of

NEW JERSEY COMMISSION

ON CAPITAL BUDGETING AND PLANNING

B. CAROL MOLNAR (Chair): I’d 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. A notice of the meeting has been filed at least 48 hours in

the Office of Secretary of State.

We will now take a roll call.

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

response)

Senator Bryant. (no response)

Assemblyman Cryan. (no response)

Assemblyman Biondi. (no response)

Mr. Rousseau. (no response) He’s present.

Mr. McCabe.

MR. McCABE: Here.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Here.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Here.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Here.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Here.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Here.

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MR. LIHVARCIK: Madam Chairwoman, we have a quorum.

MS. MOLNAR: Thank you.

Our first item of business is the approval of the minutes of the

Commission meeting, October 24, 2003. Do I hear a motion to approve?

MR. ROTH: So moved.

MS. MOLNAR: Second?

MR. ANNESE: Second.

MS. MOLNAR: Any discussion? (no response)

No. If not, we’ll take a vote.

MR. LIHVARCIK: Ms. Schermerhorn, for Assemblyman Biondi.

MS. Schermerhorn: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Chairwoman Molnar.

MS. MOLNAR: Yes.

The minutes are approved.

MS. MOLNAR: Thank you.

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The next item is the Executive Director’s report.

MR. LIHVARCIK: As you know, this is the final meeting, Madam

Chair, and the staff has been in the process of making capital recommendations.

However, due to the State’s current fiscal situation, the Fiscal 2005 capital

funding requests and recommendations were developed, as in prior years,

adhering to very specific criteria. These are basically dedicated funding sources,

such as open space, shore protection, private underground storage, and

hazardous waste cleanup, requested funded critical fire and life and healthsafety

security projects, and funding requests that required a State match to

draw down Federal funds.

As a result of using this limited criteria, the 2005 capital funding

request totals 1.05 billion, and is composed of 995.2 million in dedicated

funding, and 55.6 million in purely discretionary capital. This recommendation

is approximately 7 million less than the Fiscal 2004 recommendation made by

the Commission.

It should be noted that the request for the Juvenile Justice

Commission has been increased by 2.5 million for an exigent project that

surfaced after the initial Commission requests were mailed.

A funding summary for 2005 would be that for open space

preservation there’s 98 million of dedicated sales and use tax. The

transportation trust fund recommendation is 805 million, which is composed

of motor fuels, petroleum gross receipts, and a portion of the sales tax. Within

DEP, funded from the Corporate Business Tax, there are two separate items:

publicly funded site remediation, 37.4 million; and private underground storage

tanks/hazardous substance discharge cleanup, at 29.8 million. The remaining

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dedicated funding is for shore protection at $25 million, from the realty transfer

tax. All of these total $995.2 million.

In the discretionary area, there is 47.7 million for fire, life, and

health safety projects, and 7.9 million to match Federal dollars. And it should

be noted that even though we have the 7.9 million in a discretionary line item,

these funds are used to draw down more than a one-to-one match of Federal

dollars. Basically, the two programs involved there are the HR-6 flood control

project and program in DEP for 7.2 million, and $627,000 for a multi-purpose

room for DMAVA.

Basically, that ends my report.

MS. MOLNAR: Thank you very much.

Now we will begin with the fiscal capital recommendations. In the

past, we’ve done it department by department. It seemed to have worked well

that way. So, if there is no disagreement, we can do it that way.

MR. LIHVARCIK: Madam Chair, we can start with the

Department of Agriculture.

MS. MOLNAR: Yes. The Department of Agriculture. The

Commission is recommending 250,000 -- 328,000 was requested.

Is there any questions or comments? (no response)

MR. ROTH: Move for approval.

MS. MOLNAR: Can I have a second?

MR. ANNESE: Second.

MS. MOLNAR: Okay. We’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau, for Treasurer McCormac.

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DEPUTY TREASURER ROUSSEAU: I’m voting yes today. I just

want to make a point that I’m voting yes as a member of the Commission. As

Deputy Treasurer, I also have to balance the needs of the capital versus the

other needs in balancing a State budget. So, I’m voting yes to move these

recommendations forward, but it’s not a definite that I would then recommend

to the Treasurer or Governor that these be placed in the final budget.

Thank you.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Chairwoman Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Madam Chairwoman, we have seven votes in

the affirmative. The motion passes.

MS. MOLNAR: Thank you.

The next department is the Department of Corrections. The

Commission is recommending 5 million. You have the breakout -- perimeter,

fire safety, and roof repair.

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MR. LIHVARCIK: And facility renovations.

MS. MOLNAR: Right. Roof repair/facility renovations.

MR. LIHVARCIK: Yes.

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

If not, do I hear a motion?

MR. ROTH: Moved for approval.

MS. MOLNAR: Do I hear a second?

MR. ANNESE: Second.

MS. MOLNAR: Okay. We’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau, for Treasurer McCormac.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Madam Chair, you have-- The motion passes.

MS. MOLNAR: Thank you.

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The next department is the Department of Education. The

Commission is recommending 600,000, which would be roof replacement for

Jersey City Day School. The other money, 215,000, would come from the

interdepartmental account.

Any questions or comments? (no response)

Do I hear a motion to move?

MR. ROTH: So moved.

MR. ANNESE: Second.

MS. MOLNAR: Thank you. Take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Madam Chair, the motion passes.

MS. MOLNAR: Thank you.

8

The next department is the Department of Environmental

Protection. The Commission is recommending 100,158,000.

I had one question. Under shore protection, 25 million, does that

include Wreck Pond in that number? No, okay.

Any questions or comments? (no response)

If not, motion to approve?

MR. ANNESE: So moved.

MS. MOLNAR: Do I hear a second?

MR. BRUNE: Second.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion passes.

MS. MOLNAR: Thank you.

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The next department is the Department of Health. At the present

time, the Commission is not recommending any moneys. The laboratory

equipment -- there’s a suggestion to look at existing Federal funds, and the

renovation of the lab is on hold, pending the proposal of construction of a new

laboratory.

Any questions or comments?

DEPUTY TREASURER ROUSSEAU: I’ll move this one.

MS. MOLNAR: Okay.

Do I hear a second?

MR. BRUNE: Second.

MS. MOLNAR: All right. Take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

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MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

The next department is the Department of Human Services,

17,800,000; 10 million of which would be for the Statewide Child Welfare

Information System, some improvements at Vineland Development Center,

Woodbine Development Center, and fire suppression at Elm Hall.

Any questions or comments? (no response)

Do I hear a motion?

MR. ANNESE: So moved.

MS. MOLNAR: Okay. Second.

MR. BRUNE: Second.

MS. MOLNAR: Okay. Take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

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MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

The next department is the Department of Law and Public Safety.

At this present time, the Commission is not recommending any funding. You

have your explanation in front of you, since the majority of the capital is for

new structures and building repairs.

Any questions or comments? (no response)

Do I hear a motion to approve?

MR. BRANNIGAN: Motion.

MS. MOLNAR: Okay.

MR. ROTH: Second.

MS. MOLNAR: Okay. We’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: No.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

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MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Madam Chair, you have six votes in the

affirmative and one in the negative.

MS. MOLNAR: Okay. Thank you.

Now, Juvenile Justice Commission -- you have a new packet in

front of you. There is an addition of 2 million-five for the New Jersey Training

School, which were not in the original amount. There’s a letter explaining the

change. So these moneys will complete the fire suppression system and smoke

detection system and the programs at the Training School campus. Does

anyone want an explanation? I believe someone is here from Juvenile Justice.

If you’re happy with this explanation, we can go with this.

Mr. Brune.

MR. BRUNE: I just have one question. If we can get a

clarification of the situation with the original contractor, who was terminated,

and the bonding company. I’m not sure that’s a JJC question, but if they can

answer that, or somebody else.

MS. MOLNAR: Okay.

Thank you. Could you give your names for our reporter.

K E I T H P O U J O L: Good morning, Madam Chair. I’m Keith Poujol.

I’m the Facilities Manager with the Juvenile Justice Commission. To my left is

Steve Sutkin, Deputy Director for the Division of Property and Construction,

for contract administration; to my far right is Deputy Director Raymond

Arcario, and overseeing construction services; and to my immediate right, is

DAG Wayne Martorelli, who oversaw the negotiations in this particular matter.

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MS. MOLNAR: Would one of you gentlemen like to update us

regarding the original contract, clarification.

S T E V E N S U T K I N: The original contractor -- we had evidence while

they were engaged on the project, one, that they were not paying subcontractors

as required by the contract, and is a statutory requirement; and two, was not

performing the work in accordance with the contract documents. I

commissioned an audit of the firm’s books by our in-house auditors, and that

audit did reveal that the contractor was not paying its subs in accordance with

the requirements. We issued a notice to cure, pursuant to the contract. And at

that point, the contractor has an opportunity to cure the default, pay the sum,

and show us evidence. That was not forthcoming and, eventually, we

terminated the contractor for default.

Just so you know, there is also an open criminal investigation of the

contractor by the Division of Criminal Justice, arising from its nonpayment of

subs. I understand that anything that the Division of Criminal Justice is looking

at they don’t tell you, because it’s all privileged.

We immediately called on the bonding company and its staff to

come in and show us how they were going to guarantee the completion of the

contract in accordance with the performance bond that it issued on the project,

pursuant to law. That occurred, I believe, in February of ’03. We have been

negotiating, pleading, threatening, struggling with the bonding company since

then to get them to come in, investigate the claim, and reach an agreement with

us regarding how they would take over the project. And frankly, we’re not at a

point where we can reach an agreement with them right now.

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We have recently issued a notice to cure to the bonding company,

threatening that we would terminate them. We’re giving diplomacy every last

opportunity. Because, if we do terminate them, we have to move forward with

State funds to complete the project and pursue them in litigation. We’ve been

undertaking this effort in coordination with the Attorney General’s office, and

DAG Wayne Martorelli is here to speak to those questions.

But, as we sit here right now, I’m not optimistic that we’ll reach a

negotiated deal with the bonding company, and the result of that is partially the

request for additional, appropriated dollars.

MS. MOLNAR: Did I read someplace that the bonding company

may declare bankruptcy? Did I see that someplace?

W A Y N E M A R T O R E L L I, ESQ.: I can speak to that. What’s

happened is the bonding company -- it’s an insurance company, Highlands

Insurance, which by law are regulated by states. Generally, what happens when

an insurance company gets into dire financial straits, they file the equivalent of

a bankruptcy proceeding in the state where they are incorporated. They are in

conservatorship proceedings in Texas right now. I am told that the reason for

that has to do with some big, multi-million judgment that was returned against

them in California, that they are continuing to operate, that they now have the

legal clearance from the Texas courts to enter into a takeover agreement with us

in the event that we are able to reach an agreement. But that’s what I know.

MR. LIHVARCIK: If there is an agreement reached between New

Jersey and the bonding company, would New Jersey see any money to offset the

cost of the additional State appropriation, and would they have to pay the costs

of litigation, which obviously would mitigate against any ultimate settlement?

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MR. MARTORELLI: You’re talking about litigation in the event

that we fail to reach an agreement with them?

MR. LIHVARCIK: Either way.

MR. MARTORELLI: If we reach an agreement with them, the

whole purpose of the performance bond, basically, it’s a guarantee. It’s best

thought of as a guarantee that the work will not cost the owner more than the

stated contract price. Under the takeover agreement, they would then come in

and they would be paid the remaining contract balance according to the same

payment schedule that would apply to the contractor had there been no default

termination, and then to the extent that there wasn’t overrun. They would then

be responsible for picking up the entire overrun cost. All costs coming out of the

termination, including architectural costs, anything over the contract balance

that we’re holding, they are responsible for it. To the extent that there’s extra

work -- and I understand there has been some extra work here that is not

covered by the bond -- that that would be extra to the contract. So, therefore,

it would be an extra, whether or not the contractor did the work or the bonding

company did the work.

Now, in the event that there is litigation, generally, the courts in this

state -- as the courts in this country generally follow what’s called the American

rules, that each side bears its own litigation costs. I will say that there have been

claims made in New Jersey, as elsewhere, against bonding companies based

upon a theory of bad faith. What I see in negotiations in this case is, I would

say, close to the line on bad faith. And it’s possible, I say possible, that in the

event that there was litigation against the bonding company based upon bad

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faith, we could conceivably recover attorney’s fees, but I don’t want to

guarantee that, because it’s not a certainty.

MS. MOLNAR: Okay.

MR. SUTKIN: Just to add one additional thing -- I think, based

on my experience and the experience on this matter, I think the evidence that we

have in front of us, with the bonding company not coming through between

February and today, in December -- I think that it’s highly unlikely based on the

negotiations underway that the bonding company is going to reach a deal with

us. And even if we were to reach a deal, the conditions that they would want

to impose in order to reach a deal would require us to expend additional money.

Otherwise, they won’t come in. So, I don’t think there’s going to be a deal with

the bonding company.

MS. MOLNAR: Mr. Brune.

MR. BRUNE: I just want to ask a question. I think I understand

from Keith that part of the reason we’re seeing an increase in cost is that there

was some unforeseen site conditions that had to do with wiring. So I think I

understand you to say then, Wayne, is that if you did reach an agreement, they

wouldn’t be on the hook for that. They would only be on the hook for

whatever the original scope was and the cost associated thereby.

MR. MARTORELLI: Right. The additional scope -- any costs

incurred in connection with the default termination of the original contractor.

For example, if we have to go out and hire, as I believe we will, or pay the

architect engineer more money to prepare a new set of bidding documents to put

the remaining work out to bid, the professional fees that we’d have to pay to

prepare those documents to administer the bidding, and all of that, would all be

17

recoverable against the bond, if that’s a cost of completion. And anything

which really goes towards completion of the original scope of work is

recoverable against the bond.

MS. MOLNAR: Do we share this information with other states so

the future?

MR. MARTORELLI: Well, the way it works is that every state has

its own bond statute. I believe all states do require at least payment bonds for

the benefit of subcontractors on public jobs. They also require performance

bonds of the type we have here. The Federal Government, as well, also has a

list of approved bonding companies. Highlands happens to be on the State’s

approved list right now.

Generally what happens is that if a bonding company runs afoul

with one state government, word gets around and a bonding company, as an

insurance company, can be disqualified from doing business in one state based

on its disqualification or suspension in another state.

MS. MOLNAR: Okay.

MR. LIHVARCIK: Does the contractor bear any responsibility?

MR. MARTORELLI: Oh, absolutely, absolutely. He’s primarily

responsible for the same cost that the bonding company is. The difference is,

we don’t know how solid the contractor is, whereas we believe, or at least we

did believe, until we found out about what was going on in Texas, that the

Highlands was solvent enough to cover the cost.

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I still believe that at the end of the day they will remain solvent and

they will be able to cover these costs. But there’s certainly a deeper pocket, I

believe, than the contractors at this point in time.

MR. LIHVARCIK: Just one last thing, through the Chair. Could

you keep the Commission apprised as to the proceedings of this litigation?

MR. MARTORELLI: Absolutely. Absolutely, we will.

MR. LIHVARCIK: Thank you.

MS. MOLNAR: Do we have any other questions or comments?

(no response)

If not, is there a motion to approve the 5,500,000?

MR. BRANNIGAN: So moved.

MS. MOLNAR: Do we hear a second?

MR. BRUNE: Second.

MS. MOLNAR: Okay. We’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

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MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

Thank you, gentlemen, for coming.

MR. POUJOL: Thank you.

MR. MARTORELLI: Thank you.

MS. MOLNAR: The next department is the Department of

Military and Veteran Affairs. The Commission is recommending 1,357,000 --

two projects at the Paramus Veterans Memorial Home, and then the armories --

the fire suppression systems at one, two, three, four, five, six armories.

Any questions or comments? (no response)

If not, do I hear a motion to approve?

MR. ROTH: So moved.

MS. MOLNAR: Okay.

Second?

MR. ANNESE: Second.

MS. MOLNAR: Take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

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MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

MR. ROTH: Madam Chair, without objection, I suggest we do all

of the colleges in one vote.

MS. MOLNAR: Okay. Before the colleges, though, there’s a State

line item for 150,000 in your packet. That request -- we’re recommending zero

because it’s going to be funded out of the interdepartment Capital Complex

project’s fund. That will take care of the seating that they had requested. For

State, we’re recommending zero funding, because there’s money available in that

account.

So can we vote on that first, before Higher Ed?

Do I hear a motion?

MR. ROTH: So moved.

MS. MOLNAR: Second?

MR. ANNESE: Second.

MS. MOLNAR: Okay.

MR. LIHVARCIK: Mr. Rousseau.

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DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Okay. Higher Ed -- we’ll vote on it all together,

unless there’s an objection. (no response)

Is there still money available for the colleges in this Higher Ed

fund? It looks like that, that’s one source of revenue, is the Higher Ed fund.

And there’s also moneys in the Dormitory Trust Fund.

Any other questions or comments? (no response)

If not, do I hear a motion and a second?

MR. BRUNE: I’ll move it.

MR. ROTH: Second.

MS. MOLNAR: Okay.

MR. LIHVARCIK: Mr. Rousseau.

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DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

The next department is the State Library. They requested

2,769,000. At this time, we are recommending no funding. Their requests

included seven capital projects.

MR. McCABE: I’ll move it.

MS. MOLNAR: I need a second.

MR. BRUNE: Second.

MS. MOLNAR: Okay.

Any questions or comments? (no response)

If not, we’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau.

23

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: No.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

Okay. The next one is the Department of Transportation. The

biggest piece is the trust fund, 805 million. I recall reading in the paper that by

2005 the total trust fund will be used to pay debt service. Does that make

sense? The other question I had is, last year we recommended 930 million, but

they were prorated 805. So this year we’re also suggesting 805. Is that 805

reality, or do you think that will get cut even lower?

DEPUTY TREASURER ROUSSEAU: I’ll take that one. I think

for the last three years the Commission has recommended a number higher than

the-- The Commission has recommended the constitutional and statutory

dedications. For the last three years, the previous administration and this

administration has, because of budget problems, appropriated only the

constitutional minimum. The Commission recommendation this year is to

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acknowledge that and go with just the constitutional minimum of 805 million.

The number cannot be any lower than $805 million.

MS. MOLNAR: And going forward, this will -- the lion’s share will

be for debt service?

DEPUTY TREASURER ROUSSEAU: It depends on how you

define lion’s share.

MS. MOLNAR: Yes.

DEPUTY TREASURER ROUSSEAU: I think debt service is

probably going to be-- I’m trying to think and remember-- We had it in the

debt report, what it was projected to be. Somewhere in the 450 to five range,

maybe.

MS. MOLNAR: Okay.

DEPUTY TREASURER ROUSSEAU: Yes. When I say 450 to five,

yes. Four-eighty-four is what debt service will be. So that means that it will still

be, roughly -- it will still be roughly $320 million of pay-as-you-go capital, even

with an $805 million appropriation.

MS. MOLNAR: Now, Michael, you mentioned -- someone said

that a portion of the sales tax goes for this.

DEPUTY TREASURER ROUSSEAU: That’s part of the

constitutional dedication. The constitutional dedication is gas tax, part of the

sales tax, and the petroleum products gross receipts tax.

MS. MOLNAR: So the 6 percent sales tax, I read--

DEPUTY TREASURER ROUSSEAU: It’s roughly $200 million,

I think. It was the equivalent of some sales tax on new cars, or something like

that.

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MS. MOLNAR: Oh, okay.

DEPUTY TREASURER ROUSSEAU: It’s equivalent of about

$200 million.

MR. LIHVARCIK: It’s not the entire sales tax.

MS. MOLNAR: No. I thought maybe it was 1 percent of the sales

tax.

DEPUTY TREASURER ROUSSEAU: No.

MR. LIHVARCIK: No. A portion.

DEPUTY TREASURER ROUSSEAU: I think it’s roughly-- The

800 is roughly about 400 from the motor fuel tax, about 200 from the

petroleum products, and about 200 from the sales tax. And that’s 200 of a --

what -- $6.2 or $6.3 billion sales tax.

MS. MOLNAR: Okay.

Any questions or comments? (no response)

If not, do we hear a motion to approve the 805 million?

MR. McCABE: I’ll move that one.

MS. MOLNAR: Okay.

MR. BRUNE: Second.

MS. MOLNAR: Okay.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

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MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Okay. The next department says Treasury. It’s

really the Office of Information Technology. We’re recommending 7,182,000,

basically, for OIT availability and recovery site funding. This will complete it,

it looks like.

Any questions or comments? (no response)

If not, do I hear a motion?

MR. ROTH: Move it.

MS. MOLNAR: Okay.

MR. BRUNE: Second.

MS. MOLNAR: Okay. Take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

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MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Okay. The Interdepartmental -- we’re

recommending 107,935-- Ninety-eight million of which is for open space, and

the other 9,935,000 is for statewide capital projects, which you have a list of in

your packet.

Any questions or comments? (no response)

If not, do I hear a motion?

MR. ANNESE: So moved.

MR. ROTH: Second.

MS. MOLNAR: Okay. We’ll take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

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MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: Motion carries.

MS. MOLNAR: Thank you.

And last, but not least, we have Judiciary. At this time, the

Commission is not recommending any funding.

I have one suggestion. As you know, the court system-- It used to

be run at the counties. It is now run by the State. So we are saving counties

millions of dollars. So, to me, it’s a safety issue and productivity -- to increase

their productivity. I believe it is important for us to provide some infrastructure

changes. So we did eliminate the 1 million-two, which was for improvements

to the space for employees. I would like to suggest that we put 1 million and

two into our recommendation. Any suggestions?

MR. LIHVARCIK: So the motion would be to change the request

for Judiciary from zero to $1.2 million. That’s what would be voted on.

MS. MOLNAR: Yes. I think it would help their productivity, since

they are working under substandard conditions. So it might be a safety issue

too. I believe the dedicated funds are used strictly for the technology.

DEPUTY TREASURER ROUSSEAU: I’ll support the Chairman

on that.

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MR. BRUNE: Second.

MS. MOLNAR: Thank you very much.

So we have to have a motion on that.

Do we have to amend this first or just--

MR. LIHVARCIK: On the amendment, we would take a vote on

the amended motion to include an additional $1.2 million for the Judiciary.

MS. MOLNAR: Okay.

MR. LIHVARCIK: Make the motion and then--

MS. MOLNAR: Okay, thank you.

Would someone like to make that motion?

MR. ROTH: So moved.

MS. MOLNAR: Second?

DEPUTY TREASURER ROUSSEAU: Second.

MS. MOLNAR: Okay. Let’s take a vote.

MR. LIHVARCIK: Mr. Rousseau.

DEPUTY TREASURER ROUSSEAU: Yes.

MR. LIHVARCIK: Mr. McCabe.

MR. McCABE: Yes.

MR. LIHVARCIK: Mr. Brune.

MR. BRUNE: Yes.

MR. LIHVARCIK: Mr. Brannigan.

MR. BRANNIGAN: Yes.

MR. LIHVARCIK: Mr. Roth.

MR. ROTH: Yes.

MR. LIHVARCIK: Mr. Annese.

30

MR. ANNESE: Yes.

MR. LIHVARCIK: Ms. Molnar.

MS. MOLNAR: Yes.

MR. LIHVARCIK: The motion carries to add an additional $1.2

million to the recommendation for Judiciary.

MS. MOLNAR: Thank you very much.

Okay. I think that’s the end of our list.

Do you have any other business that you’re aware of?

MR. LIHVARCIK: I would just like to say one thing. I would like

to thank Mr. Thor Woronczuk and Mr. Roger Bushyeager of OMB staff for

working very diligently to make changes at the end of this process that got into

today’s meeting. And I don’t want to forget the other OMB analysts that also

contributed to this, and people from the department. I just want to thank

everybody for that.

MS. MOLNAR: Yes, thank you.

MR. ROTH: Madam Chair?

MS. MOLNAR: Yes.

MR. ROTH: I’d like to thank them as well, particularly for the fact

that this year we’ve been able to get all of our minutes in a timely fashion--

MS. MOLNAR: That’s right.

MR. ROTH: --and I wish everyone a happy holiday season.

MS. MOLNAR: That’s the other new business -- for you to all have

a Merry Christmas and Happy Hanukkah and Kwanzaa.

No other business? (no response)

The meeting is adjourned.

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Thank you.