The Board of Accountancy is a seven-member citizen board that licenses and regulates public accountants. The Board administers the examination and licenses individual Certified Public Accountants (CPA's) and Public Accountants (PA's), and their firms. The Board is responsible for investigating complaints, renewing licenses and monitoring the continuing education of its licensees. A staff of seven administers the Board's programs.

The Board's Other Funds come primarily from business registration fees, biennial licensing fees, and fees charged for the administration of licensing examinations. Fees are set by administrative rule to a maximum allowed by statute. Current rules have fees at their statutory maximum. Business registration fees are set at $50, biennial licensing fees are $100. These revenues are estimated at $756,000 for the current biennium. The Board charges $150 of those who take the entire four-part CPA examination and $50 per part for those who need only to pass one or two remaining parts. The exam is administered twice a year and revenues are estimated at $182,000. In addition, a nominal amount of revenue is generated by selling its mailing list and from civil penalties assessed.

The Board currently regulates 600 public accounting firms and 6,300 public accountants, most of them CPA's. The Board also licenses 300 CPA's to perform audits of state and local government agencies. The Board expects the number of CPA's licensed in Oregon to grow moderately. The addition of a full-time investigator has caused expenditures to exceed revenues and cash reserves at the end of the biennium are projected to be less than at the beginning of the biennium. To maintain an adequate cash reserve, the Board's current service level budget reduces the investigator position approved for the 1997-99 biennium to a half-time position. The Board is proposing increased fees for the CPA exam (to $200), individual license renewals (to $150), and initial business registration (to $100) to restore the investigator's position to full-time. It last increased individual license renewal fees in 1991 and business registration fees in 1993. The proposed fee increases would result in additional revenues of $382,000 for the biennium.

The Governor's budget fully funded the Board's operations including the full-time investigator. The budget anticipated the fee increases requested to pay for these costs and additional investigation and office support. Included in the budget was $3,000 to replace the existing voice mail system with one that is Year 2000 compliant, and $3,408 for increased telecommunications costs of its conference room telephone line and telephone line for bankcard payments for license renewals and fees. Funds were also provided for the Board Chair, Vice-Chair, and staff responsible for the examination and continuing education programs to attend National State Boards of Accountancy meetings to keep current on licensing and continuing education issues.

The legislature adopted the Governor's budget request with adjustments for changes in various central state government assessments and charges.

LFO Analyst: LaMonte

The Construction Contractors Board provides services to homeowners, contractors, subcontractors, construction suppliers, bonding and insurance companies, and state and local building officials. The Board regulates the profession of construction contracting and provides consumer protection and dispute resolution services. The Board registers construction contractors and subcontractors, provides consumer information and education, and resolves disputes. The Board imposes fines for violations of Oregon laws, including failure to carry workers compensation coverage, and ensures that contractors meet statutory educational requirements. The Board also provides administrative staff support to the Landscape Contractors Board through an interagency agreement.

The Board receives approximately 96 percent of its resources from contractor registration and renewal fees. These fees were increased by an average of 32 percent in the 1997-99 biennium. Other revenue includes fees and reimbursements from interagency agreements with the Landscape Contractors Board, and plumbing and electrical inspection contracts with the Department of Consumer and Business Services. In 1997, Senate Bill 974 established a new program which requires the Construction Contractors Board to certify inspectors of residential structures. Also in 1997, HB 5052 provided the Construction Contractors Board with the authority to establish registration and renewal fees for this purpose. The fees, set at $50 for the application and examination and $75 for certification, are expected to generate $19,000 in 1999-01.

The workload of the Construction Contractors Board increased significantly in the 1990's, as a result of ongoing growth in Oregon's construction industry. Between 1989 and 1997, registrations increased 142 percent, claims increased 148 percent and telephone inquiries to the Board increased 129 percent. The 1997 Legislature approved 23.5 permanent and 2.5 limited duration positions to address workload growth, a separate hearings unit, and investigator/mediator services. Budget notes encouraged the Board to work with the state police on enforcement and to improve the education resources directed to the elderly and vulnerable populations. The workload is estimated to stabilize in the 1999-01 biennium, as the pace of construction is not expected to continue at the rate of increase experienced in the 1990's.

The Governor's budget included an increase of $2.6 million and 9.0 FTE. Most of the policy packages assumed passage of enabling legislation. The budget also included funding for reclassifications, new positions and technology improvements.

The legislature reduced the Governor's budget by $2 million and 10.7 FTE. The budget is increased $1million from 1997-99 estimated expenditures, and is a reduction of 4.77 FTE. The FTE reductions reflect the transfer of 6 Hearings Unit staff to the central Hearing Officer Panel in the Employment Department, offset by expansion of a half-time FTE to full-time and 1.75 FTE added for substantive legislation. The legislature also removed funding for the Oregon State Police Criminal Construction Fraud Unit and replaced it with funding for an Interim Construction Fraud Evaluation Unit. The Unit is under the jurisdiction of the Department of Justice, and includes an Assistant Attorney General and State Police detective, with clerical support and with assistance from the Construction Contractors Board. The Unit will evaluate incidents of construction fraud, prosecute a limited number of cases and make recommendations to the next legislature.

The budget contains a number of budget notes that require reporting to the Emergency Board and approval by the Joint Legislative Committee on Information Management and Technology for technology packages. Areas of reporting include classification and compensation, management structure, performance measurement and information management.

LFO Analyst: LaMonte

The Department of Consumer and Business Services is organized into four broad program areas that include central administration and three separate consumer-related regulatory functions:

• Central Support, providing administrative support and policy direction to the various programs within the agency.
• Regulation and Enforcement of Workplace Safety and Health, including the Workers' Compensation Board, the Workers' Compensation Division, Oregon Occupational Safety and Health Administration (OR-OSHA), and the nonlimited Workers Benefit Fund.
• Financial and Insurance Regulation and Services, including the Insurance Division, the Division of Finance and Corporate Securities, and the Oregon Medical Insurance Pool.
• Regulation of Building Codes and other consumer services, including the Building Codes Division, the Appraiser Certification and Licensure Board, and the Office of Minority, Women and Emerging Small Business.

The 1999 Legislature removed the Office of Energy from DCBS and created a separate agency.

Central Support provides support services to the programs operated by the Department. Its sections include:

• Director's Office - Provides leadership and policy direction and general supervision of all programs, and provides liaison with other levels of government and the general public.
• Information Management - Establishes DCBS information technology strategy and standards, and collects, stores, processes, analyzes, and reports agency information.
• Business Administration - Provides centralized purchasing and accounting services, budgeting, collection services, payroll, and contract management services, and assists in the development and control of Division and program budgets.
• Personnel Services - Provides human resources support to the agency.

Workload in the Division is driven, in part, by the workload factors affecting the Department as a whole. This includes factors such as the demographic changes in Oregon's population, continued economic growth, changes in business practices including increased use of rapidly changing information technology, and health care needs and reform. This has also included, in recent years, absorbing administrative responsibility for a number of agencies, including Building Codes and the Office of Energy, until the Office was re-created as a separate agency by the 1999 Legislature.

The Governor's budget had a net increase of $2.2 million (8.3%) compared to 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies. Total FTE were reduced by 3.73 from the 1997-99 estimated level. The Governor's budget included a package that increased the budget by $760,515 and 4.0 FTE from the current service level estimate for the development of computer applications, including Internet and Web technology.

The legislatively adopted budget is an increase of $1.9 million over 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies. Total FTE is reduced by 5.73 from 1997-99 estimates. The legislature reduced a technology request for $760,515 and 4.0 FTE by $226,272 and 2.0 FTE. The agency was directed to return to the Emergency Board for limitation and FTE authority after a report to the Joint Legislative Committee on Information and Technology on the development of computer applications, including Internet and Web technology.

The Workers' Compensation Board is responsible for adjudicating contested Workers' Compensation cases and OR-OSHA citations, notices and orders, and for reviewing administrative orders on appeal. The Board consists of five permanent members. Offices are located in Portland, Salem, Eugene and Medford, and the Board conducts hearings in 12 other locations around the state.

Revenue sources for the Board include Workers' Compensation Premium Taxes and arbitration fees from insurers. Workers' Compensation Premium Taxes, assessed at 7.3 percent of earned premiums, are collected from SAIF, private, and self-insurers, to be used for departmental expense, the Center for Occupational Disease Research, the Rehabilitation Reserve and the Non-Complying Employer Reserve.

Workload continues to show a decline from prior biennia. In calendar year 1992, a total of 17,876 hearings and 2,230 Board Reviews were requested. By calendar year 1997, these requests were down to 10,594 hearings and 1,307 Board Reviews. However, these numbers do not tell the entire story, since the scope and complexity of the cases filed with the Board have increased. Although the causes are not entirely known, a primary cause may be the implementation of Workers Compensation Reform (SB 369), that appears to have reduced the workload. The agency has responded by reducing staffing by 15 FTE since 1995-97, with a corresponding reduction in related costs.

The Governor's budget had an increase of $124,406 (0.8%) and decrease of 6.0 FTE from 1997-99 estimated expenditures. It funded current services reduced by $704,119 and 6.0 FTE to reflect continued reductions in hearings and Board reviews.

The legislatively adopted budget is a decrease of $58,947 and 6.0 FTE compared to 1997-99 estimated expenditures, primarily as a result of continued reductions in hearings and Board reviews. The budget is also reduced based on actual expenditure patterns.

The Workers' Compensation Division administers and enforces the provisions of the workers' compensation law and provides some education and consultative services. The Division has seven sections including Administration and Hearings, Benefits, Dispute Resolution, Compliance, Operations, and two ombudsman programs. The ombudsman programs, though budgetarily housed in the Division, operate independently from the Division.

Division revenues include Workers' Compensation Premium Taxes, civil penalties on guaranty contracts, and interest and other income. The total premium paid by employers continues to decline. Oregon has had nine consecutive years of decline in the premiums paid by employers, equaling a 52.4 percent cut in these costs since 1990. Because of this shrinking base, as well as the draw down of the ending balance, the tax rate was increased from 4.5 to 7.3 percent in 1998, to cover actual costs of administering the program.

The Governor's budget had a net decrease of $325,139 (0.94%) and 17.08 FTE from 1997-99 estimated expenditures. The budget included packages recommended by a Secretary of State audit and the Management Labor Advisory Committee that would change the current service level as follows:

• Reduce $1.1 million and 9.25 FTE to eliminate the Evaluation Unit. The Unit is responsible for claims closure activities. Responsibility for claims closure would be transferred to workers' compensation insurers. This package required passage of enabling legislation.
• Reduce $113,378 and 1.0 FTE to eliminate the Claims Examiner Certification process. Workers' compensation insurers are held accountable for performance through ongoing oversight and audits. The state would eliminate specific oversight of insurer staff competency.
• Add $155,345 and 2.0 FTE for workload in the Workers' Compensation Ombudsman program.
• Add $75,301 for indirect costs and eliminate 3.0 FTE to establish a centralized hearings unit in the Employment Department.

The legislatively adopted budget is an increase of $622,890, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies, and a decrease of 17.08 FTE from 1997-99 estimated expenditures. The 1999 Legislature modified many of the budget packages recommended by the Governor, resulting in a net increase in the overall limitation. The budget was also reduced based on assessment changes, vacancy rates and actual expenditure patterns. Hearing officers were transferred to the jurisdiction of the Employment Department as part of legislation to establish a statewide hearings unit. The legislature also directed the agency to undertake a study of the impact of the major contributing cause and combined conditions on the workers compensation system and provided $250,000 in limitation for contract costs.

Oregon Occupational Safety and Health Administration (OR-OSHA) protects worker health and safety by administering the Oregon Occupational Safe Employment Act and enforcing the Federal Occupational Safety and Health Rules, under an agreement with Federal OSHA.

The Division has four program areas: Consultative Services; Education and Technical Services; Enforcement; and Administrative Services.

Funding for the Division comes from Workers' Compensation Premium Taxes, Federal Funds (expended as Other Funds), and OR-OSHA fines and penalties, most of which are transferred to the DCBS Fund to use for Department-wide workers compensation-related costs.

The Division focuses on education, and consultative and prevention services, and on worksite inspections. As a result of these activities, Oregon continues to experience a decrease in occupational illness and injury. The Division intends to expand its consultative and loss prevention services, including worker training.

The Governor's recommended budget had an increase of $3.7 million (11.5%) and 2.32 FTE compared to 1997-99 estimated expenditures. The Governor's budget included an increase of $337,116 and 4.0 FTE over the current service level to improve field service capacity, including support for the field health program, supervision for field staff, and clerical support. The staff increase would address workload growth being handled through limited duration positions created in 1997.

The legislatively adopted budget is an increase of $3.5 million and 2.32 FTE over 1997-99 estimated expenditures primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies. The legislature approved an increase of $337,116 and 4.0 FTE over the current service level to improve field service capacity, including support for the field health program, supervision for field staff, and clerical support. Budget notes direct OR-OSHA to report to the Emergency Board on farm labor camp inspections, and to work with legislators to implement an apprenticeship program for under-served communities.

Individual program amounts are as follows:

• workers' compensation funds from the Workers Benefit Fund for claims costs, workers' compensation premium subsidies, and other costs, $218,452,957;
• third-party administrator payments and claim payments for high-risk insureds within Oregon through the Oregon Medical Insurance Pool Board (OMIP), $41,258,469; and
• two reserves maintained by the Department: the Self-Insured Employer Adjustment Reserve and the Self-Insured Employer Group Adjustment Reserve, $118,482.

Nonlimited Workers Compensation revenues include:

• Workers' Compensation Premium Taxes that are assessed on employers and collected by SAIF and other private insurers and self-insurers. The current rate is 7.3% of earned premiums. The revenues are used for rehabilitation and noncomplying employer payments.
• Workers' Compensation Assessments & Contributions (cents-per-hour) are at 4.2 cents per hour, with a 2.1 cent deduction from employee wages and an equal deduction from the employer, that is dedicated to reserves in the Workers Benefit Fund. One-sixteenth (1/16) of one cent is dedicated to the Center for Occupational Disease Research at Oregon Health Sciences University. The remainder is used for workers compensation benefits.
• Recovered claims costs from noncomplying employers, fines, interest income, and other revenues.
• Oregon Medical Insurance Board assessments collected from health insurers (generally twice a year, on an as-needed basis depending on expenditure estimates) and individual insurance premiums collected from insured parties. The funds are used for the payment of claims for parties covered under the subject insurance plans.

The 1995 Legislature directed the Department to reduce the balance of reserve funds to no more than six months of expenses and transfers. This reduction was to occur gradually over a period of years, protecting against wide fluctuations in the assessments to employers, insurance companies and workers. The 1997 Legislature, in SB 484, directed the Department to maintain a Workers Benefit Fund reserve balance of twelve months until the year 2000. The Department continues to monitor assessments to ensure an adequate fund balance at the least cost to employers and workers. There is legislation pending to retain the 12-month ending balance.

The budget assumes OMIP's insurance pool loss ratio will be approximately 192.47 percent. This is a change to previously lower loss ratios, and more closely reflects the current national experience of 200 percent. The adopted budget also contains a prudent reserve for extraordinary costs, such as multiple organ transplants, which could affect total expenditures.

The Governor's budget was an increase of $7.6 million (2.2%) from the 1997-99 estimated budget. However, the Governor's budget was a decrease of almost $28 million from anticipated costs in the 1997-99 legislatively approved budget, primarily as a result of reduced injured worker claims. The budget contained no changes to the current service level projection for these programs. However, the Governor recommended that the agency establish a process to phase out the $8 million in premium subsidy currently disbursed to vocational rehabilitation facilities. This subsidy is funded out of the nonlimited Workers' Benefit Fund. This package would require passage of enabling legislation.

The legislature approved the Governor's recommended budget with an increase of $7.1 million from the 1997-99 estimated budget, including enabling legislation to phase out the $8 million in premium subsidy currently disbursed to vocational rehabilitation facilities. This subsidy is funded out of the nonlimited Workers' Benefit Fund.

The Insurance Division protects the insurance-buying public by evaluating the financial soundness of insurance companies, the availability and cost of insurance, and the equitable treatment of insureds and claimants. The Division has the following sections: Administrative Services and Operations; Company Regulation; Consumer Protection Services; and Rates.

Division revenue sources include Workers Compensation Premium Taxes, business licenses and insurance premium assessments, interest earnings, and revenue from service charges and investments. After paying operating expenses, $120.1 million in insurance premium taxes, fines and interest earnings will be transferred to the General Fund for general governmental purposes. In addition, $9.9 million from assessments on fire insurance premiums will be transferred to the Oregon State Police Fire Marshal program and to the Department of Public Safety Standards and Training.

The Division is using alternative technologies to deal with factors affecting its workload, including the increasing complexity of insurance regulations, increases in the demand for disaster insurance, and the increasing (and aging) Oregon population.

The Governor's budget was an increase of $1.3 million (10.5%) over 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies. The Governor's budget added $75,301 for indirect costs and eliminated 3.0 FTE, compared to the current service level, to establish a centralized hearings unit in the Employment Department.

The legislatively adopted budget is an increase of $1.1 million and a reduction of 1.25 FTE compared to 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies. Hearings officers were transferred to the jurisdiction of the Employment Department as part of legislation to establish a statewide hearings unit.

The Division of Finance and Corporate Securities (DFCS) enforces laws and regulations related to the sale of corporate securities and ensures the safety of financial transactions for individuals, businesses, and governments. DFCS has two sections: Finance, that regulates state-chartered banks, credit unions, savings and loan associations and related businesses, and Securities, that registers security offerings, licenses businesses and individuals who sell securities, and investigates and enforces securities and commodities laws.

The Division's revenues come from annual assessments on financial institution assets, from securities licensing, registration and examination fees, and from interest earnings and other revenue. Approximately $5.3 million is transferred biennially to the General Fund from surplus securities licensing and examination fees and from fines.

There are a number of factors that are influencing the workload and performance of DFCS. The expansion of consumer finance businesses (such as payday loans and title loans) has created demand for greater oversight. There is also an increase in licensed securities broker-dealers; the finance and securities field is becoming more globalized, with increasing use of the "information highway" for transactions. These changes increase the difficulty of oversight functions. DFCS is addressing these issues through an increase in education and cross training, enhancements in technology, and the implementation of state and local partnerships.

The Governor's budget was an increase of $1.2 million (16.69%) and 4.42 FTE over 1997-99 estimated expenditures. The Governor included packages that made the following changes to current service level estimates:

• $116,701 and 1.0 FTE to improve bank and credit union examination processes;
• $318,301 and 3.0 FTE to improve oversight of the Mortgage Lender and Consumer Finance Act programs, including oversight of payday and title loan businesses;
• $178,993 and 1.84 FTE to improve oversight of Oregon Securities Law, including specific oversight of investment advisor activities related to viatical settlement (life insurance payment) contracts; and
• $120,000 and 0.92 FTE to enforce the provisions of the Oregon Pawnbrokers Act.

The legislatively adopted budget is an increase of $1.1 million and 4.42 FTE compared to 1997-99 estimated expenditures. The legislature approved the packages recommended by the Governor and also reduced the budget to reflect vacancy savings, assessment reductions and actual expenditure patterns. The legislature requested that the Division investigate the potential risk to Oregonians from the increased use of the Internet for securities trading and investing, and to report the findings to the 71^st Legislative Assembly.

The Oregon Medical Insurance Pool (OMIP) ensures access to major medical insurance coverage for Oregon residents who are unable to obtain medical insurance for health reasons. The Board promotes access to health coverage, and administers a third-party administrator contract. Staffing in this Division is shared, through an intergovernmental agreement, with the Insurance Pool Governing Board, and 2.0 of the 4.0 FTE are assigned part-time to that function.

The Board collects assessments from health insurers (generally twice a year, on an as-needed basis depending on expenditure estimates) and collects individual insurance premiums from insured parties. Other Fund revenues include interest earnings.

Rising health care costs and underwriting practices could affect the number of Oregonians in the high-risk medical pool, which OMIP estimates currently to be between 10,000 and 15,000. Other factors that affect workload include the cost of the coverage, which is set at 125 percent of the premium set by the largest insurers. The Division continues to monitor the insurance offered for cost and coverage.

The Governor's budget was the current service level estimate for the program. The budget was an increase of $85,754 (12.52%) over 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies.

The legislature approved the Governor's budget, with adjustments for changes in assessments. The budget is an increase of $85,128 compared to 1997-99 estimated expenditures.

The Building Codes Agency was made part of DCBS by the 1993 Legislative Assembly. The Division has statutory authority for the enforcement of laws and codes related to structures and dwellings; manufactured structures, RV parks and tourist facilities; plumbing; elevators; amusement rides; electrical safety; and boilers and pressure vessels. The Division issues licenses and permits and conducts inspections. The Division has five sections: Administration; Technical Advisory Group; Statewide Services; Field Operations; and Regulatory Services.

The Division's revenue comes from:

• fees for licenses, inspections, and permits, and surcharges on fees levied by state and local jurisdictions;
• Federal Funds (expended as Other Funds) to provide consumer assistance to individuals with complaints about manufactured homes, and EPA funds for energy efficient manufactured homes certification; and
• fines and other revenue, including interest earnings.

The fees charged by Building Codes were established in the 1979 edition of the Uniform Building Code. These fees are insufficient to support existing staff and programs, and the current service level budget has a reduction of $1.8 million and 12.7 FTE to reflect the actual staffing and programs that can be supported with this revenue. The Governor's budget proposes a fee increase to restore this funding.

The economic climate and in-migration of population to Oregon continues to result in increased permits for construction and manufactured dwellings, with much of the increase occurring on the Coast and in Eastern Oregon where the Division has much of the responsibility for code administration. The Division conducts inspections of manufactured homes, and the state's production of manufactured homes continues to increase. Over 12,500 homes are produced per year.

The Building Codes Division has grown in response to the ongoing increase in workload. The 1995 Legislature approved additional positions, at the request of the affected industries whose funds support the inspection programs. The 1997 Legislature approved 19.36 additional FTE to address workload growth. The Division continues to improve efficiency through the use of a temporary employee pool, improvements in technology, and partnerships with other agencies and jurisdictions.

The Governor's budget had an increase of $230,871 (1.04%) over 1997-99 estimated expenditures and a net reduction of 13 FTE. The current service level budget was reduced by $1.8 million and 12.7 FTE due to insufficient revenue generated from the existing fee schedule. The Governor's budget proposed a legislative package that would increase fees and add surcharges necessary to generate an additional $1.8 million. The budget also proposed restoring 12.7 FTE to deal with agency workload.

The legislature approved the Governor's recommended budget and also approved two substantive measures:

• SB 512 establishes a tri-county Building Industry Service Board, with 3.5 FTE and a cost of $503,183 ; and
• SB 587 establishes a new licensing program for specialty code inspections with 1.25 FTE and a cost of $258,106.

The budget for the Division is an increase of $547,146 and a net reduction of 8.25 FTE from 1997-99 estimated expenditures.

The Division will establish a work group during the interim to review all of its programs and activities. The work group will make recommendations to the 71^st Legislative Assembly, including legislative proposals, to deal with issues raised during the review of the Division's budget.

The Office is the sole certification authority for targeted economic opportunity programs. The Office has the following functions: Disadvantaged Business Enterprise, Minority and Women Business Enterprise Programs, and Emerging Small Business, which is a race- and gender-neutral program that provides contracting opportunities on state and local projects.

The Office's revenues include transfers from the Department of Transportation for business certification, and funds from the Department of Administrative Services from an assessment based on state agency purchases.

The Office has concentrated its efforts on the certification and re-certification process. The Office has eliminated the backlog of new certification applications, and is reducing the backlog of verification requests, resulting in improved customer services.

The Governor's budget was the current service level estimate for the program. The budget was increased by $38,489 (6.13%) over 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies.

The legislature approved the Governor's recommended budget with reductions based on reduced assessments and actual expenditure patterns. The budget is an increase of $18,594 compared to 1997-99 estimated expenditures.

The Board licenses, certifies, supervises, and disciplines appraisers in Oregon, and establishes education and experience standards. The Board ensures that regulatory functions are kept separate from the influence of industries and organizations that have a financial interest in the Board's actions. The Board conducts audits and investigations, takes disciplinary action, and conducts contested case hearings.

The Board is funded through licensing, certification and registration fees, and interest and other earnings. The Board also collects annual federal registry fees and remits them to the federal government.

The increase in Oregon's population has resulted in an increased demand for real-estate appraisals. The Board has dealt with the workload by instituting strategies to improve workflow and process, and reduce staff workload. This includes changing to a two-year license renewal cycle, entering into reciprocal agreements with other states to reduce the number of licenses issued, and the use of automated testing. The Board has placed its licensing database on the Department's web site, making this data available to financial institutions electronically, which has reduced the number of telephone inquiries.

The Governor's budget was the current service level estimate for the program. The budget was increased $82,980 (11.54%) over 1997-99 estimated expenditures, primarily as a result of increases in compensation and inflationary adjustments to the costs of services and supplies.

The legislature approved the Governor's recommended budget with reductions based on reduced assessments and actual expenditure patterns. The budget is an increase of $63,546 compared to 1997-99 estimated expenditures.

LFO Analyst: LaMonte

In 1995, the Department of Energy was eliminated and the Office of Energy was created as a Division within the Department of Consumer and Business Services. The 1999 Legislature removed the Office of Energy from the Department of Consumer and Business Services and created a separate agency.

The Office of Energy contains the following programs, with the following 1997-99 estimated expenditures:

• Energy Programs ($21 million, 72.46 FTE) - Includes energy conservation, nuclear waste cleanup, and energy supply development, administration, and business services. Specific programs include the Business Energy Tax Credit, Energy Loan Program, State Home Oil Weatherization Program, Residential Tax Credit Program, energy efficiency certification for manufactured homes and buildings, waste transport safety, emergency preparedness, energy facility siting and regulation, renewable resource development, and energy research and analysis.
• Nonlimited Loan Programs ($99.2 million) for low-interest, long-term loans for conservation and renewable resource projects.
• Northwest Power Planning Council ($378,180, 2.0 FTE) - The Council was authorized by Congress in 1990 and operates under an interstate compact signed by Washington, Oregon, Idaho, and Montana. The Council is responsible for long range power planning and for developing programs to preserve and restore fish and wildlife species affected by Columbia River Basin hydroelectric facilities. The Office budget includes salaries and other personnel expense for the two Oregon members of the Power Planning Council.

The Office receives Other Fund revenue from private entities such as the Northwest Energy Efficiency Alliance that were formed to administer funding and grants sponsored by Bonneville Power Administration (BPA). Other Funds are also received from energy supplier assessments; facility siting and review fees; petroleum distillate fuel supplier assessments for State Home Oil Weatherization; and fees from Oregon housing manufacturers for the Northwest Energy Efficient Manufactured Housing program. Federal Fund resources included funds from the BPA and the US Department of Energy.

Nonlimited funds include general obligation bonds, interest earnings and fees, loan repayments and debt service for the Small Scale Energy Loan Program (SELP).

In 1995-97 the Office of Energy had a decrease in Federal Funds and an increase in Other Fund revenues. These adjustments represented changes in the way granting agencies contract for programs, termination of funding for projects completed, or elimination of one-time revenue sources. The adjustments do not affect program levels.

The Governor's budget was the current service level estimate for the program. The budget had a decrease of $1.3 million (8.8%) from 1997-99 estimated expenditures, primarily as a result of the phase-out of Federal and Other Fund support for energy programs. The budget also reflected the elimination of one-time funding for the Oregon Museum of Science and Industry (OMSI), which the 1997 Legislature funded through the Office at $1.5 million. The Governor proposed $750,000 of continued funding for OMSI through the Emergency Board.

The legislatively adopted budget for the Office of Energy is a decrease of $276,317 compared to 1997-99 estimated expenditures, primarily as a result of reductions in Federal and Other Funds. The budget includes an Emergency Board appropriation of $1.4 million for the Oregon Museum of Science and Industry. There is also a $1.5 million Emergency Fund reservation that may be requested for the Smart Jitney project. The budget does not reflect these funds. The legislature approved the Governor's budget with reductions for Attorney General, Secretary of State and Department of Administrative Services assessments, and to reflect actual spending patterns.

Analyst: Archer

Health-related licensing boards are responsible for establishing, maintaining and regulating professional practice standards. Board members are health professionals and public members appointed by the Governor. Professionals are charged fees for examinations, issuance of licenses, renewals and other activities.

All of the boards are supported by Other Funds from fee revenue. Fees are set at a level that allows for the operation of the individual boards with an adequate cash reserve for operating expenses. The 1997 Legislature requested that the Department of Administrative Services (DAS) study the boards' ending balances and make recommendations. The DAS report suggested that in most cases ending balances should be at a level which would maintain the agency for a 90-day operating period. Sixteen out of the eighteen boards have ending fund balances greater than three months. Temporary fee reductions will be taken during 1999-01 by two boards that have substantial cash balances, the Boards of Naturopathic Examiners and Clinical Social Workers.

Most of the boards have been experiencing growth in the number of licensees for the past few years. Along with this growth has come increased workload related to issuing licenses, providing information to applicants and the public, investigating complaints and monitoring continuing education requirements.

In 1997, Senate Bill 235 established guidelines and timeframes in which the boards are to process complaints. The statute requires all boards to investigate and present each case for action within 120 days of the complaint's receipt. In addition, the boards may not disclose any pertinent information about the case to the general public. The Attorney General's office determined that both the complainant and the respondent are considered to be members of the general public. As a result, the boards may not disclose information to another state agency, even if there are violations or criminal aspects to the case that are under the other agency's authority. The statute also requires that all complaints be investigated, whether or not the allegations are relevant to the boards' authority. This determination makes case investigation very difficult and time consuming. Many of the boards have hired or contracted with compliance investigators due to the number of complaints, time constraints and complexity of investigations.

The Governor's recommended budget added 8.3 FTE, and three boards made proposals to change positions to higher classifications. Four of the new positions were investigators ($357,724) and two were inspector/investigators ($254,004). Eight boards located in the Portland State Office Building are planning to share a local area network that will be managed by a contract network administrator.

During the 1999 Session, the Board of Radiologic Technology was removed from the health-related licensing board budget and placed in a separate bill. The Boards of Midwifery, Chiropractic Examiners, and Psychologist Examiners were not included in the Governor's recommended budget for the health-related licensing boards, but are included in the Legislatively adopted budget.

Fee increases and/or adjustments were approved for the Board of Dentistry, Board of Massage Technicians, Board of Licensed Professional Counselors and Therapists, Mortuary and Cemetery Board, Board of Naturopathic Examiners, Physical Therapist Licensing Board, Board of Psychologist Examiners, Board of Radiologic Technology, and Veterinary Medical Examining Board.

In response to disclosure problems with Senate Bill 235, the legislature passed Senate Bill 236. This bill allows disclosure of certain information related to action taken by the health boards, under certain conditions and to specific parties. In addition, Senate Bill 1127 was passed giving semi-independent status to eight licensing boards. Three of these agencies are health-related licensing boards: Board of Optometry, Physical Therapist Licensing Board and Board of Massage Technicians. Senate Bill 1127 has no sunset date and is a continuation of Senate Bill 546, a four-year pilot program passed in 1997 which created five semi-independent licensing boards. These boards will not be required to submit budgets for legislative approval.

The legislature encouraged the boards to increase public outreach and educational seminars for licensees in order to decrease complaints and investigations. The boards were also asked to examine the economics of.biennial license renewal and report back to the legislature. The eight boards sharing a contract network administrator were asked to report to and receive the approval of the Joint Legislative Committee on Information Management and Technology during the interim.

The Board of Barbers and Hairdressers is responsible for licensing, examinations, enforcement and complaint investigation. The Board is part of the Health Division Licensing Program Office, which consolidates in one location the licensing-related functions of the barbers and hairdressers, denture technologists, sanitarians, hearing aid dealers, electrologists, permanent color technicians and tattoo artists, direct entry midwives, athletic trainers and body piercing facilities and technicians.

Total revenue was estimated at $2.0 million for 1997-99 and $2.4 million for 1999-01. Under the Governor's recommended budget, expenses would exceed total resources for 1999-01 by $181,733. The ending balance for 1999-01 is projected at $389,176 or 3.6 months operating funds.

The Board licenses and regulates the 45,000 individuals and 10,000 businesses that provide cosmetology services within Oregon. The Board has an increasing number of license renewals, business licenses and independent contractors, mainly due to people moving into the state. The Board expects to process over 72,000 licensing activity transactions (applications, certificates, permits, etc.) during 1999-01. This is a 13.8 percent increase over the 1997-99 biennium.

Over the past four years, the number of complaints filed with the Board has increased by 149 percent. For the same period, agency investigations increased by 19 percent. The passage of SB 235 during the 1997 legislative session obligated the Board to investigate all complaints. The volume of complaints and the statutory obligation to investigate has resulted in inadequate staffing to process compliance cases.

The Board invested in technological improvements as a way to enhance agency productivity. It instituted an electronic testing system that allows license applicants to use touch screens at special testing kiosks to complete their licensing exams. With this system, applicants can receive test scores and licenses much more rapidly. Other improvements include bar coding capability for cashiering; VISA/MasterCard options for payment and toll-fee telephone numbers.

The recommended budget was $2.6 million, which would be 14.2 percent higher than 1997-99 estimated expenditures. The budget would continue existing programs, add two investigators, and improve technology initiatives. One of the investigators would be limited duration and located in eastern Oregon. The investigators would assist in processing the increased workload. Total cost for the investigators was budgeted at $218,743. The package would be funded by using the Board's cash balance.

The budget also provided $200,000 for seven technology initiatives: 1) expanding the online examination system; 2) installing an intranet; 3) refining the remote inspection system; 4) implementing electronic funds transfer technology; 5) upgrading desktop workstations; 6) expanding the web site; and 7) establishing regional service centers. The intent of these initiatives is to continue to improve customer service and enforcement.

The legislature adopted a budget just under $2.6 million Other Funds, a 14 percent increase over the 1997-99 estimated expenditures. It added two new investigator positions proposed in the Governor's budget due to growth in the number of compliance cases and inspections. The technology package funding is to be unscheduled until the package is reviewed and approved by the Joint Legislative Committee on Information Management and Technology and the Emergency Board. The adopted budget provides for a minimum 5.9 month ending fund balance in month twenty-four of the biennium.

The Board of Chiropractic Examiners regulates chiropractic physicians, chiropractic assistants and ancillary personnel (physiotherapists, hydrotherapists and electrotherapists) through examination, licensing, and disciplinary programs. The Board consists of five members (four chiropractors and one public member) appointed by the Governor.

The Board licenses approximately 1,300 chiropractors and 450 ancillary personnel annually. The number of active licensees is growing at a modest pace (6 percent) while the number of inactive licensees continues to decline resulting in an overall decrease in the number of licensed chiropractors.

Complaint and investigation cases declined from September 1997 to date by 31 percent. The Executive Director is expecting the number of cases to rise following efforts by the Board to increase public awareness of its activities.

The Board and Executive Director have made a strong effort to involve stakeholders (insurance companies, health maintenance organizations, general public) and chiropractors in the Board's strategic planning. The goal is to be more responsive to their needs by providing higher quality service. They plan to improve uniformity of services by developing the Board's Practice and Utilization Guidelines. To do so, they will be applying for grants up to $150,000 to fund the document development.

The budget for this Board is supported by Other Funds revenue charged to licensees for professional licenses, examinations and disciplinary actions. A fee increase has not been requested since 1991 nor is one requested for 1999-01. The Board estimates revenues of $877,856 for 1999-01. Expenses will exceed total revenues by $86,972 during 1999-01. The cash balance projected for 1997-99 will fund the remaining services for 1999-01.

The ending fund balance is anticipated to be $148,576 for 1997-99 dropping to $61,604 for 1999-01. This represents an operating fund reserve of 1.6 months. Generally, it is recommended a board's reserve fund equal a 90-day operating reserve. The budget as presented would allow for few unanticipated expenses.

The Governor's budget of $964,000 was a 30.9 percent increase over the 1997-99 biennial estimate. The budget would continue most services including the strategic planning process, improve communication with stakeholders, and enhance public access through telecommunications and the continue work on the Board's Quality Initiative. There is a reduction of staff by 0.25 FTE and a corresponding reduction in services and supplies. The reductions were to assist in improving the ending fund balance.

The Other Funds expenditure limitation assumed $150,000 in grant receipts. The Board has not yet applied for any grants but anticipates it can obtain a grant to develop Practice and Utilization Guidelines.

The budget was adopted at $810,392 Other Funds, a 10 percent increase over 1997-99 estimated expenditures. There was a decrease of $18,456 Other Funds to reflect the reduction of one Office Specialist position by 0.25 FTE. The action was necessary for the Board to maintain a minimal cash balance. The lowest projected cash balance provides for one month of operating reserve. The Board requested an increase in limitation for projected increases in donation and grant funding. The legislature directed the Board to pursue grants and upon approval, go to the Emergency Board for the corresponding increase in expenditure limitation. A reduction in the Attorney General's hourly rate resulted in a $2,147 decrease in the Board's budget.

The Board of Clinical Social Workers is charged with establishing standards for licensing clinical social workers and associate social workers. The Board is also charged with developing and enforcing ethical standards for licensed individuals; investigating complaints; and disciplining licensed individuals who violate ethical standards, Board rules, or state licensing laws.

The budget for this Board is supported by fees charged to licensees for professional licenses, examinations and disciplinary actions. No fee increases were requested and no new programs were being proposed. Revenues were estimated at $402,920 for 1997-99 and $410,770 for 1999-01. During the upcoming biennium, expenses will exceed revenue by $11,591. The ending fund balance for 1997-99 is estimated at $336,816, a 25.2-month reserve. For 1999-01, the ending balance is projected at $325,225, representing an 18.5-month reserve.

The number of licensed clinical social workers and applicants has increased 15.2 percent to 2,450 since January 1995. With increasing population, the number of clinical social workers is expected to continue to grow.

Processing of complaints and compliance cases has been delayed and restricted due to SB 235 (1997 Session). The Board is not able to exchange information among agencies or provide needed information to licensees. Due to the restrictions, cases are more difficult to investigate and, therefore, necessitated the hiring of an investigator.

Rural areas continue to see a shortage of licensed clinical social workers. Rural licensed clinical social workers also have limited access to continuing education offerings to complete their education requirements. The Board is making improvements through home study, video, and audio programming.

The recommended budget was $422,361. This would be a 31.8 percent increase over 1997-99 estimated expenditures. The budget continued current programs and services to licensees and citizens and allowed for an additional .50 FTE for clerical support to reduce a backlog in processing licensees and seasonal workload issues.

The legislature approved the Governor's recommended budget, including the .50 FTE Office Specialist and services and supplies necessary to support the position. The total adopted budget is $418,697 Other Funds, a 30.7 percent increase over 1997-99 estimated expenditures. The increased staffing is needed to provide timely service to licensees and the public. Due to extensive cash balances, the Board will take a temporary fee reduction of 26 percent to lower the cash fund balance. The adopted budget, with the reduction in fees, will lower the cash balance to approximately 12 months of operating reserves.

The seven-member Board of Licensed Professional Counselors and Therapists oversees a voluntary licensing program for professional counselors and marriage and family therapists. The law provides a licensing process for professionals who want to use the title of "licensed professional counselor" or "licensed marriage and family therapist".

The budget for this Board is supported by fees charged to licensees for professional licenses. The Board received a fee increase in its 1997-99 budget for both Licensed Professional Counselors and Licensed Marriage and Family Therapist. No licensing fee increase was proposed for 1999-01 biennium. A $50 late fee was proposed for those licenses renewed within 30 days after the annual April 1 deadline.

Total revenue for 1997-99 was estimated at $408,663 with an ending fund balance of $124,704, a 10.5-month reserve. Expenses for 1999-01 were estimated to exceed revenue by $66,177, reducing the ending cash balance to $58,527.

Total renewed licenses were 1,266 in 1998. Since 1996, the Board has experienced only a 1.3 percent increase in license renewals. Although renewals remain steady, new licenses nearly doubled (63 vs. 124) from 1997 to 1999. Processing new licensees is much more time consuming than renewing a license.

The relative number of complaints is small but growing. These increases are primarily attributable to the growing number of professionals relocating to Oregon

The Governor's recommended budget was a 9.6 percent increase over the 1997-99 estimated expenditure level. It would continue current services. The budget redistributed the division of time between two positions and provided improved technology. The Board planned to carry over a reasonably high ending fund balance in 1997-99. At the Governor's recommended spending level, expenses would exceed projected revenue for 1999-01 by $66,177.

The legislature approved the Governor's recommended budget with minor reductions due to lower state government service charges. The total budget for the Board is $308,575 Other Funds, an 8.7 percent increase over 1997-99 estimated expenditures. The budget makes a technical adjustment to two Office Specialist positions and replaces certain hardware and software. The budget allows for a minimum three month cash balance reserve. The Board may require a fee increase in the 2001-03 biennium.

The Board of Dentistry licenses dentists and dental hygienists, regulates the use of anesthesia in dentistry and certifies dental assistants. The Board also licenses dental hygienists and certifies dental assistants for expanded functions. The Board consists of nine members (six dentists, two dental hygienists and one public member) appointed by the Governor.

The budget for this Board is supported by charges to licensees for professional licenses, examinations and disciplinary actions. A fee increase was requested for application fees, license fees, late renewal penalties and miscellaneous administrative fees. The total fee increase would generate $294,775 in additional revenue. The Board has not received a fee increase since 1991. The requested increase should provide adequate revenues through the 2001-2003 biennium. The Oregon Dentists Association supported the fee increase. Following is a breakdown of the fee adjustments:

The Board proposed changing the late renewal fee schedule to simplify the rate and handling of late fees.

The Board provides written verification of licensure and issues a certificate to licensees who are seeking licensure in another jurisdiction. The Board has not charged for these services. To cover the cost of processing, the Board proposed the following new fees:

Revenue was estimated at $1.5 million for 1997-99 and $1.7 million for 1999-01. The ending cash balance is projected to be $287,065 at the end of the 1999-01 biennium. This represents a 4.8-month operating reserve.

Currently, the Board licenses approximately 3,500 dentists and 2,900 dental hygienists and certifies 1,500 dental assistants biennially. The number of licensees is increasing as the population grows and as more people have access to dental care. The Board is projecting an 11.8 percent increase in newly licensed dentists and 8.1 percent increase in new hygienists.

Overall, complaints have risen 25.5 percent over the past ten years. During the 1997-99 biennium, the Board estimated it would open about 480 new investigations. This is an 11 percent increase over the previous biennium. The Board is continuing to take steps to improve and expedite the process.

The Governor's recommended budget was an increase of 21.5 percent over 1997-99 estimated expenditures. The budget included $295,000 in increased revenue. The budget included the addition of an Investigator 2 position, reclassification of an Investigator 3 to a Principal Executive/Manager E, and hiring part-time temporary clerical support for the investigation section. This package totals $94,948. The entire package was contingent upon approval of the fee increase. The budget provided $25,455 to upgrade the Board's computer system and establish a Web page.

At $1.4 million Other Funds, the approved budget continues all services of the Board at the 1997-99 level. It is an 18.7 percent increase over 1997-99 estimated expenditures. The budget provides for a 25 percent fee increase. The last fee increase was in 1991. The budget includes $98,616 for reclassification of a current investigator position, establishing an additional investigator position, and for part-time temporary clerical support. The computer system package was approved in concept. No additional funding was approved for the computer package since the Board has adequate funds in its current service level to cover the $24,455 package. The projected minimum cash balance in the adopted budget provides a 3.6 month reserve.

The Board of Examiners of Licensed Dietitians oversees the voluntary licensing of dietitians and assures ethical practice by licensed dietitians.

Estimated revenue from the license fee is sufficient to maintain Board operations in the coming biennium. The revenue is estimated at $53,500 for 1997-99 and $55,400 for 1999-01. At the Governor's recommended level, expenses for 1999-01 would exceed revenues by $6,418. The projected cash balance at the end of the 1999-01 biennium is $28,301. This balance represents an 11-month reserve.

The number of licensees is expected to increase slightly from 358 in 1995-97 to 382 in 1999-01.

The Board shares office space, network administrator services, database support and clerical support with seven other boards. They are seeking a part-time network administrator and database support to improve their computer system.

The recommended budget was a 44.8 percent increase over 1997-99 estimated expenditures. It maintained current services and added $11,007 for contracting with a network administrator and development of a Webpage. No fee increases were purposed.

The legislature approved the Governor's recommended budget at $60,640 Other Funds, a 42.2 percent increase over 1997-99 expenditures. The Department of Administrative Services was requested to unschedule $11,007 for the technology package until the Board has received approval from the Joint Legislative Committee on Information Management and Technology. The adopted budget assumes a cash balance that allows for a 14.4 month operating reserve.

The Board of Massage Technicians licenses massage technicians, enforces laws and rules relating to the practice of massage and the sanitary condition of massage businesses. The Governor appoints the Board members (consisting of massage technicians and public members).

Revenues are estimated at $459,620 for 1997-99 and $448,860 for 1999-01. Expenses for the 1999-01 biennium are expected to exceed projected revenue by approximately $25,000. The Board proposed using its cash balance to defray the operational costs. It would still have a substantial cash balance of $426,041 at the end of the 1999-01 biennium. This equals a 21.1-month operating reserve.

No across-the-board fee increase was proposed. However, the Board proposed restructuring fees to reflect the actual cost of administering different components of the regulatory program. These changes would result in a net revenue reduction of $10,760. The Board proposed the following fee changes:

Because of population growth and demand for alternatives to traditional medical services, the number of licensees has increased approximately nine percent per year since 1993. The Board projects to license approximately 3,600 technicians in 1999.

During the 1997-99 biennium, the Board relocated from Portland to Salem. The Board is housed with other licensing boards and requested increased limitation to pay the rent.

The recommended budget was 16.7 percent greater than the 1997-99 estimated expenditures. Expenditures would exceed revenues generated by $24,990. The Board's cash balance would cover the additional expense. The proposed fee redistribution was assumed in the budget. The budget included $13,561 for increased rent expense, and an additional $1,550 for per diem for two Board members, $4,194 for in-state travel, $3,631 for out-of-state travel and $1,500 to purchase examination resources. In addition, $11,848 was included for design of a Web page.

The legislature approved the budget at $480,715 Other Funds, a 15.8 percent increase over 1997-99 expenditures. The budget continues all programs at the 1997-99 current service level. In addition, it increases funds for facility rental, reclassification of an office specialist position, per diem for two new board member positions, and developing and distributing a Web page and quarterly newsletter. Additional funding was added for in-state and out-of-state travel but $4,800 for out-of-state travel was unscheduled pending a review of travel requirements by the Department of Administrative Services. Licensing fees were adjusted to better reflect the cost of administering the examinations and licensing. The net result of the fee adjustment was a $10,760 reduction in revenue. The adopted budget allows for a cash balance that provides a 15.2 month operating reserve.

With passage of HB 1127, the Board of Massage Technicians received semi-independent status. It will no longer submit a budget for legislative approval.

The Board of Direct Entry Midwifery oversees the voluntary licensing of direct entry midwives. It establishes and maintains criteria for entry-level competency standards and assures protection for the client's health during home childbirth.

Lack of funding seriously impairs the Board's ability to operate independently. Revenue was projected to be $17,940 while expenditures were estimated to be $29,213 for the 1997-99 biennium. The Health Division Licensing Office, in consultation with the Board of Direct Entry Midwifery, recommended that the Board sunset on June 30, 1999, as provided for in Chapter 362, Oregon Laws 1993.

Voluntary licensing has not resulted in a sufficient number of licensees to support the small program. In the 1995-97 biennium, there were 38 licensed direct entry midwives. The number of licensees was projected to decline to 26 during the 1997-99 biennium. There has been little incentive to be licensed, because medical providers contracting with the Oregon Health Plan have not used the services of direct entry midwives, as had been anticipated when the licensing program was created.

The program was not included in the Governor's budget.

The budget was not submitted or approved in HB 5026. The legislature approved an Other Funds expenditure limitation of $108,767 for the Board in SB 611, which also extended the Board's sunset date to December 31, 2001 and increased initial and renewal license fees from $500 to $2,000. A budget note directs that administrative costs are to be funded solely from the Board's fees and donation revenues and that revenue from other boards and commissions is not to subsidize this Board's costs. Other notes direct the Board to conduct monthly cash flow projections, deposit its revenue in an approved Oregon State Treasury account and cease operations if it is unable to support itself.

The Mortuary and Cemetery Board regulates individuals and establishments involved in the transportation, care, preparation, and processing of dead bodies. The Board provides oversight, regulation, testing, review, registration, certification and discipline of funeral service practitioners, embalmers, cemetery operators, pre-need salespersons, and crematoriums. The Board's oversight includes regular inspections of licensed facilities and investigation of complaints.

Filing fees from applications, licensing, certifications, registrations, examinations, and death registrations support the Board. The revenues are expected to increase 2.1 percent from 1997-99 to the 1999-01 biennium. Revenues for the 1997-99 biennium are projected to be $875,087 and $893,031 for the 1999-01 biennium. In 1999-01, expenses are expected to exceed revenues by $36,617. The Board will use ending fund balances to cover the additional expenses. The Governor's budget projected an ending cash balance of $261,967 (a 6.8 month operating reserve). No fee increases were proposed. If the pre-need renewal legislation passes there will be an estimated $7,000 in revenue but will be offset by $5,000 in expenses.

The industry has experienced a 10 percent increase in the number of funeral establishments over the past 14 years. This increase is compounded with a 22 percent increase in the death rate. Fifty percent of Oregonians prefer cremation, resulting in a 52 percent increase in the number of licensed crematoriums since 1984. The increase in facilities and licensed professionals has resulted in a 56 percent increase in complaints the Board is required to investigate.

Oregon is experiencing escalation in corporate buyouts and an increase in the number of individuals who market pre-need funeral or cemetery goods and services. The national and multi-national funeral service corporations have been actively buying funeral establishments in Oregon. In 1997, corporations owned 32 percent of all licensed funeral establishments. In just two years, corporate ownership increased to 42 percent. The development of the pre-need marketing and other staffing requirements resulted in a 138 percent increase in the number of initial individual licenses since the 1991-93 biennium. An increase of 30.1 percent for initial individual licenses is expected for 1999-01. Background checks must be performed on all licensed and professional staff when ownership changes. The Board is required to inspect each facility and its records not less than once biennially.

The 1993 Legislative Assembly passed a law requiring the registration of individuals who market pre-need funeral or cemetery service or merchandise. Due to the enormous increase in corporate buyouts of funeral service facilities and the registration of pre-need salespersons, the Board's background investigation workload has increased from the budgeted workload of 220 in l995-97 to a forecast of 900 in l997-99. There is no requirement for annual renewal of their registration nor are there any provisions for disciplining a registrant.

The Governor's recommended budget was a 22.7 percent increase over the 1997-99 estimated expenditure level. The major components of the 1999-01 increase included the addition of 1.0 FTE investigator at $59,514, and $2,500 to upgrade hardware and software. The budget maintained all other current services.

The adopted budget continues all programs at the 1997-99 level plus adds 1.0 FTE investigator and the necessary services and supplies to support the position. The total budget was approved at $913,278 Other Funds, a 20.6 percent increase over 1997-99 expenditures. The additional investigator is needed to assist in conducting thorough background investigations, performing investigations in a timely manner and providing informational services to licensees and the public. The adopted budget allows for a 6.8 month cash balance reserve.

The Board of Naturopathic Examiners is responsible for the examination, regulation and licensing of naturopathic physicians, setting continuing education standards, determining the substances to be included in the formulary that naturopathic physicians may prescribe, and approving naturopathic colleges (three are now approved). The Board consists of five members (four naturopaths and one public member) appointed by the Governor. The seven-member Naturopathic Formulary Council, which meets 2-3 times per year, completed a review of the formulary in 1997.

The Board is funded by licensing fees and service charges. The Board proposed legislation asking for authority to charge fees for Natural Childbirth Certification. This would increase revenue by an estimated $3,000 for 1999-01. Fees for examination applications range from $150 to $500, initial licenses are $150, and biennial license renewals are $700.

The Board currently licenses over 350 naturopaths biennially, a growth of 26 percent since 1996. Because of increased public interest in naturopathic care, more students have enrolled in Board-accredited colleges of naturopathic medicine. In 1998, the Portland naturopathic college had 64 graduates; in 2001 there will be 115 graduates ready for licensure, a 55.6 percent increase. The Board has experienced a 23 percent increase in investigations and a large increase in public requests for information regarding licensing and naturopathic medicine. They anticipate a 40 percent increase in the number of licensees for the 1999-01 biennium, a 75 percent increase in examinations (from 351 to 616), and an 82 percent increase in license renewals (from 256 to 450). The Board currently shares office space, network administrator services, database support, and clerical support with seven other small agencies.

The Governor's recommended budget of $436,794 was nearly 75 percent above the 1997-99 estimated expenditures. The budget increase provided $59,047 to increase a clerical position from .25 to .75 FTE and $3,126 for a temporary investigator to handle the Board's increased workload. The budget also included $99,398 for national examination costs which are passed on to applicants, and $4,583 for network administration support and development of a website. An additional package would temporarily reduce license and application fees by 50 percent during the 1999-01 biennium in order to bring the ending balance down to $140,473, a seven-month operating reserve.

The Governor's recommended budget was adopted minus two technical adjustments: $433 reflecting the reduction of Attorney General hourly rates from $92 to $90, and a $21,528 reduction in the personnel package which increases a clerical position by .50 FTE.

The Board of Examiners of Nursing Home Administrators develops and enforces standards of practice for nursing home administrators. The Board consists of nine members (3 nursing home administrators, 3 public members, 1 registered nurse, 1 registered pharmacist and 1 physician) who are appointed by the Governor.

The Board is supported mainly by licensing and examination fees paid by nursing home administrators. The current every-two-year fee structure includes $200 for examinations, $200 to obtain an initial license, and $300 for license renewal. No fee increases were being requested for 1999-01. The budget is expected to produce an ending balance of $119,320 which represents about 15 months of operating costs.

The Board licenses about 500 nursing home administrators. Growth in all types of long-term care facilities is expected to remain stable. The Board shares office space, equipment, and computer services with seven other health-related licensing boards, and is exploring a joint business initiative with other licensing boards to pool limited technology resources and provide consistent access to technical support. The Board expects a modest increase in workload.

The Governor's recommended budget of $190,231 was nearly 10 percent above the 1997-99 estimated expenditure level. The budget included $2,762 for additional in-state travel costs due to new Board members from eastern, central, and southern Oregon. These costs are covered by savings in other areas. Also included was $4,308 for shared network administration support and database services.

The legislature adopted the Governor's recommended budget less a $114 technical adjustment for the reduction in Attorney General rates.

The Occupational Therapy Licensing Board is responsible for licensing and regulation of occupational therapists and occupational therapy assistants and monitoring continuing education requirements. The Board consists of five members (three occupational therapists and two public members) appointed by the Governor.

The Board is funded by revenue from license fees and miscellaneous fees. Licenses are renewed each year, and fees range from $70 per year for occupational therapist assistant renewals to $85 for renewal or reinstatement of occupational therapist licenses. The projected ending balance is $159,401, a reserve of 17 months of operating costs.

The number of licensees has increased 74 percent from 711 in 1990 to 1,239 in 1998, and is projected to remain stable in 1999-01. The Board is receiving more requests for information from licensees and the public as more occupational therapists and assistants maintain licenses in multiple states. The Board shares office space, equipment and staff with seven other health-related boards, and is participating in a joint business initiative to pool technology funds and create a compatible network/hardware system.

The Governor's recommended budget of $219,223 was an increase of 16 percent over 1997-99 estimated expenditures, and a 7 percent increase over the 1997-99 current service level. The increase funded the Board's 25 percent share of replacement of a computer and license printer shared with three other boards, and 75 percent share of a second printer shared with another board, and increased technology costs for network administration shared with seven other boards ($8,244). Also included were increased outreach and education costs ($6,270) for additional in-state travel, newsletters, and development of a webpage.

The adopted budget of $219,077 includes a technical adjustment reflecting the reduction of Attorney General hourly rates from $92 to $90.

The Board of Optometry protects the public from unqualified and improper practice of optometry through licensing, examination, investigation, discipline and education activities. The Board also is required to designate therapeutic pharmaceutical agents for topical use, develop rules and certify providers of such agents. The Board consists of five members (four optometrists and one public member) elected by the licensees and approved by the Governor.

During the interim the Board:

• Developed its own personnel, purchasing, payroll and accounting systems;
• Developed a birth-month licensing renewal system;
• Begun self-reporting of performance and financing requirements using an independent CPA firm; and
• Increased all fees.

The Board currently has over 1,300 licensees. The increasing number of optometrists licensed by the Board, as well as the changing method of delivering services, has an affect on the Board's workload. More retail companies, including large chain organizations, have entered the optical marketplace and have impacted how optometry services are delivered. Additionally, consumer awareness about eye care, especially with the impact of computers on the health of the eyes, has heightened.

The 1997 Legislature passed Senate Bill 546, a four-year pilot program creating five semi-independent license boards, one of which was the Board of Optometry. During the 1999 Session, Senate Bill 1127 was passed, adding three additional licensing boards and eliminating the sunset date contained in Senate Bill 546.

As a result of Senate Bills 546 and 1127, the Board is not required to submit a budget for approval. This discussion of the Board is informational only.

The Board of Pharmacy is responsible for the licensing and regulation of pharmacists, pharmacy technicians and pharmacies, drug manufacturers, wholesalers, drug outlets and other distributors of legal drugs. The Board is also responsible for the quality and distribution of prescription drugs, over-the-counter drugs and controlled substances. The Board consists of seven members (five pharmacists and two public members) appointed by the Governor.

The Board is funded by revenue from licenses and fees. Licensee categories are expected to remain stable or increase moderately, with the exception of licensed pharmacy technicians, which are expected to double from 2,550 to 5,600 in the 1999-01 biennium. License fees range from $25 per year for Student Health Centers and Pharmacy Technicians to $275 per year for certain drug manufacturers and wholesalers. The national pharmacy licensing examination is now administered directly by the national board, including collection of fees.

The Board has a staggered renewal system and currently has over 15,000 licensees. There has been a large increase in the Board's compliance, investigation, licensing and administrative workloads. This is due primarily to pharmacists becoming more involved in direct patient care and drug therapy management, the use of pharmacy technicians, the increase in the number of drug outlets that must be inspected, the increased complexity of complaints and investigations, the growing popularity of the drug alert system (which alerts pharmacists of prescription scams), and an increase in requests for information from the public, pharmacists, attorneys and others. Cases before the Board's Investigations Committee increased from 118 in 1996 to 256 in 1998, a 117 percent increase.

The Governor's recommended budget of $2.5 million was revised to $2.2 million, which is a 26.6 percent increase over 1997-99 estimated expenditures. In response to increased workload, the budget added $361,714 to fund a chief inspector/investigator, an inspector/investigator, secretary and receptionist (4 FTE), and workstations for two of the positions. The budget included $35,992 to begin a two-biennia upgrade of computer hardware and software. During 1999-01, a consultant would be hired to review, evaluate and recommend the program. Phase 2 would be implemented in 2001-03 or taken to the Emergency Board upon completion of Phase 1. Phase 2 would involve purchase and set-up of licensing software at a cost of about $250,000. In addition, $74,000 was provided for a Pharmacist Recovery Network contractor for the Board's drug diversion program. The recommended budget would result in an ending balance of $530,000, which is over five months of operating expenses.

The legislature adopted the Governor's revised budget minus a technical adjustment of $1,938 which reduces Attorney General rates to reflect the decrease in hourly charges from $92 to $90.

The Physical Therapy Licensing Board is responsible for licensing and regulating physical therapists and physical therapy assistants, protecting the public from physical therapy practiced by incompetent or untrained individuals, educating the public and licensees, investigating complaints, and auditing licensees for continuing education requirements. The seven-member Board, appointed by the Governor, consists of four physical therapists, one physical therapist assistant, one public member, and one physician.

The Board is supported by examination, license renewal, registration and penalty fees paid by physical therapists and physical therapy assistants. National examination fees are $220 and are expected to increase to $320 during the 1999-01 biennium. The ending balance for 1999-01 is estimated to be $225,465, which represents more than 10 months of operating costs. The Board renews licenses annually.

The Board currently has about 3,400 licensees, and estimates a 10 percent increase in licensing activities over the next biennium. Increased population in Oregon, a larger number of complaints, and federally-mandated therapy care for school children has led to a need for more therapists and additional outreach activities to educate consumers and licensees regarding physical therapy rules, laws and educational opportunities. The cost of background checks of license applicants' credentials will increase from $7.50 to $10.50 each, a 40 percent increase. The Board shares computer resources and office space with seven other licensing boards and is participating with the boards in a joint business plan.

The recommended budget of $447,997 was an 18 percent increase over the 1997-99 estimated expenditure level. The major components of the increase were: $15,446 for network administration contract and replacement of two computers, $6,888 for Verifax fees (background checks on applicants), and $2,000 for out-of-state travel to an educational conference. National licensing examination fees were increased by $100. This is a pass-through fee, and the Board's budget was decreased by $7,928 in this package to reflect a reduction in the projected number of examination applicants.

The legislature approved the packages in the Governor's recommended budget and made the following adjustments:

• Reduced Attorney General fees by $20,000. The Board's actual expenditures have been lower than the limitation during the last several biennia and the Board currently has no hearings scheduled.
• Increased Office Expenses by $10,000 to reflect additional expenditure needs.
• Adjusted inflation for the Attorney General and Office Expense changes, resulting in a $3,020 reduction.

The legislatively adopted budget of $434,977 is a 15 percent increase over the 1997-99 estimated expenditure level.

In Senate Bill 1127, eight licensing boards were given semi-independent status. The Physical Therapist Licensing Board was one of those boards and will no longer be required to submit a budget to the legislature for approval.

The Board sets standards for continuing education, examination, and licensing of psychologists and psychologist associates. The Board has seven members (five psychologists and two public members) appointed by the Governor. The Board of Psychologist Examiners and Psychology Associates statutes do not place it under the Health Division, so its budget is not presented with the other health-related licensing boards.

The Board is supported by the collection of fees for services relating to applications, examinations, licenses and license renewals. The national written examination fee is $250, and a $100 increase to $350 began in April 1999, earlier than anticipated. Because of these additional costs and increased Attorney General costs, the legislature approved a 1997-99 supplemental expenditure limitation of $22,000 Other Funds. The budget is expected to produce an ending balance of $40,000, which represents about 2.5 months of operating expenses.

The Board licenses and regulates approximately 1,200 psychologists and psychologist associates. The Board's workload is dependent upon the number of requests for licensure and complaints in any given time period. There has been a large increase in inquiries regarding the regulation and practice of psychology and an increase in investigations of unlicensed individuals purporting to practice psychology. An average of 10 calls per month are received regarding the ethical practice of psychology in Oregon, resulting in more than 60 investigations per year. In addition, six of the seven Board members and the Executive Director are new in the current biennium, which has increased the need for additional training, in-state travel due to the Board's geographical diversity, and an increased focus on public outreach. The Board shares office space with seven other licensing boards in Salem. In 1998, the Emergency Board allocated additional funds to the Board for development of a strategic business plan.

The Governor's recommended budget of $587,972 was a 26 percent increase over the 1997-99 estimated expenditure level and a 5.6 percent increase over the current service level. Budget enhancements included $10,000 for database conversion and website development; $3,500 for in-state travel; $1,500 for out-of-state travel; $800 for Board staff training; $4,800 for lock box charges as recommended by the Oregon State Treasury Department and Department of Administrative Services; and $10,498 for national written examination cost increases which are passed on to the applicants.

The legislature adopted the Governor's recommended budget. There was a $2,161 reduction in assessment charges made in the budget.

The Board of Radiological Technology licenses and regulates radiologic technologists, sets minimum requirements for licensees and limited permit holders, and verifies completion of continuing education requirements. The Board is composed of seven members (four diagnostic radiologic technologists, one radiation therapist, one M.D. radiologist and one public member), appointed by the Governor.

The Board is supported by license and examination fees and fines. Its license renewal system is being transitioned to birthmonth renewal, which temporarily created a large ending balance during 1997-99 and the prospect of greatly-reduced revenues during 1999-01. In 2001-03, when the system is finally in place, revenues will become more stable. The Board's ending balance is expected to be $82,800, a 5.6-month operating expense reserve. The 1997 Legislature removed the Board's fees from statute, allowing administrative rule changes subject to review by the 1999 Legislature. Fees were increased during the interim from $3 to $5 per month..

The Board has about 3,000 licensees, three quarters of whom are radiologic technologists (with degrees) and one fourth are limited permit licensees (attended trade school). Growth is expected to remain fairly stable during the 1999-01 biennium. The Board shares office space, network administration and data base services, and clerical services with seven other licensing boards.

The Governor's recommended budget of $411,657 was an increase of 40 percent over the 1997-99 estimated expenditure level. The budget included $34,831 for 0.6 FTE clerical staff to handle increased workload and $12,065 for the network administration contract. Also included was $7,739 for the Board and Executive Office to attend the Attorney General's Public Law Conference in Salem, $11,900 to review the Board's administrative rules, and $11,550 to revise the limited permit examination which was developed in 1986.

The Board was removed from the health-related licensing board bill and given a separate budget bill. The Board's services and supplies budget was decreased $5,000 for savings, and the package requesting funds to review administrative rules was not approved. The legislatively adopted budget includes $12,065 for the network administrator contract, and $5,345 for an additional 0.1 FTE to bring a clerical staff worker up to 0.5 FTE. Also approved was $760 for the Executive Officer and one board member to attend the law conference, and $11,550 to revise the limited permit examination. The legislature approved a fee increase of $1 per month, from $3 to $4 per month. The budget approved was $355,554, a 15.5 percent increase over 1997-99 estimated expenditures.

The Board's purpose is to protect the public by insuring that practitioners meet and maintain minimum standards for practice. The Board evaluates the qualifications of individuals seeking licensure, investigates complaints against licensees or persons operating without a license, provides public information and education regarding licensure and is implementing professional development requirements for license renewal. The Board has seven members, appointed by the Governor: two licensed speech-language pathologists, two licensed audiologists, two public members, and one medical doctor with American Board of Otolaryngology certification.

The Board is supported solely by license application and renewal fees. No fee increases are being requested and no new programs are being proposed. The budget is expected to produce an ending balance of $69,129, which represents about 10 months of operating costs.

The Board licenses, investigates and disciplines approximately 1,300 speech-language pathologists and audiology practitioners. The Board has increased its outreach and education with establishment of a website and distribution of a directory and newsletter. No significant increase in workload is expected. The Board shares office space, equipment and clerical help with other licensing boards, and is participating in a joint business initiative with them to pool limited technology resources and provide consistent access to technical support.

The Governor's recommended budget of $151,555 was nearly 17 percent more than the 1997-99 estimated expenditure level. The budget provided $9,838 for the network administration contract, software upgrades, computer replacement, and a new shared license printer. Also included was $2,000 to fund attendance of either the Executive Officer or one Board member at a national conference.

The Governor's recommended budget was adopted with a minor technical adjustment reducing Attorney General costs because of the decrease in hourly rates from $92 to $90.

The Veterinary Medical Examining Board is responsible for regulating veterinary medical practice, including the licensing of veterinarians, veterinary technicians, interns, and animal euthanasia technicians and shelters. The Board has seven members (five veterinarians and two public members) appointed by the Governor.

The Board is supported by Other Funds revenues from license, application and examination fees, penalties and sale of lists to the public. The national examination fee of $80 is being increased to $100 on July 1, 1999 and the Board is planning to increase its charge to applicants from $85 to $105. The ending balance is projected to be $289,595, a 15-month operating expense reserve.

Due to Oregon's population increase, license applications have increased. Currently there are 2,140 licensees regulated by the Board. Compliance expenses have also gone up, caused by increased Attorney General costs and a 25 percent increase in compliance cases since 1995-97. Two relatively new issues confronting the Board are regulation of the practice of alternative health methods for animals, and Oregon veterinary practices being purchased by outside corporations.

The Governor's recommended budget of $419,952 was a 28.5 percent increase over the 1997-99 estimated expenditure level and 16 percent over current service level. The budget increase provided $28,851 for a permanent part-time investigator (.5 FTE) to assist with the increased compliance caseload; $6,538 for increased national examination costs which are passed on to applicants; $15,882 for the network administration contract shared with seven co-located boards, $2,520 for purchase of a shared computer and printer; $720 for development of a website; and $3,680 for Attorney General costs to research, review and rewrite administrative rules.

The legislature adopted the Governor's recommended budget with a $551 reduction to Attorney General costs resulting from the decrease in hourly rates from $92 to $90.

LFO Analyst: Niswender

The Board of Investigators was created by the 1997 Legislature and consists of five members that are appointed by the Governor. The Board is responsible for licensing qualified private investigators and registering qualified operatives. Additionally, the Board is required to adopt administrative rules, establish minimum qualifications, approve and administer tests, formulate a code of professional ethics, establish and enforce professional education requirements, investigate alleged violations, and impose sanctions.

The Board is supported primarily by application, exam, registration, license, and renewal fees paid by private investigators and their operatives ($221,323). A small amount of revenue is generated from miscellaneous sources such as licensee lists and copies. In 1997-99, a $50,000 General Fund loan was provided for start-up by the Emergency Board. The Board must reimburse the $50,000 General Fund from fee revenue by no later than June 30, 2001.

The November 1997 Emergency Board established the Investigator Board's first budget to cover a 20-month period, so 1999-01 will be the Board's first full biennium budget. As of October 15, 1998, the Board has licensed 286 investigators and registered 13 operatives. During 1999-01, it expects to process 337 renewals and 75 applications for initial licenses. The Board established its original fees based on the assumption that there would be 350 to 400 licensed investigators, so it should have adequate Other Funds revenue to support the budget and repay the General Fund loan without any fee increases during 1999-01.

The recommended budget of $216,898 was $99,567 (85%) higher than the 1997-99 estimated expenditures. The budget increase was mainly because the Board was only funded for 20 months in the 1997-99 biennium. Operating expenses were minimal during the first several months while Board members were being appointed; an executive officer hired; and an office set up. The recommended budget maintains Board operations and provides the Board with the additional expenditure limitation ($6,936) it needs to obtain FBI fingerprint-based background checks from the Oregon State Police. This additional expenditure limitation would only be necessary if legislation passes that gives the Board authority to conduct a national criminal history search on each applicant. Based on expected revenues and planned expenditures, the Board will have a 1999-01 ending balance of $102,863, equivalent to 11 months of operating costs.

The legislatively adopted budget of $269,517 Other Funds is $52,619 above the Governor's recommended budget. This is the first biennial budget for the Board since it began operations in November 1997. The legislature reduced the budget by $10,519 based on services and supplies expenditure patterns and increased personal service expenditures by $60,474 so that the Board could continue a limited duration office specialist position. The office specialist position was authorized by the Department of Administrative Services in January 1999, but was not included in the recommended budget due to the timing of approval, questions that existed about the permanency of the workload, and the adequacy of revenue to support the position. The legislature confirmed that revenue was adequate and that the position remained necessary to handle mail, calls, application processing, background checks, filing, and routine correspondence. The legislature ratified currently existing fees that the Board established in administrative rules during 1997-99. The legislature also directed the Board to monitor the revenue derived from the current fee schedule and to take all necessary steps to adjust established fees in a timely manner, to ensure that fees do not exceed the cost of administering the program of the Board.

LFO Analyst: Jordan

The Bureau of Labor and Industries has four divisions: Commissioners Office/Program Support, Civil Rights, Wage and Hour, and Apprenticeship and Training. The Bureau's goals include improving workforce protection and development, intensifying enforcement of Prevailing Wage Rate laws, reviewing agency rules and streamlining Bureau systems.

The Bureau has revised and reduced its management structure and has 19 percent fewer staff for 1999-01 than it had in 1993-95. Program reductions experienced in the past three biennia include elimination of work permits and licensing (but not regulation) of private employment agencies, elimination of licensing for repair of electronic entertainment devices, transition of licensing of court reporters to the Judicial Department, and transition of the federal Job Corps recruitment program to a private agency.

The Commissioner's Office and Program Support Services Division provides overall policy direction and management for the Bureau. The Division's program units are: Commissioner's Office, Business Services (Fiscal Services, Personnel, Labor Relations, and Information Services), Hearings, and Technical Assistance for Employers. Funding for the programs is outlined in the table below:

Revenues for the Commissioner's Office/Program Support Division include fees from seminars for employers on Civil Rights and Wage and Hour laws, on-site presentations, and the sale of handbooks totaling over $1 million. Additional Other Funds are received from Prevailing Wage Rate funds and other miscellaneous fees. Federal funds of nearly $180,000 reflect costs for administrative law proceedings for contested cases relating to the Equal Employment Opportunity Commission (EEOC) contract.

Since 1991, the agency has significantly reduced its management structure. Agency staffing continues to decline without a corresponding overall reduction in workload. Prevailing rate enforcement actions have increased more than 37 percent since 1996, creating the need for increased administrative law proceedings.

The Governor's recommended budget of $5.9 million was an increase of 19.6 percent over the 1997-99 estimated expenditure level. The proposed budget added $114,046 Other Funds and 1.0 FTE for a Prevailing Wage Rate case presenter to handle increased requests for contested case hearings.

The legislature approved General Fund reductions of $305,168 in rent, expendable property and personal services for administrative efficiencies. Attorney General costs were reduced $1,512 General Fund because of the decrease in hourly fees from $92 to $90; and state government service charges were adjusted by a total of $6,994. The legislature approved addition of a prevailing wage rate case presenter in the hearings unit to handle increased enforcement actions. Also added was $169,398 Other Funds and 1.75 FTE to implement passage of House Bill 2027, which authorizes the Bureau to use funds in the Prevailing Wage Education and Enforcement account for public contracting and purchasing education programs.

The Civil Rights Division enforces laws that grant job seekers and employees equal access to jobs, promotions, and a workplace free of discrimination and harassment; and assures job protection for persons reporting safety or other violations, using family leave provisions or the workers compensation system. The Division also enforces laws protecting those seeking housing or using public facilities, and protects access to career schools. The Division processes employment discrimination complaints for Oregon Occupational Safety and Health Administration (OR-OSHA) and Workers Compensation, and ordinance complaints related to discrimination for the cities of Corvallis, Eugene, and Portland, and for Benton County.

The Division operates under a work-share agreement with the federal Equal Employment Opportunity Commission (EEOC) for cases that fall under both state and federal law, including civil rights laws, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. There were over 2,000 dual-filed cases during 1997-99, which represents about 60 percent of the Division's workload.

The Labor Commissioner also has a 15-member advisory council, the Oregon Council on Civil and Human Rights, which provides citizen input in identifying and addressing current and emerging civil and human rights issues.

The Civil Rights Division expects to receive Other Funds of over $700,000 from OR-OSHA, Workers Compensation, the cities of Corvallis, Eugene and Portland, and Benton County for services provided under contract. The Division receives federal funds covering about 63 percent of actual costs from its work-share agreement with the EEOC, which are anticipated to be over $1 million. Because federal and state civil rights jurisdictions overlap, reductions in federal resources are shifting the costs of shared cases toward the General Fund.

The Civil Rights Division responds to over 26,000 inquiries annually and investigates approximately 2,100 cases per year. Most of these cases relate to discrimination in employment. The agency has increased efficiency by implementing a new case management system which has helped to offset the declining federal share of investigative costs. Because of these improvements, case processing time has been reduced from 11 months to less than 150 days.

Funding for investigation of discrimination complaints against injured workers was shifted from the General Fund to the Workers Compensation Fund in 1995 and sunsets in 1999. Complaints from injured workers of discrimination or retaliation for using the workers compensation system comprise 15 to 20 percent of the Civil Rights Division's annual caseload and requires the equivalent of four investigators, or $466,436, for the current service level. The Management/ Labor Advisory Committee directed the agency to request General Fund for the program after 1999.

The Governor's recommended budget of $4.3 million was an increase of four percent over the 1997-99 estimated expenditure level. The proposed budget eliminated a part-time Office Specialist 2 position (0.5 FTE) saving $35,944 General Fund. The Governor's budget would retain Worker Compensation funding for the Injured Worker program.

The legislatively adopted budget includes a reduction of $6,000 General Fund for in-state travel cost savings and a small General Fund reduction in Attorney General fees due to hourly fees being decreased from $92 to $90. Department of Administrative Services and Secretary of State audit assessment charges were adjusted $8,678 total funds. Funding for the Injured Worker program was continued by the passage of House Bill 2154, but the agency was directed to propose alternative funding in 2001-03.

The Wage and Hour Division administers and enforces laws that involve the minimum wage and overtime, wage collection, certain working conditions, and the employment of minors. The Division also enforces regulations pertaining to private employment agencies, conducts surveys and regulates prevailing wage rates on public works contracts, and licenses and regulates farm and forest labor contractors.

The Wage and Hour Division expects to receive $110,000 in licensing fees for farm/forest labor contractor licenses, about $1.6 million from assessments on public construction contracts for the Prevailing Wage Rate (PWR) program, and $250,000 in interest and recoveries for the Wage Security Fund. The Fund is dedicated to pay the final wages for employees whose employers cease operations and default on final paychecks. It was transferred to the nonlimited budget by the 1995 Legislature. Over $2.8 million will be received for the Fund from the .03 percent unemployment tax premiums paid by employers during one quarter of each biennium.

The Wage and Hour Division issued and renewed licenses to about 470 farm and forest labor contractors during 1997-99 and conducted 161 investigations in fiscal years 1997 and 1998. Prevailing wage rate investigations have increased more than 37 percent since 1996. In the 1995-97 biennium, the Division collected $787,937 in unpaid prevailing wages, and during the 1997-99 biennium, recoveries increased to over $1.3 million. Also in 1997-99, over 5,000 wage claims have been filed, and the Wage Security Fund paid about 1,000 claims. The Bureau also completed creation of an annual comprehensive data-based survey of regional construction wages in Oregon. The 1997 Legislature repealed licensing provisions of the Private Employment Act; therefore, program activity has been very limited.

The Governor's recommended budget for the Wage and Hour Division of $6.6 million was an increase of 19 percent over the 1997-99 estimated expenditure level. The proposed budget shifted 2.5 FTE and $282,007 from General Fund to Other Funds. Also included in the budget was an enhancement of $86,534 Other Funds and 1.0 FTE for a Prevailing Wage Rate Compliance Specialist to handle increased investigations.

The legislature approved the Governor's budget, with two additional adjustments: an administrative efficiency reduction of $9,600 General Fund for in-state travel and a $2,553 General Fund reduction in Attorney General costs for the decrease in hourly rates from $92 to $90. State government assessment charges were revised in the amount of $9,096 total funds. Senate Bill 179 was passed which increases licensee fees for farm and forest labor contractors. This will increase revenues to a level which will fund the expenditures of the licensing program.

Following the policy direction of the 10-member Oregon State Apprenticeship and Training Council, the Division promotes the development of a highly-skilled workforce through partnerships with government, labor, business and education, and provides apprenticeship opportunities for individuals. The Division is responsible for registering apprentices and works with local apprenticeship committees to develop and submit standards to the Council for approval. Regular compliance reviews of the local committees are conducted to insure that apprentices are being treated fairly and receiving the best possible training. The Division is also responsible for maintaining a statewide registration of education and training programs for veterans, and works in partnership with school-to-work programs, educators, employers and students. The Division collaborates with school-to-work programs to connect adult apprenticeship standards to core competencies identified at the high school level.

The Apprenticeship and Training Division will receive a federal grant of over $70,000 from the Veterans Administration for on-the-job training of qualified veterans.

The Division maintains a registry of nearly 7,000 apprentices, has over 4,300 participating employers, and conducts compliance reviews to insure that programs are acting in accordance with their standards and to assure that all apprentices are being treated equally. The Division has also retooled its service to provide more consultation and oversight of its local committees, and less direction and control.

The Governor's recommended budget of $2.8 million funded the Apprenticeship and Training Division at the current service level.

The legislature approved the Governor's recommended budget, with a small reduction of $470 General Fund in Attorney General fees to reflect the decrease in the hourly rate from $92 to $90, and adjustments to state government assessment charges of $5,794 total funds.

LFO Analyst: LaMonte

The mission of the Landscape Contractors Board is to assure consumer protection, contractor competency and fair competition in the landscape industry. The agency regulates 1,190 landscape contractors and 910 landscaping businesses, and provides consumer education and dispute resolution services. The Construction Contractors Board provides administration and staff support through a contract with the Landscape Contractors Board. This contract represents 4 percent of the FTE workload of the Construction Contractors Board.

The agency receives revenues from registration and renewal fees, and examination fees. Fees were increased by 67 percent in 1997. This was the first increase for the Board in more than 10 years.

Civil penalties, estimated at $24,000 for 1999-01, are transferred to the General Fund.

The Landscape Contractors Board has experienced an increase of approximately 4 percent in registrations per year over the past seven years, and anticipates an ongoing increase of 3 percent per year. The number of landscape contractor licenses is expected to grow from 1,240 to 1,275 and landscape business licenses will grow from 920 to 950 during the 99-01 biennium. The Board received 64 claims against licensed landscape businesses in 1997-98. This is an increase of 20 percent over the previous fiscal year.

The Landscape Contractor's Board is administered jointly with the Construction Contractors Board through an interagency agreement.

The Governor's budget included an increase of $57,723 (14.7%) over 1997-99 estimated costs. The increase would reimburse the Construction Contractors Board for reclassification costs for contract staff that administer the Landscape Contractors Board ($21,303), fund per diem for additional Board meetings and other administrative costs ($14,911), and provide funding for additional technology ($17,623). These increases were funded with anticipated revenue and did not require an increase in registration and renewal fees.

The budget is increased by $36,020 over 1997-99 estimated expenditures. Adjustments include the Landscape Contractors Board's contractual share of increased costs for operations in the Construction Contractors Board, including salary adjustments, reclassifications and technology. Budget notes direct the Construction Contractors Board to return to the Emergency Board after review of technology and staffing and classification issues. If the Emergency Board approves increases to the limitation of the Construction Contractors Board, the Landscape Contractors Board may need to seek additional limitation for its contractual share of these costs. The budget was also adjusted for reductions in Department of Administrative Services and Secretary of State audits assessments.

LFO Analyst: Britton

The Board of Medical Examiners licenses, registers, and regulates medical doctors, doctors of osteopathy, podiatrists, physician assistants, and acupuncturists. The mission of the Board is to protect the health, safety and welfare of Oregonians by monitoring and investigating the unprofessional conduct of these medical professions and to insure excellence in these health professionals' practices. The Board has the power to revoke or suspend the license or privileges of health professionals to practice in the state. The 11-member Board is appointed by the Governor and includes seven medical doctors, two doctors of osteopathy and two members who represent the general health-consuming public.

The Board also administers a diversion program to assist the licensed health professionals who have substance abuse problems without coming under disciplinary action. The program provides intervention at an early stage by providing referrals to treatment programs, providing an intervention team to confront licensees who are still denying that they have a problem, and following up and providing on-going counseling for individuals who have received treatment. The diversion program represents approximately 11 percent of the Board's total budget, with the remainder for licensing, investigation and other Board functions.

Almost all of the Board's revenue is derived from fees for licensure, examination, certification, and registration of the various health professionals under the jurisdiction of the Board. A small amount of revenue is from the sale of lists, directories, and other miscellaneous sources.

The Board currently has oversight for about 12,000 health professionals. Its staff receives over 2,500 complaints and inquiries annually and investigates about 400 of them for possible violation of the Medical Practices Act.

The budget is in large part driven by the number of health professionals regulated by the Board, the number of complaints filed with the Board and the number of requests for information from licensees and the public. Although the number of licensees is stable, complaints and requests for information have been increasing both in number and complexity. In addition, more cases are being contested through the Board's hearing process.

Agency staff indicates that they are spending more time resolving policy questions related to the growth of managed care and HMOs, the passage of Oregon's Death with Dignity law, end-of-life and pain management, and an increased public interest in alternative health care.

The Governor's recommended budget was 14 percent higher than the 1997-99 estimated expenditure level. It included a 40 percent overall increase in fees that was expected to generate about $1.6 million in revenue. For example, the annual physician's license renewal fee was proposed to increase from $165 to $230. This fee increase, according to the agency, would provide for an adequate ending balance of funds through the 2001-03 biennium. The Board anticipates raising its fees 20 percent during the 2003-05 biennium. Fees were last increased in 1989.

The Governor's budget included the effects of inflation, phasing out one-time position start-up costs and technology enhancements, as well as the following increases above the estimate of 1997-99 biennial expenditures:

• Reclassification of four positions and increasing one position from 0.6 FTE to 1.0 FTE ($74,087) to retain agency staff and allow for enhanced recruitment when positions are vacated.
• Technology initiatives that would upgrade computer hardware and software, provide for a study on applying scanning technology at the agency, and install a server for the Health Professionals program ($67,900).
• Increased funding for Attorney General expenses ($62,354).
• Provide $5,000 for a study of various options for reconfiguring the registration process.
• Additional funding for the Board's per diem expenses ($123,860), anticipating legislation that would allow various state boards and commissions to increase the per diem for members. The Board of Medical Examiners per diem would increase from $30 to $250.

The legislatively adopted budget is $177,877 below the Governor's recommended budget. The budget supports the Governor's proposed enhancements but reflects a decision that the agency had sufficient ending balances to absorb the costs of several program expansions. Thus, the budget includes Other Funds reductions of $34,257 for four proposed position reclassifications, $5,000 for a study of reconfiguring the registration process, and $123,860 for funding the Board's increased per diem expenses.

In addition, the Department of Administrative Services (DAS) agreed to unschedule two amounts:

• $34,257 until the position reclassifications are approved by the Human Resources Service Division of DAS, and
• $123,860 pending passage of SB 265 which increases the Board member per diem from $30 to a maximum of $250. Assuming passage of SB 265, DAS is to reschedule the amount of expenditure limitation that is consistent with the new per diem rate.

The adopted expenditure limitation for the agency assumes a fee increase. The agency had originally estimated that it needed a 40 percent average fee increase. In light of a higher forecast of revenue for the current biennium and analysis showing sufficient ending balances, it was recommended to the Board that it consider a smaller fee increase. The agency will review this further and establish the fee increase through its administrative rule process. If the Board increases its fees during the interim, under current law legislative approval would be required to continue the fee increase.

The budget also reflects a reduction of $14,760 to reflect changes in the Department of Administrative Services, Secretary of State Audit Division, and Employment Relations Board charges.

LFO Analyst: Britton

The Board of Nursing is responsible for licensing, registering and regulating nurses, nursing assistants and nurse practitioners. The Board has the authority to revoke or suspend the license or privilege to practice in the state. The Board consists of nine members appointed by the Governor. House Bill 2198, passed by the 1997 Legislature, revised the Board's composition to include five registered nurses, two licenses practical nurses and two public members. In addition, Certified Registered Nurse Anesthetists (CRNA) were added as an advanced practice category of licensees during the 1997-99 biennium as a result of SB 412.

The Board also administers a Nurse Monitoring program to assist the licensed nurses who have substance abuse problems. The program serves as a substitute for disciplinary action by intervening as early as possible. The program provides information about approved treatment programs, formal intervention counseling, and on-going support and monitoring for individuals who have received treatment. This program is estimated to cost approximately $312,000 during the 1997-99 biennium.

Most of the Board's revenue is derived from fees for examination, licensure, renewal, certification and registration of the various health professionals under the jurisdiction of the Board. Under the federal Omnibus Reconciliation Act of 1987, the Board is able to match funds for the Certified Nursing Assistant (CNA) program with federal Medicaid funds. A small amount of revenue is from the sale of lists and directories and other miscellaneous sources.

The Board licenses over 61,600 health professionals (40,000 nurses, 20,000 active certified nursing assistants, 1,400 nurse practitioners, and 200 certified registered nurse anesthetists); and addresses over 3,600 complaints annually. External concerns and inquiries generate 600 complaints; the remaining complaints arise from internal investigations. The budget is in large part driven by the number of health professionals regulated by the Board and the number of complaints filed with the Board. The number of licensees has been growing at a low rate. The number of external complaints fluctuates annually, but the complexity of the complaints and the cost of investigations are increasing. Nonetheless, the agency resolves 98% of the complaints without conducting a formal hearing.

At the November meeting of the Emergency Board, the agency requested and received $30,000 of additional expenditure limitation for the 1997-99 biennium to fund CNA in-facility testing-a practice that is required by the Health Care Financing Administration (HCFA) but not being done in Oregon. (CNAs are currently tested primarily in clinical settings within Community Colleges around the state.) The agency is in the process of refining its estimation of roll-up costs for the 1999-01 biennium, but believes the cost could be as high as $250,000. Neither the cost nor the funding source (CNA testing fee increases) is included in the agency's budget request or Governor's recommended budget.

The Governor's recommended budget of $5.3 million was 12 percent higher than the estimated 1997-99 expenditure level. The budget included a fee increase that would allocate fee revenue more according to cost than is currently the case. Thus, fee increases for each program differ and depend upon the cost of providing the regulation or service. For example, the agency proposed increasing its Registered Nurse biennial renewal fee from $54 to $65, a 20 percent increase. At the same time, the Certified Nursing Assistant biennial renewal fee was proposed to increase from $20 to $35, a 75 percent increase that the agency claims more closely reflects the costs of the certified nursing program regulation. The overall increase would generate about $1.6 million of Other Funds. The Board believes it will deplete most of its cash balance during the upcoming biennium if no fees are raised. The last general fee increase for the agency was in 1993.

The increase in the Governor's budget above the 1997-99 estimated expenditure level would cover inflation related costs, phase out one-time technology initiatives and costs for new positions included in the current budget, and fund several program enhancements including the following:

• Increases in the agency's ability to communicate with its constituents by adding a public information representative, increasing the number of newsletters it publishes, and conducting more workshops for stakeholders ($257,425 and 1.00 FTE).
• Purchases of computer equipment including printers and imaging equipment, and converts paper licensing cards to plastic cards for durability and security ($199,800).
• Reclassification of several positions. The one position reclassification requiring the Department of Administrative Services Human Resources Management Division approval was reviewed and approved.
• Increases in in-state travel funding for Board members and agency staff to reflect higher travel costs.

The legislature approved a budget of $5.7 million and 32.50 FTE for the Board of Nursing, a nine percent increase above the Governor's recommended budget. The adopted budget modifies the Governor's proposed budget in three ways. First, the position reclassification package was reduced by $9,014, reflecting the Department of Administrative Services Human Resources reclassification review of several agency positions. One of the positions was not approved for reclassification. Second, the adopted budget includes a Certified Nursing Assistant (CNA) "in-facility" testing package which was not included in the Governor's budget, but was later endorsed by the Governor. The CNA testing package will allow the agency to contract with a testing company that will be able to provide testing opportunities for prospective CNA's in health facilities as well as community colleges where most of the testing has been done heretofore. The package of $465,840 includes revenue for test takers and those who are scheduled to take the test, but fail to arrive for the test. The "no-show" portion is $242,172. The legislature requested that the Department of Administrative Services unschedule the "no-show" amount until a reasonable forecast of "no-show" revenue can be established. The third change to the Governor's budget was an increase of $10,821 to reflect changes in the Department of Administrative Services, Secretary of State Audit Division, and Employment Relations Board charges.

While nursing board fees are established through the administrative rule process, the legislature did acknowledge that increased fees were necessary in order to implement the legislatively adopted budget and maintain the financial viability of the agency. The legislature approved HB 5041 - a bill listing all the fees that were established by the agency's administrative rule process during the 1997-99 biennium.

LFO Analyst: MacGlashan

The three-member Public Utility Commission (PUC) regulates electric and natural gas companies as well as certain telephone and water utilities. A staff of economists, engineers, financial analysts, safety inspectors, administrative law judges, compliance specialists and others supports the Commission in carrying out its responsibilities.

The Utility Program is intended to assure that every utility under its jurisdiction furnishes adequate and safe service. In addition, for investor-owned utilities, the PUC ensures these services are provided at fair and reasonable rates.

Other Funds are derived primarily from fees assessed on regulated utilities. For natural gas, telecommunications and water utilities, an assessment on the gross operating revenues of regulated utilities is expected to generate approximately $8.7 million in the 1999-01 biennium. Because of industry changes and competition among utilities, gross operating revenues are not expected to increase over the next five years. Therefore, the PUC expects to continue the assessment at the statutory maximum of 25/100's of one percent, which has been in effect since early 1997.

The 1997 Legislature passed House Bill 2623, which changed the basis for calculating assessments on electric companies from per dollar of gross operating revenues to per kilowatt-hour of electricity delivered. The change, effective January 1, 1999, limits the rate to an average of 0.18 mil ($0.00018) per kilowatt-hour delivered. The PUC intends to set the level within this limitation to ensure the electric industry is paying approximately the same total fees as in prior years. Anticipated revenues for 1999-01 are $10.6 million.

Federal Funds are received from the U.S. Department of Transportation's Gas Pipeline Safety Program to enforce federal pipeline safety regulations. These funds cover approximately 43% of the PUC's gas safety program costs.

The PUC's primary emphasis is its shift from utility monopoly regulation to service protection in an increasingly competitive environment in both the telecommunications and electric industries. The PUC's key challenges are to promote competition while incumbent utilities still exercise considerable market power and to ensure universal availability of affordable services. Debates over electric industry restructuring and competition issues in both industries are increasing the demands on staff beyond the program's current level of resources.

The federal Telecommunications Act of 1996, which encourages local exchange competition, affects all aspects of the telecommunications industry. However, the Federal Communications Commission has not yet adopted all of the rules implementing the Act and the full effect of the federal requirements is not known. The Extended Area Service, which eliminates long-distance charges for calls between exchanges, continues to be a significant issue.

The Governor's recommended budget was a 20.4 percent increase over 1997-99 estimated expenditures. The budget included:

• reclassification of 45 positions at a cost of $234,020 to implement a utility analyst series approved by the Emergency Board in January 1998 and to provide a comparable reclassification for program managers supervising these analysts;
• $390,816 for Attorney General costs due to an increase in the number of contested case hearings and appeals regarding telecommunications and electric industry restructuring;
• $228,834 and 2.0 FTE to meet increasing demand for safety and engineering services due to increases in the number of utility operators and customers as well as increases in the number of complaints needing on-site investigations and the complexity of issues; and
• $175,000 for outside services to address workload associated with restructuring the electric utility industry, in particular, the auctioning of electric utilities' generation assets.

The budget also proposed an increase of $50,405 in Federal Funds expenditure limitation for additional federal pipeline safety funds available from the U. S. Department of Transportation.

The legislature approved the Governor's budget with minor modifications. Attorney General costs were reduced by $30,216 Other Funds and a reduction of $276 Total Funds was made for changes in assessments from the Secretary of State's Audit Division, the Department of Administrative Services, and the Employment Relations Board. Additionally, the legislature requested the Department of Administrative Services to unschedule $390,816 Other Funds expenditure limitation for Attorney General costs until the PUC reports to the Emergency Board on the status of court cases involving utilities and demonstrates the need for the additional limitation.

Senate Bills 622 and 1149 from the 1999 Session continue the shift to a competitive environment for utilities. Senate Bill 622 allows telecommunications carriers to elect price regulation versus rate-of-return regulation. Senate Bill 1149 allows, under certain conditions, electric utilities to offer Oregon electricity consumers direct access to or portfolio options in competitive electricity markets. It is unknown at this time what effect these measures may have on the PUC's budget.

Passage of Senate Bill 1149 during the 1995 legislative session transferred responsibility for the regulation and taxation of motor carriers and railroad safety functions to the Oregon Department of Transportation effective January 1, 1996.

The Residential Service Protection Fund (RSPF) programs provide telecommunications services for the disabled, including the hearing- and speech-impaired, and low-income individuals. The RSPF has three separate components: the Oregon Telephone Assistance Program (OTAP) subsidizes local telephone service rates to eligible low-income Oregonians by providing a $10.50 monthly reduction for basic telephone service; the Telecommunication Devices Access Program (TDAP) provides special communication devices to deaf, hearing and/or speech impaired, or others with disabilities which prevent them from using telephones; and the Oregon Telecommunications Relay Service (OTRS) provides a 24-hour-a-day relay service as required by the Americans With Disabilities Act to link hearing-, speech-, and mobility-impaired individuals with nonimpaired individuals.

The Other Funds supporting all three program components are derived from a monthly surcharge levied against local telephone access lines. By law, the Commission can levy a surcharge of up to 35 cents monthly. The current surcharge is 10 cents, a decrease from the December 1996 rate of 26 cents, due to a renegotiated contract for relay services, an increase in the number of wireless telephones, and the statutory limit on the RSPF to not retain more than six months of projected expenses in its fund balance.

The increase in population has affected the use of the relay program by increasing calls from 68,000 per month in the 1995-97 biennium to more than 82,000 per month during 1997-99. In developing the Governor's recommended budget, the agency anticipated an increase in the contract for relay services from the 1997-99 cost of $.839 per minute to a cost of $1.26 per minute for the 1999-01 biennium.

The Governor's recommended budget continued the program at the current service level but was a 47.3% increase over 1997-99 estimated expenditures, due to the estimated increase in the current contract cost for the relay program.

The legislature reduced the Governor's budget by $677,199 based on the recently negotiated contract for the Oregon Telecommunications Relay Service at $1.04 per conversation minute. It also requested unscheduling of $1million pending passage of certain legislation or occurrence of other contingencies. At least $210,000 of this total will remain unscheduled since rescheduling was contingent upon passage of Senate Bill 297, which was not approved by the legislature. This bill would have revised the elegibility criteria for the Oregon Telephone Assistance Program.

This program includes the Commission Services Division, the Administrative Hearings Division and the Central Services Division. The Commission Services Division provides direct support to the three commissioners. The Administrative Hearings Division conducts hearings and provides recommendations to the Commission for cases involving utilities, industrial customers, consumer groups and competitors. The Central Services Division, which was formed as a result of the implementation of 1995's Senate Bill 1149, provides personnel, budget, accounting and central support to the agency. This division also includes the Consumer Services Section, which responds to customer complaints about the activities of regulated utility companies.

Other Funds are derived from cost allocations to the operating programs. The program also includes revenues from the Land Use Board of Appeals for administrative support to this agency, which is housed in the PUC building.

The number of consumer complaints against utility companies has been increasing in both number and complexity. Inquiries to the Consumer Services Section have increased from an average of 621 per month in 1994 to an average of 1,055 per month in 1997, an increase of 70 percent. For the first six months of 1998, inquiries averaged 1,288 per month. Increases have been handled mainly by job rotations and temporary employees. The agency anticipates growth in the number of complaints at 9 percent per year in the 1999-01 biennium. The changing environment of the utility industry is also increasing the number and complexity of administrative hearings.

The Governor's budget was a 20.1 percent increase over 1997-99 estimated expenditures. The budget included making permanent six temporary positions, adding one position to reduce overtime, and reclassifying three positions to address workload issues in the Consumer Services Section and the Administrative Hearings Division. The costs of $475,371 for these positions would be absorbed through savings in services and supplies and personal services. The budget also included an expenditure limitation of $34,500 for funds from the Land Use Board of Appeals for administrative support provided to it by the PUC.

The legislature reduced the Governor's budget by the following: 1) $9,500 for a revised amount to be received from the Land Use Board of Appeals; 2) $129,955 based on the agency's 1997-99 expenditure pattern; 3) $45,280 for changes in assessments from the Secretary of State's Audits Division, the Department of Administrative Services, and the Employment Relations Board; and 4) $823 in Attorney General costs.

The legislature added $228,192 Other Funds expenditure limitation and 2.0 FTE to accommodate the fiscal impact of House Bill 2576, which would have allowed the Public Utility Commission to investigate customer complaints on the practice of "slamming," defined as a change in a customer's competitive communications provider without the customer knowingly giving authorization. The legislature requested unscheduling of the limitation until the measure passed. Since the legislation did not pass, the limitation will remain unscheduled.

LFO Analyst: MacGlashan

The Real Estate Agency is responsible for the licensing, education and enforcement of Oregon's real estate laws applicable to brokers, salespersons, property managers, and real estate marketing organizations; licensing and regulation of escrow agents; and registration and public report issuance for campground contract brokers, subdivisions, timeshares and condominium developments. The agency approves courses and develops curriculum requirements for its licensees, administers real estate examinations, audits licensees, and investigates complaints made concerning its licensees and regulated activities. The Real Estate Commissioner, who is appointed by the Governor, administers the agency. The agency supports the Real Estate Board, whose seven industry members and two public members also are appointed by the Governor.

The Real Estate Agency is funded entirely with Other Funds consisting of licensing and registration fees and renewals (80%); charges for examinations (11%); the sale of publications and educational seminars (4%); and other services (5%). Real estate licensing, examination and education activities produce over 96 percent of the agency's total revenues. Activities relating to licensing and auditing escrow agencies contribute about 2 percent of total revenue. Activities relating to registration and filings for campgrounds, subdivisions, timeshares and condominium developments contribute the remaining 2 percent.

The 1997 Legislative Assembly approved a fee increase for the Agency. The increase, the first one in 10 years, was to provide an adequate ending balance to cover unforeseen expenditures and/or a significant decrease in licensees. Due to a decline in licensees, the agency anticipates revenues in 1999-01 will be 5 percent lower than 1997-99 estimated revenues. Senate Bill 182, which was proposed during the 1999 legislative session by the Agency for changes in its licensing system, was expected to reduce revenues by another 5 percent in 1999-01, but the legislature did not pass this measure.

The budget is driven by the number of licensees, which, in turn, expands or contracts with the state's economy and the real estate/housing market. Current factors affecting the number of licensees include the following:

• Use of the Internet for advertising property for sale, which affects the use of real estate personnel by the public;
• Use of technology - such as cellular phones, personal computers, and portable fax machines by real estate personnel - which increases the number of real estate agents working from their homes and cars rather than a central office;
• A trend toward franchising, mergers and mega-offices;
• Increases in Oregon's home prices leading to declining affordability; and
• Less in-migration as Oregon's economy cools down and economies of neighboring states such as California rebound.

Due to these factors, the Agency anticipates a continuing decline in the number of licensees, offices and applicants. Since 1995, the number of licensees has dropped 19 percent from 24,680 to 20,006 (as of June 1999).

The Governor's recommended budget was a 2.2 percent increase over 1997-99 estimated expenditures, and continued the current level of service. A phase-out of one-time costs related to a computer migration would offset increases for inflation and personnel costs, resulting in a decrease of slightly less than one percent from the 1997-99 legislatively approved budget. The Governor's budget anticipated an ending balance equal to nine months of expenditures.

The legislature modified the Governor's recommended budget by adding $3,627 Other Funds expenditure limitation due to a net increase in assessments from the Secretary of State's Audits Division, the Department of Administrative Services, and the Employment Relations Board.

The Commissioner currently hears contested cases and issues final orders. Due to the passage of House Bill 2525, the Agency is directed to contract for a hearings officer through the Department of Employment, effective January 1, 2000. Although the Agency believes its costs will increase as a result of this legislation, no adjustments were made to the budget due to the difficulty in estimating the fiscal impact at this time.

LFO Analyst: Weyand

The Board of Tax Service Examiners is a seven-member citizen board that licenses and regulates tax preparers, tax consultants, and tax businesses. It monitors required continuing education programs for tax preparers. It is responsible for the investigation of all complaints filed with it concerning personal tax return services by licensees and unlicensed persons. It takes disciplinary action when appropriate. A four-person staff administers Board programs.

The Board's Other Funds come principally from biennial licensing fees and fees charged for the administration of licensing examinations. Fees are established by rule but are limited by statute. Current biennium licensing fees are $55 for tax preparers and $65 for tax consultants. The Board expects to collect licensing fees of $613,000 for the biennium. The fees charged for administration of the licensing examinations are $40 for tax preparers and $70 for tax consultants. Fees from these examinations are expected to be $93,800 for the biennium. Miscellaneous fees and disciplinary fines amounting to $40,000 are also included in its Other Funds revenues.

The number of professionally prepared income tax returns is expected to increase because of changes to the Federal Tax Code. The Board regulates about 4,000 tax consultants and tax preparers, and about 1,800 tax businesses. It expects the number of tax consultants and tax businesses to grow about five percent a year. The number of licensed tax preparers is not expected to change much over the biennium. The number and severity of complaints filed with the Board has increased substantially over the past three years. The Board investigated fewer than 150 complaints in the 1995-97 biennium and has already investigated more than 200 this biennium. It is projecting 220 complaint investigations for the 1999-01 biennium. Expenditures are budgeted in excess of revenues and the Board plans to use its fund balance carried forward to fund its operations in the upcoming biennium. The budget estimates include increasing costs of investigations. Operating costs can be paid from the existing resources, however, if the number of complaints requiring investigations increase substantially beyond estimates, costs could possibly exceed resources. In an effort to keep investigation costs down, the Board is working with education institutions to allow students majoring in criminal justice to gain credits while performing investigations during internships with the Board.

The Governor's budget was strictly a current services level budget. It included the upward classification of one staff to properly reflect the responsibilities of the position. The budget projected an ending cash balance of $62,394, which would be less than two months of operating expenditures. The Governor's budget did not include two agency policy option requests amounting to $8,000 to avoid further reductions to the projected ending balance. The Board did not request, nor did the Governor's proposal include, funding for database enhancements and maintenance that could help improve operations.

The legislature adopted the Governor's budget with minor adjustments to reflect changes in Attorney General costs and Department of Administrative Services and Employment Relations Board assessments.