's budget. So that's pretty lean for administration. We spend a lot of our money on our resources, where it should be.

This next slide just shows more program divisions. It's no surprise here that State Parks and Law Enforcement carry larger percentages, primarily due to the number of FTEs that they carry in their divisions, in their operating. In your package I believe Carole handed out an action item package for tomorrow you'll see in there I have an Exhibit A of our agency's budget by strategy. I didn't include that on slides because there's 29 of them, but that's really how the Legislature views our budget. So you might want to take a look at that exhibit. And then, the second exhibit actually shows our agency's divisions by object of expense. So you get a better sense of how each division is spending their dollars. There's also FTE counts associated with the divisions on Exhibit B. We'll be asking you to approve those tomorrow.

Moving ahead to recapping our FTEs, I want to just highlight our reductions over the biennium just to more clearly show the impact of our FTEs. They have been reduced by 137.5 since 2005. In 2005, they were capped at 3,038.5. Then we took those operational reductions, the 5 percent. That ended up eliminating 59.1 FTEs. There was another mandated 2 percent reduction by the Legislature for most of the state agencies and that was another 60.4 FTEs. And then, we transferred those FTEs relating to the Nimitz. So we're capped at 2,901 and that's the same cap we have in '07.

As far as budgeting those FTEs, in '06, we budgeted 2,936.8. We have increased that by about 20. We're up to 2,956.1. And then, you see our cap. Now, we can budget above the cap because we don't keep all of our positions filled. We will be tracking that closely throughout the year to make sure we don't exceed the cap overall. They do allow us to blend our FTEs quarterly because we have a pretty big peak in the summer.

MR. COOK: I can point to it there. Commissioners, we have consistently done this through the years, budgeted slightly above our cap for planning purposes. We have never yet, ever, exceeded the cap and we will not.

MS. FIELDS: Here's the Capital Budget. As I mentioned, the Appropriations Act includes our capital budget limits and they show up in Rider 2. Again, we made the decision to increase those amounts to the maximum allowed. So the first column on this slide is just showing those capital line items at 125 percent. Two of our capital line items, the land acquisition and the construction and major repairs, those include unexpended balances, or UBs, and you can see those balances in the second column.

The construction UB of $44.5 million, that includes several components. It's the $15 million we've talked about for the fish hatchery, a good portion of the $18 million in Prop 8 bonds that were appropriated this biennium for construction and major repairs, there's some carryover of previous bonds issued, and a few other funding sources that were approved for construction. And then, the last column gives you just the total budgeted for each item. We do fully anticipate contracting the majority of the construction funds during fiscal year 2007 and just contracting them effectively encumbers or obligates those funds. So you shouldn't see these type of balances at the end of '07. However, we will carry some forward into '08-'09.

I'll wrap up my comments about the operating budget with just a few key highlights. To recap quickly here, again those reductions in '06 continue to impact us in '07. We based our budget on 100 percent of the base plus the Revenue Contingency Rider. We did not budget salary lapses. We raised our capital limits. We applied the 3 percent pay raise. We continue to absorb those inflationary costs for utilities and gas. You have to remember when we built this LAR a couple years back, gas prices were about $1 cheaper than they are now. So it's a pretty good impact to us. Again, we're going to encumber those hatchery bonds as well as the majority of the other construction balances. So that concludes my presentation on the 2007 Operating and Capital Budget.

I'm going to move on to the next item, which is a high level overview of our 2008-2009 Legislative Appropriations Request, or LAR is how I'll refer to it from this point forward. We did finalize it and it was distributed by our deadline of last Friday, August 18th. Here's the document. I believe you gentlemen will be receiving a copy so that fine document took a lot of effort. I'm sure you're going to read each and every page of it.


COMMISSIONER HOLMES: Put it under your pillow.

MS. FIELDS: I tell you what, it is a tremendous effort and before I start, I really do want to thank the budget staff Reggie Pegues, our budget director, and the staff there, as well as all of the division budget coordinators throughout the divisions that really worked with us this year when we coordinated it. It was definitely a coordinated effort. So let's take a look at what we've got here. Today, I'll discuss our base budget that was established, review the general revenue and general revenue-dedicated 10 percent reductions that are required to achieve our base, and the related impacts of that, and I'll review our exceptional items, and then just summarize the total request.

In establishing our base budget, we estimated the amount of 2006 funds that would be expended. We included our 2007 budgeted amounts. And then, we applied the required 10 percent reduction to the general revenue and general revenue-dedicated amounts. And then, we added our estimates of those other funding sources such as the federal and the appropriated receipts.

The required 10 percent general revenue and general revenue-dedicated reductions totaled $14.2 million annually; $7.9 million was reduced from our Fund 9, the Game, Fish, and Water Safety account, $2.5 million was reduced from Fund 64, our State Parks account, less than $33,000 was reduced from Fund 467, our Local Parks account, and a little bit from our Fund 5004, which is our Capital account, and then $3.8 million was reduced from general revenue for a total of $14.2 million. That's an annual number.

So in applying these reductions by those funds that I just covered, you can see that the divisions and the Local Parks took a good portion of the reductions. I'm going to talk about the impacts on the next slide. Other reductions in Fund 9 include cutting our Shrimp Buyback Program basically in half it went from $2 million down to $1 million reducing our Capital Construction by, again, almost half with another million reduction there. We eliminated $400,000 that we were holding to improve our financial systems; and we applied a 10 percent reduction amounting to roughly $400,000 to the fees that are paid to our license agents. So that's the recap of the annual reduction.

These impacts that were applied, basically the impacts include substantially reducing our Local Park Grants by roughly 45 grants and eliminating two FTEs. We've eliminated 52 game wardens from Law Enforcement. We've imposed further reductions and closures of our State Parks, along with the elimination of 44.43 FTEs. There's more FTE reductions of which seven are in the resource divisions, and six in the Infrastructure Division, along with additional operating reductions. Finally, six more FTEs from the administrative divisions and further operating reductions there. So the Governor's Office wanted to see the impact. That's the impact, along with the programs that I discussed on the prior slide.

COMMISSIONER HOLT: This is what we're showing them


COMMISSIONER HOLT: — what happened to the 10 percent?

MS. FIELDS: That is correct.

MR. COOK: We're at a point, Commission, where obviously I say, obviously we can't reduce fuel any more. We can't reduce our utility bills. We're going to have to pay those utility bills and all of those are increasing. If you take a reduction, most significantly it's going to come out of FTEs at this point.

COMMISSIONER FITZSIMONS: Let me make a little clarification with that because there's been some, I think, misunderstanding, confusion that there's two stories out there. One of them is we're reducing by 10 percent and this is what's going to happen. The other is with the Governor's support, I have appointed this State Park Advisory Committee to help us look at ways to meet our stated goals. Those aren't two different stories. Those are completely different exercises. One is the exercise of what would happen if you took a 10 percent cut. The Governor's Office, at the same time, said, Come up with a plan of what it takes to meet your stated goals from where you are. So the 10 percent cut is an exercise, I think it's accurate to say. Wouldn't you agree, Ned?


COMMISSIONER PARKER: There will be a "rest of the story."

MS. FIELDS: And here it is.

COMMISSIONER FITZSIMONS: Here it is. It's a question of "what would happen if." Yes, there you go.



MS. FIELDS: We're asking for it right back.

COMMISSIONER HOLMES: Did you know that slide was next?

COMMISSIONER FITZSIMONS: Yes, she had that planned with John and "the rest of the story."

MS. FIELDS: We are, actually, that first priority exceptional item is to restore that reduction. So there it is.

COMMISSIONER HOLMES: This is for the biennium?

MS. FIELDS: These are biennial totals. Thank you, Commissioner Holmes. So I just switched you from an annual total to a biennial total here. You'll see that throughout this slide. Our second item requests $170.9 million, over the biennium again, to provide adequate funding and an additional 262.7 FTEs for State Parks and support functions as recommended by the State Parks Advisory Committee. Our third item requests $46 million of Proposition 8 General Obligation Bonds, over the biennium, to fund the major repair projects. You'll recall those Prop 8 bonds were approved by voters in 2001. This is the last piece of those bonds that was designated for us.

MR. COOK: Mary, I think it's worthwhile to point out number 2 and number 3 are in absolute sync with the State Park Advisory Committee's recommendations that you will be hearing about tomorrow.

MS. FIELDS: Thank you. Our fourth item requests $5.2 million of general revenue, over the biennium, to fund Game Warden Operations. GR funding is requested there because game wardens are spending more time on homeland security and other duties that are not related to fish and game law enforcement. So we do need some general revenue. Our fifth item requests $18.1 million over the biennium from Freshwater Fishing Stamp sales to fund the remaining construction at the East Texas Fish Hatchery, and maintenance and repairs to other hatcheries statewide. The sixth item requests $22.5 million in 2009 to complete construction of a permanent dry berth for the battleship that will again be part of the long-term maintenance solution. Finally, our seventh item requests $11.8 million, over the biennium, to fully fund operations at the Texas State Railroad. This includes 61.7 additional FTEs. So those are our exceptional items.

In reviewing our total request for fiscal years 2008-2009, the base request amounts to $409.2 million. Those exceptional items total $302.9 million for a total of $712.1 million over the biennium. That's our request. It's in this book right here.

If there are no questions, I will move on to the final segment here. Annually, we are required to review the Budget and Investment Policies. A copy of these policies are included in that action item handout for tomorrow's meeting. There have been no changes to the Budget Policy, so I'll touch on just a couple key points. The Commission authorizes the executive director to approve and execute necessary expenditures, budget adjustments, and transfers. Several different types of transactions are detailed in the policy. Budget adjustments, excluding the federal grants and the bonds that exceed $250,000, require prior approval from the Chairman of the Commission and the Chairman of the Finance Committee. So those are the highlights on that one.

Moving onto the Investment Policy, again this policy has not changed since the prior year, but as the governing body of this department, you are required to review this policy annually. All funds administered by Parks and Wildlife are required to be deposited in the State Treasury except for the four funds that are highlighted on the slide. While not required, all of them actually do reside in the State Treasury, except for the Operation Game Thief Fund. Those are invested in CDs in several separate bank accounts. I did take a look at that. It looks like there's about $325,000 distributed in several accounts.

All of the bank accounts that we're talking about must be authorized by the delegated investment officers. It must be properly collateralized. There are specific reporting requirements that are also included and detailed in the policy. That concludes my presentation. Are there any questions?

COMMISSIONER HOLMES: Any questions for Mary?

COMMISSIONER FITZSIMONS: Thanks for your hard work.

COMMISSIONER HOLMES: Yes. Thank you very much.

COMMISSIONER FITZSIMONS: You make it all a lot easier.

MS. FIELDS: I appreciate it.

MR. COOK: I second that and I tell you, this has been an interesting process for us to get to this point, as you can well imagine. It's one that we're very, very careful with. We're working with it very hard. I would be absolutely remiss not to express to each and every one of you the staff's appreciation for your support, your involvement, and continued work as we approach a very, very important intersection here in how we're going to do business at Parks and Wildlife.

COMMISSIONER FITZSIMONS: It's going to stay interesting for a little bit.

MR. COOK: I think you might be right.

COMMISSIONER HOLT: At least through next May or whatever, when we get the Legislature and whatever.

COMMISSIONER HOLMES: Commissioner Parker?

COMMISSIONER PARKER: The thing that encourages me the most is the wonderful support for "the rest of the story" from the Governor and Speaker. I think those people are in it with us for the long haul and I really think that we should give credit where credit is due, for those two people stepping up to the plate and saying, Yes, we've got to have these exceptional LAR items.

COMMISSIONER HOLMES: I wholeheartedly agree. I want to add Harvey Hilderbran into that as well. He's been carrying the Legislation for us and we need all the help we can get


COMMISSIONER HOLMES: — because it's going to be a tough session. Are there any further questions or discussion about Mary's presentation?

(No response.)

COMMISSIONER HOLMES: If not, I'm going to place the FY '07 Operating and Capital Budget and the Budget and Investment Policy Resolution section of this item on the Thursday Commission meeting agenda for public comment and for action.

Item 3, Technology Update, Mr. Rios?

MR. RIOS: Commissioners, for the record, my name is George Rios, Director of Information Technology. I have two items to present today. We'll start with the Data Center Consolidation Project. This is a huge and complex project that affects a number of state agencies. This project will have a sweeping effect of the delivery of technology services, staff, operational procedures for procurement of goods and services that could potentially impact us financially.

A quick recap on the Legislature's intent for this project to maximize the value of technology investment, the 79th Legislature passed House Bill 1516. The Legislation directs state agencies to take a statewide approach on the delivery of data center services. For reference, data center services are a type of equipment that we generally refer to as mainframe and server-based equipment that is housed in what we call the computer room. What this is, these are those boxes for security of Internet hacking availability. They're the boxes where we store data. This is our e-mail, our financial systems, all the boxes that run the back-end systems, and applications for the agency are considered part of this scope. It also includes the staff that manage those systems. The overall goal of this legislation is to reduce the cost through economies of scale, improve securities and disaster recovery capabilities for all state agencies.

The selection of the top 27 agencies involved was based on technology spending patterns for the delivery of data center and associated services. The handout that I passed out to you lists those 27 agencies, including TPWD, in no particular order. Legislation instructed that the Department of Information Resources is responsible for the project and the project selection of the service provider that will provide these services for all state agencies statewide.

Currently, there are over 30 data centers across the state with various levels of security and disaster recover service. Most individual agencies have contracts with different terms and conditions for these related services. The goal is to move to a shared environment and a common infrastructure. The state will have two data centers rather than 30, higher levels of security and disaster recovery service, and a single contract for economical pricing and flexibility of services. Bottom line, what this does is within this project, initially the service provider takes over the equipment that's in our computer room that we currently manage, but over a two-year period, or maybe a little bit longer, what will happen is all of that equipment that is in there will actually move to one of these data centers. So it's going to impact us from that standpoint. It's in the vendor's interest to do this and consolidate this as quickly as possible to recover their initial cost on this.

Agency involvement through this project I serve along with the other IT directors on an advisory council which is the Data Center Advisory Council that DIR created soon after the legislation was passed. What this counsel does is DIR wants to seek information from all of the IT directors and the agencies. We meet frequently and actively on all aspects of the project. In addition to IT and IT staff, we have HR staff and Administrative Resource staff that have given their time to serve on these committees. These workgroups' main goal was really the development of the requirements for the Request For Offer (RFO) that's going to go out and now it's to evaluate the responses that are going to come back.

Over the past year, a large amount of time and effort has been given from our technical folks with extensive data collection and validation required for this project. I mean, for example, what this means is that for every computer or every server that we have in that back computer room, we've had to get the number of processors, the amount of memory that's associated, the systems and applications and relevant contracts that are associated. We've done this over that process in order to submit this information to DIR.

To give you a little update on the milestones and where we currently are, we've completed several of these. The big one, or the one that I'd like to mention, is the data collection that was due December 2005. What this basically did is this was the base case for what it cost this agency to provide those services. That was submitted back in December 2005. Right after that, we started working through these committees and groups in order to develop the Request For Offer and we also had to sign an inter-agency contract. The inter-agency contract was part of the legislation that required all agencies to sign it. What this did is it was what set the terms and conditions in which DIR would deliver the agency services. The Request For Offer was released in March and the vendor responses were due in May. DIR did receive two responses to the RFO, primary vendors with associated firms, each representing many of the top firms in the industry. The two primary vendors are IBM and Northrop Grumman.

Our current activities are the evaluation of the responses, which started back in June and is going to go through October. Due diligence, this is the piece where the vendors are going to have a chance to come in and true up the information that we had submitted. In fact, we have vendors here today and we'll have vendors here tomorrow. What they're going to do with this process is this will give them a chance to come in, look at the agency services that we provide, verify what those services are so that they can go back and do a better job on providing a Best and Final Offer.

The Best and Final Offer is still on schedule for October. Everything, according to DIR, is on schedule for a contract signing in late November, early December. Once that contract is signed, then we will start moving into a transition and commencement period. The transition period is basically between December and March. This is where we'll meet with the selected vendor or the awarded vendor and what they'll start doing is working with each specific agency in order to get a better understanding of the systems that are managed in the computer room, so that they can actually take over those services. They'll take over those services, which is the commencement, on March 31st. That's basically the way I look at it. We'll basically turn off the lights that night when we leave and they'll turn them on the next day.

From a financial impact for the agency, the cost associated with the delivery of services is still unknown and will not be available until the contract is signed. Since our IT Division runs exceptionally lean on the delivery of these services, there's an outside chance that even if the state sees the savings as a whole, that this agency may not realize a cost savings and that it may actually cost us a little more than what we're currently paying. This is an outside chance, but because of that we've instructed DIR of our concerns and DIR did agree that if it does cost us more that they will work with us through the Legislative Appropriations process to seek those funds. We also addressed federal funding-related concerns in our LAR Administrator's Statement to insure that if increased funds are needed, it will not impact us or impact our federal funding partners. This is a hard one for me.


MR. RIOS: Sir?

COMMISSIONER HOLT: I guess, have you gotten to the point yet to decide how they're going to allocate those costs?

MR. RIOS: No, sir.

COMMISSIONER HOLT: Okay. That's a real financial risk there.

MR. RIOS: We're hoping that through the process, and especially some time between the November, December time frame, that we'll be able to get a little better idea of what those costs are going to be for individual agencies. That's when we'll know. DIR has instructed us, and I think they're working with LBB, but when they return those costs to the agencies then we'll be able to adjust the funding needs, if needed.

From a personnel standpoint, we have a number of affected staff. When we talked about Data Center Consolidation earlier, I mentioned it was not only the equipment but it was the people that managed those systems. When we submitted the information, which is what I will call the in-scope of what is within a data center and the support, we identified nine positions whose job functions will move to the center. What we're doing, part of the requirement of the RFO, is that the selected or awarded vendor is required to offer at least a one-year minimum contract to all individuals that are affected. This is across the state.

Why they're doing that is really for the benefit of reducing the amount of risk that is associated with moving these systems over to a new vendor. We obviously have the in-house knowledge. We obviously know how to manage these systems. What we want to do is ensure that this transition is smooth, that there is no harm or issues to the services that we provide. DIR, more importantly, realizes that it's important for us, as state agencies, to work with them for the success of this project. One of the things on here, which we've been concerned with from the get-go when this legislation was passed is really the flight risk. There were a number of staff that once the legislation was passed, they knew they were in-scope. In fact, within the IT operations area, there's 20 folks. All of them have some portion of their job responsibilities within this in-scope of services. At that point, we started working with HR on affected employees. To this date, we do have nine positions that are going. All of them are made up within the IT division and one of them is made up of a portion of FTEs throughout the agency.

The loss of institutional knowledge is another one. We've been strategizing on how to ensure that we've gotten the documentation and the requirements needed to run these systems so that none of our systems are affected through this.

COMMISSIONER HOLMES: George, before you move away from that?

MR. RIOS: Yes, sir?

COMMISSIONER HOLMES: Back on the flight risk, since we know that there are nine positions that are going, you also said that there are nine positions that are going to go to the data center.

MR. RIOS: What happened is

COMMISSIONER HOLMES: Are those the same or are those different?

MR. RIOS: Well, what happened is that when you looked at the operations area where these are the folks that generally manage the equipment in the computer room, there's only 20 of them. They all wear multiple hats. For example, if we look at our e-mail system, the same person that manages our e-mail system also assists with the Wide Area Network or he'll do some other functions. So there was a percentage of everyone. When we totaled those percentages, it added up to nine positions. That included a percentage, small, from other divisions that also have some type of technology support with their areas. So what we've done is we've basically started looking at, and working with HR, to see if somebody had a large portion of their percentage that was in-scope, well then, we moved them over and added so that they work full time and to identify nine. We have had three people that have left because of this and we have been working with the other staff.

COMMISSIONER HOLMES: But there are some members of staff that will be offered the opportunity to move to the data center?

MR. RIOS: Yes, sir. In fact, we've had several that have stepped up to say that they recognize that there's an opportunity. I mean, when you're looking at an IBM, a Northrop Grumman, and you're looking at them offering you a one-year comparable pay, and you're going to be in there doing the job, and if you do a good job, you know, as far as career opportunity, they're some of our younger folks that have taken a look at that.

For us, you know honestly, we hate to lose some of the folks that are there. We've had them for so long and some of them have institutional knowledge that when a system really breaks and, you know, for IT it's one of those, if everything works, nobody even knows we're around. We kind of like it that way. When it doesn't, they're looking for us. These guys have worked on this so long, they know how to go in. They know these systems. So, for us, that's one risk, but it's really going to help us on the transition and when we roll over to the transformation. We really need those folks to be part of that team so that they know how to manage our systems. So, for us, it really is a win-win. We've encouraged that and we've worked with them on that.

COMMISSIONER HOLT: Tell me, are all the agencies going into this?

MR. RIOS: Just the 27 that I showed you. They're the top 27 agencies.


COMMISSIONER HOLT: Yes, the short list. How many are there?

MR. RIOS: For this round, it impacts the top 27 agencies that obviously had the higher number of associated cost for data center services. I think we really just squeaked in. I was really working to see what we could do to

COMMISSIONER HOLT: Yes, that would be the second round or the third round. I assume you've got to be worried about this because the time frames you're showing there are awfully short.

MR. COOK: We are very, very concerned about this, folks.

COMMISSIONER HOLT: Yes, I can see that.

MR. COOK: We know that we operate a very, very efficient, a very, very lean operation. We know what other agencies do. We know the number of staff they have and the amount of money that they spend. We compare very well. We will not we probably are not going to save money here. We are doing everything we can. Mr. Rios and his staff have done an incredible job of working through this. It is not easy. It's not much fun. I serve on the board, a very similar board as an ex-officio member at the Department of Information Resources. I have expressed my concern about over-promise and under-delivery. Now, that's not fair in a way because we've got to give them a shot and they're working at it very hard, but it's a difficult transition in the agency and one that we are concerned about. We'll get there.

COMMISSIONER PARKER: Bob, let me ask one question that you made in a statement a moment ago. We're not going to know what this is actually going to cost us until the day that we sign the contract?

MR. RIOS: No, they are working through a negotiation process now. Really, the financial piece of it has been held within DIR, their contracts there. There are agency representatives. There was a financial workgroup that had agency representatives from CFO level and throughout, but we really won't know the cost until they're closer to signing the negotiation. Right now, they're waiting for the best and final to come in, which is due in October. Hopefully, we'll hear something more in the November time frame.

COMMISSIONER PARKER: And what if it blows our budget? I mean, what if it comes in real high? Are we going to suck up and go?

MR. COOK: We'll adjust and keep moving.


COMMISSIONER BIVINS: Will there be any possibility within these agencies to have, you know, you're going to have a total expense with all the entities involved. Is there any way to blend the cost or prorate the cost out so that maybe someone else could pick up a little bit more of the total?

MR. COOK: That remains to be seen.

MR. RIOS: Yes, I think that that's been in some of the discussions as well.

COMMISSIONER HOLMES: Mark, it's kind of like when you hire someone to build you a commercial building. You know, you negotiate on the front end and then you negotiate on the back end.

VOICE: Also, highway structures, too.

MR. RIOS: Well, on the procedural impact, we've already implemented some of the processes that allow us to procure most of our IT-related items and services through the DIR contract. Basically, it's just the continued coordination with the divisions on technology spending and projects, and really we're moving from where we used to buy assets and install them ourselves to paying for services. We'll continue to work that out as we move through this process. The next step is really for us to stay involved in the project, which we've been doing, and refine our strategy for delivery of services to minimize impact on this agency, and then keep you updated.

Business presentation

COMMISSIONER HOLMES: Any questions or comments for Mr. Rios?

MR. RIOS: Well, this brings us to the second item and this is where I have a little bit more concern about my ongoing employment with this agency. So I'll ask Ann to come up.

MS. BRIGHT: Good morning. I'm Ann Bright, General Counsel. Hopefully, this one will be a little bit more positive and interesting, maybe even exciting. Over the last several years, staff in the Executive Office, Communications, and IT have been working to try to make the Commission process, the process of having these meetings, more efficient, transparent, and user friendly for the Commissioners and for the members of the public. The use of the Internet has assisted a lot in this. One of the things you probably already know is that we actually have agendas from old Commission meetings on our website back to, I think it's November '97. We've got transcripts of previous Commission meetings back to November '99. All are available right now on the website.

Right now, we post the agendas and related materials, which you all get in a book. I see a few of these around. We post those at least 12 days before the Commission meeting, which you know our statutory deadline is only seven days. So, again, we're trying to get as much information out there as possible. Recently, we added another feature, which is audio transcripts, so that an audio transcript of a meeting is available on the website within a few days after the Commission meeting. So if you want to hear exactly what was said at a Commission meeting, you don't have to wait for the court reporter to transcribe the meeting. You also don't have to wait to get a copy of the tape.

So now we're ready to move on to the next stage. Beginning in November, we are planning to further automate the Commission process. We're going to have a dual system and George Rios in IT, as well as Communications, have been working on this. I'm going to let him take it from here.

MR. RIOS: Sure. I think for the November meeting what we planned on doing, what we wanted to do is roll out the meeting with sending the book, the hard copy like you currently get. What you'll do is this time you'll receive a CD with it and you'll also receive instructions on the CD. It will basically be the same information that's in the book, which will be included in there will be the transcripts from the old meeting.

During Commission day, what we'll have is a laptop for each of the Commissioners and on there, it will be preloaded with the same information that's there. The difference is that this is more of a point and click navigation, similar to what you would do on the Internet, but we'll have staff here that morning and we'll have staff here through the meeting to make sure that we can help you. Basically, that's going to be the way we're going to try that out. After the meeting, we'll go back and reassess how that worked and see what we need to do, adjustments, for the January meeting.

COMMISSIONER FRIEDKIN: Will that be committee and meeting, both?

MR. RIOS: Yes, sir.

COMMISSIONER HOLMES: So we'll have the laptops?

MR. RIOS: We'll have the laptops and what we're using is


MR. RIOS: Yes. What we're going to reduce costs on that is we're actually using our laptops that we take out in the field for training to help reduce travel costs. We'll be using those same laptops. So really there's no additional cost.

COMMISSIONER FITZSIMONS: So there will be links there so if you're referencing a statute or a reg, you can look at it.

MS. BRIGHT: Actually, no.


MS. BRIGHT: It's not going to be set up so you can surf the Internet basically, not that you would, but

COMMISSIONER FITZSIMONS: No, my question is if you reference a reg or you reference a statute, you link it?

MS. BRIGHT: It will be whatever is in your book available with point and click.

MR. RIOS: We're basically looking at hyperlinking everything that's there.

COMMISSIONER FRIEDKIN: Would it have key word search so if you wanted to look up "flounder" for the last two years, we can pull that information up?

MS. BRIGHT: Probably not during the meeting.

COMMISSIONER FRIEDKIN: But at some stage, we might lean toward that capability?

MS. BRIGHT: That's one of the things we definitely will do.

COMMISSIONER FRIEDKIN: I think that would be very good.

MS. BRIGHT: One of the things that having something connected to the Internet, in connection with the regs, for example, is that other than our staff having to go in and basically adjust all of our regs, we can just link to the Texas Register, which is really the primary source for that information. It's the same thing with the Administrative Code. I just want to make sure that you understand that the availability is not going to be everything on the Internet. It's going to be the stuff really that

COMMISSIONER FITZSIMONS: Make sure that they can't e-mail one another while you're talking.

MS. BRIGHT: Not that that would happen.

COMMISSIONER FITZSIMONS: You still have to do the notes.

COMMISSIONER RAMOS: Will it also include the slides and the charts?

MR. RIOS: Not at this time. I think that's where we said that we'll do the start, and reassessing, get feedback from everybody, and see whether we can include it or not include it, but they will be standalone for this meeting.

COMMISSIONER RAMOS: Because sometimes you may want to refer back to a chart, and you could do it while whoever is addressing the Commission is still here, and say back in the chart 2 for example.

MS. BRIGHT: As we go through this, we'll be looking for feedback on ways to improve this process. This is just our first stab at it. Also, we're going to have a dual system. So you will still get your book. You'll still have everything you get now. So it's a little more gradual transition.

COMMISSIONER PARKER: It's very exciting.

COMMISSIONER HOLMES: I think it's a great idea.


COMMISSIONER HOLMES: It might take a meeting or two or three to get it down.

COMMISSIONER PARKER: Yes. There's a lot of people.

MS. BRIGHT: George is very good about having his staff here.

MR. COOK: We'll get there. I think it's going to be a great step. You know, I want to take you back just a couple or three years. I want to particularly thank this lady right over here. Carole Hemby has done just a tremendous job in assisting all of us in getting there. Four years ago, Gene, we used to print 80-something copies of that book. Our goal is to I mean, you can imagine how many trees that was, and how much of it went to waste, and the amount of time and printing cost it took. We're basically eliminating all that, making it available to you sooner. I can remember the days when those books got to Commissioners literally almost as they walked in the door. That's something that we can do better on.

So as we go through this process, I'm anxious to see how that works. I think as you go through those agendas, for example, it would be good if we have a notes section, where, as you're looking there, if you have something that you want to be sure to remember to ask about or to get more information on, that you can make a note right there that is saved somewhere in the process.

COMMISSIONER FITZSIMONS: And will be followed up by staff?

MR. COOK: Yes, absolutely.

COMMISSIONER FITZSIMONS: So that we don't ask the same question three meetings in a row?

MR. COOK: Absolutely right.


COMMISSIONER RAMOS: I was going to suggest in that connection, of course we do this in trial work, but if you leave a little margin on the left, like an inch, an inch and a half, that's where you can put your notes and it relates to the item. I mean, that's the way I do it. I'm not saying we need to do it that way, but if you just leave a little margin, then you can make a note.

COMMISSIONER FITZSIMONS: Along that same line, is this also where you address the issue? Some people have mentioned that the agenda is not as easily accessible on our Parks and Wildlife website as it might be. You do have to go searching for it. You really have to.

MS. BRIGHT: I mean, one of the things we can work out with our web folks is putting a link. I think once it goes up, usually there's a link on the far right side, kind of like "Hot Topics" to the current one. You know, that's one of the things we can definitely work with Communications on, is making that

COMMISSIONER FITZSIMONS: Could you all work on that and just give us a report because it ought to be just front and center, right there? If we're two weeks out from the meeting, and somebody goes to our website, it shouldn't be hard to find.

MS. BRIGHT: Correct.

COMMISSIONER RAMOS: How would you handle the attachments? For example, you'd have a regulation and with the attachments in there

MS. BRIGHT: What it will probably look like, and again we're still kind of working out exactly the appearance, is you would get it, your screen would essentially be the agenda, and you would click on, for example, regs. And then, within regs, there would be the items, and then you could click on


MS. BRIGHT: — the item 1 and it would have the description of that plus any attachments. If there are rules, whatever, they would all be there.


COMMISSIONER HOLMES: It's going to be an interesting process.


COMMISSIONER HOLMES: The meeting will be exciting. Thank you very much. That's a great project.

MS. BRIGHT: Thank you.

COMMISSIONER HOLMES: No action required on that.

Item Number 4, Super Combination License Rules Stamp Revenue Allocation, Gene? This is kind of a black box of allocation. Maybe you can help them with allocating the cost to his data center process.

MR. McCARTY: That's a whole different issue.


MR. McCARTY: Mr. Chairman, Commissioners, my name is Gene McCarty. For the record, my name is Gene McCarty. The item before you today deals with the allocation of net receipts from the sale of the Super Combo license. As you may remember in a recent audit of Fund 9, the State Auditor's Office recommended that the Commission define net receipts in the methodology it uses to allocate revenue for the Super Combo licenses, to dedicate stamp funds, and allocate revenues accordingly. In addition, it was recommended that the Commission define that receipt from any other combination license from which the full amount of the stamp is not allocated to a restricted fund. Just for your information, the only other license is the Senior Super Combo so we're still working with both the Super Combo and the Senior Super Combo.

At your May Commission meeting, you authorized staff to publish a proposed administrative rule in the Texas Register that would define and allocate net receipts for the Super Combo license components that's both licenses and stamps as a value calculated from the weight from a relative weighting using both the price of the stamp or the license and the purchaser use, as established by a dedicated survey. This rule was published in the July 21, 2006 issue of the Texas Register. To date, we've received no public comment.

Also as discussed in the May Commission meeting, the Department has conducted a dedicated survey of Super Combo and Senior Super Combo buyers to determine license and stamp usage. What you see here is the results, to date, of that survey. We've only got one mailing out right now. We've, recently last week, sent a second mailing out just as a reminder. Just on a single mailout, we've gotten an extremely good response rate, about 35 percent in the Super Combo and over 60 percent in the Senior Super Combo, in terms of individuals responding to our mailout. So we feel pretty confident in this data and it's even going to get better. Probably, we can pull the plug on it in a couple of weeks and do our allocations. It's interesting to note the difference between Super Combo and Senior Super Combo. It would appear to me that purchasers of the Senior Super Combo are really purchasing that license at a value license, as compared to the regular Combo which is purchased as a convenience license.

When these results are applied to the actual revenues from the FY '06 Super Combo, you get this kind of an allocation. Just for comparative reference, I've also included the fund allocation schedule based on our 2005 methodology. If you remember our old methodology was based on a series of a lot of different surveys, Fish and Wildlife Survey of users, Small Game Harvest for Texas Parks and Wildlife Division; a lot of different survey data was all blended together to create an allocation. We didn't miss it by too far, I don't think. You know, there's a little bump here and there. I think probably the place that we missed it the most is in archery hunters. We missed the percentage of archery hunters that are actually using the Super Combo.

Based on the Super Combo survey results and comments received from in-house reviews, we are proposing an amended administrative rule. The amendments are intended to just simply clarify, and simplify the rule, and provide for you the organization of all this data. We would be requesting your consideration to present this to the full Commission tomorrow for the final adoption. Any questions?

COMMISSIONER FRIEDKIN: Will you survey annually?

MR. McCARTY: Annually. We will survey every year. You know, over time, we'll get an idea of any movement


MR. McCARTY: — within groups, any change in utilization. You know, it's interesting to look at the difference between people who are utilizing the Super Combo to fish or utilizing the Super Combo to hunt. Those numbers are slightly lower than what we would have expected. However, the other interesting component of it is looking at the Freshwater or Saltwater Stamp. The amount of overlap there is higher than we would have expected. So there's a lot of interesting data here. You know, we'll be mining it for a good while.

MR. COOK: We'll get you a full report on this when we get our numbers in, but we wanted to give you this preliminary because we think it's going to change very little with that kind of return. It's a really good statistical, valid samples methodology being used here and the guys are doing a great job.

COMMISSIONER HOLMES: Just one quick question that I have, Gene.

MR. McCARTY: Yes, sir?

COMMISSIONER HOLMES: The numbers, the percentage return on these surveys is stunningly high, like 10x higher than you would normally expect. How many did you send out? You didn't send out to everyone who had a

MR. McCARTY: No, sir. It was a random sample

COMMISSIONER HOLMES: You had a sample, a random sample?

MR. McCARTY: — of 5,000.

COMMISSIONER HOLMES: It's still amazing.

MR. COOK: They care about this.

MR. McCARTY: Plus, our Super Combo buyers are our premiere user group.

COMMISSIONER FITZSIMONS: That's a qualified, a very qualified group, the Super Combo people.

MR. COOK: That's interesting. They want us to know.

COMMISSIONER HOLMES: They want us to know, yes.

COMMISSIONER FITZSIMONS: Does that include the Life? That wouldn't include the Life?

MR. McCARTY: No, that doesn't include the Lifetime License.

COMMISSIONER FITZSIMONS: That's another interesting group. It would be interesting

MR. McCARTY: Another premiere user group.


COMMISSIONER HOLMES: Are there any further questions, comments, for Gene?

(No response.)

COMMISSIONER HOLMES: Thank you very much. If there are no further questions or discussion, I will place this item on the Thursday Commission meeting agenda for public comment and action.

Mr. Cook?

MR. COOK: I believe that's it.


COMMISSIONER FITZSIMONS: In the interest of some items that require action, we've requested that we move to Regulations, change our order here just a tad.

(Whereupon, at 10:49 a.m., this Finance Committee meeting was concluded.)


MEETING OF: Texas Parks and Wildlife Commission
Finance Committee
LOCATION: Austin, Texas
DATE: August 23, 2006

I do hereby certify that the foregoing pages, numbers 1 through 83, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Parks and Wildlife Commission.

Debbie Greene 8/31/06
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731
(512) 450-0342