Increase Cost Recovery from Providing Copies, Computer Data and Mailing Lists

Fees for state information such as standard copies, microfilm, computer data and mailing lists should be increased to reflect a greater portion of the fair cost of providing the information.


Background
Texas state agencies routinely provide various types of information to the general public, specific industry groups, and private vendors, in many cases at little or no cost to the requestor despite research, copying and maintenance costs to the state. Alth ough some of this information is used by groups such as the news media interested in the functioning of state government, a significant percentage of requests for state data including mailing lists, corporate registry data and the like are used for commercial purposes. Texas has never systematically studied these costs. Surveys of state agencies indicate numerous areas to pursue cost recovery without hindering open records requests.

Under General Services Commission (GSC) rules, information charges are identified to recover the costs of providing information pursuant to the Open Records Act. 1 Because current state laws and GSC guidelines are vague, incomplete and rarely updated, agency employees often decide that it is not worth the time or effort to impose or collect charges. Conversely, it would even be possible for agencies to set fees above the actual costs. Improved state guidelines and fee-setting methodologi es would ensure that fees are fairly and accurately set.

An important distinction must be made between knowing the full costs of providing information and actually establishing policies regarding charging fees for state data. It is up to each agency to d ecide how much to charge, but good policy decisions cannot be made without sound cost analysis. There may be cases where fees will be set well below agency costs, but those decisions should be well-informed. As a general principal, agencies should attempt to recover costs on commercial uses of data but should not set fees that would impede the public s right to access public records.

Public Information
As defined by the Open Records Act, public information is:

All information collected, assembled, or main tained by or for governmental bodies, except in those situations where the governmental body does not have either a right of access to or ownership of the information, pursuant to law or ordinance in connection with the transaction of official business. 2~

This broad definition is modified by certain confidentiality issues; however, most official business of the state is subject to public scrutiny. The types of information requested from various state agencies is diverse and are discussed below.

Standard Copies
Most commonly, records, reports, documents, and lists are requested. The GSC establishes guidelines setting fees as directed by the Open Records Act. Appropriate labor and postage expenses are determined by each agency. The Texas Department of Human Servic es follows the GSC fee guidelines of $0.70 for the first page and $0.15 per page thereafter, with a labor charge of $13 per hour for personnel effort involved. 3~ Representing a standard hourly rate, the $13 likely recovers a significant portion of the full costs.

However, many agencies may not be recovering all costs. An objective hourly rate as determined by standard business cost accounting methods should include the base salary and benefits, plus an allocated portion of indirect costs, such as costs to enter and maintain data, storage and filing costs, an allocated portion of rent and utilities, divisional support costs, and even a portion of agency-wide support costs. An allocated portion of material costs, information systems development costs, a nd equipment costs, including maintenance and depreciation expense, should also be recovered. Once identified and pooled, they can be included in the fee structure.

Non-Standard Copies
Other information is occasionally of a non-standard page size and/or is provided in records, lists, databases, and publications, or on alternative media, such as diskettes and computer tapes; microfilm or microfiche and other systems are also used. The Texas Rai lroad Commission provides printouts, diskettes, and tapes containing certain oil and gas industry data. Rates are in place that identify labor costs, material costs, and computer costs. 4~

Mailing Lists
For over ten years, the Mailing List Services Division of the Minnesota Department of Administration has had the authority to charge full costs for over 100 kinds of mailing lists, including licensed professionals, hunters, insurance agents, and teachers. In 1991, they were given the authority to sell the mailing lists at market value, which garnered some public opposit ion, but no court challenges. Private firms were obtaining mailing lists from licensing agencies, the state highway department, the public safety department and other agencies, and then repackaging the state data and selling it to other private firms. This has been described as a lucrative source of revenue. 5~ Proper management ensures better protection of these lists.

Of 91 Texas state agencies responding to a Texas Performance Review (TPR) survey, 39 stated that they sold mailing lists generating cash re ceipts of about $1.4 million in fiscal 1991. However, interviews with some agencies revealed that the state is only barely tapping into the full revenue potential.

Vendors obtain mailing lists from professional licensing boards and sell them at prices that greatly exceed what state agencies are allowed to charge. 6~ The Office of the Secretary of State provides various listings to outside vendors who even inform their customers that it is Secretary of State data. 7~ Charges in these cases are for labor and materials only, even though considerable expense is involved in system development and maintenance.

Kentucky has taken a more aggressive approach, allowing for charges for commercial value. Legislation passed by the Kentucky General Assembly explicitly defines the terms database, geographic information system, and commercial purpose, as they pertain to the public information issue, and further stipulates that commercial intent be stated and one component of the fee charged based on the value of the commercial purpose for which the database or geographic information is to be used. 8~

Other Information Access
Public information can also be provided through online computer access, terminals or modems. Use of 900 number services has been studied by the Comptroller and the Secretary of State. 9~


Recommendations
A. The State Legislature should require the General Services Commission (GSC) to establish consistent statewide application of rules and guidelines for cost recovery in the open records proces s.

State agencies need to develop fee policies that are consistent, reasonable, complete, and based on standard industry cost accounting methods. The first step would require GSC to conduct a comprehensive, statewide review to establish policy and standards. The report should be prepared with the participation of the Comptroller, the Department of Public Safety, the Attorney General, the Department of Information Resources, the Department of Human Services and the Board of Public Accountancy. GSC should i ssue the report to be distributed to all state agencies by December 1, 1993, and should be required to update the rules and guidelines each biennium. This study could also include the preparation of a handbook explaining and instructing state agencies in m ethods of determining proposed fees.

B. The Legislature should require each state agency, by May 1, 1994, to review its open records processes and to prepare an analysis of all information being requested by the public and the associated full costs incurr ed to maintain and provide the information.

One of the goals of this review would be to provide better customer service. Through a comprehensive review, each agency would define what information should and should not be provided based on public information definitions and exclusions. This would be an education process for state employees and would result in consistent dissemination of information. Each agency would define standard procedures for providing and charging fees. Using the revised rules and the cost accounting handbook developed by GSC, each agency would compute accurate and objective cost rates and be required to update its cost analysis every biennium. Many agencies do not have cost accounting expertise available; in those cases, GSC should of fer cost accounting advice. Copies of each agency s study should be distributed to GSC, the Legislative Budget Board and the Comptroller on or before May 1, 1994.

C. The Legislature should authorize each agency to charge full cost value for providing info rmation if appropriate; in the case of mailing lists and mailing labels, agencies would be authorized to charge market value for providing such lists, whether in printed or computer format.

State law should give agencies the authority, but not the mandate, to charge full cost value for information, based on sound cost accounting principles and methods. However, it would be up to each agency s discretion whether to actually charge full value costing, or to charge a reduced amount when the agency believes that it is in the public s best interest. Once rates are set, they should be consistently applied.

To ensure immediate savings, the Legislature should require that wherever fees are currently being charged for providing data, a 15 percent increase be instituted beginning September 1, 1993, and that the additional revenues from the fee increase be depos ited to the General Revenue Fund. This increase would apply to all current and future charges for public information including copies of records, reports, lists, documents, computer and microfilm records. This 15 percent increase represents a negligible amount in order to begin recovering the true costs of providing information and keeping up with rising costs. State agencies would have the discretion to ra ise fees above 15 percent after preparing the cost studies due May 1, 1994.

Many of these fees are currently being deposited under the Comptroller s revenue category fees for copying or filing of records (revenue code 3719), water resources filing and copying fees (revenue code 3368), and vital statistics certificates and service fees (revenue code 3579). However, an analysis of these accounts revealed that very few agencies are using these object codes. In fiscal 1992, only 29 state agencies and se veral district courts were making deposits to the correct account (revenue code 3719). The remainder of agencies are either recording these fees as reductions in expenditures or depositing them in other revenue accounts.

For uniform accountability, the L egislature should require agencies, as of September 1, 1993, to deposit all such fees as described in this report to the state revenue account 3719. This will provide uniform accounting of fees and better accountability of agency activities. The Comptrolle r would be authorized to transfer 15 percent of fees deposited to this account into the unappropriated General Revenue Fund. The Legislature should require agencies to deposit the fees under any other accounting guidelines as subsequently established by th e Comptroller.

The driver record information fees currently being charged by the Department of Public Safety would be exempt from this immediate 15 percent increase, since those fees were doubled in 1992 as the result of a recommendation by the TPR. The justification fo r raising the fee at that time is similar to the increases proposed in this paper: to keep fees in line with the actual direct and indirect costs associated with maintaining the data, retrieving it, and providing it upon request in a reaso nable amount of time. 10~

State agencies should be given the authority to charge market value rates for mailing lists, computerized mailing lists, and mailing labels, whether they be in the form of computer printouts, computer tapes and diskettes, pressure sensitive labels, or various custom sorted lists. Mailing list databases are considered valuable assets by private companies; the state should profit equally.

To ensure immediate savings for providing mailing lists, the Legislature should require tha t fees currently charged for mailing lists be increased by 25 percent beginning September 1, 1993, and that the additional revenues from the fee increase be deposited to the General Revenue Fund. Mailing lists would include printed lists, printed mailing l abels and copies of computerized mailing lists. The Legislature should require agencies to deposit the fees under accounting guidelines established by the State Comptroller, who would be authorized to transfer 25 percent of mailing list fees into the unapp ropriated General Revenue Fund.


Implications
Through a comprehensive review of the open records process in each agency, consistent and fair management, customer service and cost recovery would be achieved. The Comptroller has recently completed a thorough review of its process to achieve a standardiz ed approach to handling open records requests. Recommendations included increasing employee awareness of open records issues and implementing standardized charges for classes of information. 11~

Through detailed cost analysis, once full costs are identified, each agency would set policy regarding charging full costs, or having state funds subsidize part of the costs of providing information.

This study found that most fees are currently so much below the true costs of providing the information that a fee increase would not cause reduced public demand. For example, when driver record information fees were doubled in fiscal 1992, demand for info rmation did not decline; in fact, fees collected more than doubled, from $24.1 million in fiscal 1991, to $51.6 million in fiscal 1992. 12~

In the future, the state is likely to have more and more data, databases, and other information that will be valuable to requestors. The state should implement policy changes now in anticipation of this.


Fiscal Impact
The full fiscal impact of the recommendations cannot be estimated because state agencies are not consistently depositing revenues for fees for copies and other information to the proper revenue account (3719). However, analysis shows that the state could expect a minimum of $1,560,000 per year after a first-year phase-in period.

First, general surveys and interviews were conducted with 15 state agencies to determine the types of public information being provided to outside requestors, the fees that are in place, and the basis used to set fees. Additional estimated revenues of $3 m illion per year could be achieved from just the five agencies analyzed in most detail.

Second, an analysis of several state revenue codes (3719, 3368 and 3579) showed total deposits of $8,069,930 in fiscal 1992. 13~ Applying an immediate 15 percent increase to this amount yields approximately $1.2 million annually. However, when all state agencies deposit these fees into these accounts, the increase should be greater than this estimate.

Third, 39 agencies responding to a TPR survey indicated that they are currently selling mailing lists for a total fiscal 1992 revenue of $1.4 million. Assuming a modest increase of 25 percent, an additional $350,0 00 in yearly revenue would be realized.

The table below represents the revenue enhancements and cost savings for only a small sample of all Texas state agencies. The total cannot be determined because agencies are recording the receipt of fees in varying ways, often as a reduction to a variety o f expenditure object codes.

The Legislature should require a 25 percent increase in fees for mailing lists, mailing labels and computerized mailing lists, and a 15 percent increase for all other information fees c urrently being charged, effective September 1, 1993, with the additional fees being deposited to an unobligated account in the General Revenue Fund. The analysis below assumes a reduced level of fee revenue for fiscal 1994 as agencies improve the accountin g for such fees and begin collecting additional revenues. There is also the expectation that fee collections would increase beyond these amounts as all state agencies begin setting more accurate fees.

Gain to the Gain to the
Fiscal General Revenue Other Dedicated Gain to Change in
Year Fund 001 Accounts or Funds All Funds FTEs

1994 $445,000 $335,000 $ 780,000 0
1995 889,000 671,000 1,560,000 0
1996 889,000 671,000 1,560,000 0
1997 889,000 671,000 1,560,000 0
1998 889,000 671,000 1,560,000 0



Endnotes
1 General Services Commission Rules, 1 TAC Sections 111.61-111.63.
2 Comptroller of Public Accounts, Review of the Open Records Process (Austin, Texas, October 1992), (Exhibits volume), p. 2. (Unpublished Draft Report)
3 Survey response from Burton Raiford, Texas Department of Human Services, Austin, Texas, November 1992.
4 Published list of Texas Railroad Commission charges for information provided by the Automatic Data Processing Division, Mr. Bob Kmetz, Austin, Texas, November 1992.
5 Interview with Debby Svoboda, Program Manager, Mailing List Service, Minnesota Department of Administration, December 14, 1992.
6 Interview with Mr. William Treacy, Executive Director, Texas State Board of Public Accountancy, Austin, Texas, November 19, 1992.
7 Interview with Lorna Wassdorf, Deputy Assistant Secretary, Statutory Filings Division, Office of the Secretary of State, Austin, Texas, November 19, 1992.
8 General Assembly of the Commonwealth of Kentucky, Acts of the General Assembly, Chapter 492, SB 340, Section 3(c), Approved April 11, 1990.
9 Interview with Lorna Wassdorf.
10 Comptroller of Public Accounts, Breaking the Mold: New Ways to Govern Texas, 1991, p. CG 201.
11 Comptroller of Public Accounts, Review of Open Records Process, pp. 7-31.
12 Comptroller of Public Accounts, Annual Cash Report, Volume II, Part 1 (Austin, Texas, November 2, 1992), p. 21.
13 Ibid.