Commission Meeting

of

NEW JERSEY COMMISSION

ON CAPITAL BUDGETING AND PLANNING

LOCATION:

Committee Room 11 State House Annex Trenton, New Jersey

 

DATE:

September 26, 2003
10:00 a.m.

 

MEMBERS OF COMMITTEE PRESENT:

B. Carol Molnar, Chair
Anthony F. Annese, Vice Chair
Assemblyman Peter J. Biondi
Patrick R. Brannigan
Gary Brune
Kevin P. McCabe

 

 

ALSO PRESENT:
 

David Rousseau
(Representing John E. McCormac)

George LeBlanc
(Representing Senator Wayne R. Bryant)

Mary Messenger-Gault
(Representing Assemblyman Joseph Cryan)

Michael Vrancik, Acting Executive Director
New Jersey Commission on Capital Budgeting and Planning

 


                                                     

Meeting Recorded and Transcribed by
T
he Office of Legislative Services, Public Information Office,
Hearing Unit, State House Annex, PO 068, Trenton, New Jersey

B. CAROL MOLNAR (Chair): Iíd like to call the meeting to

order.

In accordance with the Open Public Meeting Law, the Commission

has provided adequate public notice of this meeting by giving written notice of

time, date, and location. And notice of the meeting has been filed at least 48

hours in advance by mail or fax to the Trenton Times and the Star-Ledger, and

filed with the office of the Secretary of State.

Weíll now take a roll call.

MR. VRANCIK (Acting Executive Director): Senator Littell. (no

response)

Senator Bryant. (no response)

George LeBlanc, for Senator Bryant. (affirmative response)

Assemblyman Cryan. (no response)

Mary Messenger, for Assemblyman Cryan. (affirmative response)

Assemblyman Biondi.

ASSEMBLYMAN BIONDI: Here.

MR. VRANCIK: For the State Treasurer, Dave Rousseau.

DEPUTY TREASURER ROUSSEAU: Here.

MR. VRANCIK: Kevin McCabe. (no response)

Gary Brune.

MR. BRUNE: Here.

MR. VRANCIK: Pat Brannigan.

MR. BRANNIGAN: Here.

MR. VRANCIK: Robert Roth. (no response)

Mr. Anthony Annese.

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MR. ANNESE: Here.

MR. VRANCIK: And Ms. Carol Molnar.

MS. MOLNAR: Here.

Thank you.

MR. VRANCIK: We will now have the motions for election of a

Chair and Vice Chair.

MR. BRUNE: Iíd like to make a motion to nominate Carol to

continue as the Chair of the Commission.

MR. VRANCIK: Do we have a second?

MR. ANNESE: Second.

MR. VRANCIK: Okay. Nominate the Vice Chair.

MS. MOLNAR: Can we vote on them separately?

MR. VRANCIK: Okay, do we have a vote for Carol Molnar as the

Chair of the Commission?

Senator Littell. (no response)

For Assemblyman -- for Senator Bryant, George? (affirmative

response) Yes.

Assemblyman Biondi.

ASSEMBLYMAN BIONDI: Yes.

MR. VRANCIK: Dave Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. VRANCIK: Gary Brune.

MR. BRUNE: Yes.

MR. VRANCIK: Iím sorry. Mary Messenger, for Assemblyman

Cryan.

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MS. MESSENGER-GAULT: Yes.

MR. VRANCIK: Pat Brannigan.

MR. BRANNIGAN: Yes.

MR. VRANCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. VRANCIK: We have a unanimous--

MS. MOLNAR: Thank you.

Thank you for your continued support.

As Vice Chair, Iíd like to nominate Mr. Anthony Annese.

DEPUTY TREASURER ROUSSEAU: Iíll second it.

MR. VRANCIK: Dave Rousseau seconds.

MS. MOLNAR: Any comments or other nominations? (no

response)

If not, weíll take a roll call.

George?

MR. LeBLANC: Yes.

MR. VRANCIK: Mary?

MS. MESSENGER-GAULT: Yes.

MR. VRANCIK: Assemblyman Biondi.

ASSEMBLYMAN BIONDI: Yes.

MR. VRANCIK: Dave.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. VRANCIK: Gary.

MR. BRUNE: Yes.

MR. VRANCIK: Patrick.

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MR. BRANNIGAN: Yes.

MR. VRANCIK: Mr. Annese.

MR. ANNESE: Of course, yes.

MR. VRANCIK: Itís unanimous.

MS. MOLNAR: Thank you.

Our next item-- We have a new Acting Executive Director, Mr.

Michael Vrancik.

Iíve asked Michael to give you just a quick thumbnail of his

background.

MR. VRANCIK: Iím replacing John Geniesse. Heís worked with

the Commission, I guess, for the last four years -- maybe three. I also work in

OMB. Iíve actually taken over Johnís responsibilities. Iím currently the

Manager of the Capital Planning Unit. I oversee the capital budgets, generally,

of the Departments of Transportation, Military and Veteransí Affairs, and

currently the Office of Information Technology. Iíve been with the State and

the Budget Office, on and off, since 1979.

MS. MOLNAR: Thank you.

Do I hear a motion to approve the appointment of Michael Vrancik

as Acting Executive Director?

MR. ANNESE: So moved.

MS. MOLNAR: Do I hear a second?

MR. BRUNE: Second.

MS. MOLNAR: Any discussion? (no response)

If not, weíll take a roll call.

MR. VRANCIK: George.

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MR. LeBLANC: Yes.

MR. VRANCIK: Mary.

MS. MESSENGER-GAULT: Yes.

MR. VRANCIK: Assemblyman Biondi.

ASSEMBLYMAN BIONDI: Yes.

MR. VRANCIK: Dave.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. VRANCIK: Gary.

MR. BRUNE: Yes.

MR. VRANCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. VRANCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. VRANCIK: Chairwoman Molnar.

MS. MOLNAR: Yes.

MR. VRANCIK: Thank you.

MS. MOLNAR: The next item is the approval of the minutes.

Now, I know Mr. Roth is very interested in this. I thought maybe

we could table this until our next meeting, see if he has any changes. Heís

usually very good about going through these.

Is there any objection if we table this until the next meeting? (no

response) Hopefully Mr. Roth will be back.

Do I need a motion to table?

DEPUTY TREASURER ROUSSEAU: No.

MS. MOLNAR: Oh, good.

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Do you have an Executive Directorís report at this time?

MR. VRANCIK: At this time, Iíd just like to give a brief summary

to update everyone on whatís occurred since the Commission concluded the FY

í04 budget recommendations.

The amount of funding recommended by the Commission was

$1,138,690,000. The amount recommended in the Appropriations Act, or the

amount actually appropriated, was $1,136,428,000, for a net drop -- or an

amount thatís about $2.2 million below what the Commission actually

recommended.

But within that base, there are some significant changes. The

Commission recommended $930.5 million for the Department of

Transportation. The í04 Appropriations Act contains $805 million, which is,

essentially, the statutory minimum for the Transportation Trust Fund. So thatís

a decline of approximately $125 million.

That number is off-set in part by an increase in the appropriation

for the Department of Environmental Protection. The Commission

recommended about $75.3 million. The actual Appropriations bill contained

$126.4 million for DEP. That represents an increase of about $51 million. It

represents, largely, additional funds available from the CDT -- constitutionally

dedicated taxes.

And, essentially, thatís it. The other departments received, in

essence, largely what was recommended by the Commission, with a few

exceptions. There was a decision to budget, centrally, funds for life-safety, fire,

and other improvements in a central, inter-departmental account. And that

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amount totaled $9.7 million. It will offset some of the funds that werenít

provided directly to departments and agencies for those kinds of projects.

And that, essentially, brings us up to where we are right now.

MS. MOLNAR: Is there a process in place, now, for these

departments to apply for these moneys in the central account?

MR. VRANCIK: Yes. In fact, weíre working with the departments

right now to determine an allocation methodology for the $9.7 million. Weíve

been in contact with cabinet heads and their operating staff to determine how

to best allocate that fund.

MS. MOLNAR: Okay, thank you.

Any other comments or questions? (no response)

If not, thank you very much.

Weíll begin with our departments.

Our first department is the Department of Agriculture. Iíd like to

welcome Jack Gallagher, Chief of Operations.

Could you introduce your staff for the stenographers?

J O H N J. G A L L A G H E R JR.: Certainly. Iíd be happy to.

Good morning, Chairwoman.

And congratulations on your election, Mr. Annese.

With me this morning is Mr. Carl Shulze, who is the Director of our

Division of Plant Industry; and our Senior Seed Analyst, Marcello Mangano.

Itís a pleasure for me to be here on behalf of the Department of

Agriculture and our Commissioner, Secretary of Agriculture, Charles Kuperus.

I appreciate the opportunity to present to you, this morning, our

requests for Fiscal Year í05 capital funding.

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As you know, our Department works closely with all segments of

the Garden Stateís multi-billion dollar food and agricultural industry. Over the

years, our capital funding requests and subsequent capital appropriations have

helped us maintain and administer programs that have served that industry very

well.

However, in current -- the current economic times, our Fiscal Year

2005 capital request omits several key areas of need. Rather, we are submitting

two requests for capital funding that are more related to health and safety issues.

Our first request is for $250,000 for chromatographic diagnostic

equipment. This computerized, highly technical machine and related software

is needed to replace current outdated liquid and gas chromatographic equipment

that no longer fulfills its intended purpose and can no longer be repaired.

This equipment is used by two of our laboratory divisions to

identify harmful chemicals and compounds that can be found in pasture grasses

and animal feeds. These mycotoxins and other chemical agents put agricultural

animals such as horses, cows, and sheep at great risk inasmuch as these

compounds can cause sickness and death. In the specific case of dairy cows, for

instance, that could be affected by mycotoxins, human health may also be at

risk from contamination of that cowís milk.

New, state-of-the-art chromatographic equipment will provide

prompt and accurate analytical data not available to us. We consider this an

important health and safety issue for our stateís agricultural industry.

Not in the prepared statement that you have in front of you is an

addendum that Iíd like to add. We serve-- Using this equipment that we have,

we serve as a resource for the New Jersey Poison Control Center. This is a

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facility and utility that the Department of Health does not currently have. We

have a, actually, recognized expert on fungi on our staff -- in fact, on Dr. -- or

Mr. Schulzeís staff, excuse me.

We had a recent case of a young person -- an infant -- who,

somehow, got a hold of some poisonous mushrooms. It was unclear at the time

whether those poisonous mushrooms would be, in fact, poisonous. They were

not. We did that diagnostic work in our laboratory for the New Jersey Poison

Control Center. So I just throw that out as an off-growth of our mission.

Our second request is for $78,000 for refurbishment of two growth

chambers in our laboratory. These chambers are rooms equipped with light,

temperature, and humidity controls. Optimum growing conditions are achieved

to grow selected plants and related plant pests and pathogens. A number of

plant pathogens are recognized agents of bioterrorism. Small-scale tests can be

performed replicating climates found anywhere in the world at any time of the

year. Currently, these growing chambers are used for storage, because they donít

function. We use plastic bags, lights, and everything else to simulate a growth

chamber. Itís really not the way to do business.

With New Jersey being a border state with two seaports and major

international and military airports, the introduction of foreign plant and animal

pests and diseases, such as Asian Longhorned Beetle and Plum Pox Virus, are

of great concern to agriculture in New Jersey and the nation.

Our current growth chambers are no longer functional, and in fact,

as I indicated, are used for storage. In light of the current world situation, and

New Jerseyís efforts to safeguard its citizens, we request that you give this

project serious consideration.

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In total, our Fiscal Year 2005 capital request is $328,000.

Our out-year requests total $393,000, which includes $178,000 for

an extension to the accessory building at our beneficial insect laboratory, and

$215,000 for a livestock pavilion at the Horse Park of New Jersey. Those of

you that have heard us testify in the past know that we always ask for

something for the Horse Park of New Jersey. So this year being no exception,

we thought weíd throw that in, too.

Madam Chair, before I close, I would like to make reference to

what testimony you will likely hear from the Department of Treasury. We were

prepared to submit a request for refurbishment of parts of our building, to help

an Ag building. In speaking with the Department of Treasury, theyíre carrying

the message. I would hardily support the request of the Department of Treasury

for improvements to our building. We have several serious conditions in the

building which need immediate repair. Iím sure youíll be hearing more about

that from Treasury.

And unless Iím mistaken, I believe our building is the last of the

State-owned buildings in the city of Trenton which has not had a major

renovation. So itís high time. In fact, there are many buildings in the city of

Trenton, State-owned, which are much younger, which have been totally

refurbished. So we are in need. Our major systems -- our HVAC, our

bathrooms, our carpeting-- Itís all in pretty deplorable condition.

I would ask your support of Treasuryís request in this regard.

Thank you for the opportunity to present the Departmentís capital

budget.

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And myself, Mr. Schulze, and Mr. Mangano will be happy to

answer any of your questions.

Thank you.

MS. MOLNAR: Thank you.

Any questions or comments?

Mr. Annese.

MR. ANNESE: Could you bring us up to date of the status in this

state of the Asian Longhorned Beetle?

MR. GALLAGHER: Weíd be happy to.

Carl.

C A R L P. S C H U L Z E: Sure. Thank you for the question. Iíd be glad

to update you.

Weíve recently concluded inspecting all the trees in Jersey City and

Hoboken within the quarantine area. And weíve not found any additional signs

of the Asian Longhorned Beetle.

Initially, we found about 118 infested trees that were removed,

along with all the host trees within a quarter-mile of that area. We then did

chemical protective treatments of most trees within a half-mile radius of that

area.

And I might want to point out that we had superb and outstanding

cooperation from the residents of Jersey City and Hoboken. We did a very

aggressive public outreach program. People welcomed us into their homes so

that we could look at trees in their backyards. And we had tremendous

cooperation in the cities of Jersey City and Hoboken.

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We feel confident that we found the extent of the bug. Itís going

to take a few more years of follow-up surveys to ensure that we got it, but we

think weíve done a pretty good job due to all the cooperation that we received.

MR. ANNESE: Next question. The equipment youíre asking for --

would that have any bearing on this, the Longhorned Beetle?

MR. SCHULZE: Not on Asian Longhorned Beetle.

MR. ANNESE: And also, with regard to the equipment youíre

asking for, in the event that your building does get refurbished, this equipment

could be used and transferred or whatever? Is there a problem if you have

refurbishment to the building?

MR. GALLAGHER: The equipment can be used. In fact, Mr.

Annese, we are now in negotiations for a new laboratory, which is -- if

everything goes according to schedule, ground would be broken in 2007 -- 2006,

2007. Iím led to believe, by Mr. Schulze and his staff, that this equipment

would be transferrable.

MR. ANNESE: All right, thank you.

Those are my questions.

MS. MOLNAR: Any other questions or comments?

Mary.

MS. MESSENGER-GAULT: On priority one and two, are there

any savings, or at least more efficiencies in the use of staff time associated with

this?

MR. GALLAGHER: The short answer is yes, although I canít

quantify that at the present time.

MS. MESSENGER-GAULT: Okay.

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MS. MOLNAR: Mr. Brune.

MR. BRUNE: Two questions.

Jack, in the first request, the Department of Health has a very

significant amount of homeland security, bioterrorism attack money, some of

which is for equipment. They have chromatographic equipment over there. Is

it different chromatographic equipment?

I guess what Iím wondering is, is there any possibility of a ripple

effect from them to you, in terms of equipment -- they buy a new piece, and you

get their slightly used piece?

MR. GALLAGHER: Well, the piece we have now formerly was the

Department of Healthís -- the chromatograph that we have now. I believe Carl

-- Glen has talked with the Health Department.

MR. SCHULZE: Yes, the equipment that weíre using now was

originally built in 1980, and in 1984 they were hand-me-downs. It was built in

the days prior to computers. Some of this is still operated by cassette tape

drives.

In fact, the technicians have told us that there is no longer parts

available through the company. And in order to get spare parts, we would have

to continue to cannibalize old equipment or actually purchase it off of eBay.

MR. BRUNE: Yes, Iím not questioning the validity of the need.

Iím questioning whether you could solve it through, again, getting a piece of--

I donít know, sitting here, whether a piece of chromatographic equipment that

Health uses is similar to what you need.

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MR. SCHULZE: Their equipment is similar. Theyíre set up for

different things. And if they have surplus equipment -- I mean, weíre always

talking to them about that.

MR. BRUNE: So you open up that line of--

MR. GALLAGHER: Yes, there are--

Actually, Gary, we constantly do. We do share information. The

scientists talk to one another on any variety of issues. They do share some

equipment now. The proximity -- the general knowledge-- As I said, this

nationally known expert is -- has tremendous ability with DNA, regarding plant

material and other things. So they pick his brain. We go up there, and we talk,

and that kind of thing. So there is a cooperative nature.

MR. BRUNE: Just one other quick question, Jack, in terms of the

seed purity. I noticed you mentioned the New Jersey State Seed Law. Does it

require -- does the law require that Ag do the tests, or does -- is there any

possibility of using certified labs in other places -- at least in the short term -- to

get the tests done?

MR. GALLAGHER: Well, the statute requires that the--

MR. BRUNE: Ag--

MR. GALLAGHER: Yes, correct.

MR. BRUNE: Thank you.

MS. MOLNAR: Any other questions or comments? (no response)

If not, I want to thank you and your staff for coming today.

MR. GALLAGHER: Thank you, Madam Chair.

MS. MOLNAR: Our next department is the Department of

Education. Iíd like to welcome Isaac Bryant, Assistant Commissioner.

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Good morning, and could you introduce your staff?

A S S T. C O M M I S S I O N E R I S A A C B R Y A N T JR.: Good

morning.

Yes, I will. Thank you.

To my left, and to your right, is our Director of Administration,

David Corso; to my right, and your left, is the Superintendent of the

Katzenbach School for the Deaf, Dennis Russell; and to his right is Ron Rice,

our Coordinator for the Regional Day Schools.

Good morning, and thank you for the opportunity to testify before

the department about the Department of Educationís Fiscal Year 2005 capital

budget request. My name is Isaac Bryant.

Our Departmentís funding requests are in two areas: the Marie

Katzenbach School for the Deaf and the Regional Day Schools for Children

with Disabilities.

At the outset, I would like to publicly thank Mr. Vrancik and his

staff for assistance and advice in preparing this budget request. Their continued

support has been greatly appreciated.

As you are aware, no capital projects were approved in the FY 2004

budget for the Department of Education. As a result, the Department is

submitting the same requests as last year. These projects are critical if we are to

fulfill our responsibilities under State law to provide a healthy and safe

environment for the students with disabilities who attend these State-operated

schools.

There are six priority projects that we consider critical to the

maintenance of the buildings and to the health, and safety, and well-being of the

16

students who use them. Our total request is for $2,416,000. We have carefully

reviewed all requests and have included only the most essential projects for your

consideration.

First, Iíd like to talk about the Katzenbach School for the Deaf.

The Katzenbach School for the Deaf provides facilities for

educational, vocational, and residential programs for deaf and hard of hearing

students. Many of the students have additional disabilities which further

compound their needs. The Department is requesting funding for four projects

at the school totaling $1,266,000. Priorities 3, 4, 5, and 6 reflect the current

capital construction needs at Katzenbach.

Priority 3 requests $186,000 to upgrade the exterior campus lighting

throughout the school grounds. This project received prior funding and a scope

of work was completed. However, the remaining funding was cut due to the

budget crisis. We are, again, asking that the funding be restored, because we feel

that the additional lighting will address safety concerns on the campus.

Priority 4 requests $215,000 to remove asbestos in Cottages 8 and

10. These two cottages were selected for asbestos removal because water

damage caused a buckling of the floors and a cracking disintegration of the

asbestos-containing floor tiles. Children and staff have been removed from

these buildings because of health and safety concerns associated with the

deteriorating tiles.

Priority 5 represents the combination of three related projects

involving domestic water and sanitary waste removal pipes and plumbing into

one project, at a cost of $665,000. The majority of the sewer and water lines

in this area of the campus, both between the buildings and internally, were

17

installed between 1924 and 1929. Leaks and stoppages are a continuous

recurring problem. The proposed solution is to replace both the water delivery

and sanitary waste removal pipes for all of the buildings in that quadrant of the

Katzenbach campus, from the clock tower building, which is Building 7, back.

This will include Buildings 1, 8, 9, 10, 11, 12, and 13. Simultaneously, the

interior plumbing, supply and removal in those individual structures will also be

replaced.

Priority 6 addresses the need to replace the streamline connections

within Buildings 24, 25, 26, 27, and 28, at a cost of $200,000. These

connections are over 70 years old. These buildings are residential halls and

instructional buildings. If the current connections fail, it would require that the

buildings be closed and would have a serious and major impact on school

operations.

And my final area of concern is with the Regional Day Schools.

The Department is required by law to operate 10 Regional Day

Schools located in 9 counties throughout the state. At this time, all of the

schools are operated by local education agencies under contract with the

Department. Operating expenses are generated entirely through tuition charged

to local districts that send students to the Regional Day Schools.

Most of our buildings are approximately 20 years old, and we are

beginning to see a pattern of need for replacement of key structural building

units.

The Department is requesting funds for two projects at the Regional

Day Schools, at a cost of $1,150,000.

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Priority 1 is a request for $550,000 for modification and

replacement of the HVAC controls at the Bleshman Regional Day School. This

request will complete the overall replacement of the entire HVAC system. Recent

projects that have been completed with your support include the replacement

of the rooftop HVAC units, the replacement of the entire duct work, and the

replacement of the roof. This project will alleviate the current problems with

indoor air quality, temperature variations, and higher than normal relative

humidity.

And finally, Priority 2 is requesting $600,000 for the entire roof

replacement at the Jersey City Regional Day School. Funding for this request

was previously made and approved; however, was eliminated due to the budget

crisis. We are again requesting the funding for the project due to the poor

conditions of the roof. It is in need of constant repair.

Thank you for your consideration, and weíre here to answer any of

your questions.

MS. MOLNAR: Thank you.

Any questions or comments?

MR. BRUNE: Carol.

MS. MOLNAR: Mr. Brune.

MR. BRUNE: One question -- one, just, quick statement.

I think weíve been in contact with your staff about Priority No. 1,

in terms of the discretionary money we have this year.

ASSISTANT COMMISSIONER BRYANT: Yes, sir.

MR. BRUNE: And I think weíre pretty close to pulling the trigger

on funding that, from the current year -- just so weíre all clear.

19

ASSISTANT COMMISSIONER BRYANT: Yes.

MR. BRUNE: The other question, though, is, in terms of the four

Katzenbach priorities -- four through -- I guess 3 through 6-- Can you just help

us with the safety issue on the lighting. We listed the lighting before the

asbestos. In terms of life safety, I think we just want to understand exactly what

the safety issue is, in terms of the lighting.

ASSISTANT COMMISSIONER BRYANT: Sure.

Mr. Russell.

D E N N I S R U S S E L L: Is this on? (referring to PA microphone)

As you probably know, we have students that live on the campus.

Youíre familiar with where the campus is located, Iím sure.

We have people traveling back and forth across the campus in the

evening, and it is very dark. And we just believe that our children will be safer

if the roadways were lighted.

We also have Home Front, which is one of the tenants on our

property that has families there, as well. And that was one of the things that

caused us to think about and look at the lighting on campus. So itís just a

matter of trying to upgrade safety and security for all the folks that live on the

campus at night.

MR. BRUNE: In terms of the asbestos, can we assume -- I know

youíre not in the rooms -- itís encapsulated in a way that it doesnít -- if we donít

access the room, itís not a threat. Is it that kind of a situation?

MR. RUSSELL: The asbestos in the cottages that is in the request

is in the floor tiles. And what weíve had to do with those buildings, for the time

20

being, is vacate them. And those buildings are not usable until such time as we

can replace the floors.

MR. BRUNE: Thank you.

MS. MOLNAR: Any other questions or comments? (no response)

If not, I want to thank you and your staff for your presentation.

ASSISTANT COMMISSIONER BRYANT: Thank you.

MS. MOLNAR: Okay, weíre taking the agenda a little bit out of

order. Weíd like to do the Judiciary. Weíd like to welcome his honor, Judge

Richard J. Williams, Administrative Director of the Courts.

R I C H A R D J. W I L L I A M S, J.A.D.: Good morning. Thank you.

Itís nice to be with you, again, this year.

I appreciate--

Let me introduce, first of all, folks who are here with me: Deputy

Director Ted Fetter; Director of our Office of Management Administrative

Service, Chris Higgins; and her Deputy Director, Shelley Webster; and our Chief

Information Officer, Jim Rebo.

I appreciate the opportunity to address the Commission about the

Judiciaryís pressing needs for long-range funding.

As I have done for the past several years, I am requesting funding

for two important needs. First, modernizing our information technology, and

secondly, upgrading the Justice Complex. Both are important and unmet. We

ask, this year, for funding of $16.8 million; $15.6 million in information

technology, and $1.2 million in facility upgrades.

The Judiciaryís computer systems are large and complex, well

beyond anything that we might be familiar with, with a simple office. They are

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vital to the operations not only of the courts, but other agencies as well. We

serve more than 20,000 users. We have three million online transactions each

day. Our systems manage court dockets and schedules for a million cases in the

Superior Court and six million cases each year in the municipal courts. The

systems control our records of hundreds of millions of dollars of payments

received and transmitted. They provide our ability to access case files. And

more than 9,000 staff communicate all around the state using E-mail.

The reliance on our systems goes well beyond the courts themselves.

The 20,000 users include prosecutors, public defenders, domestic violence

service providers, and local law enforcement officials. State agencies -- including

the Division of Motor Vehicles, the Division of Youth and Family Services, the

Attorney Generalís Office, and the Treasurerís Office -- need information from

the courts, and they get it with electronic access, the only way in todayís world

that makes sense.

Our systems face substantial problems. A generational transition

to new hardware and software is required. We are working with 1980sí

technology. The companies that sold us our computers and our systems -- many

have gone out of business, some have stopped using the systems themselves, and

they no longer provide maintenance, parts, or necessary technical support.

From our experience in New Jersey, from the Division of Motor

Vehicles to the Division of Youth and Family Services, weíve seen too many

examples where failure to upgrade inadequate and outdated computer systems

has had serious public consequences. We simply cannot let this happen to the

Judiciary.

22

Weíve developed a strategic plan for our information technology.

We know what must be done. We know how to get it done. But to accomplish

our plan, we require adequate funding. Although a dedicated fund from filing

increases will yield an estimated $13.9 million each year, that amount is

insufficient to accomplish a plan which will cost in excess of $160 million over

five years. Capital funding, as part of the funding of that need, is essential.

Iím now beginning my fifth year. Time flies when youíre having

fun. Iím beginning my fifth year as Administrative Director. In each of those

years, weíve asked for funding for critical items in our capital budget request,

but in none of those years has the Judiciaryís budget been funded.

I recognize the fiscal difficulties confronted by the State, and

because of that, in each of those years, we deferred critical work. But we simply

cannot risk deferring essential information technology upgrades any longer. Iím

actually advised that the Judiciary has not received a capital appropriation in

well over 10 years. Our needs are critical, and we believe that both sound public

policy and fundamental fairness dictate that our time has come for necessary

funding.

Our IT request involves three projects. The first project addresses

the necessity to convert our database to a new technical foundation, in order to

ensure that our central case management systems do not fail. The current

software is seriously outdated with decreasing support from its vendor. The

capital component of this project will cost $6.3 million. We will be able to

fund $4.2 million of that from our IT dedicated fund, but we still require an

additional $2.1 million in capital funding.

23

The second request is to enable us to protect our local area

communication capabilities -- that is, our local area network. In order to keep

that network from breaking down, we have to replace outdated hardware and

software. And if we fail to do that, our local network servers, desktop hardware,

and software risk disruption in our ability to communicate both internally and

with outside agencies and clients of the courts. We need to allocate $8.2

million for the capital portion of this project, and for this particular project in

FY í05, all of that project would be capital.

The last IT initiative would enable attorneys to file cases and

documents electronically, and would allow the courts to begin to use an imagebased

filing system. The long-term advantage to E-filing and electronic record

storage is that, once fully implemented, cases will be filed electronically,

managed electronically, and stored electronically, avoiding the costs associated

with paper storage and retrieval.

As you know, the State is struggling with burgeoning records storage

problems -- not only the requirements for storage, but problems as well where

facilities have, in fact, experienced a variety of difficulties resulting in

destruction of records.

In addition to storage and retrieval deficiencies, the initiative will

enable the Judiciary to respond to expectations that our clients have. As the

public more and more uses the Internet to conduct their business -- and now, for

instance, in the Judiciary, to pay their traffic tickets and moving violation fines

electronically, they expect that they should be able to do that business with all

aspects of the court.

24

The capital cost for the E-filing project in this fiscal year would be

$5.5 million, $5.3 million of which would come from -- would be part of our

request.

And finally, there is a request in our submission dealing with the

Hughes Justice Complex. The Judiciary moved into that complex in 1982, and

most of the office furnishings and partition walls are still there. The old

partitions are hard to repair, impossible to replace, and they do not readily

accommodate the wiring needed for todayís information technology efforts.

Furthermore, perhaps most importantly, they waste valuable space. Modern

office partitions are more compact and efficient, and they would allow us to

reconfigure areas rather than request new lease space from the State.

As you know, the State has issued $21 million in bonds to renovate

the general parts of the Justice Complex, including improvements to the security

system, the roof, and other elements. Our request to renovate the offices within

that building, and provide for more efficient use of space, would be completely

compatible with that effort.

These requests are important to the Judiciary. We envision a multiyear

approach to meet these particular needs, but we believe that the funding

requested this year is absolutely critical to keep us from deferring, and to allow

us to begin to address, these needs on that approach.

We thank you for the opportunity to be here, and I would be

prepared to entertain any questions that the Commission may have.

MS. MOLNAR: Thank you.

As an attorney, Iíd like to thank you and the Judiciary for all the

hard work that you do.

25

I have a global question for Treasury.

Does Treasury have any position regarding this lack of capital

appropriation for 10 years? Is there any philosophy or anything you could

articulate?

DEPUTY TREASURER ROUSSEAU: I can only speak for the last

two, and it would just be that I donít think any department has had any capital

appropriations for the last two years, except for either statutory or constitutional

dedication. And I actually think if we had the staff go back and do some

research, weíll find, over the last 10 years, that thereís been very little capital

that wasnít either constitutionally or statutorily dedicated to any department

over the last 10 years.

MS. MOLNAR: Okay, thank you.

DEPUTY TREASURER ROUSSEAU: And as you did say, we did

-- the administration and the Legislature did honor the request a few years ago

for a fee increase that was dedicated to IT, which some other departments like

Human Services, Agriculture, departments like that, donít have that ability.

JUDGE WILLIAMS: I would note, by the way, this committee did

recommend, in Fiscal Year 2002 -- I believe it was either 1.2 or 1.8 in capital,

and we were grateful for that recommendation. It just never, ultimately, was

adopted.

MS. MOLNAR: Now, I read some interesting articles in the New

Jersey Law Journal. How is the fee program going?

JUDGE WILLIAMS: The fee program is going well. It will not

quite-- We had projected 13.9. Weíre projecting 13.9, in fact, for next year.

Iím not quite sure whether it will quite get up to that. Civil filings did not --

26

decrease slightly during the year. Weíre probably going to come in closer to the

$13 million area. But the revenue from that has been absolutely indispensable,

in terms of being able to try to address some of these years.

As we look at these projects, particularly things like system

infrastructure, the cost this year -- the total cost for that is going to be about

13.2. The capital phase of it is only 6.3. Weíre applying those funds to both

the capital and the operating expense side of that. So, but for those funds, we

would be in very, very difficult shape, particularly on our major priority request

here. And weíre looking -- as I say, 13.2 this year. As we go to next year, weíre

facing even larger expenses to be able to complete that multi-year transition. So

the moneys have been critical.

Theyíve also done something else, which I think is very important.

They enable you to plan. As I said, we are dealing with a strategic plan for our

information technology needs. But to be able to do that, you have to have some

idea as to what you can reasonably expect. You canít live off of unspent funds

that you may accumulate during the course of the year, and do any type of

planning. Weíve had to use that for 10 years, obviously. So the ability to have

that dedicated fund has been extremely helpful, in terms of being able to plan

and know we at least have some moneys that we can count on.

MS. MOLNAR: One other question. This Commission loves cost

savings. You mentioned filing cases and documents electronically. Have you

ever quantified any cost savings to going to a paperless filing?

JUDGE WILLIAMS: We havenít quantified that. Obviously, we

would anticipate that there should be some. We know, for instance, although

itís relatively new -- we rolled out a system for the municipal courts, funded by

27

the automated traffic fund that we have, that letís you pay parking and moving

violation tickets. And when that occurs, obviously, the funds are immediately

deposited into accounts. The courtsí records are updated. So municipalities

will have some savings. Weíve not yet been able to quantify that. And part of

the degree of savings will depend on how many people use the system. As they

become more familiar with it, then youíre probably going to be able to save in

terms of data entry costs, and processing of funds, and things like that in that

system. But youíre going to need to get more of the public increasingly using it.

The same would be true with things like E-filing. Obviously, much

of the work that would be done manually, now, can be eliminated. But you

need to be able to put a system like that in place. You need, then, to be able to

promote it so that there is not just occasional use, but so that becomes the

predominant mode. And when you do that, you should then be able to have

savings from the standpoint of staffing. But at this point, we canít actually

quantify that.

Part of the other difficulty we face is that weíve been downsizing

in staffing, in any event, over the past few years, dealing with the budget crisis.

So it becomes hard to, ultimately -- to try to put figures on that.

MS. MOLNAR: Thank you.

Any questions or comments?

Mr. LeBlanc.

MR. LeBLANC: Good morning. I just want to follow up on

Davidís response, going back 10 years, about capital appropriations.

I was wondering if you had an answer to the question, besides the

13.9 in last yearís budget in increased fees, whether you could quantify the total

28

increases in fees over the last 10 years that might have been used for IT

improvements. And, secondly, could you provide what the average carryforward

of the Judiciary has been over the past 10 years?

JUDGE WILLIAMS: Let me address the first. The fee increase that

we received went into a dedicated fund, strictly for information technology

purposes. The fees received before that were not part of a dedicated fund. In

fact, they did not inure to the benefit of the Judiciary. They went to the -- they

were inured to the benefit of the State. So we never had access to any of the

revenues raised by filing fees prior to the legislation, approximately a year and

a half ago, that created the dedicated fund.

As far as the figures with regard to carryforward, I can generate them

for you. I can tell you that for the past several years -- Iím going to say -- Iíd

have to estimate three or four, but I can be precise -- weíve been limited in our

carryforward. Last year, the figure was $3 million carried forward. Prior to that,

we were limited to $2 million. Before I became Administrative Director, Iím not

sure we had those limitations, and I could check on those figures for you. But

I can tell you, since Iíve been Administrative Director, for most of that time,

there has been a limit on the amount of carryforward.

MR. LeBLANC: And do you think it would be possible to use

some of that carry-forward money for the IT improvements youíre looking for?

JUDGE WILLIAMS: In fact, thatís generally how we have tried to

use our carryforward. And, in fact, in the period of years -- Iím told -- before I

became Administrative Director -- and this actually went back to the late í80s --

that was how they funded most of their IT needs. There, I think, were no

limitations at that point.

29

The difficulty with that is that you never know what youíre going

to have to spend. You have to wait until, perhaps, January, February, March,

and then youíve got less than three months to spend it. You donít know

whether youíre going to be able to keep it or not keep it, whether purchasing

restrictions will be put on, which typically go on in March or April. And when

youíre dealing with something like a-- Thatís not a problem if youíre going to

buy some desks and chairs, but itís a major problem if youíre dealing with

significant complex information technology systems like we have. You canít

operate in that speed-up, slow-down, maybe-you-can-spend-it, maybe-you-canít

mode. You really need to be able to know what you have, to be able to look

forward over several years. Thatís why the IT fund, in fact, has been so critical,

because we know we can, at least, plan on that. And when you initiate these

multi-year projects, youíve got to know that once you start, youíre going to be

able to carry through.

MR. LeBLANC: Thank you.

MS. MOLNAR: Any other questions or comments?

Mr. Brune.

MR. BRUNE: Couple of questions.

Your Honor, do you have a total cost, a most recent estimate, of the

project youíre trying to -- the total IT cost?

JUDGE WILLIAMS: For everything, or for--

MR. BRUNE: For your total plan.

JUDGE WILLIAMS: For the total plan--

MR. BRUNE: Just a ballpark.

30

JUDGE WILLIAMS: Yes, the total plan, originally, not counting

the ATS system, was in the area of about 130 -- Iím sorry, $233 million. That

plan -- weíre looking at that, weíre revising that, because the costs, in fact, are

probably increasing at this point in time. But we are -- our best estimate -- and

I donít think weíve totally finished that -- is somewhere in the area of about

$160 million now.

MR. BRUNE: One hundred sixty.

JUDGE WILLIAMS: Yes.

MR. BRUNE: Just, sort of, a techy question. Do you assume the

use of the Garden State Network that already exists when you make that cost

estimate, or is there a separate--

JUDGE WILLIAMS: Iím going to ask Mr. Rebo for that.

J A M E S R. R E B O: We coordinate with OIT on our network, and, of

course, you can ask them that question when they come up.

We do have some separate facilities, as we must with different

locations, and so forth. But we do coordinate on data communications,

wherever possible.

MR. BRUNE: Okay. So the broad answer is that when we see

$160 million, pretty much assumes these are the existing network.

MR. REBO: If we can use the Garden State Network, we will.

MR. BRUNE: Just conceptually, because we have a situation where

we have a dedicated fund, some of which, as I understand, is being used for

operating, some of it for capital-- Conceptually, have we considered a master

lease arrangement for the system youíre trying to buy? In other words, using it

to pay off, essentially, a debt arrangement as opposed to pay-as-you-go.

31

JUDGE WILLIAMS: Chris Higgins will--

You can stay up here if you want, Jim.

C H R I S T I N A P. H I G G I N S: Hi.

Many of the costs that weíre talking about include consultant cost

and software cost. So where master lease is an opportunity, with regard to

hardware and such, we do avail ourselves of that. We work with OMB to

structure that.

MR. BRUNE: So the items we see in here, Chris -- the 15 or so

million -- are largely -- are they a mix of the two?

MS. HIGGINS: I would have to check that and get back to you.

But I believe that we have structured that for master lease. But I will check.

MR. BRUNE: Just so I understand what youíre saying--

MS. HIGGINS: Financing. I think we made financing

assumptions, but I would need to check that and get back to you.

MR. BRUNE: Just one last question.

We, obviously, most recently, raised fees. Can I assume that in a

context for the fees that weíre -- fee level weíre now at -- that we are pretty much

competitive with surrounding court systems having raised them?

JUDGE WILLIAMS: Weíre near the top of the list.

MR. BRUNE: Okay.

JUDGE WILLIAMS: Ms. Molnar could probably tell you that.

MR. BRUNE: Thank you.

MS. MOLNAR: Is there any other questions or comments?

Mary.

32

MS. MESSENGER-GAULT: On your Priority 1 project, do we

have more information that says the software is rapidly losing vendor support?

I just want to clarify, is that a vendor thatís under contract now and not

fulfilling their obligation, or is it a vendor thatís no longer under contract and

for whatever reason canít provide support?

JUDGE WILLIAMS: Itís like the vendor that sold Betamax stuff.

Itís computer associates with IDMS. Itís not a technology. Itís an outmoded

technology. So, from that standpoint, it increasingly becomes difficult to have

-- to continue to maintain that. People just arenít working in that technology

anymore. So the vendor moves on to new technologies. And, basically, what

weíre dealing with here is a 1980s technology. You increasingly find that you

donít have people that work with that.

MS. MESSENGER-GAULT: But are they still under contract for

other systems?

JUDGE WILLIAMS: Jim.

MR. REBO: Theyíre under contract for database technology, which

underlies our applications, the functional support management systems. And it

is a technology that they are no longer investing in, in the direction of Internet,

Web enabling, just the whole future of where technology is going. And we have

to be concerned that when things go wrong, they cannot fix it quickly. And

thatís really what happens, as a practical matter.

JUDGE WILLIAMS: It would be a little bit like asking Ford Motor

Company to honor itís warranty on an Edsel. I mean, itís a quick analogy. But

the fact of the matter is, yeah, you might be able to do it, but youíre not going

to find people that are familiar with it, youíre not going to find parts. And even

33

the company, itself, is going to not be able to give you the kind of service on a

timely basis that you would need to get.

MS. MESSENGER-GAULT: Thanks.

MS. MOLNAR: Any other questions or comments? (no response)

If not, congratulations on starting your fifth year, and thank you

for your testimony. (laughter)

JUDGE WILLIAMS: Thank you -- on surviving the first four.

Thank you very much.

MS. MOLNAR: Congratulations.

Our next department is the Office of Information Technology,

Charles S. Dawson.

Could you introduce your staff?

C H A R L E S S. D A W S O N: Yes.

I guess I have to press this button, I guess (referring to PA

microphone). Thereís the technology standpoint.

Thank you, and good morning, Madam Chair, and members of the

Commission. I appreciate the opportunity to present to you today the Office

of Information Technologyís capital budget request for Fiscal Year 2005.

In the interest of time, I have shortened my remarks from the

speech that has been provided to you already.

Also, due to the very complicated nature of the services that we

offer, we thought that this year we might actually provide you with a

PowerPoint presentation, as another component of our presentation. The fact

that itís a little bit further back than what we had originally anticipated

something we thought about a little bit -- so actually, in the materials that we

34

handed out to you, this particular document in the back -- or actually the

overheads -- well, I guess thatís a dated term -- the actual PowerPoint

presentation is in that material, as well. So you can follow it there.

Before I begin, I would like to recognize members of my

management team who have helped to shape this budget request, and who will

assist me to answer any of your questions: Alfonsina Comune, Chief of Staff;

Chris Rein, Chief of Operations; Anna Thomas, Administrator, Strategic

Development; Tom Pierson, Director of Network Infrastructure; Ray Bunn, of

the Office of Geographic Information Services; George Hulse, Director of Fiscal

Services; and Mark Carroll, of our Budget Planning Unit. We are here to

answer any questions that you may have, and provide a clear picture of our

funding request.

Technology now plays a greater role in the operation of State

government than ever before, and that role continues to expand rapidly. The

New Jersey State Web site averages more than 240 million hits per month, an

increase of about 80 million from the same time last year. More than 36,000

users have become registered users of the State Internet portal, allowing them to

conduct business securely with the State through the Internet. Thatís an

increase of nearly 300 percent from last year. Our Garden State Network

processed more than two billion transactions this past year, 600 million more

than the year before.

While these statistics clearly demonstrate the ever-expanding role

of technology in State government, technology can seem abstract and hard to

visualize.

35

The growth in demand for IT services can be likened to the

increased demand for electric power as a village grows into a densely populated

area. The village begins small, and electric needs are modest. As more people

move in, using electricity not just for lighting, but also for air conditioning,

microwaves, stereos, televisions, and many other appliances, the demand for

service expands and grows. The utility company needs an infrastructure to

support that growth. Power grids, substations, transformers, generators, storage

methods, wiring, facilities, and back-up systems are all built to support the

increase in population and demand.

As our citizens have come to expect 24-hour-a-day, seven-days-aweek

access to more and more online information and services, we need

increased and improved servers, networks, processors, and storage devices to

sustain the infrastructure that delivers the information and services.

In a city, you would not build a separate utility company for each

house or business. By the same token, it doesnít make sense to create a

computer infrastructure for each department. By providing funding to OIT, you

will ensure a solid, well-functioning infrastructure to support the technology

requirements of all State departments and agencies.

All the funding that OIT is requesting addresses current demands

on the Stateís IT capabilities. Let me tell you the realities of the situation.

Industry experts predict that, over the next several years, demand will increase

annually up to 15 percent for server capacity, 20 percent for network

bandwidth, and 40 percent for storage capacity.

36

The capital request I bring to you today is not overstated. We are

not starting new initiatives; we are only asking for funds to meet immediate

demand.

As a nation, weíve experienced a number of challenges in emergency

situations. Our generation is entirely dependent on computers to keep our

society safe and functioning properly. It is my job and my duty to present these

critical requests to you.

Our capital budget request for Fiscal Year 2005 totals $23.9

million. Your briefing package breaks our request into 10 categories listed in

order of priority for OIT. I will be presenting to you today a brief summary

that, along with our visual presentation here, demonstrates the

interconnectedness of the projects for which we are requesting funding.

The OIT Availability and Recovery Site, for which we are requesting

$7.1 million, will provide comprehensive disaster recovery capabilities for all

State departments. The construction work on the building has not been

completed. The dollars already allocated have been targeted for very specific

equipment that will be purchased as soon as the building is completed. The

funds being requested here will move us on to the next phase of this critical

initiative. As we saw so clearly during this summerís blackout, it is essential to

have readily available backups if systems fail. OARS will be that backup for the

Stateís IT functions.

Our second request, for $3 million, is for an enterprise server

infrastructure upgrade. Over recent years, as the Stateís computer infrastructure

began developing more rapidly -- thanks in large part to the funding provided

by this Commission -- OIT recognized the need to make its computer

37

environment usable for as many different purposes as possible. Just as it does

not make sense financially to have many utilities serving one city, it doesnít

make sense to create an independent computer infrastructure for each new

online initiative. Online applications for initiatives as varied as unemployment

insurance, child support, and digitized driver licenses can all be hosted on the

same network.

In the last two years, we have added to the shared IT infrastructure

more than 40 different online services, and there are a number of others in

development.

Failure to fund the necessary enterprise infrastructure upgrades

would force each agency to purchase additional hardware platforms for each

new service they develop. Hardware platform costs, on a per service basis, can

add approximately $50,000 to $150,000 to each initiative.

Additionally, the $500,000 we requested for an upgrade to the IBM

CPU will address the increased workloads on our two enterprise computer

servers. Due to overloads caused by high utilization, these two servers have

performed at less than acceptable service levels. These servers can be compared

to an overtaxed generator. A utility must provide more capacity to the generator

to prevent it from crashing. We must provide more capacity to these servers

before they fail.

Four million, five hundred thousand dollars has been requested for

Wide Area Network infrastructure upgrades. As most power companies serve

a large geographic area, so, too, do OITís computer systems. To serve a wide

area and limit the impact of outages, utilities set up substation transformers.

Likewise, OIT has set up different nodes of its Garden State Network to make

38

sure the network provides high quality service throughout the state and is always

functioning.

Over the past five years, the Garden State Network, the Stateís wide

area network, has become nearly 25 times faster, and the number of State

agency connections to the network has tripled. Our major applications --

including Social Services, Criminal Justice, and Transportation -- use the

network. This infrastructure must be responsive to the citizenís need for State

services.

OIT has not received capital dollars for the network for the last two

years. We have been forced to use line-of-credit funding, which does not allow

us to fully implement critical upgrades to the wiring of the network.

OIT has taken many steps to ensure the security of our systems over

the past year. For example, we are the first state in the nation to contract with

the U.S. Army to analyze our network for the development of an intrusion

detection system. The 2005 network upgrades will help us respond to security

vulnerabilities found in the Armyís analysis. They will also allow us to

minimize the effects of computer viruses and other hacker attacks that plagued

our network over the past year, notably the Slammer and Blaster viruses.

We have requested $1 million for an enterprise storage upgrade. All

information must be stored so it can be delivered to users when they need it.

And as more information is added to the State Internet, OIT needs more storage

devices to hold all the data. As new applications are introduced into the

computing environment managed by OIT, we must increase our data storage

capacity. Our enterprise storage environment provides many of the same

39

benefits as the shared IT infrastructure that I discussed earlier. It does not make

sense to force each department to provide its own data storage.

We request $4.1 million for IT and communications facilities

improvements. OITís facilities are like the utilityís generating station. The

generating station houses the equipment that provides the electricity; OITís

facilities house the servers, switches, wires, and routers that enable us to deliver

information. We are requesting capital funding this year to ensure that our

facilities continue to run smoothly.

Two million dollars has been requested to fund the fiber network

infrastructure initiative. Utility companies must undertake electrical wiring

upgrades in response to increased demand. An electric company logically moves

to more advanced, higher-powered lines to handle increased loads, as well as to

provide for anticipated future increases in demand. OIT is requesting funds this

year to establish a high-speed, high-capacity fiber network to better meet the

current needs of the departments and agencies, as well as to prepare future -- for

additional demand in the future. The fiber optic network would provide

support for initiatives -- better support, actually, for initiatives such as the

Motor Vehicle Agency modernizations.

In addition to these closely related requests, we are also requesting

money for some other important projects. The New Jersey Mapping Assistance

Partnership Program, for which we have requested $660,000, provides a

technical infrastructure on which local governments build, maintain, and share

their geographic data. Our funding request will be used to establish nodes in

Union, Camden, Passaic, Burlington, Middlesex, and Hunterdon counties, as

well as Jersey City.

40

To upgrade our pressure-sealing equipment, we request $285,000.

Our current sealing equipment does not operate at speeds fast enough to process

our workload.

Our request for voice mail expansion of $700,000 will

accommodate increases in the number of agency subscribers to the statewide

voice messaging system.

In conclusion, just as the utility uses many different components

to deliver electricity, OIT uses many components to deliver information. And

just as the utility needs to upgrade its equipment to keep the power going, OIT

needs to upgrade its equipment to sustain the infrastructure to deliver

information and services to the citizens.

Thank you, Madam Chairwoman and members of the Commission,

for your help and assistance. To get a hands-on look at our operations and see

our systems in action, I cordially invite each of you to tour our facilities. Feel

free to contact our office, and we will gladly make the arrangements.

At this time, I welcome any questions you have on our capital

budget request and any of the other issues that I have brought up in our

presentation.

Thank you.

MS. MOLNAR: Any questions or comments?

Mr. McCabe.

MR. McCABE: A quick question. On the IT and communications

facility improvements, the $4.1 million, youíre talking about upgrading your

facilities to run a smoother operation. Whatís wrong with them now that you

need to-- Are we talking about roofs, or walls, or issues of that nature?

41

MR. DAWSON: I think Iíll have Chris answer that question.

C H R I S T O P H E R J. R E I N: Thank you.

This capital budget request is for the upgrading of the UPSís --

uninterruptable power sources -- as well as refrigerant and coolants, to provide

their cooling capacity for the data centers. These are engineered devices that

typically have life spans of five to seven years. Currently, I believe, the median

age for some of our cooling equipment and our UPS systems are about five to

5.5 years. So, taking a look at when this capital funding would be available,

they would be at the end of their recommended service lives. These are,

basically, moving parts. Theyíre air conditioners, and theyíre transformers and

batteries that have physical life spans, limitations.

MR. McCABE: Thank you.

MS. MOLNAR: I had a question about outsourcing. There was

a small article in Business Week saying that state governments, including New

Jersey, are outsourcing IT work to contractors that are using overseas labor. Is

that true?

MR. DAWSON: Well, thatís certainly an issue thatís come up

among a number of states. Itís a relatively standard practice in the private

sector. We have, I believe, limited the amount of outsourcing that takes place,

as far as OIT is concerned. Some of the departments and agencies have used

certain levels of outsource contracts. Some of that we call, sort of, body shop

type of work. So there is a certain amount of outsourcing, but we principally

have tried to do as much within the context of our State staffing and other

resources.

MS. MOLNAR: Thatís good to know.

42

Any other questions or--

Mary.

MS. MESSENGER-GAULT: A few of your projects, particularly

some of the upgrades-- It talks about the need for increased operating costs.

Shouldnít the upgrades increase efficiency, reduce breakdowns, and tech support

needs, and save us money?

MR. DAWSON: Iíll answer generally about that, and then Iíll ask

Tom Pierson to follow up with a little bit more detail.

Certainly, information technology has done a tremendous amount

in terms of increasing efficiency. And I might point out that even with the

Office of Information Technology, itself, about two years ago, we had 1,100

employees. We now have under 1,000 employees. So weíre taking that to

heart, ourselves, in terms of increasing efficiency, even in our operations.

But along with that, as I pointed out in my initial comments, the

amount of utilization thatís going on, with regard to citizens and employees, has

dramatically increased our need for these additional services.

Tom, would you like to speak to the specifics?

T H O M A S G. P I E R S O N: Yes.

Like anything else that we look at, we look at efficiencies, we look

at cost avoidance, we look at equipment thatís reaching end of life, similar to

the question with the last -- courts and their software programs. We look to see

where things are going to reach end of life and we need to replace, just like

hardware with batteries and uninterruptable power supplies. We also increase

capacities, and increase as work loads increase and to add applications. We

need to address the capacity of the network, and the facilities, and everything

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we do so that these new applications can run without degrading, or without

degrading existing obligations.

MS. MESSENGER-GAULT: So is this increased operating cost

staff?

MR. DAWSON: Well, weíre not actually talking about staff here

in our request, since this is actually a capital request.

MS. MESSENGER-GAULT: Right, but it says youíre going to

increase operating cost. So the operating cost increases staffing, or some other

cost?

MR. DAWSON: Actually, our staffing has been decreasing. So

weíre not actually asking for it.

MS. MESSENGER-GAULT: What are the components of the

operating cost increase?

MR. DAWSON: I beg your pardon?

MS. MESSENGER-GAULT: What are the components of the

operating cost increase?

MR. DAWSON: I think Mark would be able to handle that.

M A R K P. C A R R O L L: Can you hear me know? (laughter)

With regard to the operating costs, every time we make an

acquisition, we have a warranty that covers a certain period of time. At the

close of that warranty, if we want to continue the vendor maintenance -- which

is extraordinarily advisable with computer technology hardware and software --

you enter into a contract with the vendor. Costs with those vendors increase at

a rate between 5 and 15 percent per year.

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So, for example, if you had a car, and you had two children, and

you drove the car for several years, and then you had three children, and you

needed to buy a bigger car, youíd need to pay more for the car. And then youíd

also need to pay more for the maintenance of that car as you went along.

MS. MESSENGER-GAULT: So these operating increases arenít

actually in the year in which youíre buying the (indiscernible).

MR. CARROLL: Correct.

MS. MESSENGER-GAULT: How many years out on these three

projects: three, four, and five?

MR. CARROLL: You would normally get between 90 days and a

yearís worth of warranty, and after that, you would enter into a vendor contract.

And the vendor contract is done on an annualized basis. So you would renew

it at the end of every year.

MS. MESSENGER-GAULT: Okay, thanks.

MS. MOLNAR: Mr. Annese.

MR. ANNESE: Just very broadly speaking, are there certain

departments within the State, either because of their size or their mission, that

use your services much more than other departments?

MR. DAWSON: Yes, the Department of Human Services

represents, I believe, about 25 percent of our service delivery. And several of the

others -- I think Transportation, Treasury--

MR. PIERSON: Labor.

MR. DAWSON: --and Labor are probably our largest users. But,

by far, Human Services is our biggest customer.

MR. ANNESE: All right, thank you.

45

MR. PIERSON: If I can add to that-- Just about every department

uses some portion of our infrastructure.

MR. DAWSON: As well as was pointed out in the last

presentation, the court system also rides on the backbone of our Garden State

Network.

MR. REIN: If I may, for the committee-- To clarify, the use of the

Garden State Network is a portion of the networking needs that the Judiciary

requires. If you look at the entire network needs, some are met by the

Judiciaryís local network, and some are met by cross-agency traffic, which does

use the Garden State Network.

MS. MOLNAR: Mr. Brune.

MR. BRUNE: A question about your access to the line of credit

financing thatís already been provided, versus your request for the Wide Area

Network.

At OMB, we are tracking the balances in the line of credit, and I

guess what weíre seeing at the moment is about $10 million of balances, a little

more than half of that being in projects that meet the definition of, in some way,

the Garden State Network, whether it be an increase or infrastructure.

I just want to understand -- because you made a statement in your

testimony that line of credit financing doesnít allow us to fully implement

wiring. Are the things that youíre requesting here, in a capital sense, things that

you canít fund under the line of credit? I just need to understand the--

MR. PIERSON: Itís a combination of the two. There is-- Line of

credit is hard, as you know -- a hard commodity. You cannot get consulting

services, you cannot do services to wire buildings or wire facilities. We would

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do -- the same things we are buying, we would upgrade and replace a certain

amount of equipment in hard commodity with this request. But weíd also do

the things that we havenít been able to do over the last two years, especially in

the security space.

We have a lot of highly technical people on staff, but we like to

augment them at times with security consultants or with design consultants. We

canít get those facilities -- we canít get that with line of credit.

Things to support the network and increase and improve the

network that arenít available on line of credit would be things that are not just

a hard piece of commodity.

MR. BRUNE: I might suggest this, because it would be a great help

to us-- I was reading the description of the $4.5 million of the Wide Area

Network, and it is, sort of, filled with terms like hardware. Maybe you could

supply, through the Chair, just a reconciliation of the existing -- the uses of the

existing money you already -- thatís in balance, versus this need -- maybe in a

more formal way. It might help us a little bit.

MR. DAWSON: Okay. Weíll provide that information to you.

MR. PIERSON: I would also echo the tour of the facilities. I think

a couple of years ago, we had a number of members tour our facilities. It really

helps to see the things weíre doing. And you can see old technology and new

technology in the same facility.

MS. MOLNAR: Thank you. It was very helpful.

Any other questions or comments? (no response)

If not, I want to thank you for your presentation.

MR. DAWSON: Thank you for your time.

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MS. MOLNAR: Is there any other business to come before the

Commission? (no response)

If not, our next meeting is October 10, on Friday. See you all then.

Meeting adjourned.

(MEETING CONCLUDED)