LEl .gov

STATE OF CALIFORNIA Budget Change Proposal - Cover Sheet DF-46 (REV 08/17)

Fiscal Year 2019-20

Business Unit 7760

Department DEPARTMENT OF GENERAL SERVICES

Budget Request Name 7760-300-SFL-2019-A1

Program 6324046 - FACILITIES

MANAGEMENT DIVISION

Budget Request Description Facilities Management Division Increased Operational Costs

Subprogram

Priority No.

Budget Request Summary

The Facilities Management Division (FMD) is requesting a permanent budget authority augmentation of $30,149,000 for the Service Revolving Fund in 2019-20 to reflect the true costs of operations that have increased over time. The Department of General Services (DGS) assesses a statewide surcharge to state entities to recover costs associated with central services provided by the DGS. The FMD can no longer absorb significant cost increases related to statewide surcharge services. This request will also provide a permanent augmentation to cover costs for partial services for clients in non-DGS owned buildings, workers' compensation and insurance costs, as well as general economic inflation and cost of living adjustments for maintenance, security, and contract costs.

Requires Legislation

U Yes

lEl No

Code Section(s) to be Added/Amended/Repealed

Does this BOP contain information technology (IT)

components? U Yes

^ No

If yes, departmental Chief Information Officer must sign.

Department CIO

Date

For IT requests, specify the project number, the most recent project approval document (FSR, SPR, S1BA, S2AA, S3SD, S4PRA), and the approval date.

Project No.

Project Approval Document:

Approval Date:

If proposal affects another department, does other department concur with proposal? ? Yes ? No Attach comments of affected department, signed and dated by the department director or designee.

Prepared By Jemahl Amen

Date March 28, 2019

Reviewed By Andrew Sturmfels

Date March 28, 2019

Department Director Dan Kim

Date March 28, 2019

Agency Secretary Julie Lee

Date March 29, 2019

Department of Finance Use Only

Additional Review: ? Capital Outlay ? ITCU ? FSCU ? OSAE ? CALSTARS ? Dept. of Technology

PPBA

Original Signed by: John Fitzpatrick

Date submitted to the Legislature

STATE OF CALIFORNIA

Budget Change Proposal Cover Sheet DF-46 (REV 08/17)

A.

Budget Request Summary.

The Facilities Management Division (FMD) is requesting a permanent budget authority augmentation of $30,149,000 for the Service Revolving Fund in 2019-20 to reflect the true costs of operations that have increased over time. The Department of General Services (DGS) assesses a statewide surcharge to state entities to recover costs associated with central services provided by the DGS. The FMD can no longer absorb significant cost increases related to statewide surcharge services. This request will also provide a permanent augmentation to cover costs for partial services for clients in non-DGS owned buildings, workers' compensation and insurance costs, as well as general economic inflation and cost of living adjustments for maintenance, security, and contract costs.

B.

Background/History

Government Code Section 14685 authorizes the FMD to act as the Property Manager for the state. FMD provides the necessary operations, regular maintenance and special repairs to maintain a building environment adequate for the use of state employees and the public, and to preserve the state's investment in real estate properties.

Due to increases in requests for services from clients and normal economic inflation over the past few years, FMD has experienced a sharp rise in costs which exceeds the current expenditure authority. FMD is requesting an increase in authority to maintain the state's real estate assets.

C.

Justification

The $30,149,000 increase in operational costs are attributed to five different areas: security contracts, workers' compensation and SCIF costs, recurring maintenance, partial services and statewide surcharge.

Security Contract Cost Increases:

FMD is requesting a permanent budget augmentation of $2.4 million to account for increases in security contract costs. FMD procures contracted security guards in order to provide a secure work environment for its client agencies. Security costs for DGS owned buildings have been steadily increasing over time, namely attributable to annual cost of living adjustments for contracted employees.

FMD's Security Contracts are tied to the Statewide Master Services Agreement (MSA) for Unarmed Security Guards that is administered by the California Highway Patrol (CMP). State civil services security guards are included in Bargaining Unit 15 - Allied Services. Exhibit A in the MSA ties the pay increases for Security Guards to any pay increases approved in the collective bargaining for similar civil services classifications. The current MSA for BU 15 is in effect from July 2016 through January 2020. General Salary Increases included in the contract are as follows:

? Effective July 1, 2017, employees shall receive a four percent (4%) GSI. ? Effective July 1, 2018, employees shall receive a four percent (4%) GSI.

? Effective July 1, 2019, employees shall receive a three and a half percent (3.5%) GSI.

The impact of the salary increase is quantified in Table 1 below. Between FY 2017-18 and FY 2019-20, FMD anticipates an aggregate increase of $2.4 million.

TABLE 1

2016

2017

2018

2019

Total Security

Vtndor

Contract # Original Contract Amt 4% Salary Increase Adjusted Amount 4% Salary Increase Adjusted Amount 3.5% Salary Increase Contract Increases

Inter-Con Security Srv Inter-Con Secui%Srv Inter-Con Security Srv Inter-Con Security Srv

Cjypress Security

3190501 S 3190502 $ 3190503 $ 3190691 $ 3179570 $

$ 2.276,475.88 282,099.17 $

3,840,940 92 $ 4,910,310.16 $ 5,612,668 80 $

91,059.04 S

11,283.97 s

153,63764 $

196,412.41 s 224,506 75 s

$ 2,367.534 92 293,383.14

$$ 3,994,578.56

5,106,722 57 $ 5,837,175.55 $

94.701.40 S 11,735.33 $ 159,783.14 $ 204,268 90 $ 233,487.02 $

2,462,23631 $

305,118.46 $

4,154,361.70 $

5,310,99147 $

6,070,662.57 $

86,178.27 S 10,679.15 $

145.40266 $

185,884.70 s

212,473.19 $

271,938.70 33,698.44

458,823.44 586,566.01 670,466 96

Cypress Security Total Increast

3179571 $ $

3,618.240 00 $

$ 20,540,734.93

144,729 60 $ 3,762,969.60 $

$ 821,629.40 S 21.362,364.33

150.518.78 $ 3,913,488.38 $ 854,494.57 $ 22.216,858.90 %

136 972 09 $ 777,590.06 S

432.220.48 2,453,714.03

PAGE 11-1

STATE OF CALIFORNIA Budget Change Proposal - Cover Sheet DF-46 (REV 08/17)

DGS receives annual budget adjustments for employee compensation increases that result from collective bargaining through the Department of Finance (DOF) prescribed Budget Letters, but this process is not inclusive of contract employee salary adjustments. Accordingly, FMD is requesting a permanent budget authority augmentation of $2.4 million. FMD plans to recover these additional costs through their building and partial services hourly rates.

Workers' Compensation/SCIF Increases:

FMD is requesting a permanent budget augmentation of $4 million to account for the true costs of Workers Compensation and SCIF expenses. Workers' Compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment. Due to the physical nature of FMD's workload, including maintenance and repair, the program incurs Workers' Compensation claims at a much higher rate than the average DGS program. Workers' Compensation claims and SCIF costs have averaged out to 12.15 percent of FMD's total benefits cost per year. Based on 5-year average costs approaching $5 million, less current funding of $1 million, FMD is requesting a permanent budget authority augmentation of $4 million in 2019-20. The additional costs will be recovered through FMD's rates process. Table 2 on the following page displays FMD's actual Workers' Compensation and SCIF costs for the past five fiscal years compared to the departmental average of all other DGS programs.

TABLE 2

FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18* 5-Year Average

Workers Compensation (WC) 4,025,269 3,642,868 3,705,933 3,236,838 3,680,732

3,658,328

SCIF Admin Fee

1,042,508

962,963 1,165,900 1,293,390 1,305,158

1,153,984

Total

$5,067,777 $4,605,831 $4,871,833 $4,530,227 $4,985,890 $ 4,812,312

Total Benefits Cost WC/SCIF % of Total Benefits

35,881,699 38,388,758 40,863,376 41,796,309 42,072,688

14.12%

12.00%

11.92%

10.84%

11.85%

39,800,566 12.15%

WC Departmental Average

2.67%

2.99%

2.74%

3.58%

5.J S ^3

3.11%

W C Projection oased on Departmental Average

957,976 1,146,416 1,120,095 1,495,686 1,505,577

1,245,150

Difference

$4,109,801 $ 3,459,415 $3,751,738 $ 3,034,541 $3,480,313 $ 3,567,162

*Straight-line projection based on actual costs through M o y 2018

Recurring Maintenance:

FMD is requesting a permanent budget augmentation of $5 million to address increased costs related to recurring maintenance service contracts. Maintenance includes various activities designed to keep a facility in good repair so that it achieves its full useful lifespan. Recurring maintenance includes routine activities necessary to keep facilities in good condition such as annual roof inspections, elevator inspections, regular servicing of heating, ventilation, air conditioning (HVAC) systems and fire and life safety systems, minor roof or HVAC repairs. Buildings may require more significant maintenance activities, such as replacement of building components when they reach the end of their useful lives. These larger maintenance projects may include, replacing roofs or HVAC systems and repaving parking lots.

Recurring maintenance is critical for maintaining building systems and avoiding costly breakdowns and

system replacements. When buildings are not properly maintained, it can result in significant repair

costs in the future and a shorter useful life of buildings. Depending on the nature of the problem, facility

repair and replacement can be many times more expensive than if the routine maintenance had been

performed early on.

.

Over the past decade, costs for recurring maintenance service contracts have increased significantly due to labor and material increases. In addition, due to aging buildings and systems, the costs and frequency of recurring maintenance has continued to increase.

PAGE 11-2

STATE OF CALIFORNIA Budget Change Proposal - Cover Sheet DF-46 (REV 08/17)

Recurring maintenance costs are recovered through FMD's building rates. Therefore, while costs have exceeded FMD's allocation by approximately $14 million over the past two fiscal years, FMD is only requesting a $5 million baseline increase in 2019-20 in order to minimize the immediate impact on building rates. Although the requested authority is only a fraction of what is needed to address the full need, it will allow FMD to establish critical annual maintenance contracts for building systems including Fire, Life and Safety, Elevator, HVAC, Emergency Medical Systems, etc. in phases.

Table 3 below shows FMD's recurring maintenance allotment and costs since 2015:

TABLE 3

FY

Allotment

2015-16 $16,746,000

Redirected Aliotment (Additional

Need)

$0

Recurring Maintenance Revised Expenditure Encumbrance Allotment

$16,746,000 $12,448,761

$3,411,418

Total Expenditure

and Encumbrance

$15,860,179

Remaining Allotment Balance

$885,821

2016-17 $16,746,000 $14,141,767 $30,887,767 $27,731,634

$3,156,133 $30,887,767

$0

2017-18 $16,746,000 $13,594,645 $30,340,645 $11,690,641

$18,650,004

$30,340,645

$0

Partial Services:

FMD is requesting a permanent budget authority augmentation of $7 million to reflect increases in partial services. Partial Services are maintenance services in non-DGS-owned or managed buildings. These services include custodial, grounds maintenance, engineering, trades, and general building maintenance. FMD has experienced increases in client agency requests to cover maintenance contract costs in non-DGS-owned partial services buildings. The majority of the increase is attributed to one of FMD's largest client agencies, CalTrans, for their buildings in Los Angeles and the Bay Area. Maintenance contracts for CalTrans and other clients that were previously not funded by FMD include window washing, elevators, proprietary fire-life safety and building maintenance systems.

FMD does not currently have expenditure authority in its existing budget to fund expenses related to non-DGS owned properties and is currently absorbing these costs with existing authority that is needed for maintenance of DGS-owned buildings.

Table 4 below displays the costs related to Partial Services have increased significantly over the past two fiscal years most notably in the operating expenses category due to the increase in maintenance contracts.

TABLE 4

2013-14

2014-15

2015-16

2016-17

2017-18

PS Labor

$34,308,803 $34,120,208 $38,331,571 $38,265,903 $38,053,375

PSOE

$3,478,975

$2,439,170

$2,937,683 $10,031,442 $10,825,865

PS Total

$37,787,7-78 $36,559,378 $41,269,254 $48,297,345 $48,879,240

With costs rising in operating expenses from $2.9 million in 2015-16 to $10 million in 2016-17 and 2017-18, FMD is requesting a permanent budget authority augmentation of $7 million in 2019-20. This adjustment has no impact on building rates because the costs are billed to and reimbursed by the requesting client agencies.

Statewide Surcharge:

DGS is requesting a permanent budget authority augmentation of $10.8 million for cost increases related to services for the State Capitol and other statewide surcharge programs. DGS assesses a statewide surcharge to state entities to recover costs associated with central services provided by the department. These services include, but are not limited to maintenance and operation of the state

PAGE 11-3

STATE OF CALIFORNIA Budget Change Proposal - Cover Sheet DF-46 (REV 08/17)

capitol, capitol grounds, legislative office building, state burial grounds, governor's office space, legislator's office space, and capitol park, capitol security, legislative work orders. Governor's work orders and legislative printing. This adjustment will align FMD's spending authority commensurate to the income generated for services provided. This adjustment will have no impact on rates as the revenue is collected through the Statewide Surcharge.

PAGE 11-4

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download