Pursue Self-Sufficiency Measures at the Texas Parks and Wildlife Department

The Texas Parks and Wildlife Department should continue to work to achieve fiscal self-sufficiency by instituting policies that will reduce its reliance on general revenue.


Background
The Texas Parks and Wildlife Department (TPWD) began in 1992 to make park operations more self-sufficient and less reliant on the state s General Revenue Fund by generating more revenue through improved and expanded public services. 1~

The agency can achieve greater self-sufficiency by making changes that include: (1) increasing concession sales revenue; (2) licensing and marketing its proprietary items; (3) gaining increased park fee flexibility; (4) gaining in creased budget flexibility; (5) being given authority to keep unspent balances and (6) establishing endowment funds based on local community partnerships and donations.

A self-sufficiency rate is defined as the amount of operational revenue divided by the amount of operational spending. For fiscal 1992, TPWD s state park operations had an average operational self-sufficiency rate of 44 percent.

According to the National Association of State Park Directors (NASPD), the average revenue generated by the 50 state park departments represented 41 percent of their total budgets. 2~ In fiscal 1992, of the 115 TPWD parks, two were self-sufficient and returned excess revenues to TPWD.

Eighty-four parks 73 percent operated at less than 50 percent self-sufficiency, and 31 parks operated at less than 10 percent. Although some of TPWD s parks are paying their way, others are a drain on these more financially independent parks, so that a few parks are providing broad support for many others.

In fiscal 1992, parks were p rimarily funded through general revenue, fees and a portion of the cigarette tax. The other sources of state park operational revenue were entrance fees of $3.4 million, facility use fees of $7.7 million, concession sales of $1 million and Texas Conservati on Passport (a park entrance pass that also provides discounts on other park activities and concessions) sales of about $760,000. In addition, federal funds contribute about $17 million per year. Pricing flexibility, park concessions and licensing the TPWD seal are measures that could improve TPWD s ability to become more self-sufficient.

Funds Flexibility and Interest Revenue
TPWD considers its lack of flexibility over its own budget a major deterrent to more entrepreneurial operations. 3~ In fiscal 1992, three major funds under TPWD s control earned interest of $4.8 million. They included the Game, Fish and Water Safety Fund for $1.1 million, the State Parks Fund for $0.5 million and the Texas Local Parks, Recreation and Open Space Fund for $3.2 million. B y statute enacted in 1985, all of the interest earned on these funds must be deposited to the General Revenue Fund. 4~

In May 1989, the U.S. Fish and Wildlife Service required all interest earned on license revenue and federal reimbursements to be used solely to administer state fish and wildlife agencies. 5~ State agencies were given three years to comply. On September 23, 1992, the U.S. Fish and Wildlife Service requested that Texas be declared in a diversionary of funds status because TPWD had only par tly complied with the statutory deadline as of May 1992. 6~ This action could potentially result in the loss of $17 million in federal reimbursements, about 21.4 percent of the budget for fish and wildlife programs. TPWD has requested that the interest earned on the Game, Fish and Water Safety Fund the only fund affected be removed from general revenue and placed in the fund itself.

Pricing Flexibility
Currently, among the four state park entrance fee schedules used by TPWD, flexibility is limited to weekd ay rates versus weekend rates. Park managers have no discretion to price park services and facilities, for example, campsites, based on market factors such as desirability and demand for particular services or facilities. The restrictive pricing policy occ urs in areas such as state park and historic areas, which lack fees or are charging tour fees instead of entrance fees. Examples of this policy are shown in Table 1 below:

Table 1 - Attendance and Fees at Selected State Parks, 1992

Estimated TPWD Estimate
State Park or Visitors Current of Lost
State Historical Park in 1992 Fee Revenue Opportunity

Lyndon B. Johnson 457,492 None $ 39,000
San Jacinto Battleground 1,890,441 None 162,000
Washington-on-the-Brazos 247,283 $2 Per Tour 21,000
Varner-Hogg Plantation 78,943 $3 Per Tour 7,000
Governor Hogg Shrine 97,738 $2 Per Tour 9,000
Sheldon Lake 314,953 None 27,000
Mustang Island 1,330,000 Entrance* 114,000

Total 4,416,850 $379,000

* There is no entrance collection at two of three beach access roads leading into Mustang Island.
Source: Texas Parks and Wildlife Department, Office of Internal Auditor.


While these parks have a significant volume of visitors, fee revenues do not cover the cost of operations. Some facilities lack fees due to agency policy made by TPWD. Lost fiscal 1992 revenues are estimated at a minimum of $379,000 at these areas. 7~

Parks also lose revenue opportunities by not charging flexible prices for basic services such as individual campsites. Though premium sites would bring a h igher fee, TPWD policies have limited pricing variation in each location. In addition, TPWD could also better use seasonal pricing in peak periods.

TPWD personnel indicate that park managers are being given greater flexibility by decentralizing some of the operating decisions. 8 TPWD is hoping these actions will result in increased use, improved customer service and additional revenues. For example, TPWD personnel state that flexible pricing at the Cedar Hill State Park could potentially yield an increase of $68,000, or 40 percent of operational revenues, by pricing entrance fees competitively with other parks on the lake and eliminating weekday discounts (an estimated revenue increase of $24,000). Also, pricing the 40 campsites on the lakeshore at a premiu m price could increase revenues $25,000, and more competitive pricing of the two open-air pavilions with other lake parks having comparable facilities could increase revenues by $19,000. TPWD personnel believe that the park use and demand for these facilit ies will support the proposed fee increases.

Special services could also be designed and priced to meet specific markets. For example, TPWD s Texas Adventure Program offers the public an opportunity for a vacation involving archeology work. This has been so successful that the program currently has a waiting list.

Park Concessions
In the 1992 NASPD Annual Information Exchange, TPWD reported concession revenue of $752,000 for fiscal 1991, ranking Texas 14th of the 46 states reporting. In the same report, the top ten states reported between $1.1 and $8.6 million in concessions. 9~ This report indicated that on average, concessions represented 8.3 percent of all park revenue, while TPWD reported concessions brought in 5.9 percent of its total revenue.

In fiscal 1992, TPWD increased concessions 33 percent to $1 million. While TPWD concessions tend to be limited to golf, boating, horse rentals and some grocery operations, some states offer a broad variety of concession activities including food operations , golfing and camping supplies and convention facilities. These same states ranked higher in financial self-sufficiency.

Licensing, Copyright and Mailing List Revenues
TPWD could also market and license its agency seal, and copyright other logos and agency designs. The TPWD seal is considered a non-exact representation of the Great Seal of Texas. Accordingly, it is protected from private use by the statute that protects the Great Seal of Texas. By statute, any entity seeking commercial use of the seal is requir ed to execute a licensing agreement with royalties of 3 percent to be paid to the state (not to the agency whose seal is licensed) for gross receipts in excess of $5,000. 10~ Currently, one commercial entity is marketing products with the TPWD seal without obtaining a licensing agreement. Furthermore, if a licensing agreement were obtained, TPWD would have no incentive to market these products since under statute this is not a revenue source to the agency.

TPWD could also market its mailing lists. Currently , TPWD provides mailing lists to requestors for a minimal fee that does not come close to covering the costs of providing the information. Another issue in this report would allow state agencies to charge a fair full-cost fee for providing such data. In th e private sector, commercial mailing lists are considered a valued asset and often command high fees. TPWD could also benefit from this source of additional revenue as it depends less on the state s General Revenue Fund. Of course, the department would have to exercise a certain amount of care to avoid inappropriate uses of its lists.

Funds Dedication
Over time, the Legislature has dedicated certain revenues to particular uses. Dedicated funds with balances carried over from fiscal 1992 to fiscal 1993 include the waterfowl hunting stamp, with an ending balance of $2.56 million, and the white-winged dove stamp, with an ending balance of $911,000. If these funds had not been dedicated, the balances could have been used to pay for deferred maintenance in the agency s programs.

TPWD Budget Process
Currently, TPWD has an internal budget process that ties historical revenue information to each park s expenditure budget. An expenditure budget is the fiscal information provided to park managers for park operations under their control. Before expenditure s are made, park managers check with budget personnel at the TPWD central office to see if there are sufficient funds available. However, park managers have no budget information related to expected revenues. The curr ent system provides no incentive for park managers to focus on revenue enhancements.

Further diminishing entrepreneurial incentive is a lack of unspent balance reappropriation authority in the park operations budget. Currently, expenditure budget authority lapses annually both at the park level and at the agency level. A study by TPWD s internal auditor, through interviews with park managers, noted that this system promotes end-of-year spending to avoid losing these funds. The lapse in authority also acts as a deterrent to generating additional revenues since unspent funds can be lost at the end of the year. TPWD s centralized budget system was created in response to the state s budget system. By lapsing expenditure budgets annually, the Legislature removes the incentive for state parks to maximize revenues and services and plan for a long-term program of maintenance and repair.

By providing for the reappropriation of balances between fiscal years, TPWD could establish fiscal self-sufficiency goals for eac h park and provide incentives to park managers to achieve or exceed the goals. For example, park managers who could raise additional revenue or economize operations during the fiscal year would have their budgets increased by a portion of the additional re venues or savings.

Setting of Park Fees
Another barrier affecting TPWD s goal of self-sufficiency is the lack of statutory authority to set fees for 5 of the 140 current license fees. These include the State Parklands Passport (for which there is no fee) , the wildlife art stamp (priced at $5), the turkey stamp ($5), the non-game stamp ($5) and the oyster processing fee ($1 per barrel). These fees are established in state law and cannot be adjusted by TPWD to meet changing agency needs or to improve the ag ency s self-sufficiency.

Private-Public Partnerships and Endowment Funds
One of TPWD s objectives is to enter into more public and private partnerships to operate parks. 11~ Currently, TPWD funds and operates some small state parks which may have great loc al significance but not necessarily statewide significance. Some of these sites have low visitation rates, yet the state bears the costs of operations, maintenance, security and repair.

TPWD is finding some success in establishing state-local partnerships in which localities provide donations and volunteer efforts to help support the designated park site. Examples of these types of parks include the Landmark Inn in Castroville, the Fulton Mansion in Rockport and the Admiral Nimitz Museum in Fredericksburg. Under TPWD s control, the parks are not self-sufficient; Fulton Mansion and Landmark Inn operate at 25 percent self-sufficiency, while the Admiral Nimitz Museum operates at 65 percent.

A barrier to establishing these partnerships is that the Parks and Wildlife Code does not authorize TPWD to establish endowment funds for park operations including capital improvements, repairs, community partnerships or funds for innovative projects. This lack of authority prohibits TPWD from encouraging private and publ ic partnerships. Through the Parks and Wildlife Foundation of Texas, Inc., a non-profit organization, TPWD receives support for various projects from private interests that contribute to the foundation. However, TPWD cannot control those resources, nor are those resources always directed toward critical TPWD projects. Public or private contributions made directly to TPWD cannot be effectively managed because TPWD has no authority to establish endowments dedicated for specific purposes.

Funding of Road Construction, Maintenance and Patrolling
Under the state constitution, the State Highway Fund receives money allocated by law to promote public road construction and maintenance and to police the state public roads. Another issue in this report recommends that costs incurred by state agencies for these purposes be funded by the State Highway Fund, subject to biennial legislative appropriation controls. That recommendation would also reduce TPWD s reliance on the state s General Revenue Fund. It would also ensur e that road maintenance on public roads within state parks be performed on a regular basis, which would improve customer service and reduce long-term costs of road maintenance and repair.


Recommendations
A. The Legislature should establish, through riders to the General Appropriations Act and legislative statutes, that it is the intent of the Legislature for Texas Parks and Wildlife Department (TPWD) to become a financially self-supporting organization.

Performance measures should be established to promote self-sufficiency for TPWD. Specifically, barriers to innovation and fiscal self-sufficiency should be removed in the ways listed below.

TPWD should be considered for reappropriated unexpended balance authority within the biennium, with such balances to be placed in a TPWD endowment fund for capital improvements, repairs and maintenance and initial funding for innovative park projects or p rograms with supplemental funds provided by private-public partnership endowments for low-usage parks and historical sites.

The Legislature should authorize TPWD to establish public and private endowments for park operations. To fund this endowment, TPWD should be given authority to transfer excess from park operating funds and to deposit funds from public and private partners hips.

The Legislature should allow TPWD to set all fees and to remove all fee restrictions. All TPWD revenue should be available to support all TPWD operations. Fund dedications should be removed so TPWD can determine where fees should be spen t. TPWD should institute revenue enhancement measures, including charging entrance fees where no fees are currently charged or in lieu of tour fees.

The Legislature should provide an exemption for the disposition of interest on investments for the Game, Fish and Water Safety Fund and the State Parks Fund. TPWD should pursue the state s compliance with federal requirements, thus allowing for uninterrupted federal reimbursement of $17 million annually if this change in interest is not allowed.

The Legisla ture should allow TPWD and other agencies to keep concessions and royalties paid for commercial products sold bearing its seal. Also, the Legislature should, through an appropriation rider, authorize TPWD to spend funds for marketing efforts to allow TPWD to aggressively market the parks services and products.

The Legislature should require through a rider in the General Appropriations Act that TPWD report to the 74th Legislature on its actions to implement these recommendations.

B. TPWD should adopt measures that would allow them to further move toward self-sufficient operations, including the development of decentralized and flexible budgeting.

Revenue and expenditure information should be included in managers budgets. Evaluations of park managers should stress increases in self-sufficiency, as well as the control of expenditures. TPWD should phase in a system to allow park managers more flexibility to develop products that better meet their customers needs and pricing flexibility to increase park revenues and self-sufficiency. Additionally, TPWD should increase both the volume and types of concessions. TPWD should push decision-making to the lowest levels possible while creating incentives that are profit-centered and customer service-oriented.

To achieve these General Revenue Fund savings, the Legislature must reduce general revenue appropriations by the amount indicated in the fiscal impact section of this report.


Implications
In times when state funding pressures are increasing, the policy t o change to more entrepreneurial government becomes important for maintaining or improving park and other recreational services. TPWD could move more quickly towards self-sufficient operations if these measures are implemented, resulting in improved profit ability for each park. Although these measures may appear to diminish TPWD s managing and conserving of natural and cultural resources, a pay its own way philosophy is appropriate today for users of these services.

The success of revenue enhancement measures would depend on an increased level of marketing to improve the public s awareness of park activities and services. TPWD also would need to publicize its efforts to improve customer services to avoid alienating loyal park customers, particularly when fee changes are contemplated.


Fiscal Impact
If full depository interest of $1.7 million were retained for the Game, Fish and Water Safety Account and the State Parks Account, and if subsequently, $3 million approximately one-half of its general revenue appropriation were eliminated, TPWD would gradually reduce its reliance on general revenue. The state would gain $3 million in general revenue from not appropriating funds, would lose $1.7 million in depository interest and would gain $271,000 previously p aid from general revenue for TPWD employee benefits.

Based on fiscal 1992 data, revenue that could have been collected at seven state park locations was estimated at $379,000, and the potential increased revenue at Cedar Hill State Park was $68,000. 12~ T his would result in $444,000 in additional fee revenue. Other fee revenue from variable pricing and other fee structures and increased concession sales cannot be estimated since that would depend on implementation and marketing expertise at TPWD and each s tate park. Greater cost savings would also be expected as TPWD starts entrepreneurial management at each state park. Measures to improve self-sufficiency would result in less dependence on general revenue.

Although these recommendations reduce general revenue appropriations, they also provide enough flexibility to make up the loss through the initiatives of TPWD.

Gain to the
Fiscal General Revenue Loss to Change in
Year Fund 001 TPWD Accounts FTEs

1994 $1,615,000 $(1,171,000) 0
1995 1,615,000 (1,171,000) 0
1996 1,615,000 (1,171,000) 0
1997 1,615,000 (1,171,000) 0
1998 1,615,000 (1,171,000) 0



Endnotes
1 Texas Parks and Wildlife Department (TPWD), Natural Agenda: A Strategic Plan for Texas Parks and Wildlife (Austin, Texas, September 24, 1992), p. vi.
2 National Association of State Park Directors (NASPD), 1992 Annual Information Exchange (Tallahassee, Florida, September 1992), p. 30.
3 TPWD, Austin, Texas, interviews with selected management, November 1992.
4 Tex. Revenue Code Ann. sec. 404.071 (Vernon 1990).
5 U.S. Department of the Interior, Fish and Wildlife Service, Federal Aid in Sport Fish Restoration and Federal Aid in Wildlife Restoration: Interest Earned from License Fees, Federal Register , vol. 54, no. 72 (April 17, 1989), pp. 15208-9.
6 Memorandum from Regional Director, Region 2, United States Department of Interior, Fish and Wildlife Service, to Director, U.S. Fish and Wildlife Service, September 23, 1992.
7 Kemp Long, TPWD Analysis of Fees Fiscal Year 1992, Working Paper (Austin, Texas, Internal Audit, TPWD, 1992), p. 1.
8 Interview with Bill Scruggs, Coordinator, Park Operations, TPWD, Austin, Texas, November 25, 1992.
9 NASPD, 1992 Annual Information Exchange, p. 29.
10 Interview with Guy Joiner, Staff Attorney, Secretary of State s Office, Austin, Texas, December 3, 1992. Also, see Tex. Comm. and Bus. Code Ann. sec. 17.08 (Vernon 1990).
11 Texas Parks and Wildlife Department, Natural Agenda, pp. 32-33.
12 Long, p.1; and Memorandum from Jerry Hopkins, Park Manager, Cedar Hill State Park, TPWD, to Kemp Long, Director of Internal Audit, TPWD, November 30, 1992.