COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0689-01
Bill No.: SB 196
Subject: Department of Corrections; Political Subdivisions; State Departments
Type: Original
Date: February 3, 2003
FISCAL SUMMARY
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| General Revenue* | (Unknown) | (Unknown) | (Unknown) |
| Total Estimated
Net Effect on General Revenue Fun |
(Unknown) | (Unknown) | (Unknown) |
*Could exceed ($100,000) in any given fiscal year.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| All State Funds | (Unknown) to Unknown | (Unknown) to Unknown | (Unknown) to Unknown |
| Total Estimated
Net Effect on All State Funds |
(Unknown) to Unknown | (Unknown) to Unknown | (Unknown) to Unknown |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 9 pages.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Local Government | $0 | $0 | $0 |
ASSUMPTION
Officials from the Office of Administration - Division of Design and Construction, Department of Economic Development - Public Service Commission, Department of Mental Health, Department of Labor and Industrial Relations, Department of Revenue, Department of Public Safety - Capitol Police, - Missouri State Water Patrol, - Division of Fire Safety, - Office of Adjutant General, - Division of Liquor Control, - State Emergency Management Agency, - Missouri State Highway Patrol, - Director's Office, - Division of Highway Safety, - Veterans Commission, Office of Governor, Department of Insurance, Missouri House of Representatives, Office of Lieutenant Governor, Office of State Auditor, Missouri Senate, State Tax Commission, Central Missouri State University, Harris-Stowe State College, Missouri Western State College, Truman State University, Southwest Missouri State University, and the University of Missouri assume the proposed legislation would have no fiscal impact on their agencies.
ASSUMPTION (continued)
Officials from the Office of Administration - Division of Purchasing and Materials Management (DPMM) assume the proposal could increase the number of bid solicitation documents produced by the DPMM. This increase in documents would be for items that were previously purchased directly from Missouri Vocational Enterprises and now would be purchased through the competitive bid process. However, DPMM assumes the proposed legislation would have no fiscal impact on their agency.
Officials from the Department of Natural Resources assume the proposal would result in minimal fiscal impact.
Officials from the Department of Elementary and Secondary Education (DESE) assume the proposal would require the state to evaluate, on a competitive basis, purchases from the vocational enterprise program in any case where one or more existing Missouri business can provide such goods or services.
DESE has spent approximately $95,000 with MVE for FY 03. DESE typically purchases such items as envelopes, furniture, cleaner, communication services, and paper. All these services can be provided by outside vendors, so DESE would be required to evaluate whether the vocational enterprises program can best meet their needs in terms of price, quality, and time of delivery; therefore, DESE would likely seek competitive bids. DESE cannot know whether they would receive better prices, quality, and delivery; however, experience has shown that the bidding process generally divulges better prices. There would be additional administration costs for DESE because of the additional work required in bidding out these products and services. It is unknown whether the results of competitive bidding would offset the additional work required.
DESE assumes public schools would not qualify as a public institution owned, managed, or controlled by the state.
Officials from the Department of Social Services (DOS) state they make several thousand purchases from Missouri Vocational Enterprises each year. Most of these transactions fall into the two broad categories of furniture and recycled printing cartridges. Both of these products are sold by Missouri businesses, so an evaluation would be required and the bidding requirement would seem to apply. DOS assumes the additional work could be absorbed by existing staff.
Officials from the Office of State Treasurer assume the proposal would have a small unknown positive impact to their office.
ASSUMPTION (continued)
Officials from the Office of Secretary of State (SOS) assume the average number of annual purchase orders from SOS to MVE is 150. This estimate is based upon actual prior fiscal year data. The SOS assumes the same number of bids, 150, would need to be conducted on an annual basis in order to comply with the terms of the proposed legislation. Under the proposed legislation the bid process would have to be completed for products or services provided by MVE without regard to which vendor sere the successful bidder, an existing Missouri business or MVE. The issuance of a purchase order would be delayed approximately 15 days in order to complete the bid process.
The average time involved in conducting a bid is approximately 14 staff hours. Thus, the mandatory requirement to conduct bids for products or services provided by MVE would result in an increase of approximately 2100 staff hours annually (150 bids x 14 staff hours), resulting in the need for an additional FTE Procurement Officer I (at $37,488 per year). The SOS estimates the cost of the proposal to be $62,200 in FY 04; $61,366 in FY 05; and $62,893 in FY 06.
Officials from the Department of Transportation (MoDOT) assume this legislation may result in a cost savings for MoDOT due to the ability to purchase items from an open market; however, the requirement that these items be competitively bid will increase MoDOT's cost when performing a competitive market analysis for each purchase. This legislation will require all items purchased be competitively bid; however, under other procurement laws, competition is not required until the acquisition value reaches $3,000.
MoDOT currently contracts with the MVE for the recycling of waste tires and tire pieces that are removed from the right-of-way by MoDOT. The competitively bid requirement would result in MVE being awarded the contract or a commercial business being awarded the contract at a price lower than the current MVE price. Due to the unknown outcome, MoDOT is unable to determine a fiscal impact.
Officials from the Department of Conservation (MDC) assume the proposed legislation could have a positive fiscal impact on MDC funds since Missouri businesses other than Missouri Vocational Enterprises may be used.
Oversight assumes state agencies could experience an increase cost of an unknown amount due to the bidding process. Oversight also assumes state agencies could experience savings of an unknown amount due to the decreased cost of goods and services as a result of the bidding process.
ASSUMPTION (continued)
Officials from the Department of Corrections (DOC) assume that removing the statutory requirement that state agencies purchase products and services from MVE will greatly affect MVE's revenue. The potential exists to force MVE to dissolve. Passage of the bill will cause a chain reaction throughout the agency. Inmate canteens where MVE programs once were will struggle with profits due to the fact that inmate wages would be greatly reduced. Canteen funds provide vocational and educational necessities for the inmates which would then have to be purchased with General Revenue funds. MVE's Working Capital Revolving fund, a self-sustaining fund whose funds do not lapse annually, will diminish.
It is possible that approximately $19,680,914 in annual revenue would be at stake. This is the total revenue ($25,168,381) minus the non-state public entity revenue ($5,130,592) minus the goods and services sold to state employees ($356,875)(FY02 data). It is also assumed that sales to state entities would be at risk.
The revenue from MVE in the Working Capital Revolving Account funds several key functions within the DOC which could be jeopardized:
ASSUMPTION (continued)
The following chart details the MVE programs and the revenue generated from each. The difference between the revenue listed on the spreadsheet breakout and the $25,168,381 listed above is from rental property income. MVE leases property which generates income.
| Industry | Site | Offender Employees | State Employees | Revenue |
| Clothing | CCC | 26 | 2 | $266,104 |
| Data Entry | CCC | discontinued | discontinued | $47,310 |
| Cartridge Recycling | CMCC | 16 | 1 | $328,596 |
| Quick Print | CMCC | 15 | 3 | $455,238 |
| Tire Recycling | CMCC | 28 | 10 | $712,424 |
| Shoes | CMCC | 12 | 1 | $546,239 |
| Furniture | CRCC | 91 | 4 | $578,053 |
| Laundry | FCC | 216 | 18 | $2,288,141 |
| Clothing | FCC | 31 | 3 | $985,188 |
| Clothing | MSP | 73 | 7 | $119,153 |
| Chemical/Dry Cleaning | MSP | 41 | 6 | $1,755,570 |
| Office Systems | MSP | 19 | 13 | $530,974 |
| License Plates | MSP | 28 | 4 | $2,247,150 |
| Plastic Bags | MSP | 13 | 1 | $54,684 |
| Furniture | MSP | 70 | 8 | $939,870 |
| Graphic Arts and Engraving | MSP | 32 | 4 | $1,573,154 |
| Office Systems | NECC | 58 | 5 | $2,301,843 |
| Laundry | MCC | 160 | 12 | $1,349,781 |
| Metal | MCC | 70 | 5 | $906,488 |
| Sign Shop | MCC | 52 | 5 | $1,001,311 |
| Print Shop | MCC | 43 | 4 | $1,460,914 |
| Furniture | MECC | 87 | 3 | $760,065 |
| Chair Frame | PCC | 19 | 2 | $208,328 |
| Chair | TCC | 44 | 2 | $1,307,448 |
| Clothing | WERDCC | 97 | 4 | $1,217,443 |
| Administration | 57 | $342,665 | ||
| Vocational Education | 30 | $2,120 | ||
| Total | 1341 | 214 | $24,286,254 |
In summary, although the exact fiscal impact is unknown, it is estimated that potential costs will be in excess of $100,000 per year.
ASSUMPTION (continued)
Officials from the Department of Agriculture, Department of Health and Senior Services, Missouri Lottery Commission, Lincoln University, Missouri Southern State College, Northwest Missouri State University, and Southeast Missouri State University did not respond to Oversight's request for fiscal impact.
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| ALL STATE FUNDS* | |||
| Savings - Various State Agencies | |||
| Decreased costs due to competition | Unknown | Unknown | Unknown |
| Costs - Various State Agencies
Increased costs due to bid process |
(Unknown) |
(Unknown) |
(Unknown) |
| Losses - Department of Corrections | |||
| Lost MVE revenue | (Unknown) | (Unknown) | (Unknown) |
| ESTIMATED NET EFFECT ON ALL STATE FUNDS* |
(Unknown) to Unknown |
(Unknown) to Unknown |
(Unknown) to Unknown |
*Impact to General Revenue Fund could exceed ($100,000) in any given fiscal year.
| FISCAL IMPACT - Local Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
The proposed legislation could have a fiscal impact on small businesses.
DESCRIPTION
Under this proposed legislation, the state and its agencies would no longer give Missouri Vocational Enterprises favorable status when purchasing goods and services. Agencies would be required to accept competitive bids for goods and services from Missouri businesses.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration
- Division of Purchasing and Materials Management
- Division of Design and Construction
Department of Economic Development
- Public Service Commission
Department of Elementary and Secondary Education
Department of Transportation
Department of Mental Health
Department of Natural Resources
Department of Corrections
Department of Labor and Industrial Relations
Department of Revenue
Department of Social Services
Department of Public Safety
- Capitol Police
- Missouri State Water Patrol
- Division of Fire Safety
- Office of Adjutant General
- Division of Liquor Control
- State Emergency Management Agency
- Missouri State Highway Patrol
- Director's Office
- Division of Highway Safety
- Veterans Commission
Office of Governor
Department of Insurance
Department of Conservation
Missouri House of Representatives
SOURCES OF INFORMATION (continued)
Office of Lieutenant Governor
Office of State Auditor
Office of Secretary of State
Missouri Senate
State Tax Commission
Office of State Treasurer
Central Missouri State University
Harris-Stowe State College
Missouri Western State College
Truman State University
Southwest Missouri State University
University of Missouri
NOT RESPONDING
Department of Agriculture
Department of Health and Senior Services
Missouri Lottery Commission
Lincoln University
Missouri Southern State College
Northwest Missouri State University
Southeast Missouri State University
Mickey Wilson, CPA
Director
February 3, 2003