MINUTES OF THE

      ASSEMBLY COMMITTEE ON WAYS AND MEANS

 

      Sixty-seventh Session

      February 3, 1993,

 

 

The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 8:04 a.m., on Wednesday, February 3, 1993, in Room 352 of the Legislative Building, Carson City, Nevada.  Exhibit A is the agenda and Exhibit B is the attendance roster.

 

 

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

 

COMMITTEE MEMBERS ABSENT:

 

      None

 

STAFF MEMBERS PRESENT:

 

      Mark Stevens, Fiscal Analyst

      Gary Ghiggeri, Deputy Fiscal Analyst

     

 

Chairman Arberry recognized Mark Stevens, Fiscal Analyst, who presented an update regarding the two week adjournment.  Mr. Stevens explained on Thursday, February 11, 1993, the committees would be meeting until approximately 3:00 p.m. in order for the committee members to catch the 5:00 p.m. flight to Las Vegas.  The committee would meet over the Monday holiday, February 15th, to hear budget presentations from the Department of Transportation and the Department of Motor Vehicles and Public Safety.  Mr. Stevens pointed out Las Vegas tour agendas would be distributed for the subcommittees on capital improvement projects, prisons, welfare and MH/MR.

 

Mr. Stevens appraised the committee he had been in contact with James Weller, Executive Director of the Department of Public Safety.  Mr. Weller had extended an invitation to the members of the committee to attend the POST Academy this coming Saturday.  Mr. Weller indicated the academy would be running through a series of practical problems which would include legislators if they so desired.  Mr. Stevens requested anyone wishing to attend to please notify him so Mr. Weller would be prepared.

 

STATE TREASURER - PAGE 61

 

Robert Seale, Nevada State Treasurer, explained to the committee he had reduced his previous budget by approximately 13 percent in dollars and 22 percent in personnel.  The treasurer's office is a small operation and his personnel had been reduced from 18 positions to 14.  Mr. Seale asserted that although his budget and personnel had been reduced, the output and performance of the treasurer's office had not been reduced.  Mr. Seale had applied to the Municipal Treasurer's Association of the United States and received a certificate of excellence in investment policies.  It is the first such award that a state in the United States has received and the office is understandably proud.

 

Early in the first year of the biennium, Mr. Seale commented, he had recognized an opportunity to sell off some of the assets in the municipal bond bank because of some interesting circumstances.  That sale generated $3 million for the general fund.  That one transaction has paid for the general fund dollars appropriated to the treasurer's office for nearly Mr. Seale's entire term.  When the local government investment pool was taken over, there was $142 million in that fund.  It now has approximately $250 million and upwards of $75,000 has been reverted to the general fund.  Mr. Seale emphasized these successes have not been performed in a vacuum.  He explained he had been fortunate to have a team in the treasurer's office, consisting of his chief deputy, Brian Krolicki, who comes from the private sector in investment banking; and John Adkins, deputy treasurer of operations, who is a certified public accountant who originally came from the private sector but had been in state government for some time and understands the process.  Mr. Seale also mentioned his investment advisor, Diane Vasey, who had assisted three treasurers.  Mr. Seale explained Ms. Vasey does an excellent job and was primarily responsible for obtaining the award for investment policies. 

 

Mr. Seale stated there is not much controversy with his budget, but he wished to point out some things of interest and importance.  He remarked he had asked for an increase in salary for his deputy treasurer of operations, John Adkins.  The job description had changed rather dramatically and as the number of positions in the office had been reduced, there has been an attempt not to replace those people.  Therefore, the job duties have been increased for each of the deputy treasurers.  Mr. Seale stressed the salary request was in line with the talents possessed by Mr. Adkins.

 

There is a position classified as a micro computer specialist which is recommended to be transferred to the Department of Data Processing based on the governor's reorganization plan.  The person in this position does very little in the way of micro computing as there are very few computers in the treasurer's office.  Mr. Seale explained this person's primarily responsibility is interest distribution of the general fund on a quarterly basis.  This is an incredibly difficult and inefficiently performed job, particularly because of the type of equipment in the office. 

 

Mr. Seale asked for a modest increase in his travel budget for five additional trips.  Last year, Mr. Seale explained, he made five trips which were not paid for by the state - two to New York, one to Orlando, one to Atlanta and one to Guam for the Western Legislative Conference.  These trips were paid by Mr. Seale personally.  He emphasized the importance for the ability to travel to attend National Association of State Treasurers conferences and other related conferences for the purpose of "cross pollination."  It is at these conferences that a small state such as Nevada can learn what other states are doing and those ideas can be brought home.  Some of these ideas have been successfully applied on several instances already. 

 

Mr. Seale remarked his primary responsibility is to invest a portfolio of $1 billion.  He maintained it is a great deal of responsibility and he takes his job very seriously.  When he took over the job of State Treasurer, Mr. Seale found a lack of substantive data processing equipment.  Due to this lack of equipment, he was required to provide two of his own personal computers in order to manage this enormous portfolio.  As Mr. Seale later recognized in his attempts to computerize the office, he realized it would be a waste of money to create a data processing environment in the office.  The controller and treasurer must, and in fact do, work very closely with each other.  The controller has previously requested the committee provide him with funds for improvements and enhancements in the date processing environment.  Mr. Seale stressed strongly how important this data processing equipment is to the treasurer's office.  Computer equipment would do more for the treasurer's office than for the controller in terms of being able to generate revenue.  With this explanation, Mr. Seale clarified his request for a new position - a cash management specialist.  The federal government has mandated the office comply with the Cash Management Improvement Act of 1990.  This is a crucial requirement.  If the state does not comply, it will cost the state a minimal amount of $400,000-$800,000 per year in additional interest expense.  This expense can be avoided with the creation of this new position.

 

Mr. Marvel asked what the rationale was for not providing this appropriation.  Mr. Seale stated he had no answer.  Mr. Marvel requested Forrest "Woody" Thorne, Deputy Budget Administrator, to respond.  Mr. Thorne explained the treasurer had chosen to leave three positions vacant and given the existing talented staff, it was assumed the cash management duties would be provided by the existing staff.  Mr. Marvel requested a response from Mr. Seale.  Mr. Seale stated he was flattered as the office clearly has the talent; however, the staff is already overburdened.  The process of complying with the Cash Management Improvement Act will take a significant amount of time.  The grants activities will have to move from the controller's office into the treasurer's office.  Mr. Seale estimated this would be a half-time activity.  It makes sense to have this position in the treasurer's office and not the controller's office.  Mr. Seale stated he and the controller had discussed this at great length.  On the other hand, the state of Nevada has no cash management system, in part because it lacks the data processing capability.  In addition, this is also due not to the lack of talent, but to the lack of time.  There is approximately $12 billion going through the state's 350 bank accounts every year.  Clearly, Mr. Seale emphasized, several things must be done to make this environment more efficient.  Some of the accounts must be closed, some must be consolidated and the monies must be concentrated in order to invest appropriately.  Mr. Seale estimated approximately $3 million in additional earnings can be made if these bank accounts can be managed in a proper fashion.  With the help of the Legislative Counsel Bureau, which has been working very closely with the treasurer's office, an account was found which had been set up in an agency some time ago which was established outside the control of the treasurer's office.  To make a quick comparison, Mr. Seale explained this account charges 20 cents for each check run through the account.  The treasurer's office has negotiated for the general account a fee of 13 cents, which represents a significant difference.  If this one account was under the control of the treasurer's office, it could save significant amounts of money to the state.  Mr. Seale commented other accounts have been identified and although there have been some attempts to bring these accounts back into the treasurer's office, additional help is required.

 

Mr. Humke asked if the treasurer's budget was subject to executive review.  Mr. Seale remarked he believed it was.  Mr. Humke explained according to his understanding, as a constitutional officer, the budget was not subject to review by the budget office.  Mr. Seale stated to his knowledge all the constitutional officers' budgets are reviewed by the budget department.  Legislation has been submitted to change this policy so the budgets will be submitted directly to the legislature and not reviewed by the budget division; however, the budget will be provided to the governor for information purposes.  Chairman Arberry requested Mr. Stevens respond to the question.  Mr. Stevens explained the only budgets not reviewed by the budget office are those of the court system and the legislature.  The budgets of the constitutional officers are reviewed by the budget office and recommendations are made.  Mr. Stevens pointed out the agency request versus the governor's recommendation in the budget are different figures.

 

Mr. Seale called attention to another request made in his budget-- that being a new telephone system.  The old system currently in the office is not a touch tone system and when calls are made requiring touch tone ability, the call must be placed in the foyer of the capital building.  Mr. Seale requested the committee's attention be directed toward this need.

 

Mr. Seale relayed his concerns with the new budget format.  He pointed out his main concern was not the difficulty reading the new format, but what was unseen between the lines.  Another concern was Mr. Seale's interpretation of the diminished authority of the treasurer's office.  Mr. Seale expressed support of the concept of government reorganization which he had incorporated into his office.  There are a number of issues involved including the consolidation of debt.  The debt of the state should be consolidated, since this action would help the state's bond rating, on Wall Street and in the market.  However, the issuance of debt is most frequently accomplished through the treasurer's office, but with the reorganization, this falls under the Department of Finance, with the approval of the Board of Examiners.  This responsibility should more properly fall under the control of the Board of Finance which consists of the governor, the treasurer, the controller, two outside members appointed by the governor, one of which must be active in the banking community.  This is the logical place to issue debt because the financial "horsepower" resides with the Board of Finance.  The Board of Examiners has neither one of the fiscal officers sitting on it and Mr. Seale commented this was not the appropriate place for debt to be issued.  Under the governor's reorganization plan, a comment was made the Board of Finance would take on an advisory role to the director of the Department of Finance.  Mr. Seale the treasurer, controller and governor should not act as just an advisory board.  He expressed concern that as treasurer, every quarter he must appear before the Board of Finance and explain his policy relative to his investments.  He must tell the board how he has performed his duties.  The board provides an important oversight role on the treasurer's activities.  A constitutional officer should not be required to report to and potentially have his investment environment directed by an appointed official.

 

Consolidation of revenue should be facilitated, Mr. Seale stated.  With 350 bank accounts, nearly one for every day of the year, changes must occur and revenue collection should be consolidated in Nevada.  There is a long stream of income coming into the state and a large portion does not get into bank accounts for many days.  Mr. Seale explained he had identified an agency which had an average of 16 days getting funds into bank accounts - these funds amounting to approximately $8 million.  The interest which could be earned is substantial.  The reorganization plan discusses the centralization of revenue in the Department of Taxation, although more frequently it is done through the state treasurer's office.

 

Unclaimed property, Mr. Seale continued, was another area he wanted to comment on.  Unclaimed property has been handled through the commerce department for a long period of time.  However, the reorganization plan has moved this program to the Department of Administration.  Most frequently, unclaimed property resides in the treasurer's department because the treasurer is closest to bank accounts.  The National Association of State Treasurers has a subcommittee which deals just with unclaimed property.  Mr. Marvel asked if this move had been on the recommendation of Peat Marwick.  Mr. Thorne explained unclaimed property, like excess properties, was essentially a housekeeping function and the recommendation was to consolidate those functions in the Department of Administration.

 

Chairman Arberry referred to the maintenance section of the budget.  He asked Mr. Seale to provide in writing a statement explaining the expenditures of $23,866 in the Municipal Bond Bank Administration and Statewide Cost Allocation.  Mr. Marvel commented one of the recommendations of the audit report was to create a type of assessment for those being serviced through the municipal bond bank.  Mr. Seale explained the Legislative Counsel Bureau audited the municipal bond bank for the first time in a long while and had made some very good suggestions.  Mr. Seale remarked he had implemented many of the ideas, not the least of which ensures the municipal bond bank, which services local governments, pays for itself.  This was accomplished with the last sales to Henderson and Kingsbury General Improvement District.  Approximately 20 basis points had been saved for Henderson.  Kingsbury is an entity which could not get financing under any set of circumstances, so the bond bank was able to provide them with an incredibly valuable service.  There was an opportunity when the last debt was issued to create a Nevada savings bond program which can be used for college savers or retirement.  The office has been able to sell bonds in $1,000 increments to people and the underwriter has been directed to sell those bonds to Nevadans first to encourage saving.

 

Mr. Spitler thanked Mr. Seale for bringing his personal computers into the treasurer's office.  He expressed concern that constitutional officers do not have adequate funding to perform the jobs they are elected to do.  In terms of the reorganization, Mr. Spitler inquired if Mr. Seale saw any benefits for his office or if it amounted to an erosion of power constitutionally provided to the treasurer.  Mr. Seale replied as he understood the reorganization plan and particularly the movement of the Department of Finance, there was clearly an erosion of the authority of the state treasurer.  There were several instances where this point was demonstrated, in the reorganization document itself and in the organizational charts.  Mr. Seale recalled one of the first joint hearings of the money committees when Mr. Heller inquired where the Board of Finance would report and Judy Matteucci, Budget Director, informed him the board would report directly to the Department of Finance.  Mr. Seale remarked he could not come to any other conclusion given the information he had garnered to date.  The movement of debt issuance to the Department of Finance would significantly diminish the duties of the treasurer's office.  Mr. Seale expressed concern that another agency would be creating contracts with banks outside of the treasurer's fiscal area and responsibility.  This has happened over the years in no small part because some of the preceding treasurers were not willing to stand up and exercise the authority given to them.  The citizens of the state of Nevada elected the treasurer to do the job and to preserve the duties of the treasurer.  Mr. Seale said he fully intended to carry out those duties.

 

In terms of interest income over the last two quarters, Mr. Spitler commented there was a significant drop of almost $900,000.  He asked what conditions contributed to that drop.  Mr. Seale replied the federal funds rate and the discount rate have continued to decline over the last two years, almost from the moment Mr. Seale took office.  However, with the new policies implemented in the office, he began to bench mark where the state stood using the one year T-bill rate.  He has managed to increase the return by approximately 40 basis points over what the preceding treasurers had obtained.  Mr. Spitler requested a written narrative of that difference and also asked for estimates of future earnings.

 

Mr. Spitler observed he had a great respect for the constitutional authority which had been given the elected constitutional officers by the people of Nevada.  He stressed he was concerned about the continued erosion of their duties.  It is not just this particular reorganization plan which contributes heavily to that erosion, over time, the legislative body has passed bills which have slowly eroded this authority.  He commented if these officers are to be held fully accountable for what is constitutionally required, the legislature has an obligation to provide the tools to do the job.  He felt it was grossly unfair for the treasurer to be required to bring his own personal computers to his office in order to do an adequate job.  As the legislature looks at the laws and the big picture, Mr. Spitler remarked there should be more respect for the constitutional officers.

 

Mrs. Evans agreed with Mr. Spitler's comments regarding the necessity of computers and telephones in order for Mr. Seale to do his job.  She inquired about the positions in the treasurer's office and whether the figures appearing on page 61 represented vacancy savings.  She noted 18 positions had been requested, the governor recommended 17 and at the beginning of Mr. Seale's testimony, he stated he had 14 employees.  Mr. Seale replied some of the money savings resulted from the movement of the micro computer specialist from the treasurer's office to data processing.  Several positions are vacant which Mr. Seale did not intend to fill at this point.  There will also be some obvious salary savings at the end of the year with the reversion to the general fund.  Mrs. Evans commented the savings were rather substantial, approximately $97,000 in the first year and over $100,000 in the out year.  Mr. Seale remarked that would be approximately correct unless the micro computer specialist was placed back into the budget. 

 

Mrs. Evans inquired if Mr. Seale was scheduled to make an appearance before the Assembly and Senate committee on reorganization.  Mr. Seale stated he was unaware whether he had been scheduled.  Mrs. Evans said the hearings had just started and department heads from the executive branch were testifying in front of this committee.  She added it was helpful to the money committees to hear testimony by department heads, but other members of the committee on reorganization were not privy to the information available to the money committees.  She felt it was important for the rest of the legislators to hear Mr. Seale's presentation.  Mr. Seale remarked he would be delighted to make a presentation.

 

Mr. Thorne expressed a desire to speak on some of the comments made by the treasurer.  Concerning the issuance of debt, Mr. Thorne explained under current statutes, the Board of Examiners is responsible for issuing debt.  The clerk of the Board of Examiners is the head of the current Department of Administration; under the reorganization, she will be the head of the Department of Finance.  Thus, the indication of the issuance of debt shows up under the Department of Finance as that department provides support to the Board of Examiners.  Secondly, concerning the Board of Finance, Mr. Thorne explained there was an enhancement of the responsibilities of the Board of Finance through consolidation of the board of financing water projects into the Board of Finance.  This is the financing of water projects, a program similar to that handled by the municipal bond bank.  It made logical sense to bring those two together.  There have been only a few issues under that board of financing water projects because the process is rather cumbersome and in fact a number of municipalities have gone through the municipal bond bank due to easier access.  Mr. Thorne stated the treasurer had indicated he wanted the Board of Finance to issue debt.  That is a decision the legislature would have to make, but it is not an erosion of his existing authority.  That authority currently exists with the Board of Examiners.  The reorganization calls for consolidation of certain revenue collection activities within the Department of Taxation.  None of those revenue collection activities are currently with the treasurer.  The same applies to unclaimed property and as referenced yesterday, referral to the internal audit division is being established in the Department of Finance. 

 

Mr. Heller inquired if he understood correctly that Mr. Seale was reclassifying the micro computer specialist.  Mr. Seale replied affirmatively.  The job description does not correspond with the actual job being performed and had been changed over a period of time.  Mr. Heller asked what the position would be reclassified as.  Mr. Seale responded the position would be an accountant specialist or a term along those lines.  The reclassification has not yet been completed.  Mr. Heller asked how long it would take to reclassify the position with the idea it could be coordinated with this committee when the treasurer's budget is closed.  Mr. Seale hoped the reclassification could be accomplished in four to six weeks.  The office cannot afford to do without this person who will be making the interest distribution on a quarterly basis.  Mr. Heller reiterated he would like to see the reclassification completed prior to budget closings.

 

Mr. Seale stated there was no question he was asking for authority which he currently does not have.  These items were put into play by others through the reorganization plan and if there is going to be efficiency in government, then let there be efficiency.  Mr. Seale emphasized he felt his authority was being reduced by the advisory nature of the Board of Finance, by moving what little debt issuance exists from the treasurer's office elsewhere.  Also, the creation of an internal audit function within the executive branch of government made great sense, Mr. Seale commented.  Internal audits have long been a needed service and are good for the checks and balances necessary in state government and private industry as well.  For this audit division to reside in the Department of Finance, Mr. Seale felt might not be the most logical place.  One of the things which needed to be created was a position of independence from the persons being audited.  That function would more logically lie in the treasurer's office. 

 

Mr. Humke asked as some of the issues had been put into play by the reorganization, if Mr. Seale had input into the reorganization process.  Mr. Seale replied he had some input with Peat Marwick when the study first began.  There had been no other opportunity to provide any other input in any fashion.  Mr. Humke asked for the nature and quality of Mr. Seale's input as a constitutional officer and whether it was adequate.  Mr. Seale replied he had spent a total of 45 minutes, but because of his professional background, 30 years as a certified public accountant, he felt he could have had more input.  Mr. Seale believed he could have made some suggestions which would have been valuable to the reorganization.  He emphasized the reorganization plan was conceptually a good idea and many of the consolidations made a lot of sense.  Mr. Seale indicated his concern was how some of the ideas would work functionally and he was very concerned about the diminishment of authority of the state treasurer's office.  If the authority is to be diminished as much as it appears, Mr. Seale suggested the office be dissolved and combined with another office.  If such a move is approved, Mr. Seale indicated his support; however, he did not believe the citizens of the state of Nevada would agree to such constitutional changes.

 

 

MUNICIPAL BOND BANK REVENUE - PAGE 70

 

MUNICIPAL BOND BANK DEBT SERVICE - PAGE 73

 

Mr. Seale asked to present these two budgets together because they are linked.  The first budget represents the monies which come in from the municipalities for the municipal bond bank and the numbers represent merely the revenue received from each of the agencies listed in detail on page 71.  Mr. Seale referred to the line item "Transfer to Treasurer" on page 70.  He pointed out that figure had been changed as noted by Chairman Arberry on page 61 from $115,262 to $159,274 which better reflects the cost of doing business for the municipal bond bank.  The debt service budget which begins on page 73 represents merely the output of the municipal bond bank in paying for the bonds which have been issued into the street.

 

Mr. Marvel questioned if there had been any problem with defaults.  Mr. Seale replied negatively.  One of the recommendations of the Legislative Counsel Bureau was to have a better oversight role on those municipalities.  That oversight role has been initiated and financial statements are being reviewed on an ongoing basis.  Mr. Marvel inquired if the treasurer's office was now in compliance.  Mr. Seale stated they were.

 

Mr. Spitler mentioned the reversion of the proceeds of the municipal bond bank sale and inquired if the targeted figure in excess of $2.7 million was an accurate figure.  Mr. Seale replied the estimate was reasonably close and it will be reverted to the general fund by statute on June 30, 1993. 

 

ATTORNEY GENERAL ADMINISTRATIVE FUND - PAGE 17

 

Frankie Sue Del Papa, Attorney General, introduced Brooke Nielsen, Assistant Attorney General and Marietta Grass, Chief Financial Officer.  Ms. Del Papa referred to a handout (Exhibit C) which had been prepared for the committee.  The first page shows the current organizational chart and the balance is an expanded version of the biennial report of the Attorney General's office.  Page 3 of Exhibit C is a statistical summary which explains the active and pending cases opened and closed during the last biennium.  Ms. Del Papa assured the committee the office is a busy one as verified by the statistics.  Page 4 contains a chart comparing activities from 1988-1992.  It is important to note that even during this period of recession, the amount of litigation has increased.  Unfortunately, unscrupulous activity tends to rise during recessionary times.  Referring to the monetary awards as a result of litigation, Ms. Del Papa pointed out 94 percent of the judgments against the state in FY90-92 involved resolution of condemnation proceedings.  There was a tremendous amount of condemnation activity in Clark County which had been ongoing because of the highway work and it was expected this activity would continue.  Examples could be provided where the state has been hit very hard in some condemnation actions in the past and was an area which has a tremendous fiscal impact on the state.

 

Ms. Del Papa mentioned that during the budget reductions, the office had returned $509,855.51 in salary savings.  These savings have been carried forward this year as well.  Nearly everything which had been negotiated for the office during the last session had been returned to the general fund.  In addition, a substantial portion of the data processing money had been returned.  Ms. Del Papa pointed out Mr. Spitler had been very instrumental in supporting the data processing request.  She commented Mr. Spitler would be touring the office on Friday and invited any other members of the committee who would like to attend to see what had been purchased and what the future plans were. 

 

Ms. Del Papa explained there is no in-house system to track all the pending litigation in the state.  The attorney general's office does not represent every legal entity in the state, which is an assumption many people have.  There are many agencies who have outside, inside or special counsel.  It is hoped to build a litigation tracking system for the benefit of the budget division and the attorney general's office.  A recommendation has been made to move the risk management portion of the budget office into the attorney general's office in order to consolidate more of the litigation activities.

 

A priority of the office, Ms. Del Papa explained, is the salaries of the investigators, which are very inequitable.  There was no relief recommended in this budget for salaries.  Ms. Del Papa asked the committee to direct their attention to the salaries for the investigators in particular as well as those of the legal researchers.  The legal researchers have not had a pay increase in four years and are set at $25,000 per year.  By way of comparison, the First Judicial District Court law clerks make approximately $35,000.  The Chief Financial Officer, Ms. Grass, is responsible for the entire budget of the agency.  She is paid $36,000 which is less than comparable positions, particularly given the responsibility she has with the budget, and the additional responsibility she will be requested to absorb through consolidation.

 

Mr. Marvel asked what the turnover rate was at the attorney general's office.  Ms. Del Papa responded at the present time it was approximately seven percent.  When she took office, the turnover rate was approximately 24 percent.  Mr. Marvel asked if that was just attorneys or other staff.  Ms. Del Papa stated that was the overall rate.  He mentioned turnover in the legal researcher position.  Ms. Del Papa stated it was an equity question.  It is certainly a buyer's market, but on the other hand, the researcher position is usually held by a lawyer who has just passed the bar. 

 

Mr. Marvel inquired about the "fraud squads" and asked if such a thing had been built into this budget.  Ms. Del Papa explained there were two separate items.  A fiscal note had been prepared relative to the SIIS fraud unit which is expected to be assigned to the attorney general's office.  She had been approached about a telemarketing fraud unit, but although this is an important issue, there are other priority items ahead which have not been addressed.  The telemarketing fraud unit is a separate issue from the SIIS fraud unit. 

 

CONSUMER ADVOCATE - PAGE 38

 

Mr. Spitler remarked to the committee he would not be participating in this budget as he is employed in the telecommunications industry.

 

Ms. Del Papa introduced Fred Schmidt, Consumer Advocate.  Mr. Schmidt commented he had been appointed to the position for a four-year term as provided by statute.  Although he is frequently referred to as the consumer advocate, he felt it important to point out his office is only an advocate for customers of public utilities.  His office and its functions narrowly relate to utility monopoly services which are performed by private companies in Nevada.  The budget is presented separately because the agency is not part of the general fund and no general fund money is received from the state.  The office is funded by a maximum mil assessment which was set when the office was first created in 1981 at .75 mils, applied to all privately owned utility revenue in the state.  The maximum mil assessment has not changed in the 12 years the office has been in existence.  The budget being proposed does not change that mil assessment level although the caseload had dramatically increased in the last two years.  In the last two years, there have been eight major general rate cases totalling over $159 million.  The office has been very successful in holding down those rate increases, but the impact on the budget has been a reduction in the reserve and a higher level of spending as reflected in the current budget.  No special enhancements are being sought for the budget, but there are several areas of change, the majority of which are supported by the governor.

 

Chairman Arberry inquired about the caseload and mils assessment and asked if the office was at its maximum level.  Mr. Schmidt replied he is not at the maximum level now, but part of the reserve will be used this year in order to pay for the budget which was authorized last session.  Currently, the office is at .6 mils and next year, unless there is a break in the current work load beginning in July, Mr. Schmidt explained he will have to go to the .75 mil level.  Chairman Arberry asked what would happen if the case load increased beyond the level of .75 mils--if Mr. Schmidt would be required to come before the Interim Finance Committee or go elsewhere.  Mr. Schmidt replied he had come before IFC several times during the last two years because of the dramatic increase in major rate cases to seek additions to specific budget categories.  Mr. Schmidt does not plan to ask for a change to the .75 mils assessment because most of the major general rate cases came from the major utilities in Las Vegas.  Each of those utilities filed a case as frequently as one per year or less during the last two years.  Under Nevada law, utility companies cannot file any quicker than that.  The only additional burden which might be faced would be if and when Southwest Gas files for rate relief.  Under a stipulation negotiated by his office 2-1/2 years ago allowing Southwest Gas to take over the Henderson service area from CP National in a heavily contested case, an agreement was made that Southwest Gas would not file any general rate cases before 1993.  Any filing could enhance the work load of the office such that the .7 assessment may have to go to .75 mils.  Mr. Schmidt stated he had tried to keep that mil assessment as low as possible and in fact had lowered it twice since he was appointed consumer advocate in 1988.

 

Mr. Marvel inquired who initiated the majority of the caseload, Mr. Schmidt's office or consumer complaints.  Mr. Schmidt explained most cases were initiated by utility companies.  Individual consumer complaints are not generally handled by this office, the Public Service Commission has a consumer division which handles customers facing a shutoff or objections regarding utility bills.  The consumer advocate handles the broad filings by utilities for general rate relief.  Mr. Marvel asked if the utilities initiated the filings or the consumer advocate.  Mr. Schmidt responded if a utility wishes to change the rates it charges its customers under Nevada law, it must request from the state permission to change those rates.  In the last biennium, the office handled 171 cases.  Currently, approximately 64 cases are open and 90-95 percent are Public Service Commission cases, several are federal energy regulatory or FCC cases and there are a couple of court cases.  The utilities stimulate the office's work load primarily because they ask for rate relief.  Unless the consumer advocate intervenes and opposes any of that rate relief, it must be granted according to state law by the PSC.  Unless the increase is fought, expert testimony presented and other data given upon which the PSC can rely to change the decision, the increase will be granted.  The eight major cases now in the office total nearly $160 million.  In those cases, the PSC only authorized approximately $55 million in general rate increases. 

 

Mr. Marvel inquired how often during the year the utility companies request rate increases.  Mr. Schmidt replied in the last year several major utilities have had at least one request each year.  Nevada Power and Centel have each asked more frequently than once per year; the last two cases were only 10-11 months apart.  This has caused a significant strain on the budget and office work     load but Mr. Schmidt felt the office could handle the cases with the current mil assessment ceiling.

 

Mr. Dini pointed out Nevada Power's bonds were downgraded because they were not getting a good rate of return.  He asked if the actions of the consumer advocate had caused part of that downturn.  Mr. Schmidt replied he did not believe so.  Although Nevada Power's bonds were downgraded approximately two years ago, the current financial picture for Nevada Power has substantially improved.  Based upon the last two rate proceedings involving Nevada Power where a portion of the increase was contested, not all the rate increase was contested.  Nevada Power was awarded a healthy increase.  Nevada Power's stock has risen from $17 per share just before that case to $23-$24 per share now, and the company is touted in the major Wall Street analyses as one of the more attractive electric utilities in the country.  Their bond rating is still not at the "A" level and Mr. Schmidt stated they would like to see the rating there.  The major part in not being able to maintain its bond level was Nevada Power has a construction budget which far exceeds its ability to keep up.  Most of the major utilities in Nevada are very healthy and most of the major casinos are higher bond rated than other large businesses.  However, this healthy climate does not eliminate the function of the consumer advocate from ensuring the companies do not go too far too fast.  The increase of $22 million granted in that case was at least $5-$6 million too high.  The stock could have increased and been at a very healthy $20 level if a lesser amount had been given.  Nevada Power initially asked for another $16 million in addition to the $22 million received.  That would have meant higher costs to their ratepayers if that had been granted.

 

Mr. Marvel asked how the consumer advocate kept from duplicating work being performed by the Public Service Commission.  Mr. Schmidt replied there had been some press about that issue two years ago relating to a Nevada Power case.  There was some criticism because the consumer advocate did not recommend any increase and the PSC recommended even a lower amount than the consumer advocate.  It appeared the PSC staff was competing with the consumer advocate, but that has changed in several regards.  Mr. Schmidt explained he had always made an effort not to have his office perform functions or handle cases the PSC becomes involved in.  A perfect example was the Federal Energy Regulatory Commission cases.  The work load carried by the consumer advocate had been cut in half because the PSC often intervenes in those cases and has the staff to take care of them.  Many of the cases are filed by Nevada utilities in federal court and with the PSC involved in these federal cases, Mr. Schmidt felt it was an unnecessary duplication of effort.  Another avenue to avoid duplication was not hiring the same depreciation witnesses as the PSC.  There was criticism because it looked as if the PSC and the consumer advocate were on the same side.  In actuality, the consumer advocate was trying to hold down the cost by hiring the same witnesses.  Since then, the office has been negotiating with the PSC staff to not sponsor the same costly depreciation expert witness.  Another area where duplication has been avoided in rate cases is determining not how much money a utility company was entitled to, but who should pay.  There are a variety of customer classes, large business, small business, residential, etc.  The consumer advocate always represents residential customers and small business.  The office does not try to represent the larger customer classes, however, the PSC has the resources to do so.  As a result, the consumer advocate becomes involved in many of these rate cases fighting all other parties in the case.  But for the participation of the consumer advocate, small businesses and residential rates would be dramatically higher.  The mission of the office is clear--to represent the consumer.  When the utility files a rate case, it is really representing its shareholders.

 

Mr. Schmidt explained not becoming involved in federal cases has kept their out-of-state travel low.  He had not sought an increase, but he hoped the legislature would not take the opportunity to cut that budget.

 

Mr. Schmidt commented he was seeking an additional person for his office.  There had been a dramatic increase in the number of mergers and acquisitions involving the large utilities.  The amount of financing and issues involving Wall Street have increased and Mr. Schmidt is seeking a full-time financial specialist who will assist in ensuring the actions taken do not harm the financial health of the utilities, but on the other hand, make sure consumer interests are adequately protected. 

 

Chairman Arberry referred to this financial position and asked if it would reduce the expert witness costs.  Mr. Schmidt pointed out the expert witness cost $383,000 last year and was reduced in the next biennium to $320,000.  The activity of the new position will reflect the new and expanding caseload in the merger and acquisition area, so the reduction will be two-fold.

 

Mr. Schmidt recognized it was not a good opportunity to discuss salary enhancement and he was not seeking salary enhancement for himself.  However, he was seeking increases for three positions in the office.  In the last year he had lost two employees to utility companies, and most recently he lost his staff economist to Sierra Pacific Power Company right after they filed a $30 million case.  Last year he lost his staff counsel who went to work in private sector and is under contract with Sierra Pacific Power Company advising and training their witnesses on how to deal with Mr. Schmidt's cross-examination in a case.  The consumer advocate cannot compete with utility salaries and Mr. Schmidt emphasized he does not try to.  More importantly, the assistant staff counsel is the lowest paid attorney position, other than the legal researcher, in the attorney general's office.  The other two salary increases were for technical specialists.  One was for a technical engineer to ensure that person has similar responsibilities as PSC engineers and would not be attracted to shift to another agency.  The other salary increase was for an auditor to bring his salary up to the comparable functions performed at the PSC.  Mr. Schmidt asked for special attention to these three budget requests, because even with the current fiscal problems, this small amount requested would make a big difference to the office of the consumer advocate.

 

EXTRADITION COORDINATOR - PAGE 34

 

Ms. Del Papa introduced Beverly Saucedo, Extradition Coordinator.  In the past, Ms. Del Papa explained, the extradition budget had been a partial budget.  Most of the operating expenses had been paid through the attorney general's administrative budget and out-of-state travel was paid out of the state's travel funds.  It was the request of the attorney general to make this a complete budget to more accurately state the true cost of the extradition program.  The attorey general's request has been adjusted to reflect reduction of the extradition expenses.  Ms. Del Papa pointed out Exhibit C has a complete narrative of the division.  Most of what the division had requested was recommended by the governor.

 

Ms. Del Papa remarked the previous extradition coordinator had been an institution in the state.  Clare Welch had been in state government for over 27 years and approximately 20 years as extradition coordinator.  There have been some changes since Mrs. Saucedo took over the position and she has done a tremendous job in the time she has been with the division.  Mrs. Saucedo has been working with the law enforcement agencies in trying to build a consensus, including stricter rules for law enforcement to follow in order to receive reimbursement for their extraditions.  The amounts which the state will reimburse have been tightened in hopes of keeping down the ever increasing costs.  Approximately $3,000 in requests have been denied.  There are several bills which have been referred to the judiciary committees which could have a very positive impact in reducing costs.  An extradition procedure manual is being prepared which will be made available to all district attorneys, law enforcement agencies, correctional officials, justices of the peace and district judges.  The manual will go a long way toward explaining the procedure.  Ms. Del Papa called attention to the request for an upgrade of the program assistant II to a program assistant III.  This is due to the increased responsibilities which have been given to that position.

 

Mrs. Saucedo requested additional travel funds to attend out-of-state conferences.  She reiterated she is the liaison between the governors of various states, district attorneys and other law enforcement.  Part of her job is to guide the Nevada district attorneys through the extradition process, and by attending these conferences she is able to bring back valuable information for them.  Historically, these funds were paid out of the governor's budget until the last legislative session.  Now these funds come from the attorney general's budget. 

 

Mrs. Saucedo stressed the importance of the upgrade for her assistant.  The extradition office consists of only two persons and when Mrs. Saucedo is out of the office, her assistant must be able to make the decisions.  Calls are received from governors, district attorneys, state officials and judges who need an answer within two-three hours.  If Mrs. Saucedo is out of the office, her assistant must be able to provide the requested information.  As pointed out by Ms. Del Papa, the division is trying to hold down costs as much as possible.  During this last year, approximately $55,000 was collected in restitution payments and approximately $35,000 was returned to the general fund.  It is hoped this figure would be doubled in the next year.

 

Ms. Del Papa added this was one of the areas of the office which was not computerized.  There are 17,000 3" x 5" index cards containing extradition records; however, the process of entering this information into the computer is well underway and it is expected to be completed by the end of the biennium.

 

Mrs. Evans inquired about the figure of $295,000 paid from the statutory contingency fund for extradition costs as outlined on page A24 of the Executive Budget.  She asked for clarification of what costs were involved and what the needs of the division were.  Ms. Del Papa stated she did not have the information in front of her and she would submit an answer in writing to clarify the figures.

 

PRIVATE INVESTIGATORS LICENSING BOARD - PAGE 42

 

Ms. Del Papa introduced Carol Hanna, Executive Secretary of the Private Investigators Licensing Board.  Ms. Hanna explained this account provides funding for the licensing board and an agency which resides in the attorney general's office.  An occupational study had been conducted on the position Ms. Hanna holds and a recommendation was made she be promoted from a program assistant I to a program assistant II.  An enhancement of $1,015 has been requested in out-of-state travel which will allow a second staff member to attend the CLEAR conference.  The agency is very similar to the Gaming Control Board in that investigators have peace officer status.  This conference was a significant help to the agency.

 

Chairman Arberry remarked in FY92 approximately $169,000 had been collected in fees.  However, the budget shows the agency is requesting $216,000 annually.  He inquired if the fees collected would help support the request.  Mr. Thorne pointed out a revised budget page had been given the committee with the correct figures.  Chairman Arberry maintained the revised figures still did not work.  The revised page still shows higher expenditures than revenue.  Mr. Thorne explained an amount which had been an expenditure in the attorney general reimbursement is in the reserve category.  The reserve category in the first year is $63,000 and in the second year $101,993.  Chairman Arberry reiterated his question.  Ms. Hanna stated there were some fee increases.  Chairman Arberry asked for a specific figure.  Ms. Hanna stated she would provide a figure in writing. 

 

Ms. Hanna remarked the only enhancement to the operating category was the $480 requested in dues and registration.  The full $5,000 for background investigations had not been expended, but the potential existed to use the full sum which was why it had not been reduced.  Most of the investigators are located in-state, but quite a few agencies are licensed out-of-state so there was the potential for an investigator to travel out-of-state.  Mr. Marvel inquired how much had been generated last year in licensing fees.  Ms. Hanna stated $157,725 was collected in FY91-92.

 

Mr. Price asked if Ms. Hanna belonged to an association where she met with similar people from around the nation.  Ms. Hanna replied she does attend the CLEAR conference.  The CLEAR conference was for private investigators, private patrols and security.  Mr. Price mentioned the stalking bills which have been or will be introduced this session.  He commented the private investigators in some states had become involved in some stalking cases and had actually been arrested.  Mr. Price asked Ms. Hanna if she was aware of similar situations in Nevada.  Ms. Hanna was not aware of any other investigators being arrested under those circumstances.  Ms. Del Papa assured Mr. Price the issue had been raised when the bill was drafted and effort had been expended to guard against investigators being arrested.

 

Chairman Arberry called attention to the revised budget page for the board, line items attorney general reimbursement and reserve figures of $63,262.  He asked Mr. Thorne for an explanation.  Mr. Thorne explained the new cost allocation plan, which would be further explained in the Department of Administration budget, was eliminated from one category and added to the cost allocation category.  In error, that number was not eliminated out of the attorney general category which had already been set up.  That funding should have dropped into the reserve category, flowed into the balance forward and then into the second year of the biennium.  Mr. Thorne said in regard to the licensing fees, a total of $169,440 was generated last year, there was a significant negative balance.  Chairman Arberry reiterated only $169,000 was generated, but the budget shows $203,000.  Mr. Thorne responded he understood what the Chairman was getting to.  Part of the revenue reflected in the budget was a balance forward, wihch was in addition to the revenue generated.  There is no line item which shows the breakdown, but there is a balance forward which has increased the revenue reflected in each year of the biennium.

 

ATTORNEY GENERAL ADMINISTRATIVE FUND - PAGE 17

 

Ms. Del Papa explained the attorney general's budget has been historically operated in a fashion whereby most of the funding went into other agency budgets and was then transferred into the attorney general's budget.  There have been several problems with this system.  At the end of FY91, there was over $300,000 in attorney general funding which had not been transferred to the attorney general's account.  This was after repeated requests and having the agencies reported to the governor in an attempt to collect payment.  There have been many problems with the agency's funding in the past.  In addition, there are 9-10 major agencies in the state which require representation but do not pay for services.  Ms. Del Papa pointed out a classic example was the Ethics Commission.  At the last legislative session when increased responsibility was being considered for the Ethics Commission, a fiscal note was prepared regarding the cost of legal representation through the attorney general's office.  The position and funding for this representation never came to fruition.  Part of the restructuring of the agency has attempted to rectify the way in which the attorney general's office is funded and it is a reflection of the increased efforts in billable hours.  More and more entities are requiring very strict accountability as to hours actually expended in the legal area.  The budget before the committee was a reflection of a number of these changes coming together. 

 

Mr. Thorne remarked the funding for the attorney general in the past was a combination of indirect and direct recovery from the agencies to which the attorney general provides support.  The federal government did not like this mix of recoveries from the agencies and wanted the budget office to go one way or the other.  The same firm which did the statewide cost allocation plan for the state was asked to prepare a cost allocation for the attorney general's office.  A copy of those plans have been provided to the fiscal staff.  Mr. Thorne said the cost allocation generated the amounts which appear in the line item Agency Transfers.  Based on the new cost allocation plan there is no charge to an agency funded 100 percent fromm the general fund and instead the general fund money is placed directly into the attorney general's budget. 

 

Mr. Humke inquired if through the reorganization plan, the attorney general will be supplying counsel for boards and commissions which now have outside counsel.  Ms. Del Papa replied that was not necessarily the case.  As Mr. Humke is well aware, there was quite a battle last session in that the attorney general felt she could provide the same services for a cheaper rate.  Because it is statutorily controlled, the legislature clearly has discretion on use of counsel.  Certain entities have statutory authority to have outside counsel and certain entities have statutory authority to have inside counsel.  The attorney general does not represent SIIS and the university system has their own internal general counsel.  Those changes were not reflected in the budget because it would require a statutory change on the part of the legislature.  Mr. Humke stated perhaps that was coming, but he had not seen the reorganization bill.  Ms. Del Papa remarked she did not believe those changes were reflected in the bill.  Mr. Humke requested an explanation for the 20 new positions requested.  Chairman Arberry stated the entire committee was interested in the new positions and Ms. Del Papa would have an opportunity to explain them as she progressed through her budget.

 

Ms. Giunchigliani asked for clarification on the statewide assessment.  Mr. Thorne replied it was a cost allocation plan which was developed in the same way as the statewide cost allocation plan.  Instead of the funding being a mix of revenue sources, there was an assessment within each of those budgets in the cost allocation category.  There were two lines in each budget, one for the attorney general cost allocation assessment and one for the statewide cost allocation plan assessment.  As a result of this change, Mr. Thorne explained, the use of non-general fund revenue sources have been maximized.  Ms. Giunchigliani asked if this pertained to federal funds.  Mr. Thorne replied through the cost allocation plan, a determination was made of the time and cost of the attorney general's office and how it was allocated to the agencies based on the legal support requirements of those agencies.  If a budget was reviewed which had a mix of general fund and other funds, the proportion of the budget which was represented by non-general fund sources, a percentage of the total allocation would be assessed to that agency.  Ms. Giunchigliani inquired if there was a copy of the cost allocation plan and methodology.  Ms. Del Papa interjected if the committee would refer to the very last pages of Exhibit C there was a chart of attorney general staff assignments by percentage of time.  The top line indicates deputies on the attorney general's staff.  Number 1 is Norman Allen who is assigned to the Department of Transportation.  The internal position number is 36.  Looking down that column, it will be noted that 100 percent of his time is paid by the Department of Transportation.  This chart is the working document which is the basis of the cost allocation.  Ms. Del Papa added that except for the solicitor general position and the three upgrades with reference to the litigation unit, all other new positions are shown as maintenance which is attributed to demographical and caseload changes which would be reflected in this document.  It had been attempted to build these new positions out of non-general fund money. 

 

Ms. Del Papa referred the committee to Exhibit C, page Admin - 1.  She explained she had asked for three deputy attorney general position upgrades to senior deputy attorney general in the criminal division.  The creation of the litigation division headed by a solicitor general, the agency's number one priority, was essential to the proper management of complex and increasing litigation against the state of Nevada.  The proposed litigation would consist of three sections, a civil rights section, a complex litigation section and Las Vegas.  There had been a tremendous increase in civil rights cases and it had become necessary to create a separate unit with specialized training to handle those cases.  With reference to complex litigation, assistance was offered to other state agencies which were not represented by the attorney general.  If the time and expertise exists, the agency will be helped, but at times the expertise does not exist in-house.  If the committee will recall, Ms. Del Papa mentioned, the Hillhaven case which was in progress last session, outside counsel had to be hired to handle this very complicated Medicaid reimbursement case.  The office simply did not have the expertise or personnel to handle it.  This does not happen very often in Nevada compared to other states.

 

Ms. Del Papa moved to the new position request.  The first position was a senior deputy attorney general for the Department of Motor Vehicles.  The position would be totally funded out of the highway fund.  The work load at the Department of Motor Vehicles has increased substantially during the biennium, clearly justifying the addition of another deputy attorney general.  The DMV caseload increased 48 percent in 1990 and 12 percent in 1991.

 

The next position, Ms. Del Papa explained, was a senior deputy attorney general to be assigned to the Las Vegas office.  Again, the position would be funded with highway dollars.  The number of cases and increased work load in Las Vegas due to the Beltway and other highway projects justified the position. 

 

In the civil division, a non-general fund revenue position has been requested.  The Architecture Board is supported by licensing fees and they have requested additional attorney time.  The attorney general has not been able to provide that service due to not having the position.  The Public Works Board is an entity which has been serviced with attorney time; however, the board does not currently pay for those services.  The position would be divided 25 percent architecture which is not general fund and 75 percent public works, which is 50/50 general fund and inspection fees. 

 

Ms. Del Papa again referred to Exhibit C and explained the next position request was for a deputy attorney general, 25 percent for the Pharmacy Board, 25 percent for the Private Investigators Board and 50 percent for the Fire Marshall.  The Pharmacy Board portion would be non-general fund, the Private Investigators portion comes from licensing fees and the Fire Marshall funding is a mix, general fund, licensing fees and review fees. 

 

Two additional deputy attorneys general have been requested for the Department of Taxation.  Ms. Del Papa explained a great deal of time has been spent training people in bankruptcy law, and there was increased collections work in the taxation department.  A conservative estimate of 10 percent of the outstanding collectibles would amount to $3.6 million in additional revenue for the state.  The bodies must exist in order to assign the positions.  It was felt these positions would be more than self-supporting.  There was money which needed to be collected and there must be positions available to do the work.

 

Another position which the attorney general had mentioned many times was the need for an attorney for the Ethics Commission.  In the first six months of 1992, they used approximately 3/4 of the time of a deputy attorney general and 1/3 the time of a legal researcher.  This time was not enough, the backlog is tremendous.  The decisions are complicated and must be well researched.  Ms. Del Papa reiterated this was an agency which had not paid for any attorney services.  Mrs. Williams commented when the filing fees were raised last session, the intent was that revenue would go to the Ethics Commission.  Unfortunately, there was some controversy over the bill and at the end, when the conference committees met, it was decided the revenue would go into the general fund.  Mrs. Williams emphasized she believed that revenue from the increase in filing fees was to fund the Ethics Commission.

 

Ms. Del Papa said the next position request was for a legal researcher for the Las Vegas office.  Currently, there was no researcher for the 25 deputy attorneys general in the Las Vegas office and several additional positions have been transferred to Las Vegas.  To not have a researcher with this many attorneys was a disservice to the office and legal services were not being maximized.  Both positions requested for the Ethics Commission and the legal researcher position are general fund dollars.  As an aside, Ms. Del Papa mentioned they have been designated as one of the anchor agencies in the new state office building in Las Vegas.  Currently, the office in Las Vegas is completely full and some consideration should be given to providing space for those individuals during the interim.  She understood the new office building was not scheduled to come on line until January of 1995.

 

The next position requested was a deputy attorney general for the Department of Conservation and Natural Resources, an environmental/ water position which would handle such sophisticated and complex issues as the Sparks Tank Farm case.  During the last biennium, environmental cases have generated more than $800,000 in civil penalties for the state.  In addition, the state water engineer has expressed a need for additional legal services.  Some general fund dollars were requested for this position as Ms. Del Papa anticipated one part coming from the EPA low level dump fees and indirect cost assessments; the other part from water resources would be general fund money.  She believed the cost of the position would be offset by the penalties and there had been tremendous activity in this area.

 

A part-time deputy was being requested for insurance fraud by the insurance commissioner.  The funding would be through insurers' assessments, no general fund money would be involved.  The insurance fraud deputy in Las Vegas required the assistance of one or more deputies from the criminal justice division to prosecute cases in Carson City and Washoe County. 

 

Ms. Del Papa continued a deputy attorney general was being requested for the Human Resources Division.  This field had been particularly hard hit due to the increased demand for services, stemming from the recession and increased growth.  One deputy had been requested for the rehabilitation division, which was partially non-general funded.  Twenty-four percent of the position would be general fund and the remainder would be through federal grants.  The rehabilitation division does not pay for any legal services.

 

A half-time attorney general has been requested for the health division.  Thirty-five percent of the funding would come from the general fund with the remainder from fees and federal funds.  The work load and litigation involving the health division far exceed the work capacity of a single deputy.

 

A deputy attorney general had been requested for the Division of Child and Family Services.  This would be 65 percent general fund with the remainder federal grants.  The itemized legal services required are in Exhibit C.

 

Human resources required the services of another deputy attorney, Ms. Del Papa explained, for administration and fiscal matters.  The litigation in this area has increased significantly and was on-going.  Unfortunately, there is no control over who sues the state and obviously, the state must be able to respond to litigation. 

 

A legal secretary position has been requested which would be partial non-general fund.  The position would be built one-fourth from rehabilitation, health, child and family services and human resources.  This position and the attorneys for which the position would provide clerical support are housed in the Department of Human Resources.  Ms. Del Papa called attention to the fact the agency was located in 14 different locations which was an additional burden.  Some of this would be changed when the agency staff was consolidated in the old supreme court building.  The director of Human Resources had requested the return of the management assistant II who had provided legal clerical support for the two deputies.  At this time, those two deputies do not have any legal support.  Although computerization of the office has made great improvement, there must be secretarial support for the two deputies given the work generated.

 

Mrs. Evans commented the handout, Exhibit C, was full of good information and was easy to follow.  She thanked the attorney general for her efforts.  Mrs. Evans pointed out the position requests were based on the current budget which was undergoing change due to the reorganization.  For example, the rehabilitation division has been moved to another location.  Under the youth services budget, one children's home had been closed and another privatized.  Mrs. Evans did not request an immediate response, but as the reorganization was finalized and budgets closed, some of the position requests would be impacted and another look would be required.  Ms. Del Papa remarked Mrs. Evans was correct.  There had been an attempt to monitor the reorganization and assistance had been offered to the reorganization committee and the Legislative Counsel Bureau with the legal impediments found in certain parts of the reorganization.  One deputy has been assigned to monitor the reorganization. 

 

Chairman Arberry requested Ms. Del Papa to prioritize her new position requests in writing.  Ms. Del Papa stated the number one priority out of general fund money, which was requested but not recommended last session, was the solicitor general position.  Three divisions in the agency require reorganization: civil rights, complex litigation and the Las Vegas office.  Given the Americans With Disabilities Act, the activity through sexual harassment and employment discrimination, tremendous increases will be seen in these areas and the state must be prepared to defend these lawsuits.

 

Ms. Del Papa stated she had requested a second investigator position for the Las Vegas office.  The work load increase had been unparalleled and there was a tremendous backlog.

 

The final position requested by the attorney general was a senior deputy attorney general for the missing children clearinghouse/ crime prevention coordinator.  The need was clear, the problem was funding.  Ms. Del Papa pointed out a more detailed explanation of the need was included in Exhibit C.  There had been no deputy specifically assigned to those cases and time had been borrowed from other deputies. 

 

Ms. Del Papa referred to the travel category.  She explained the request was the same as the recommendation.  The sum of $160 was attributed to enhancement due to the solicitor general position.  The in-state travel was for the most part considered maintenance.

 

The operating budget was reduced by $7,466 in normal expenses, which covers telephones, postage, etc.  Ms. Del Papa said there was a $14,894 operating enhancement which was attributed to the solicitor general position.  There was $11,272 in maintenance related costs to other positions due to increased caseload and there was $8,407 in general enhancement increases in printing and copying attributed to revising and printing manuals and other publications. 

 

A total of $2,334 in the maintenance area is recommended for new furniture and telephone equipment for one new position.  Furnishings for all other positions were part of the request for the supreme court remodel.  Telecommunications devices for the deaf at a cost of $2,500 have been requested pursuant to the mandates of the ADA.  All other requests for furniture and equipment were considered part of the base budget.

 

Ms. Tiffany referred to the number of positions which had been requested.  She inquired how so many attorneys could be managed with their high caseloads and their locations in various offices.  She asked if the attorney general had an overall plan.  Ms. Del Papa replied she definitely had a plan.  She referred to page 6 of Exhibit C concerning the role of the attorney general.  Even though the office was not funded as well as it should be and salaries were not competitive, Ms. Del Papa emphasized she was fortunate in having the best people to work with.  For example, she pointed out Brooke Nielsen, the Assistant Attorney General, who has 13 years service with the office.  Mrs. Nielsen was a former chief of the criminal justice division, former chief of the department of transportation and former chief of gaming.  Ms. Del Papa explained the management team for the office consisted of herself, Mrs. Nielsen, the six chief deputy attorneys general, the consumer advocate and the chief of investigations.  The office is managed with a team concept and there are regular chiefs' meetings.  Through the teleconferencing capabilities, which Ms. Del Papa emphasized was a wonderful system, she was able to meet with her staffs from the north and the south.  In addition, monthly litigation reports track the caseloads for all deputies.  The attorney general's office is a large public interest law firm.  On any given day, in addition to 83 attorneys, there were approximately 4,000 active cases throughout the state.  Ms. Del Papa offered to meet with Ms. Tiffany and explain the office in greater detail.  Ms. Tiffany indicated that would be of interest to her.  Through the reorganization plan, it was hoped to maximize efficiency with people and the span of control was a big issue.  She asked if the attorney general was comfortable with the span of control in the office.  Ms. Del Papa replied she was comfortable.

 

Mr. Marvel referred to the operating expenses for the office.  He pointed out there were no expenses for contract legal services and asked if there was any anticipation for contract legal services.  Ms. Del Papa replied she did not foresee any at this time.  She referred to the special litigation fund and a discussion of the same which was in Exhibit C.  Approximately $75,000 has been given to the office each year for the special litigation fund.  By way of comparison, Ms. Del Papa explained the attorney general in New Mexico, which is a comparable sized state, complained because his legislature had cut his special litigation fund from $1.5 million to $800,000.  She pointed out the times she has had to appear before the Interim Finance Committee in order to request additional funding, most recently with the very complex Hillhaven case.

 

Mr. Spitler addressed the $195,000 in FY93-94 and $322,000 in FY94-95 for data processing and the enhancement of $80,000.  He inquired if some of this funding was to purchase items which had not been acquired due to budget constraints.  Ms. Del Papa referred Mr. Spitler to Exhibit C, page Admin - 11.  She expressed a desire to work in particular with Mr. Spitler to show what had been done with data processing in the office.  Mr. Spitler said he wanted to ensure those expenses were clearly defined.  Ms. Del Papa pointed out the office was fortunate in having an in-house computer manager.  Through reorganization, this person's salary will be pulled from the attorney general's budget and placed into the data processing budget.  By virtue of the size and complexity of the system in the office, he will remain physically in the attorney general's office.  She understood the data processing budget to reflect everything but that one position.  The final phase of the networking plan which had been authorized during the last session, had been extended to a four-year plan due to budget constraints.  The goal was to complete all networking of all computers, optimize the peripheral equipment and software purchase during the first three years and install a docketing/calendaring software program.  This was an essential goal in that there was no existing tracking procedure.  Another goal is to enter all the published attorney general opinions into the computer system.  Over the past two years the published opinions have been converted and all remaining opinions will be converted.

 

Ms. Del Papa remarked when she took office, the agency did not have a Westlaw hookup.  In her opinion, this lack was akin to malpractice.  Given the emphasis placed on the development of a management information system and the networking between Las Vegas, Ely and Carson City, it was now possible to prepare a document in Carson City, transfer the information to Las Vegas and have that document filed in court that day in Las Vegas.

 

Ms. Del Papa advised the committee the renovation of the old supreme court building into offices had come in $500,000 under budget.  As the bid was under budget, items which had previously been eliminated due to lack of funding such as blinds and furniture, have now been taken care of.  After consolidation, the agency will have 79 offices and 36 secretarial stations and will house 155 employees in the Heroes' Memorial Building, the annex and the old supreme court building.  Chairman Arberry inquired if after the consolidation all deputies would be housed in one central location.  Ms. Del Papa answered there would not be enough space for all the deputies in the buildings in the north.  Some, by virtue of their unique positions, will remain with the agencies they are assigned to.  In the Las Vegas area, all deputies will be housed in one location.

 

With reference to the training category, Ms. Del Papa pointed out in the past the agency had been given a sum of approximately $100 per attorney for training.  Every attorney in the state was required to have continuing legal education.  She asserted she was proud of the very good continuing legal education program which had been developed in the office.  The various programs have been shared with the district attorneys, city attorneys and the National Association of Attorneys General.  There was a special emphasis on preventative law.  Ms. Del Papa called attention to the reduction in training which had been recommended by the governor.  The office will be short approximately $1,800 which will only fund training for 64 deputies.

 

Two years ago, Ms. Del Papa advised the committee the development of a Medicaid fraud unit had been requested.  She said the program had been developed and went into effect in October of 1991.  She was proud to say the program had been every effective.  Approximately 45 major cases have been opened, some of which have been discussed in the press.  Ms. Del Papa and Mrs. Nielsen met with the Federal Bureau of Investigation a short time ago and they were very interested in health care fraud and the continuation of the investigations.  The fiscal notes which have been prepared for the proposed SIIS fraud unit have been based on what has been learned thorough the development of the Medicaid fraud unit.  This unit has performed a tremendous service to the state.  The funding was still covered for the first three years under the 90/10 federal match.  So far the state's share had been covered with the fines and penalties which have been collected.  During the first year of operation, approximately $380,000 in fines were collected.  She thanked the legislature for their support of this program.  Nevada became the 40th state in the country to implement a Medicaid fraud unit.  This was a priority at the federal level and information was shared throughout the states.

 

TORT CLAIM FUND - PAGE 24

 

David Thomas, State Risk Manager, made some brief comments regarding the impact of the reorganization to put it into perspective.  The Risk Management Division of the Department of Administration was responsible for, among other things, the identification and analysis of the risk to property and the general liability of the state, to recommend actions to minimize or eliminate those risks and to implement programs to control or fund losses associated with those risks.  One function associated with that mission was the processing of all tort claims or actions resulting from third-party claims against the state.  The governor's reorganization proposal recommends the consolidation of the tort claims processing function with the attorney general's office.  The tort claims section receives, reviews, investigates, adjusts and processes all third-party claims against the state, approximately 1,000 annually utilizing two staff members, a management analyst II and a management assistant II.  Both of these positions are proposed to be transferred to the attorney general's office along with all associated responsibilities.  Mr. Thomas pointed out this section works very closely with the attorney general's office, particularly on larger cases or those with potential for litigation.  Due to the confidentiality required in litigation cases, the tort claims section was not routinely advised and/or involved in the specifics of the cases.  Although the agency was self-funded for the losses resulting from those cases, the state has never been able to establish a proper reserve level for eventual settlement.  Thus, Mr. Thomas explained, it had become routine to rely on statutory contingency funds to pay settlements in those cases.  For example, this year the budget will be exhausted for claims sometime in the next month. 

 

Chairman Arberry inquired how the section had been funded.  He noticed the per position figure had risen from $39.99 to $89.  Mr. Thomas replied that was correct.  For the first time in several years, an actuarial analysis was done for the fund.  The actuarial analysis was conducted by ARM-TECH, Advanced Risk Management Technics, a California firm.  The analysis indicated the unit was grossly under-funded to pay losses in the current year and for those incurred in this year but paid in future years.  Based on estimates computed by ARM-TECH, the rates were established to fund the unit.  For budgeting purposes, it should be noted in the tort claims item on page 24, the figure of $874,069 was the amount recommended based on ARM-TECH recommendations.  Those numbers were discounted to 60 percent in the first year and 70 percent in the second year.  Over five years, according to the ARM-TECH recommendations, the plan would be fully funded.  A similar proposal was applied to the reserves.

 

Ms. Del Papa stated her office had worked closely with risk management in regard to the tort claim fund.  One area where there would be shortfalls was the operating account based on the initial review.  Depending where these people will be housed, there may be additional building rent and a fairly large expense for claim management would be postage and telephone.  Ms. Del Papa added it appeared the budget office had shorted this fund approximately $10,000 in the operating category.  Due to the transition and the fact it was a new program, it appeared there would be a shortfall, but it was difficult to be sure.

 

Mr. Humke stated concern about the high reserves.  He requested a written response of the actuarial study and why the reserves were required to be so high.

 

Ms. Giunchigliani asked where the risk management position would go as it does not appear to be transferred.  Also, she inquired if that was the reason why some of the operating costs had not moved.  Mrs. Nielsen indicated they would provide answers to Ms. Giunchigliani's questions.

 

SPECIAL FUND - PAGE 28

 

Ms. Del Papa explained the attorney general's special litigation fund was established for the payment of expenses directly related to the investigation, preparation, prosecution and defense of lawsuits unknown at the time of the budget preparation.  Some of these expenses are reimbursable by other state or county agencies.  The nuclear waste litigation covers any costs of litigation against the United States.  The federal government does participate in other legal actions undertaken by the nuclear waste project office and those costs are fully reimbursed.  The sum of $81,000 has been requested in this category, $79,996 was recommended which was the amount spent in FY91-92.  The litigation budget this year has already been severely impacted by the Ekechukwu case--a race, age and nationality discrimination case--in which there are 34 defendants.  Of those defendants, five are state agencies and 10-12 are state administrators.  To date in this one case, court reporting fees have exceeded $11,000, which have been paid out of the litigation fund. 

 

Ms. Del Papa reiterated her willingness to meet with any of the legislators to explain any aspects of her budget or the requests she has made.  She also offered assistance in the formulation of the SIIS fraud unit using the experience gained from the Medicaid fraud unit.  She commented it had been an honor and privilege to serve in the capacity of attorney general.  She praised her office staff for their dedication and cooperation during the budget crunch.

 

Mr. Price called attention to a bill which has been introduced to have the constitutional officers prepare their budgets outside the administrative budget office.  He stated he had not seen the bill but inquired if the attorney general's office was included or if Ms. Del Papa was aware of the bill.  Ms. Del Papa indicated she was aware of the bill and the office had not opposed it.  She had been out of town when testimony had been heard in the Senate, but she remarked she did not mind which direction the legislature decided to go.

 

Chairman Arberry adjourned the meeting at 11:00 a.m.

 

                                          RESPECTFULLY SUBMITTED,

 

 

      ------------------------------

                                          Reba Coombs, Secretary

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Assembly Committee on Ways and Means

February 3, 1993

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