Senate Bill No. 78

Introduced By sprague

By Request of the Governor

A Bill for an Act entitled: "An Act creating government competition and efficiency; establishing a competition council; granting rulemaking authority; providing procedures for review of privatization and competition plans; authorizing a general fund loan to the office of budget and program planning; amending sections 17-7-139 and 17-7-304, MCA;

repealing sections 2-8-301, 2-8-302, 2-8-303, and 2-8-304, MCA; and providing an immediate effective date."

WHEREAS, state government is interested in increasing productivity and efficiency in the delivery of state government services because increased population and related service needs continue to exceed growth in state revenue each year; and

WHEREAS, further reductions in workforce are not the best solution to balancing the budget and providing more services with fewer resources; and

WHEREAS, across-the-board cuts in agency budgets are not a tenable ongoing solution to balancing the budget and providing more services with fewer resources in state government; and

WHEREAS, the purpose of [this act] is to establish competition as a means of ensuring that Montana state government will deliver quality services at a competitive cost to customers and taxpayers, while maintaining a competitive market for the services; and

WHEREAS, Montana state government employees and employee groups should be allowed to compete with the private sector to provide government services; and

WHEREAS, the competition process should include a review of appropriate state government functions for possible competitive procurement; and

WHEREAS, the current 4-year period of relative economic stability is an appropriate time to establish the competition process, appropriate laws, and procedures to prepare for inevitable future economic downturns and federal revenue reductions; and

WHEREAS, the goals of service quality, competitive cost, and maintenance of a competitive market should guide the competitive process; and

WHEREAS, some of the factors that contribute to cost savings under competition include a focus at all levels of an organization on improved methods for providing services in a competitive manner, skill levels matched with job requirements, more flexibility in the use of part-time workers to adjust for peak or surge workloads, increased responsibility assigned to managers for equipment and labor availability, less equipment downtime, supervisors responsible for hiring and firing, lower rates of absenteeism, the potential for incentive pay systems, higher productivity, and less variability in efficiency; and

WHEREAS, the Legislature finds it appropriate to establish and encourage competition in state government programs and services.

STATEMENT OF INTENT

A statement of intent is required for this bill because the bill gives the department of administration and the office of budget and program planning authority to adopt administrative rules to implement [sections 1 through 18]. It is not the intent of this bill to in any way restrict the current management practices of agencies to address workload changes by doing the work themselves, contracting work out to the private or public sectors, or any combination of these practices.

Be it enacted by the Legislature of the State of Montana:

NEW SECTION. Section 1. Short title. [Sections 1 through 18] may be cited as the "Montana Government Competition and Efficiency Act".

NEW SECTION. Section 2. Definitions. As used in [sections 1 through 18], unless the context requires otherwise, the following definitions apply:

(1) "Agency" means an office, department, division, board, commission, council, or other entity or instrumentality of the executive branch of state government.

(2) "Competition" means the use of the concepts of free market functioning when there are at least two viable service providers that bid to perform services for state government, one of which may be the agency currently providing the function, to help ensure that state government delivers quality services at the lowest possible cost to customers and taxpayers.

(3) "Competition council" or "council" means the entity created in [section 3] to recommend implementation of competition and efficiency in state government services.

(4) "Competition team" or "team" means the group of state employees who have been selected by their colleagues to lead their workplace unit in the competitive process.

(5) "Competitive government process" or "competitive process" means applying the principles and schedules contained in the handbook to a specific state program, service, or function that has been approved by the council for participation and that either is authorized by law to be part of the process or is proposed to be performed by the private sector under a contract that is scheduled to be renegotiated sometime within 3 years from the date of council approval for participation.

(6) "Eligible state employee" means a state employee who worked at least 20 hours a week for a total of 1,040 hours in the year immediately preceding the effective date on which the service is awarded to a successful bidder.

(7) "Handbook" means the state competitive government notebook prepared and maintained by the office of budget and program planning, with input from the council, as the reference and training document to guide state employees and the private sector throughout the competitive process.

(8) "Private sector" means:

(a) any entity or individual not principally a part of a governmental unit and that is associated with or involved in commercial activity;

(b) a not-for-profit entity or an individual not principally a part of a governmental unit; or

(9) "Privatize" or "privatization" means contracting as a result of the competitive process with the private sector. The term includes the sale or lease of equipment, buildings, land, and other assets required to provide a state government service if the state does intend to directly deliver the service.

(10) "Program" has the meaning provided in 17-7-102, consistent with the management and accountability structure established on the statewide budgeting and accounting system, that is identified in the general appropriations act as a major subdivision of an agency and that is ordinarily numbered with an Arabic numeral.

(11) "Service" or "function" means a combination of resources and activities designed to achieve an objective of state government.

(12) "State employee earnings" means the amount paid for base salary and longevity. The term does not include overtime, differential, or holidays worked.

(13) "State employee severance pay" means the amount to be paid to each eligible state employee, computed by multiplying the eligible state employee's earnings during the year immediately preceding the effective date of the privatization contract by 26.8%.

NEW SECTION. Section 3. Competition council. (1) The competition council consists of the following individuals or their designees:

(a) the budget director;

(b) the commissioner of labor;

(d) a person filling a position within the purchasing bureau of the department who manages state contracts;

(e) two members of the house of representatives, one appointed by the speaker of the house and one by the house minority leader;

(f) two members of the senate, one appointed by the president and one by the senate minority leader; and

(g) the legislative auditor serving as an ex officio nonvoting member.

(2) The council is administratively attached to the office of budget and program planning as provided in 2-15-121. The budget director is the presiding officer of the council.

(3) Legislative appointments to the council must be made by the 60th legislative day. Legislators serving on the council may be reimbursed in accordance with 5-2-302 from the competitive government account established in [section 10].

(4) The council shall meet as often as necessary to perform its duties. The council is subject to the provisions of Title 2, chapter 3.

(5) Staff support for the council must be provided by the office of budget and program planning and other agencies upon request of the council.

NEW SECTION. Section 4. Duties of council. The council shall:

(1) encourage efficiency through competition;

(2) recommend that available resources be directed toward achieving competition in state government; and

(3) oversee implementation of [sections 1 through 18], applying the objectives of service quality, competitive cost, and maintenance of a competitive market.

NEW SECTION. Section 5. General powers of council. In performing its duties under [sections 1 through 18], the council may:

(1) comment on rules governing any aspect of the council's duties or responsibilities;

(2) hold public hearings or conduct studies;

(3) consult outside sources;

(4) recommend approval of the initiation or termination of the competitive process;

(5) recommend priorities for considering applications and implementing the competitive process;

(6) prepare recommendations for inclusion in a government competition and efficiency bill for the legislature;

(7) review the final competition plan for each service and comment on the bid specifications;

(8) evaluate bid responses and assess the bidders' qualifications and experiences;

(9) make recommendations for contract awards to the department;

(10) monitor contracts and evaluate performance; and

(11) report outcomes of the competitive process.

NEW SECTION. Section 6. Duties of affected agencies. The council may, while performing its duties under [sections 1 through 18], request agencies to perform an activity or to provide information. Nonexecutive branch agencies may choose to participate or may be directed by the governing body for the branch to participate in the process.

NEW SECTION. Section 7. Principles for competition. (1) The competitive process will be applied systematically, as determined by the office of budget and program planning, to state government programs and services that use state personnel or resources.

(2) Agency managers and workers in a service or program approved for competition may organize a representative work unit team that will lead the agency's competitive process, consulting with professional consultants and outside experts as necessary, in order to compete to continue delivering the service.

(3) An agency may respond to a request for proposals, an invitation to bid, a request for information, or other advisories issued pursuant to the competitive government process.

(4) If an agency does not choose to compete, the agency shall still complete the direct and indirect cost schedules described in [section 15(3)(d) through (3)(f)] before a contract may be awarded to an outside vendor.

(5) An eligible state employee who is involuntarily terminated from state employment as a result of the implementation of [sections 1 through 18] is eligible for any reduction in force benefits and for state employee severance pay if the employee continues in employment through transfer of responsibilities to either an employee group or the private sector.

(6) An agency wishing to compete may do so as part of a consortium, with other state agencies or with other public or private organizations. It must be clear in the competition report required in [section 15(3)(h)] what role the agency is to have in the consortium.

(7) Because the intention of [sections 1 through 18] is not to create private sector monopolies, the competitive process will be terminated by the office of budget and program planning whenever there are not at least two viable bidders, one of which may be the agency currently providing the service.

(8) In the event that there are not two viable bidders, the office of budget and program planning may work with the agency to redefine and narrow the scope of the function in a second request for proposals. If the office of budget and program planning terminates the process because of lack of viable bidders for the second time, then the function may not be included in the competitive process for at least 2 years.

NEW SECTION. Section 8. Handbook. The office of budget and program planning shall develop, distribute, and maintain a competitive government handbook.

NEW SECTION. Section 9. Competitive government training. The council and the office of budget and program planning shall conduct periodic training sessions on the competitive government process and on how to use the handbook. Training must be open to all affected state employees and other persons wishing to participate. A fee commensurate with the actual cost of the training may be charged.

NEW SECTION. Section 10. Competitive government account. (1) Competitive government activities of the council and the office of budget and program planning, pursuant to [sections 1 through 18], are intended to be self-supporting after the first biennium of implementation. There is a competitive government account in the state special revenue fund to be appropriated for use by the council and the office of budget and program planning.

(2) Fees, account balances, and miscellaneous revenue collected under [sections 1 through 18] must be deposited in the competitive government account.

(3) Money in the competitive government account may be invested pursuant to the provisions of the unified investment program by the board of investments. The income from the investments must be credited to the account.

(4) If the office of budget and program planning decides to privatize a function, the state may sell or transfer assets in accordance with 18-6-101, which may result in one-time revenue for the state. Unless otherwise specified by federal or state law, the one-time revenue must be deposited in the competitive government account.

(5) At fiscal yearend in each odd-numbered year, unreserved cash in the competitive government account that exceeds appropriations for the next biennium must be transferred to the general fund.

NEW SECTION. Section 11. Expenditure adjustments. (1) Whether or not an agency retains a service upon completion of the competitive government process, the budget director shall, with the approval of the governor, direct the agency to reduce spending to reflect the savings resulting from the competition for the remainder of the current fiscal year and for the second fiscal year of a biennium. The savings must be based on the final competition plan reviewed by the council and approved by the office of budget and program planning, including any contract monitoring and one-time conversion costs, and on the bid awarded by the department.

(2) The budget director may restore the authorized level of expenditure to the level authorized by the previous legislature if compelling unforeseen circumstances or an emergency are presented to and concurred in by the council and approved by the governor.

NEW SECTION. Section 12. Cash balances in accounts being closed. In the second year after implementation of a competitive process, any cash remaining in state special revenue, enterprise, or internal service fund accounts being closed as a result of implementation must be transferred to the competitive government account created in [section 10], unless otherwise specified by federal or state law. The department shall concur with the budget director on the status of the account prior to transfer of the remaining cash balance and closure of the account.

NEW SECTION. Section 13. Initiation of competitive government process. (1) A state employee, a group of state employees, a private citizen, a representative of any public or private entity, the council, or the legislature may submit a written recommendation to the office of budget and program planning asking or suggesting that a service or function provided in whole or in part by state personnel or resources be considered for competition.

(2) State employees making competition recommendations are protected from retribution under the state grievance policy.

(3) If the service considered for competition is provided directly by an agency or under a contract to an agency, the office of budget and program planning shall examine the facts and may require the agency to engage in the process developed by the council, including training, study, review, and development of performance measures and cost estimates for the service or any aspect of the service.

(4) The council may request agencies to review strategic plans and identify commercially available aspects of services that they are providing that could be better or more cost-effectively delivered through competition with other agencies or the private sector.

NEW SECTION. Section 14. Government competition and efficiency bill and funding. (1) The governor shall submit to each regular session of the legislature a government competition and efficiency bill listing by agency the services that are recommended for competition during the ensuing biennium.

(2) The budget for the competitive government account must be submitted to the legislature as part of the executive budget in accordance with Title 17, chapter 7, part 1.

NEW SECTION. Section 15. Competition teams. (1) Following the enactment of a government competition and efficiency bill, representatives of the council and the office of budget and program planning shall meet with the agency managers and workers in each of the programs approved for the competitive process to describe the process, review the handbook, and offer appropriate assistance.

(2) Each agency program approved by law or recommended by the council for the competitive process may form its own representative work unit competition team to provide workers, their labor organizations, and public employers with opportunities to study new and innovative joint approaches to achieving service quality and competitive cost. Each team must be encouraged to elect a presiding officer, vice presiding officer, and secretary and to distribute recorded minutes of each meeting to all affected employees.

(3) The competitive government process steps that apply to each agency program or function approved for the competitive process include:

(a) orientation and training for the team and as many affected employees as possible;

(b) assessment and revision of the current program or function description and its goals and objectives;

(d) accumulation of the total direct costs for the function and distinguishing those costs that are relevant to the decisionmaking process;

(e) completion of personnel and equipment cost worksheets;

(f) determination of indirect costs attributed to the function and distinguishing those costs that would be discontinued if the function were shifted to a contractor;

(g) preparation of the preliminary estimate of supervising and monitoring costs that would be expected if the service were to become a contractor-provided service; and

(h) submission of a written report on steps listed in subsections (3)(a) through (3)(g) to the council and a meeting with the council to present the report and answer questions.

(4) At any time during the process, the team may request information on strategic planning, performance measures, technical assistance, budgeting and accounting, contract writing, or other assistance, which may be provided by the office of budget and program planning.

(5) In acting upon a team or agency report, the council may conduct hearings, request further study, identify commercially available services, recommend that the process be halted because of insufficient competition or savings, recommend to the office of budget and program planning that the service be submitted to competitive bidding or any another process that creates competition, recommend the specifications that are to be used by the department in drafting the request for proposals, or take other actions consistent with its duties under [sections 1 through 18].

(6) Agency management is responsible for the competitive process if a team is not established.

NEW SECTION. Section 16. Direct and indirect cost schedules. The handbook must contain detailed direct and indirect cost schedules, together with supporting schedules and instructions. Each agency is responsible for completing the schedules to the satisfaction of the office of budget and program planning.

NEW SECTION. Section 17. Council recommendation to proceed. (1) If the council votes to recommend proceeding after reviewing a team or agency report, it shall forward the function specifications to the department in accordance with Title 18. The department shall work cooperatively with the council and the office of budget and program planning in drafting and issuing the request for proposals or other instruments.

(2) The office of budget and program planning, with technical assistance from the department, shall evaluate the bid responses, assess the bidders' qualifications and experiences, and negotiate the final and best offer. Negotiations and office of budget and program planning decisions may include:

(a) requiring that the private sector hire state employees;

(b) the state contracting with private sector employees; and

(3) The department shall make the award under this section.

NEW SECTION. Section 18. Rulemaking authority. The department and the office of budget and program planning may adopt rules to implement [sections 1 through 18].

Section 19. Section 17-7-139, MCA, is amended to read:

"17-7-139. Program transfers. (1) Unless prohibited by law, the approving authority may approve agency requests to transfer appropriations between programs within each fund type within each fiscal year. The transfer may not exceed 5% of the total agency appropriation, excluding statutory appropriations, administrative authorizations, and budget amendments. All program transfers must be completed within the same fund from which the transfer originated. A request for a transfer accompanied by a justification explaining the reason for the transfer must be submitted by the requesting agency to the approving authority and the office of budget and program planning. Upon approval of the transfer, the approving authority shall inform the legislative fiscal analyst of the approved transfer and the justification for the transfer.

(2) This section does not apply to transfers under [section 12]."

Section 20. Section 17-7-304, MCA, is amended to read:

"17-7-304. (Temporary) Disposal of unexpended appropriations. (1) ~~All~~ Except as provided in [section 12], all money appropriated for any specific purpose except that appropriated for the university system units listed in subsection (2) and except as provided in subsection (4) must, after the expiration of the time for which appropriated, revert to the several funds and accounts from which originally appropriated. However, any unexpended balance in any specific appropriation may be used for the years for which the appropriation was made.

(2) Except as provided in 17-2-108 and subsection (3) of this section, all money appropriated for the university of Montana campuses at Missoula, Butte, Dillon, and Helena and the Montana state university campuses at Bozeman, Billings, Havre, and Great Falls, the agricultural experiment station with central offices at Bozeman, the forest and conservation experiment station with central offices at Missoula, the cooperative extension service with central offices at Bozeman, and the bureau of mines and geology with central offices in Butte must, after the expiration of the time for which appropriated, revert to an account held by the board of regents. The board of regents is authorized to maintain a fund balance. There is a statutory appropriation, as provided in 17-7-502, to use the funds held in this account in accordance with a long-term plan for major and deferred maintenance expenditures and equipment or fixed assets purchases prepared by the affected university system units and approved by the board of regents. The affected university system units may, with the approval of the board of regents, modify the long-term plan at any time to address changing needs and priorities. The board of regents shall communicate the plan to each legislature, to the finance committee when requested by the committee, and to the office of budget and program planning.

(3) Subsection (2) does not apply to reversions that are the result of a reduction in spending directed by the governor pursuant to 17-7-140 or [section 11]. ~~Any~~ Except as provided in [section 12], any amount that is a result of a reduction in spending directed by the governor must revert to the fund or account from which it was originally appropriated.

(4) For the 2 years following the end of a fiscal year, 30% of the money appropriated to an agency for that year by the general appropriations act for personal services, operating expenses, and equipment and remaining unexpended and unencumbered at the end of the year may be spent for any purpose that is consistent with the goals and objectives of the agency. The dollar amount of the 30% amount that may be carried forward and spent must be determined by the office of budget and program planning. (Terminates July 1, 1997--sec. 13, Ch. 23, Sp. L. November 1993.)

17-7-304. (Effective July 1, 1997) Disposal of unexpended appropriations. (1) ~~All~~ Except as provided in [section 12], all money appropriated for any specific purpose except that appropriated for the university system units listed in subsection (2) must, after the expiration of the time for which appropriated, revert to the several funds and accounts from which originally appropriated. However, any unexpended balance in any specific appropriation may be used for the years for which the appropriation was made.

NEW SECTION. Section 21. Competitive process for 1999 biennium. On [the effective date of this act], the following programs listed by agency shall take part in a competitive government process:

Agency Program

Commerce Montana Lottery

Fish, Wildlife, and Parks Parks - Capitol Grounds Maintenance

Secretary of State Records Management - Long-Term Storage and Retrieval

Transportation Construction - Federal Bridge Inspections

Transportation Construction - Well Drilling Services

Transportation Maintenance - Rest Area Maintenance

Transportation Maintenance - Highway Striping Services

Transportation Maintenance - Crack Sealing Services

Transportation Maintenance - Roadside Mowing Services

Transportation Construction - Pavement Preservation

Revenue State Liquor Warehouse Operation

Public Health and Human Services Mental Health Nursing Care Facility in Lewistown

Public Health and Human Services Family Assistance Eligibility Determination

NEW SECTION. Section 22. Loan authority. The office of budget and program planning may borrow up to $50,000 from the general fund after [the effective date of this act] and during the 1999 biennium to implement Government Competition Efficiency Act. The amount of the loan must be repaid from the competitive government account established in [section 10].

NEW SECTION. Section 23. Repealer. Sections 2-8-301, 2-8-302, 2-8-303, and 2-8-304, MCA, are repealed.

NEW SECTION. Section 24. Codification instruction. [Sections 1 through 18] are intended to be codified as an integral part of Title 17, chapter 7, and the provisions of Title 17, chapter 7, apply to [sections 1 through 18].

NEW SECTION. Section 25. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

NEW SECTION. Section 26. Effective date. [This act] is effective on passage and approval.

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