MINUTES OF THE JOINT MEETING OF
ASSEMBLY COMMITTEE ON WAYS AND MEANS
AND
SENATE COMMITTEE ON FINANCE
Sixty-seventh Session
January 26, 1993
The joint meeting of the Assembly Committee on Ways and Means and the Senate Committee on Finance was called to order by Chairman Morse Arberry Jr., at 8:35 a.m., on Tuesday, January 26, 1993, in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
ASSEMBLY COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry, Jr., Chairman
Mr. Larry L. Spitler, Vice Chairman
Mrs. Vonne Chowning
Mr. Joseph E. Dini, Jr.
Mrs. Jan Evans
Ms. Christina R. Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Mr. John W. Marvel
Mr. Richard Perkins
Mr. Robert E. Price
Ms. Sandra Tiffany
Mrs. Myrna T. Williams
SENATE COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Lawrence E. Jacobson
Senator Bob Coffin
Senator Diana M. Glomb
Senator William R. O'Donnell
Senator Matthew Q. Callister
ASSEMBLY COMMITTEE MEMBERS ABSENT:
None
SENATE COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Dan Miles, Fiscal Analyst
Gary Ghiggeri, Deputy Fiscal Analyst
Bob Guernsey, Deputy Fiscal Analyst
Chairman Arberry asked Ms. Judy Matteucci, Budget Director, to present to the joint committee her overview of the Executive Budget. He acknowledged Ms. Matteucci's presentation would be limited by time constraints. Ms. Matteucci said she would try to get through as much of the Executive Budget as possible in the time available to her.
Ms. Matteucci directed the committee's attention to Volume I of the Executive Budget, which includes the balance sheets and revenue projections. She noted there were some differences in the revenue projections of the Budget Office and the projections of the fiscal staff, but the bottom lines were relatively close.
Ms. Matteucci introduced Mr. Perry Comeaux, Director of the Department of Taxation, and Mr. Bill Bible, Chairman of the Gaming Control Board, and indicated they would be discussing items specific to the revenue projections for their divisions.
Before beginning her presentation, Ms. Matteucci thanked her staff for the hard work they had put into production of the Executive Budget; Ms. Wynne Walker, former Deputy Budget Director, who assisted with some of the Welfare projections; and the State Printing Office for its help in distributing the Executive Budget to the committee members.
Ms. Matteucci then distributed to the committee members copies of the Executive Budget in Brief (a copy of which is on file in the Fiscal Analysis Division) which was designed to highlight some of the more notable actions in the various pieces of the Executive Budget.
Ms. Matteucci referred to page A1 of the Executive Budget containing the balance sheet reflecting an unappropriated balance at July 1, 1992, of $33,458,416. Anticipated income for fiscal year 1992-93 is $965,210,175. 1991 appropriations for the current year were $1,008,050,116. The estimated supplemental appropriation for the Distributive School Account is $51,035,894 and represents the amount necessary to replace lost sales tax revenues which were guaranteed to the school districts under state law.
Ms. Matteucci noted an item on the balance sheet entitled "Budget Reductions (Estimated)" in the amount of $116,198,851. She explained this was the amount the Budget Office believed would be achievable as a result of the budget reductions which the Governor announced for fiscal year 1992-93. She noted the Governor had originally estimated budget reductions would be $120 million. Approximately $3.5 million of the savings as a result of cuts in the Welfare Division were recommended to be carried forward to fiscal year 1993-94. The $85,000 removed from budget savings in the Budget Division to fund the more detailed study for the reorganization was not included in the balance sheet. The Budget Office did not recommend reducing the probation subsidies payment to local entities, as was originally contemplated. The 5 percent requested from the school districts was included in the balance sheet, and the Budget Office did anticipate receiving that money from the school districts.
Ms. Matteucci continued to explain the balance sheet items. She noted an additional supplemental appropriation in the amount of $64,358. Ms. Matteucci indicated the cost of the 1993 Legislature was $6.5 million with an additional $1 million coming from the Legislative Commission for a total of $7.5 million. Capital Improvement Projects were $17,216,514 and would be discussed in greater detail at a later hearing. Ms. Matteucci said the majority of that amount was $10 million for maintenance projects at the university in return for keeping the Higher Education Capital Construction $5 million (per year) coming into the General Fund as a revenue item. One-time appropriations were $4,563,129. Ms. Matteucci stated the bulk of those appropriations were attributable to the settlement of the Fair Labor Standards Act litigation. The restoration fund balance was $4,993,539, which included the Board of Examiners Emergency Fund, the Stale Claims Account, the Statutory Contingency Fund, and the Interim Finance Contingency Fund. The unappropriated balance at July 1, 1993, was $58,269,402. That amount represents 5.8 percent of the appropriations for this fiscal year.
Ms. Matteucci said estimated income for fiscal year 1993-94 was $1,019,286,487; estimated reversions were $14,250,000; and 1993 appropriations were $1,022,798,169, leaving an unappropriated balance at July 1, 1994, of $69,007,720. That amount represents 6.7 percent of the appropriations. Estimated income for fiscal year 1994-95 was $1,083,521,517; estimated reversions were $14,000,000; 1993 appropriations were $1,104,783,300; and the cost of the 1995 Legislature was $6,500,000, leaving and ending fund balance of $55,290,937. She said that amount represents the 5 percent mandated by statute.
Ms. Matteucci asked Messrs. Comeaux and Bible to join her in her presentation. She directed the committee's attention to the revenue tables shown on page A2 and highlighted the items of note. She indicated property tax represented the net proceeds estimation. She said her office was using different projections for sales and use tax, which she would explain at a later time. She asked Mr. Bible to explain gaming revenue projections.
Mr. Bible referred to page A7, the beginning of the gaming revenue portrayal. He indicated the major revenue source was license fees on gross revenue assessed against the gaming industry. License fees represent a graduated tax on monthly gross revenues ranging from 3 percent to 6.25 percent. He explained restricted slot flat fees were flat fees on restricted locations--those locations licensed for 15 or fewer slot machines and no table games. This was also a graduated tax, ranging from $45 per machine to $90 per machine quarterly. He stated non-restricted slot flat fees were $20 per machine per quarter and were assessed against all non-restricted licensees--those licensees operating more than 15 slot machines, or table games, or a combination thereof. Mr. Bible noted there was also an annual state fee on games. This fee was collected by the state and was based on a graduated table tax ranging from 1 game per year for $100 to more than 16 games where each game is assessed at $200 and the first 16 games are assessed at $1,000. The tax is collected annually. The state takes administrative costs and remits the remainder to the counties on an equal basis.
Senator Coffin asked if any of the fees reflected in the Executive Budget were the newly proposed fees mentioned by the Governor in his State of the State Address. Mr. Bible indicated the fees shown were the existing fees and no changes were reflected on page A7 of the Executive Budget. The proposed changes were incorporated in the revenue projections beginning on page A8.
Mr. Bible then moved to the main gaming revenue projections on page A8. He said the estimated revenue from license fees on gross revenue, including rate and base, was $361 million, which represented a 5.5 percent increase over fiscal 1991-92 collections.
Mr. Bible explained win was the basis of the tax projection because actual collection figures varied, depending on credit play and how revenue was collected by the licensees. He indicated the win figure for the first quarter of fiscal year 1992-93 was 6.39 percent, for October the win figure was 9.7 percent, and for November the win figure decreased to 2.9 percent. He said the November figure was collected after the budget estimates were prepared and caused him some concern. He noted over the past year table game wins had fluctuated greatly and had shown some decreases while slot machine wins had been very stable and were increasing at a very good rate. Apparently in November the slot win figure did not increase at the same rate it had been increasing previously. He suggested the win figure required further scrutiny as the legislative session progressed because it was tied to the economic activity in adjoining states, particularly California.
Mr. Bible said the Executive Budget showed a projected 10 percent increase for fiscal year 1993-94, or $397,002,708. In response to Senator Coffin's earlier question, he explained this figure included $5.3 million from changes in the restricted license classification (slots) suggested by the Governor. The Gaming Control Board projection of $391,600,000 provided to the Budget Office did not include the $5.3 million. The methodology used to determine the Gaming Control Board forecast took into consideration three new major gaming properties in Las Vegas--the Luxor, Treasure Island, and MGM theme park--using the revenue effect of the openings of the Excalibur and Mirage hotels as a comparison. The Gaming Control Board conservatively estimated 2.5 percent revenue increases from $361 million without consideration of the new properties. It then disaggregated the revenue estimates for the new properties--provided by the properties themselves--then compared those figures to comparable win figures for similar existing locations and added them back into the base estimate to come up with an increase of slightly less than 8.5 percent in the first year of the biennium and 6.5 percent in the second year.
Mr. Bible explained the assumption of the gaming revenue projections in the Executive Budget was twofold: 1) the national economy will continue to show some improvement; and 2) the California economy will continue to be troubled.
To further respond to Senator Coffin, Mr. Bible pointed out the restricted slot fee category showed a decrease of 47 percent, or $2.85 million, which reflected a change in the restricted license fee structure proposed by the Governor.
Mr. Bible said the other license fee of significance was advance license fees. He explained the state collected three months in advance from new licensees coming into the system. Advance license fee projections for 1992-93 were $2.65 million; estimated collections for 1993-94 were $7.5 million, driven by the additional capacity coming on-line. Collections would then decrease back to a more reasonable level in 1994-95 to $1.25 million.
Chairman Arberry asked whether marginal casinos were taken into consideration when estimating the gaming revenues. Mr. Bible responded generally larger properties were doing better than smaller properties, but certainly not all of the smaller properties were struggling. Mr. Bible defined "smaller properties" typically as those whose stock was not publicly traded or whose revenue was less than $72 million.
Senator Callister said he understood there was an interim study. He questioned whether the additional $3 million the Governor indicated he would be seeking from slot route operators had been recommended by that study. Mr. Bible said a consultant had been hired to analyze the fiscal health of the gaming industry. The consultant recommended four or five alternative scenarios to create tax equity within that segment of the industry. The additional $3 million was one of those alternative scenarios. The alternatives ranged from annual revenues of $7-8 million to $3 million.
Senator Callister asked for an explanation for the disparity in those amounts. Mr. Bible said the difference was attributable to the tax calculation method by which equity would be achieved. The top range would result if revenues were aggregated by route operator rather than by individual location. Mr. Bible indicated he would provide the tax committees with a fairly extensive presentation on this matter.
Senator O'Donnell asked if Mr. Bible had any projections about increased tourist traffic to Las Vegas as the new hotel properties went on-line. He questioned whether those numbers would change dramatically in the next two years. Mr. Bible responded the existing figures showed increases in air passengers coming into McCarran International Airport but a decrease in the gaming budgets of those passengers. He said it was reasonable to assume there would be increased traffic through McCarran International Airport; however, there would be some cannibalization by the new properties from the rest of the industry. It would take some time for the market capacity to be absorbed. Assuming increased traffic from areas other than California, there may be some restoration of dollars available in the gaming budgets of tourists. However, for at least a portion of the projection period, the effect for California tourists (reduced gaming budgets) would continue because of California's economic difficulties.
Mrs. Williams asked if the $3 million tax on slot route operators was predicated on a flat tax or gross tax. Mr. Bible responded it was predicated on a gross tax.
Mr. Bible stated the pages following page A8 reflected collection figures. He indicated Ms. Matteucci would update the committees as they continued to deliberate the Executive Budget. Pages A8 and A9 showed the license fees on gross revenue by fiscal year and aggregated by calendar quarter. Page A11 showed some projected increases in casino entertainment tax revenue in fiscal year 1994 based on new properties.
Mr. Bible said page A13 reflected annual slot tax credit projections. He noted there had been a decrease in collections in fiscal year 1991-92 which had resulted from the deployment of fewer gaming devices than during the prior year. A flat collection was anticipated for fiscal year 1992-93. Increases were incorporated into the projections for 1993-94 and 1994-95. He explained the tax revenues were distributed as follows: 1) $5 million which was formerly allocated to the University System for capital improvements had been reallocated since 1983 to the General Fund; 2) the Distributive School Fund received 80 percent of the tax, less the $5 million for the University System; 3) the Special Higher Education Capital Construction Fund received the remaining 20 percent, which was used to redeem debt for the Thomas and Mack Center and Lawlor Events Center.
Ms. Giunchigliani asked why 1992-93 projections were the same as 1991-92 actual figures. Mr. Bible responded the 1992-93 projections assumed no growth. He explained this tax revenue was difficult to estimate because it was transactionally oriented. For example, if a license changed hands, the new licensee would be required to repay the tax.
Mr. Price questioned whether the litigation regarding changing ownership had been settled. Mr. Bible acknowledged the assistance of the Legislature in changing the statute. He indicated the Supreme Court had upheld the state's position in this regard.
Ms. Matteucci then directed the committee's attention back to page A2. She explained the property tax item represented the net proceeds on mines tax. Property tax projections were prepared by the Department of Taxation, minus 5 percent set aside in the trust fund, as required by statute. She pointed out the business privilege tax and noted the Governor was proposing a revenue neutral adjustment to that tax. She asked Mr. Comeaux to provide more detail on that item.
Mr. Comeaux said the Taxation Department staff had extensive conversations with the Department of Minerals as well as a number of the larger mining operators throughout the state in attempting to estimate the net proceeds of minerals tax. The Department looked at current production, futures contracts, and historical numbers to help make projections on what the mining companies' net to gross ratios would be for the current year as well as the two years of the biennium. According to the mining companies and the information gathered by the Department, production would continue to increase slightly and the price of gold would begin to increase slightly during the next biennium. No change was expected in the net to gross ratio.
Mr. Price asked why proceeds of minerals tax was characterized as "property tax" in the Executive Budget. Ms. Matteucci said it was an ad valorem based tax and had been traditionally labeled "property tax" in the Executive Budget. Mr. Price said this item would more appropriately be described as a mining tax or proceeds of minerals tax in order to be more understandable to the layman.
Chairman Arberry inquired about estimated gold prices utilized in the revenue projection. Mr. Comeaux said the Taxation Department was estimating $355 for the current year, $360 for 1993-94, and $365 for 1994-95.
Ms. Matteucci indicated the next significant item was the business privilege tax. She asked Mr. Comeaux to discuss the Governor's revenue neutral proposal to remove the cap on the business privilege tax and exempt employers with four or fewer employees from the tax.
Mr. Comeaux noted the business privilege tax had only gone into effect in October 1991. Therefore, the data base of information was limited. The original forecast for the business privilege tax was prepared in connection with the business license fee and was based on an assumption of 5 percent growth per year. That assumption was consistent with the limited data base as well as the data base associated with the sales tax account. Forecasts of growth in employment prepared by the Employment Security Department were in the range of 2.5 percent for fiscal year 1993-94 and 3 percent for fiscal year 1994-95. The Governor was proposing the $400,000 annual cap on the amount of the business privilege tax be lifted. Currently, seven or eight companies were able to take advantage of the cap due to a provision in the law which allowed related companies to file jointly. Additionally, the Governor was proposing to eliminate the rate schedule provided in the statutes and substitute a flat tax rate which would apply to any company subject to the tax. The additional revenue provided by removal of the cap and the substitution of the flat rate would be used to fund the exemption for the small employers. Based on reports received by the Department of Taxation since the business privilege took effect, it was estimated between 17,000 and 18,000 businesses would become exempt from this tax under the Governor's proposal.
Senator Coffin inquired whether all employers except exempt employers would pay the same tax rate per employee. Mr. Comeaux said all employers would pay the same rate.
Senator Coffin noted the exemption was similar to the exemption in the original BAT tax proposed during the 1991 legislative session. Mr. Comeaux stated the current proposal would probably affect more employers than the previous proposal would have.
Senator Coffin questioned whether the current exemption roughly equaled the 5 percent reduction he had proposed. Mr. Comeaux responded he had not seen Senator Coffin's proposal but if it was a revenue neutral proposal, then it must be equal to the current proposal.
Senator Raggio asked whether the Governor's proposal also excluded the first four employees of any business. Mr. Comeaux replied the proposed exemption applied only to those employers with four employees or less. All other business would pay the tax on all employees, including the first four. Senator Raggio said he did not want to build into the tax the possibility of small businesses with five or six employees laying off one or two employees in order to qualify for the exemption.
Senator Coffin said the new bracket created by the exemption was not onerous, as were the brackets in the business privilege tax currently in force. Employers with more than four employees would only be paying approximately $100 per year for the additional person.
Mr. Dini asked Mr. Comeaux to explain the rationale for exempting only employers with four or less employees rather than extending the exemption to the first four employees of all employers. Mr. Comeaux explained the Governor's main concern was to provide tax relief to small employers. To provide an exemption to all employers would have meant dropping the number of exempt employees significantly in order to keep the proposal revenue neutral.
Mr. Dini questioned whether there was some test of law whereby the exemption must be applied equally across the board. Mr. Comeaux responded he believed the Governor's proposal met such a test because all employers with four or fewer employees would enjoy the exemption and all employers with more than four employees would not. He could not say, however, the exemption would not be challenged. He indicated he would have the Deputy Attorney General assigned to the Department of Taxation review the matter to determine if there was a problem. He noted the Deputy Attorney General had reviewed the proposal and had given it preliminary approval.
Mr. Price pointed out the federal government's description of a "small employer" was any employer with 250 or fewer employees.
Ms. Matteucci referred to page A5 which reflected the sales tax revenue projections. She distributed summary data received from Foremetrics, the econometric consultant to the Budget Office and the Fiscal Division, which assumed two scenarios for future projections: 1) a December low scenario with base case counts (Exhibit C) and 2) a late November base case (Exhibit D). The Foremetrics modeling system provides U.S. economic forecasts, including GDP, total U.S. employment, consumer price index, and consumer confidence, as well as Nevada and California economic forecasts. Both scenarios were developed in conjunction with a national forecasting firm, WEFA.
Ms. Matteucci explained the Budget Office had assumed, for its projection purposes, the low scenario because of Nevada's proximity to California. The scenario was used primarily for correlating projections on liquor, cigarette, and sales taxes. She said Exhibit C and Exhibit D reflected the varying results which could be achieved when different expectations were applied to the national and regional economies.
Ms. Matteucci noted sales tax revenue projections for fiscal year 1992-93 assumed an 8.1 percent collection level, falling to 3.4 percent in fiscal year 1993-94 and 2.3 percent in fiscal year 1994-95. She said the Budget Office had attempted to take into consideration the estimated $29 million impact of construction of the three new destination resorts in Las Vegas on the sales tax revenue to the General Fund and the school districts. Following completion of construction, the sales tax revenue would decrease. Sales tax projections for the biennium would be those shown in the base scenario (Exhibit C): 5.3 percent for fiscal year 1992-93, 4.5 percent for fiscal year 1993-94. Although the Foremetrics model anticipated a 5.4 percent increase for fiscal year 1994-95 due to restored consumer confidence at the national level, the Budget Office had opted to use a 4 percent base due to the uncertainty in the California economy. The projections shown on page A6 represent the Foremetrics figures adjusted to accommodate the $29 million impact of the new construction in Las Vegas.
Ms. Matteucci noted the Budget Office recommended an equalization of the General Fund commission rates for the local school support tax, the basic city-county relief tax, and the special city-county relief tax at 1 percent.
Senator Raggio asked what the impact of the equalization would be. Ms. Matteucci responded the impact would be approximately $6.8 million over the biennium. The loss to the school districts would be made up in the General Fund. The cities and counties would be asked to pay a higher commission.
Senator Rawson asked if 5 percent of the projected revenue was being held in reserve. Ms. Matteucci said it was.
Ms. Matteucci noted in the second year of the biennium the Budget Office recommended a change in the basis of the insurance premium collection from the prior premium year to the current premium year on an estimated basis. The value of the change would be approximately $30.3 million.
Ms. Matteucci pointed out other significant differences from the Fiscal Division projections. She explained corporation license revenue projections were somewhat higher as a result of discussions with the Secretary of State's office which was anticipating some fairly consistent collections. The Budget Office was projecting $10.7 million for interest on bank deposits in fiscal year 1992-93, $11.2 million in fiscal year 1993-94, and $11.8 million in fiscal year 1994-95.
Ms. Matteucci said a number of all other receipts items on page A4 were changing. Radiation waste shipment fees (low level) would disappear in 1993-94 due to the closure of the Beatty dump site in December 1992. The Budget Office recommended that all monies in excess of $250,000 in the ending balance in the telemarketing account in the consumer affairs program be reverted to the General Fund for projected revenues in the first year of the biennium of $1,425,190 and $287,667 thereafter. Finally, indirect cost recovery of federal funds was increased to $3,994,319 in the first year of the biennium and $4,008,352 in the second year.
Ms. Matteucci concluded her presentation of the revenue side of the Executive Budget and proceeded to explain projected expenditures. She referred to page 1 of the Executive Budget in Brief, which showed a pie chart of the increases in the Governor's recommended General Fund expenditures as well as the percentage (3.9 percent) and dollar amount ($79,477,962) changes in General Fund operating appropriations from the 1991-93 biennium. She noted the higher education and education services components comprised 55.6 percent of the budget, up slightly from the 1991-93 level.
Ms. Matteucci referred to page 2 which provided an explanation of the distribution of the $79,477,962 increase. She noted the bulk of the money would go to Human Services and Education Services.
Pages 3 and 4 showed the percentage of expenditures by funding sources for the base budget, the maintenance component, and the enhancement component. The total budget was $6.1 billion, an increase of 8.3 percent over the $5.6 billion budget for the 1991-93 biennium. Page 5, the full time equivalent (FTE) position summary, reflected a decrease of 16.52 positions over the course of the biennium.
Senator Raggio asked how many of the currently authorized positions were not filled. Ms. Matteucci said she did not have that number but would attempt to get it for Senator Raggio.
Ms. Matteucci said page 6 showed the supplemental appropriations and requested appropriations. Page 7 reflected General Fund revenues, which increased 11.8 percent over the 1991-93 biennium. Ms. Matteucci noted the Governor recommended an increase in real estate license fees.
Senator Raggio referred to page 7 which stated the Executive Budget included a one-time adjustment due to an accounting change in insurance premium tax of $30,300,000. He questioned whether this was a precarious adjustment to such an austere budget and what the long-term consequences might be. Ms. Matteucci said Senator Raggio was correct in pointing out the $30 million adjustment would have to be planned for in the next biennium. She noted traditionally there had been approximately $50 million new money from year to year.
Senator Coffin asked if there would be an increase in insurance premiums based on the adjustment. Ms. Matteucci said the adjustment did not change the premiums. It changed the base on which the premiums were assessed from a prior premium year to the current premium year on an estimated basis.
Senator Coffin inquired whether Ms. Matteucci had spoken to any representatives of the insurance industry or actuaries to determine whether the adjustment would result in an increase in premiums. Ms. Matteucci indicated she had not spoken to any actuaries. She had spoken to insurance industry representatives and they were aware of this proposal. She did not ask them specifically about premium increases. She said she would provide more information to Senator Coffin about this issue at a later time.
Ms. Matteucci referred to the appropriations summary on page 8. She noted the summary reflected what percentages of the total General Fund each of the functional groups received in the 1991-93 biennium and would receive in the 1993-95 biennium.
Ms. Matteucci asked to be excused from the hearing. She asked Mr. Forrest "Woody" Thorne, Deputy Budget Administrator, to continue the presentation of the Executive Budget in Brief.
Mr. Thorne referred to page 9, a summary of the 1993-95 Executive Budget significant actions. He noted the University and Community College System would receive 18.2 percent of the budget, down from 19.9 percent in the 1991-93 biennium. The finance and administration functional group would receive .98 percent, down from 1.2 percent in the 1991-93 biennium. There was a reduction in $10 million from 1991-93 to 1993-95 for the commerce and industries functional group from 3.1 percent to 2.4 percent.
Mrs. Williams inquired about the note on page 11 indicating the executive director position of the Athletic Commission was recommended for reinstatement at a biennial cost of $98,635. Mr. Thorne explained the position had been maintained vacant as part of the commission's budget reduction program. The Governor was now recommending the position be filled.
Mr. Thorne noted a significant increase of $81 million over the biennium for the human services functional group, particularly the education services group. Education services would receive $101 million or 36.9 percent of the General Fund, up from 34.24 percent in 1991-93. The mental health bureau would receive an additional $9.9 million. The health bureau budget would be decreased $5.2 million. In human services the rural transportation program in aging services would be reduced by approximately $30,000 in each year. Appropriations to the Child and Family Services Bureau would decrease $2.7 million while the Welfare Bureau would receive an $88 million increase.
Mrs. Williams asked what comprised the $2.7 million decrease to Child and Family Services. Mr. Thorne said the reduction was a reduction from the legislatively approved appropriation for 1991-93 but represented an increase over actual figures. Mrs. Williams said she would look into this question further.
Ms. Giunchigliani asked the amount of the total rollup percentage in the Education budget and the per pupil expenditure for fiscal years 1992-93 and 1993-94. Mr. Thorne indicated rollups were 2.5 percent. He said expenditures would be maintained at the legislatively authorized levels for the current fiscal year--$33.12--for both years of the biennium.
Ms. Giunchigliani inquired whether special education units were included in the proposal. Mr. Thorne answered he was unsure.
Ms. Giunchigliani questioned whether there were vacancy savings in the Education budget and, if so, whether it was for school districts or the Department of Education. Mr. Thorne responded there were vacancy savings for both the Department of Education and the school districts.
Mr. Humke noted the elimination of 18.5 positions from Youth Parole with the function being moved to the county. He questioned whether those positions represented the entire Youth Parole Division. Mr. Thorne said he did not know but he did not believe so. He pointed out $1 million would be added to Probation Subsidies.
Mr. Humke questioned whether the counties and court districts had been informed of this proposal. Mr. Thorne indicated there had been discussions with the counties and court districts. His understanding was there was acceptance of this approach.
Mrs. Evans asked what the total appropriation to Probation Subsidies would be. Mr. Thorne said he did not have the total figure but he would provide it to Mrs. Evans at a later time. Mrs. Evans inquired whether the additional $1 million was to help county probation offices absorb Youth Parole functions. Mr. Thorne said that was the case.
Mr. Thorne noted Aid to Dependent Children benefit levels would be maintained at current levels. Mr. Humke asked if those levels represented the originally appropriated amounts or the amounts remaining after the budget reduction. Mr. Thorne responded the recommended levels were the amounts following the budget reduction.
Mr. Spitler asked how Spring Mountain Youth Camp would be impacted by this proposal and what the status of the privatization of the Southern Nevada Children's Home was. Mr. Thorne responded there was a proposal to privatize the Southern Nevada Children's Home and doing so would realize a positive return for the Child and Family Services Bureau. Mr. Spitler noted privatization would require legislative approval prior to implementation. He asked whether the Budget Office was assuming receiving such approval. Mr. Thorne responded affirmatively.
Mr. Thorne said he understood Spring Mountain Youth Camp was to be returned to the county. Mr. Spitler queried whether the county had agreed to the proposal. Mr. Thorne indicated he was unsure as to the status of the proposal.
Mr. Spitler asked whether there was a program to transfer the 18.5 Youth Parole positions to the county. Mr. Thorne responded the positions would no longer be on the state payroll. The early retirement option incorporated in the reorganization plan would be open to those employees.
Mr. Thorne reported there would be an $8.2 million reduction in the appropriation to the public safety functional group. The proposal incorporated implementation of the Facilities Capacity Act to keep prison facilities at 98 percent of emergency population capacity, resulting in a $47.3 million savings, and a recommendation to close all rural honor camps.
Senator Callister asked what was involved in implementing the Facilities Capacity Act. Mr. Thorne replied as prisons reached 98 percent of emergency capacity, the prison commissioners would be asked to allow the Director of the Department of Corrections to add good time credit to the sentences of the inmates up to a maximum of 90 days, allowing early completion of time served and release of prisoners from the system. The program would apply to minimum security prisoners approaching the end of their sentence.
Senator Callister asked if this would be an automatic early release without review by the Parole Board and driven by prison capacity. Mr. Thorne responded affirmatively.
Senator Callister questioned whether the $47.3 million savings was also partially the result of the closure of the rural honor camps and, if so, how much of the $47.3 million was attributable to the closure. Mr. Thorne said he believed the closure of the rural honor camps contributed to the $47.3 savings. He did not know how much the actual contribution was but would provide the figure at a later time.
Senator Callister inquired whether there had been an analysis of the offset to the anticipated savings from the closure of the rural camps of the loss of the 100,000 plus hours received annually in forestry services from honor camp inmates. Mr. Thorne said he did not have this information but would provide it at a later time.
Senator Callister noted page 15 indicated the Lovelock Correctional Center was not recommended for opening. He asked whether this recommendation was based on the presumed enactment of the Facilities Capacity Act. Mr. Thorne said Senator Callister was correct.
Senator Callister asked if the Lovelock Correctional Center would need to open if the Facilities Capacity Act were not adopted. Mr. Thorne responded if the Facilities Capacity Act were not adopted, in all likelihood, opening of the Lovelock Correctional Center would be required.
Mr. Spitler expressed surprise at learning about the Facilities Capacity Act from a newspaper article. He noted his concern that such an act would create disparity between treatment of men and women prisoners. He questioned whether men who were incarcerated would benefit far greater than women who were incarcerated. Mr. Thorne responded the Facilities Capacity Act addressed overall system capacity. He said he could not say whether men or women would benefit more from its enactment but he would research the question. Mr. Spitler also requested Mr. Thorne to research whether similar legislation had been challenged.
Mr. Thorne stated the appropriation to the infrastructure functional group would be reduced $11 million.
Mr. Thorne then referred to page 17, the appropriation by functional group in detail. He noted the critical issues summary began at page 29. Page 55 began the explanation of the proposed governmental reorganization, including changes, their impact to FTEs, impact to the General Fund, and the impact on other funds. The total state impact would be a reduction of 268.45 positions, $9.7 million in General Fund savings, and a total combined savings of $27.9 million.
Mr. Thorne explained Mr. Tom Stephens, Manager of the Public Works Board, was available to explain the proposed Capital Improvement Projects.
Chairman Arberry indicated the committee's time had expired. Capital Improvement Projects would be addressed at the next joint hearing.
Chairman Arberry adjourned the hearing at 10:13 a.m.
RESPECTFULLY SUBMITTED:
C. Dale Gray
Committee Secretary
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Assembly Committee on Ways and Means
Senate Committee on Finance
January 26, 1993
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