Fiscal Highlights - November 2016

An Update on Internal Service Fund Rates - Sean C. Faherty ( PDF)

On November 15th, the Executive Appropriations Committee heard an update on internal service funds.
An internal service fund (ISF) agency is a state entity that provides goods or services to other government agencies on a cost-reimbursement basis. Each fiscal year ISF agencies propose new rates based on expected costs; the Legislature then makes funding decisions based on those proposals. The two types of ISF rates are those that are consumption or use based, such as vehicle/fleet management or information technology services and those that are determined actuarially such as property or liability insurance.
ISF agencies employ business practices to take advantage of economies of scale, to avoid duplication of effort, and to provide an accounting mechanism to identify costs of certain governmental services. There are two primary advantages to using internal service funds within government. First, ISFs charge customer agencies at rates set by the Legislature, and the price mechanism motivates customer agencies to find efficiencies to reduce expenses for ISF services so that operational budgets can be utilized elsewhere. Second, agencies can use federal and restricted funds to pay for ISF services rather than relying solely on General Fund and Education Fund appropriations.
The state's major ISFs are operated by the Department of Administrative Services (DAS), the Department of Human Resource Management (DHRM), and the Department of Technology Services (DTS). When making funding decisions during the 2016 General Session, the Legislature did not fund all impacts and agencies for these ISFs and they have had to work within their own budgets to manage those differences.
The combined impact of the proposed DAS, DHRM and DTS rates, if approved for the 2017 General Session would be $2.24 million ($1.35 million GF/EF), all from discretionary/consumption based rates.
The Legislative Fiscal Analyst made the following three recommendations to the Executive Appropriation Committee (EAC):
  1. Due to the differences between actuarially-based and consumption-based rates, LFA recommended that the EAC include actuarially-determined rate impacts in its discussion of major cost drivers each fall.
  2. LFA also recommended that EAC refer all other ISF rate impacts to the appropriations subcommittee with jurisdiction over the ISF for review and new funding prioritization.
  3. To support agencies that did not received ISF funding for Risk Management during the 2016 General Session, LFA recommended the Legislature consider providing $1.2 million ($0.7 million GF/EF) one-time in FY 2017 and $1.2 million ($0.7 million GF/EF) ongoing beginning in FY 2018 for Risk Management rate changes.
November 2016 Content ( PDF)

Access to High Quality Schools - Hector R. Zumaeta Santiago
During the 2016 General Session, the Utah State Legislature appropriated $11 Million for 3 years (t...
An Evaluation of Tax Exceptions and Inducements - Andrea Wilko
Utah offers more than 170 exceptions to tax code and inducements to behavior change. They can be r...
An Update on Internal Service Fund Rates - Sean C. Faherty
On November 15th, the Executive Appropriations Committee heard an update on internal service funds....
As the Holidays Begin, Let's Discuss Debt Affordability - Steven M. Allred
I recently had the opportunity to attend a National Conference of State Legislatures fiscal seminar...
B&C Roads Funding May Reach $175 Million in 2017 - Thomas E. Young
The 4th Special Session of the 2016 Legislature addressed B and C Roads funding. Among the formula ...
Comprehensive Study of Career and Technical Education in Utah - Jill L.Curry
House Bill 337, Career and Technical Education Comprehensive Study (2015 General Session), created ...
FY 2018 Capital Development Rankings - Brian Wikle
As defined by UCA 63A-5-104, "capital development" means 1) a remodeling, site, or utility project ...
Justice Reinvestment Initiative (JRI): Status Report - Gary R. Syphus
During the 2015 General Session, the Legislature passed House Bill 348 commonly referred to as th...
Managing the $173 Million DCFS Budget - Clare Tobin Lence
At the October 2016 meeting of the Social Services Appropriations Subcommittee, LFA staff present...
Student Enrollment Continues to Grow - Ben Leishman
A total of 644,476 students enrolled in Utah public schools this fall. This is an increase of 10,58...
Unclaimed Property: A Pleasant Surprise - Alexander R. Wilson
The Utah State Office of the Treasurer has made significant progress over the last three years in r...
Updated Full Medicaid Expansion Cost Estimates - Russell T. Frandsen
Staff was asked to update full Medicaid expansion cost scenarios. This resulted in five changes to ...
USHE Data Available, More to Come - Spencer C. Pratt
The Utah System of Higher Education collects and organizes a significant amount of data from each o...

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