01/28/1994 09:15 AM Senate FIN

                                                                               
  SB 246 REIMBURSABLE SERVICE AGREEMENTS                                       
                                                                               
  Co-chair Pearce  directed  that SB  246  be brought  on  for                 
  discussion.  NANCY SLAGLE, Director of Budget Review, Office                 
  of Management and  Budget, came before committee  to present                 
  an amendment.  Senator Randy  Phillips sought concurrence in                 
  the amendment from  the Legislative Auditor and  Director of                 
  Legislative Finance.   Mrs. Slagle explained that  the first                 
  provision  of  the   amendment  removes  redundant  language                 
  prohibiting use  of RSAs  to merely  transfer money  between                 
  appropriations.  That prohibition is covered in the previous                 
  sentence of the legislation.                                                 
                                                                               
  (Senator Rieger arrived at this time.)                                       
                                                                               
  The second change within the amendment eliminates subsection                 
  (2)  wording  requiring that  the  agency that  provides the                 
  service have authority, by  law, to do so.  The change would                 
  provide  flexibility  in  areas  where  an  agency  provides                 
  certain  expertise  but  may  not  have  specific  statutory                 
  authority.                                                                   
                                                                               
  Mrs. Slagle  said that the remainder of the amendment simply                 
  provides a better flow of bill  language.  She then directed                 
  attention to subsection  (2)(A) of  the amendment and  noted                 
  need to correct a typographical error by replacing "of" with                 
  "to."                                                                        
                                                                               
  RANDY WELKER, Legislative Auditor,  came before committee in                 
  response to  questions from  Senator Kerttula.   Mr.  Welker                 
  explained that the bill attempts to curtail past RSA  abuses                 
  highlighted by an  audit of the  Dept. of Health and  Social                 
  Services.    Statutory  clarification is  needed  concerning                 
  allowable uses of  reimbursable service agreements.   An RSA                 
  should  only provide reimbursement for a  service.  The bill                 
  attempts  to  cut off  potential  transfer of  funds between                 
  appropriations  under  the  guise  of  an  RSA.    There  is                 
  presently  no   statutory  language  that   addresses  these                 
  agreements.    The  proposed bill  would  "put  some  . .  .                 
  direction in statute."                                                       
                                                                               
  Responding to an earlier question from Senator Phillips, Mr.                 
  Welker said that amendment language proposed by OMB poses no                 
  significant problem.  Legal authority language proposed  for                 
  removal is an inherent requirement for use of an RSA.                        
                                                                               
                                                                               
  MIKE   GREANY,   Director,  Legislative   Finance  Division,                 
  concurred  in  comments  by  Mr.  Welker that  the  proposed                 
  amendment would  present no problem.  Mr.  Greany next noted                 
  that  when   the  bill  was  previously   before  committee,                 
  questions  were  raised  concerning legislative  ability  to                 
  continue  to  make  necessary  transfers within  the  annual                 
  budget  document.    Subsequent  review  has  not  evidenced                 
  problems in that area.                                                       
                                                                               
  Senator   Rieger   commented  regarding   subsection  (2)(B)                 
  language relating to cost allocation methods and asked if it                 
  provides a loophole.   Mr. Welker acknowledged  the concern,                 
  but questioned whether there was any way to totally preclude                 
  intentional circumvention.  It will be incumbent upon OMB to                 
  critically  review proposed cost  allocation plans to ensure                 
  that they  have a  rational basis  in cost.   Bill  language                 
  identifies  and places  responsibility  for approval  of the                 
  plan with OMB.                                                               
                                                                               
  Senator Frank MOVED  for adoption  of amendment no.  1.   No                 
  objection having been raised, amendment no. 1 was ADOPTED.                   
                                                                               
  Co-chair  Pearce  noted that  the  title of  the legislation                 
  appears to be  broad.  Senator  Rieger concurred in need  to                 
  limit the title to reimbursable service agreements.  Senator                 
  Kelly MOVED to tighten and clarify  the title.  No objection                 
  having been raised,  amendment no. 2, to restrict the title,                 
  was ADOPTED.                                                                 
                                                                               
  Co-chair  Frank MOVED  that  CSSB  246 (Fin),  incorporating                 
  amendment no. 1 and the conceptual title change of amendment                 
  no. 2,  pass from committee with  individual recommendations                 
  and the accompanying zero fiscal note.   No objection having                 
  been raised,  CSSB 246 (Fin)  was REPORTED OUT  of committee                 
  with a unanimous  "do pass"  recommendation, new title,  (An                 
  Act  permitting the use  of reimbursable  service agreements                 
  and other agreements  between state agencies to  finance the                 
  provision  of  services  if  the  agency that  requires  the                 
  service has  the authority to obtain or  provide the service                 
  and has an appropriation  that may be used for  that purpose                 
  and if the agency that provides the service bills the agency                 
  administering the funds available for  that service based on                 
  the actual cost to provide the  service or a cost allocation                 
  method  approved by the office of management and budget) and                 
  zero fiscal note from the Office  of Management and Budget.