MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
February 26, 1993
The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 7:05 a.m., on Friday, February 26, 1993, in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. 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
Mr. David Thomas, Risk Manager, distributed copies of a notice which had been posted on all state bulletin boards by the Service Employees International Union (SEIU) (Exhibit C). He noted there was an effort currently underway by SEIU to organize state employees.
Mr. Thomas indicated he did not want Exhibit C to unduly influence the committee's consideration of the Benefit Services Fund budget. He explained Exhibit C contained several factual errors. The referenced rate increase from $162.46 to $320.83 reflected full family rates for employees enrolled in the Health Plan of Nevada HMO. He noted the state health program was comprised of a self-funded plan, Hospital Health Plan in northern Nevada and the Health Plan of Nevada HMO in southern Nevada. The Committee on Benefits had no control of HMO rates. Exhibit C indicated the Committee on Benefits predicted a rate increase of $76.00 per month. In fact, the Committee on Benefits adopted an increase in self-funded rates for full family coverage of $76 per month. The increase of $158.37 for a family of three referenced in Exhibit C reflected an increase in the Health Plan of Nevada rate for full family coverage.
Mr. Thomas noted Exhibit C stated new rates were higher for families of four or more. He stated there were no higher rates for larger families. Rates were the same for families of three or for families of four or more.
Exhibit C reported more than 6,000 state workers with family coverage paid $1 million more in January 1993 than they paid in December 1992. Mr. Thomas stated there were only 210 state workers with family coverage enrolled in Health Plan of Nevada. Enrollment in the self-funded plan with full family coverage was 2,924. Approximately 80 percent of state employees were enrolled in the self-funded plan. The remainder were enrolled in the two HMO plans.
STATE EMPLOYEES WORKER'S COMPENSATION - PAGE 197
Mr. Thomas reported the budget account provided for the collection of worker's compensation premiums for employees within the Department of Personnel central payroll system. It did not include employees within the University and Community College System, the Department of Transportation, the State Industrial Insurance System (SIIS) or the Legislative Counsel Bureau. He explained while there was clearly a wide variety of occupational exposure within this group of employees, they were combined for experience rating and premium determination purposes so losses could be spread over a broad base, reducing the impact of claims fluctuations. The current claims modification factor based on claims experience was a very favorable 92 percent. The claims modification factor was applied to manual rates developed and provided by SIIS to determine the amount of premium to remit to SIIS for worker's compensation coverage.
Mr. Thomas explained SIIS developed separate manual rates for the various occupational classes. The Department of Finance compiled composite rates from those manual rates in order to spread the risk over all occupational classes. Both calculations resulted in the same bottom line figure.
Mr. Thomas said funding for the account was from payroll assessments. Under the guaranteed cost basis rating program there were no retrospective adjustments to premiums paid by the state to SIIS on the basis of actual loss experience; however, the guaranteed cost premium was subject to payroll audit. Thus, the premium could increase if actual payroll was higher than the estimated payroll on which the premium was calculated. The rate was projected at $4.27 for fiscal year 1993-94 and $4.65 for fiscal year 1994-95 and represented a charge against each $100.00 of payroll applied to the annual maximum salary per position.
Mr. Thomas noted under the emergency regulations recently adopted by SIIS the annual maximum was currently rolled back to $27,000 per year with expected gradual increases of $3,000 per year over the next three years. However, when the Executive Budget was developed the $36,000 salary limit in place at the time was utilized to calculate premiums. Payments made to SIIS in the last quarter also reflected the higher limit. SIIS would adjust premium payments in 1993 to accommodate the changes resulting from adoption of the emergency regulations.
Mr. Thomas explained the transfer to benefit services under the expense category reflected personnel costs for staff to administer the fund. The loss fund reserve was to pay unexpected premium liabilities resulting from the annual payroll audit assessments performed by SIIS.
Ms. Giunchigliani asked Mr. Thomas to provide the committee with a schedule of losses by classification for each agency, including the type of injuries. She also requested a list of safety committees within the agencies, loss control and prevention activities and safety training occurring within the agencies. She noted the state was one of the highest contributors to SIIS.
Ms. Giunchigliani commented HMOs did negotiate rates with organizations. Further, the deemed wage had not been acted on by the Governor. It was on a 90-day hold and time was due to expire in approximately 20 days. If passage did not occur within the time limit the $36,000 figure would be the basis for budget projections.
Ms. Judy Matteucci, Budget Director, said the Governor's office was still reviewing the emergency regulation.
Mr. Spitler asked for clarification regarding the state's payments to SIIS. Mr. Thomas explained there was one premium rate charged to all agencies which was compiled from the rates for the various occupational classes derived by SIIS.
Mr. Spitler questioned whether the Executive Budget accurately reflected the amount of premiums SIIS would be charging. Mr. Thomas responded affirmatively.
Mr. Spitler asked if SIIS would charge the same premium over the next biennium. Ms. Matteucci stated if the emergency regulation was passed within the remainder of the 90-day period the basis would be rolled back and the Executive Budget would be impacted. Otherwise, the $36,000 cap would remain in place.
RETIRED EMPLOYEE GROUP INSURANCE - PAGE 199
Mr. Thomas stated the fund was previously administered by the Department of Personnel. Its purpose was to defray a portion of the group insurance premiums for retired state employees who elected to continue participation in the group insurance plan. The program was funded by payroll assessments to all agencies. Projected expenditures were based on projected retiree population rates each year using an annual growth figure of 6.25 percent supplied by the Public Employees Retirement System multiplied by the state contribution. The state contribution was held constant at $119.35 per month for the first year of the biennium. In the second year an inflationary increase of $8.26 per month was projected.
Mr. Thomas explained the budget served to collect the state contribution on behalf of retirees for deposit into the benefits services fund.
SUPPLEMENTAL FUND - INDIGENTS - PAGE 201
INDIGENT ACCIDENT ACCOUNT - PAGE 203
Mr. Thomas explained the supplemental fund for indigents and the indigent accident fund were to support indigent medical services provided by counties. He introduced Ms. Michelle Bero of the Nevada Association of Counties.
Ms. Bero reported the accounts were both administered by the Nevada Association of Counties. Both were funded by property taxes. Claims expenses were based on total revenue coming into the accounts.
Mr. Marvel inquired whether claims were paid on a first-in-first-out basis. Ms. Bero replied counties could submit an application for funds from the supplemental fund once they reached 90 percent of their indigent health care budgets. Claims were reviewed and paid on a pro rata basis. She noted all claims received were paid. Meetings were held twice a year to review claims submitted by the counties and hospitals to the indigent accident fund. Historically, the indigent accident fund supported payments to 100 percent of allowable charges. The supplemental fund supported 40 to 60 percent of allowable charges.
INSURANCE AND LOSS PREVENTION - 291
Mr. Thomas stated budget account no. 715-1348 (Tort Claim Fund) was the insurance revolving fund which provided funding for tort claims processing and management of property and casualty insurance and loss prevention activities. The Governor's reorganization proposal provided for transfer of the tort claims function to the Attorney General's Office. The remainder of account no. 715-1348 would be transferred to the new construction and facilities division of the Department of Administration as account no. 101-1347 (Insurance and Loss Prevention).
Mr. Thomas reported funding recommended by the Governor provided for the transfer of one assistant risk manager position and associated personnel and travel costs. Operating expenses included $5,250 for annual independent audits. Insurance premium expense covered the premium costs of various insurance programs purchased to support the activities of the fund, including fidelity bond coverage for employees other than employees of the University and Community College System and SIIS, boiler and machinery coverage, contractor's equipment coverage, excess property coverage and aircraft liability and hull coverage. Property damage liability and motor vehicle liability coverages were self-insured.
Mr. Thomas indicated special projects expense provided for continuation of the driver training program. Auto comp/collision, property claims and reserves for losses expense were based on historical claims experience. For example, property damage claims over the past several years averaged $106,000, with a high of $160,000 in one year.
Mr. Thomas noted the fund did not have statutory authority to fall back on the statutory contingency fund. Therefore, funds were budgeted in reserves for losses expense to cover larger than expected physical damage claims.
Mr. Marvel asked how reserves for losses were determined. Mr. Thomas responded the number was a balance forward from the previous year.
Ms. Matteucci stated she would provide the historic loss reserve figures which were used for the balance forward.
Mr. Marvel asked what formula was used to calculate the balance forward. Ms. Matteucci replied the figure was based on prior history. The amount reflected in the Executive Budget was comprised of ending fund balance reserve and reserve for losses.
Mr. Marvel asked if insurance recoveries were credited back to the account. Mr. Thomas indicated they were.
Ms. Giunchigliani asked Mr. Thomas to provide the number of auto accidents per agency as well as reports of loss prevention activities.
Ms. Giunchigliani asked what constituted state property. Mr. Thomas said state property included vehicles, buildings and contents of buildings.
Mr. Spitler inquired about programs to reduce property loss during the 1991-93 biennium. Mr. Thomas replied the state had not been involved in loss prevention programs. The responsibility had historically been left to the agencies. One of the goals of the Governor's proposed reorganization was to move the loss prevention activity into the construction facilities division where the assistant risk manager could work with architectural and engineering personnel to develop comprehensive programs.
Mr. Spitler noted the program description indicated the responsibility to analyze risks to state property and recommend activities to minimize and eliminate those risks. He asked if recommendations had been made. Mr. Thomas answered his office coordinated the driver-training program but no other statewide loss prevention programs.
Mr. Spitler questioned whether the agency was established to perform loss prevention activity. Mr. Thomas stated the agency should perform a loss prevention function but historically the responsibility had fallen to the individual agencies. His office had provided funding and insurance.
Mr. Spitler inquired whether it was misleading to assume this agency provided programs which would expose risks for property loss. Ms. Matteucci explained essentially this budget supported a self-funded plan for property damage and fleet liability. In the past, little attention had been paid to performing loss prevention activities. The Governor's planned reorganization could improve that situation by moving the insurance programs to the Facilities Management Division.
Mr. Spitler asked for a copy of the proposed loss prevention program. Ms. Matteucci said she would request a copy for the committee. She noted the driver-training program had helped reduce auto accidents.
Mr. Marvel asked what the mission of risk management was. Ms. Matteucci replied there were no mission statements for the proposed new agencies. They would be developed if the reorganization plan was approved.
Ms. Giunchigliani questioned where property coverages, property management and construction management would fall under the proposed reorganization. Ms. Matteucci responded those agencies would be located in the new Department of Administration, Facilities Management Division. The proposed relocation would improve interface between the Public Works Board and risk management and allow for better estimates of property damage coverage and better loss prevention programs.
Ms. Giunchigliani requested a copy of the rationale for moving the tort fund to the Attorney General's Office. Ms. Matteucci stated the relocation was based on an actuarial study conducted during the interim which showed the tort claim fund was significantly underfunded. The tort claim reserve would be increased so claims would not have to be funded from the statutory contingency fund.
Ms. Giunchigliani asked if the administration was averse to the committee looking at loss prevention within each of the agencies. Ms. Matteucci answered the administration fully supported loss prevention programs. However, the state purchased worker's compensation coverage from SIIS and there was little incentive for individual agencies to be concerned with loss prevention.
Ms. Giunchigliani stated it was not fair to charge high risk agencies the same rate as low risk agencies. Ms. Matteucci explained the rate consolidation was purely budgetary. There was a benefit to lowering the rate for agencies which were funded entirely by the General Fund but doing so resulted in a disincentive for establishing safety programs.
CLEAR CREEK YOUTH CENTER - PAGE 300
Ms. Matteucci reported Clear Creek Youth Center was originally built by the federal government as a Job Corps center. The center was closed in 1969. In 1970 the State of Nevada began operating the facility under special use permits. In 1988 the state assumed ownership of the facility. She introduced Mike Shaughnessy, Director of the center. Mr. Shaughnessy distributed a schedule of Clear Creek users (Exhibit D).
Mr. Shaughnessy stated the center provided meeting space for youth and community groups as well as state and federal users. Youth programs included workshops, community activities, ecological studies, substance abuse seminars and school field trips. Adult groups used the center for meetings, retreats, seminars, workshops and special training. Adult users included Alcoholics Anonymous, religious groups, firefighters, municipal staff personnel, military organizations and university groups.
Mr. Shaughnessy noted the center was operated year-round by a staff of two and enjoyed fairly constant use. Reservations were currently booked through July 10, 1993.
Mr. Shaughnessy said the center included seven dormitories containing 32 beds each, a large dining facility and a conference center with seven classrooms or meeting rooms. There was also a gymnasium for limited sports activities. Meals furnished to user groups were provided by an independent contractor.
Ms. Matteucci noted revenue for meals and beds was increased in August 1992. The per meal charge was increased from $3.50 to $4.00. The bed charge was increased from $4.50 to $5.00 per day. The allocation for salary expenses for seasonal staff had been reduced from $10,000 to $4,000 during the budget reductions implemented in July 1992. The base budget now allowed for $8,000 for a seasonal employee in each year of the biennium. The only change in operating expenses was a request for funding for ant and spider extermination. The Governor recommended funding for replacement of 50 mattresses in fiscal year 1993-94 and 55 mattresses in fiscal year 1994-95 as part of the ongoing mattress replacement program.
Ms. Matteucci noted the center had received a capital improvement allocation in 1992 to repair dormitories. Those repairs were complete and one dormitory was in compliance with the Americans With Disabilities Act.
Mr. Marvel inquired if Prison Industries would have an opportunity to bid on the mattress replacement. Mr. Shaughnessy stated the mattresses would be purchased from Prison Industries.
Chairman Arberry pointed out the budget narrative was silent regarding who would administer the center. Ms. Matteucci stated under the Governor's reorganization plan the center would continue to be administered by the Department of Administration.
Mr. Heller said it had been rumored Rite of Passage was looking at the facility. He asked if there was any truth to the rumor. Ms. Matteucci said Rite of Passage had expressed interest at one point and had done some preliminary inspections of the center. However, they had decided not to pursue acquisition.
Chairman Arberry asked if all capital improvement projects had been completed. Mr. Shaughnessy replied all scheduled improvements had been done. The shower areas and some floor area had been renovated.
ADMINISTRATION SERVICES DIVISION - PAGE 304
Mr. Tracy Raxter, Chief of Administrative Services, Department of General Services, reported the budget account represented a consolidation of administrative support personnel from the Department of General Services, Department of Personnel, Data Processing and the Public Works Board. Division personnel provided accounts payable, personnel payroll, billing, financial reporting, budgeting, contract administration and management analysis services. Additionally, accounting services were provided to the Governor, Lieutenant Governor and the Ethics Commission.
Mr. Raxter explained revenue was derived from administrative assessments to each division and agency served. Personnel expenses were to fund 21 administrative support personnel and a department director position. Travel expense would fund the department director's travel throughout the state to administer programs. Operating expenses included supplies, rent, postage, insurance, etc. The purchasing assessment represented the Department of Administration's pro rata share of the costs of operating the Purchasing Division. This assessment would, in turn, be passed along to the divisions and agencies receiving services. The state cost recovery plan represented assessments for the Attorney General's Office and the Administrative Services Division's share of the state cost recovery plan.
Ms. Giunchigliani asked why personnel were being transferred into the Administrative Services Division. Mr. Raxter answered a reorganization savings was anticipated as a result of consolidating administrative personnel. Consolidating personnel would allow a centralized system of budgeting and accounting throughout the department. It was also expected there would be a partial consolidation of billing systems within the department.
Ms. Giunchigliani questioned whether personnel were currently performing the same tasks as they would following the reorganization. Mr. Raxter responded some of the positions were currently in the Department of General Services; however, some were located in the Department of Personnel, the Department of Data Processing and the Public Works Board.
Ms. Matteucci explained administrative services divisions had been designated for every new department. This was the administrative services division for the proposed Department of Administration and included accounting, personnel, buildings and grounds and data processing positions formerly assigned to separate agencies.
Ms. Giunchigliani questioned why the data processing positions were not transferred to data processing. Ms. Matteucci replied the three positions were accountant positions.
Ms. Matteucci explained the transfers would provide central business functions within the consolidated departments.
Ms. Giunchigliani inquired whether the unclassified director was a new position. Ms. Matteucci responded there was a proposal to establish new department directors for all of the new departments, including the Department of Administration.
Chairman Arberry requested performance indicators for this budget account. Ms. Matteucci agreed to provide them.
Mrs. Williams asked if the positions would be physically relocated and, if so, what the impact on state-owned building rent would be. Mr. Raxter said staff in this budget account would be increased from 3 to 22 positions. The rent increase reflected in the Executive Budget included costs associated with the additional positions. It was unknown whether all of the positions would be located in one office. It was expected the consolidated division would be located in the Kinkead Building.
Ms. Tiffany asked the rationale for separating planning and technology services from operations in the Department of Finance. Ms. Matteucci explained KPMG Peat Marwick had strongly recommended separation of the ITA from Information Technology Services in order to ensure data processing planning and telecommunications processing were tied to a financial function for strategic and capital planning purposes.
Ms. Tiffany asked if this was purely KPMG Peat Marwick's recommendation. Ms. Matteucci said it was.
GAMING CONTROL BOARD - PAGE 320
Mr. William Bible, Chairman, Gaming Control Board, introduced Mr. Harlan Elges, Chief of Administration.
Mr. Bible distributed copies of the Gaming Control Board organization chart (Exhibit E). He explained the Gaming Control Board budget was a consolidated budget which included all of the divisions and operating activities of the Board and the Nevada Gaming Commission. He noted principal offices were maintained in Carson City and Las Vegas. Additional offices were located in Laughlin, Reno and Elko.
Mr. Bible referred to page 2 of Exhibit E, a list of positions approved by the Legislature in 1991 and positions eliminated by budget reductions. Current staffing was 372 positions. He stated all divisions were essentially equal in strength. There were currently 20 vacancies within the agency. Five positions had recently been filled. He pointed out turnover and attrition rates had increased considerably as a result of increased opportunities within the gaming industry both in Nevada and outside Nevada. The Gaming Control Board was losing employees to other jurisdictions seeking regulatory and operations expertise. Nevada operators were also recruiting staff from the Gaming Control Board. He noted there had been no salary increase for Gaming Control Board employees in the past year and there was no prospect of an increase for the coming biennium which was causing lowered morale among staff.
Mr. Bible noted in the base budget the Governor recommended agency transfers of $2,522,801 in fiscal year 1993-94 and $2,609,027 in fiscal year 1994-95. Those transfers represented investigative fees and reflected a fee increase from $30.00 to $40.00 per hour for regular investigations and from $25.00 to $35.00 per hour for investigators on travel status. Comparison surveys of investigative fees in other jurisdictions had revealed Nevada's fees were at the low end of the scale. He stated a fee increase could be justified to maintain current staffing levels.
Mr. Bible referred to the performance indicators. He noted time for conducting investigations and time between audits had increased as a result of decreased staffing levels.
Mr. Bible indicated the Governor recommended allocating $20,000 in each year of the biennium in order to have the Gaming Control Board assume the duties and responsibilities of the Nevada Racing Commission. The Racing Commission was responsible for the conduct of racing activities within the state. Currently the agricultural associations conducted races in Ely, Elko and Winnemucca. Additionally, there was a proposal to reactivate the greyhound racing track in southern Nevada.
Chairman Arberry asked why the Gaming Control Board was not affected by the Governor's proposed reorganization. Mr. Bible replied the Gaming Control Board was a unique organization. Most states did not have a comparable agency. The reorganization consultants felt it was not appropriate or necessary to consolidate the functions of the Gaming Control Board within another department of state government. There had been some discussions regarding consolidation of the computer functions but Gaming Control Board computer activities were different from those of other agencies. The Gaming Control Board used its computers extensively for laboratory functions to test gaming devices, probability theories and modeling activities. Also, much of the Gaming Control Board activity was of a confidential nature similar to law enforcement functions in the police agencies and Department of Motor Vehicles.
Mr. Marvel asked what would happen to the Racing Commission. Mr. Bible replied the proposal was for the Gaming Control Board and the Nevada Gaming Commission to assume all the activities of the current Racing Commission.
Mr. Spitler said he had recently read an article which indicated Nevada provided the best employee base for gaming operators in other states. He questioned whether the Gaming Control Board had examined the ultimate long-term impact of increased turnover rates and continued withholding of salary increases. Mr. Bible said analysis of salary structure was a key point. He said he understood there would be proposals from the Administration for rearranging the classified and unclassified structure which might provide some relief. However, Nevada was clearly the training ground for the gaming industry. Employees had traditionally been lost to the industry. He was concerned when employees moved from the regulatory agency to the regulated industry but, on the other hand, it was helpful to the agency to have employees move into the industry from time to time because those employees understood the regulatory structure and the agency perspective. However, over the next biennium there would be an increase in movement of staff into the industry or regulatory agencies in other jurisdictions.
Mr. Spitler asked Mr. Bible to keep the committee apprised of new information regarding this matter. Mr. Bible agreed to do so.
Mr. Price asked if the revenue from the new proposed slot route tax as recommended in the enhancement budget for monitoring had been projected by the study. Mr. Bible explained the enhancement budget reflected funding for five additional staff positions to support a proposed slot route tax increase.
Mrs. Williams inquired whether there had been a significant loss of Gaming Control Board personnel when gaming had been legalized in New Jersey. Mr. Elges responded a number of staff members had left to accept positions in New Jersey.
Mr. Heller noted the Board's mission statement included ensuring public confidence. He questioned whether extending audit cycles would deteriorate that portion of the mission. Mr. Bible replied the cycle for compliance audits performed by the tax division was slightly over five years. The Executive Budget anticipated staffing to bring the cycle closer to five years. The cycle for audits performed by the audit division was approximately 3.2 years. He noted cycles over 3.5 years were too long for effective regulatory control and 3.2-year cycles caused him some concern.
Mr. Heller inquired whether the Executive Budget projections for performance indicators had taken into consideration new gaming operations in southern Nevada. Mr. Bible responded the agency request included funding for additional positions to support the new gaming operations. However, that funding was not provided in the Governor's recommendation. He noted the new operations would not pose an immediate audit problem.
Mr. Heller asked if it would be reasonable to incorporate significant audit findings in the performance indicators. Mr. Bible said he was reluctant to include audit findings in performance indicators because he did not want those numbers to be viewed as quotas or targets.
Mr. Price noted gaming regulation in New Jersey was funded by assessments on the industry itself rather than from the General Fund. He questioned whether Nevada should consider such a shift in funding as part of the proposed state government reorganization plan. Mr. Bible replied industry funding would represent an increased tax burden to the industry which, in turn, would seek to reduce Gaming Control Board expenditures to offset that burden.
Mr. Bible indicated the Governor recommended an inflationary increase to the budget for the tort program through the risk management division and increases for Motor Pool fees and in-state travel costs. The major increase in expenditures was for non-state-owned office rent. All Gaming Control Board offices were currently in non-state-owned buildings. The Las Vegas office would move into the new state office building in mid-1995. The governor also recommended increased funding for classified employees as a result of a statewide occupational study, increased fringe benefits and funding for compliance with the Americans With Disabilities Act and OSHA standards.
Mr. Bible said budget enhancements included increased funding for monitoring the new slot route tax revenue and funding for a meeting room sound system for the new state office building in Las Vegas. Additionally, the Governor recommended $20,000 for Bank Secrecy Act compliance activities (money laundering) in conjunction with the federal government.
Mr. Marvel asked how many cases of money laundering had been proven. Mr. Bible replied most incidents of failure to comply with the Bank Secrecy Act appeared to be of a clerical nature. He had not seen anything which led him to believe violations were being done willfully. Approximately 6 to 12 claims for those types of violations were filed per year. Penalties and fines were assessed against those licensees.
Mr. Marvel inquired how many violations had occurred in Nevada since the Bank Secrecy Act went into effect. Mr. Bible responded he could not provide an exact number. Some of the violations were simply clerical errors.
Mrs. Evans asked what was reflected by the performance indicators which indicated an increase in the percentage of audits resulting in unqualified opinions. Mr. Bible explained the last legislative audit had taken exception to the number of qualified opinions which the Gaming Control Board was issuing. As a result the Board began using existing manpower to perform interim observations so it would be in a position to write unqualified opinions as audits were conducted. He said the number of unqualified opinions would continue to increase. However, the Board was reluctant to file unqualified opinions on licensees where there had not been interim observations.
Ms. Giunchigliani questioned whether the number of work permits processed reflected in the performance indicators took into consideration the opening of new operations in Las Vegas. Mr. Bible stated the performance indicators were based on a percentage increase which did not account for the new operations.
Ms. Giunchigliani asked if the Board would be able to handle the increased work load resulting from those new operations. Mr. Bible responded affirmatively.
Ms. Giunchigliani asked for clarification of the investigation fee increases. Mr. Bible explained the hourly rate was increased approximately 30 percent or $10.00. The increase was calculated to generate additional revenue and was based on comparisons of fees charged by other jurisdictions.
INVESTIGATION FUND - PAGE 329
Mr. Bible stated this was a collection budget. Revenues were derived from license application processing charges and laboratory fees for gaming devices. The major expenditure in this account was for out-of-state travel. Additionally, funds were transferred back to the Gaming Control Board budget.
Additional information provided by the Gaming Control Board is attached as Exhibit K.
HEARINGS AND APPEALS DIVISION - PAGE 308
Ms. Matteucci introduced Mr. Bryan Nix, Senior Appeals Officer, and Ms. Sue Naumann, Legal Office Manager.
Mr. Nix explained the Department of Administration was responsible for hearing contested industrial insurance case appeals from the State Industrial Insurance System (SIIS) and from self-insured employers as well as appeals from the victims of crime program. He distributed copies of an information packet about the division (Exhibit F).
Mr. Nix said the appeal process was two-tiered. The first level of appeal was an informal hearing conducted by lay hearings officers on requests filed by claimants or employers.
Mr. Nix referred to the first page of Exhibit F which reflected over 14,000 requests for hearings in fiscal year 1991-92. It was anticipated the number would increase to nearly 19,000 in fiscal year 1993-94 and 22,000 in fiscal year 1994-95. The projected growth triggered changes in the budget account.
Mr. Nix stated the second level of appeal was a formal hearing conducted by appeals officers who were licensed attorneys appointed by the Governor. The second hearing was subject to the Administrative Procedure Act and rules of evidence. It was conducted with a court reporter present and was unrelated to the earlier hearing before the hearing officer. He noted the hearing provided the only opportunity for litigants to present evidence in a contested industrial insurance case. Reviews from the appeals officers went to the District Court which reviewed the record to determine whether or not the appeals officer made any errors of law.
Mr. Nix referred to the third page of Exhibit F. He noted the number of appeals at the second level were significantly lower than at the first level. In fiscal year 1991-92 the hearings level eliminated approximately 10,000 disputed industrial insurance issues. Only 169 claims ultimately went to the District Court for review.
Mr. Nix reported the Executive Budget reflected no changes to the base budget. The maintenance budget reflected anticipated increases in caseload and additional funding for court reporting and supply costs. There was no request for additional staff or salary increases. He noted the Interim Finance Committee had approved five additional clerical positions in fiscal year 1991-92. As a result of the staff increase the division had been able to comply with all statutory requirements for setting cases, handling hearings and entering decisions in a timely manner.
Mr. Nix said the division requested funding for four new computers to replace outdated equipment and increase the computer network and for upgraded photocopy equipment and telephones.
Ms. Giunchigliani asked if the division was funded through assessments from worker's compensation. Mr. Nix responded most funding was from assessments to employers for worker's compensation. Additionally, the division received a small amount of income from the victims of crime program.
Mr. Nix pointed out it was significant the Hearings Division might be undergoing substantial structural changes as a result of the Governor's proposed reorganization. A bill presently before the Senate contained language which would essentially eliminate the hearing officer level of the process. He stated the division might have to redraft its budget prior to the end of the legislative session or in the interim following the session.
Ms. Giunchigliani noted S.B. 7 of the Sixty-sixth Legislative Session had attempted to provide an informal hearing level where issues could be resolved. Exhibit F indicated the attempt had succeeded. She expressed concern about reversing the trend.
Ms. Giunchigliani asked if it was possible to calculate the average award on overruled claims and the total impact of rulings. Mr. Nix answered the division had not tracked that information. He noted financial impact was not a factor in many of the decisions made. For example, the division might be called upon to determine whether or not a person was entitled to compensation benefits without actually knowing what those benefits were because the claim was administered by SIIS or the self-insured employer.
Ms. Giunchigliani inquired whether the division was in compliance with audit recommendations regarding timeliness. Mr. Nix said the division was in compliance. Hearings were conducted within 30 days. He pointed out the Oregon model was currently the national standard. Cases took three to six months to be heard in Oregon.
Mr. Nix indicated appeals were scheduled within 45 days although they were generally continued beyond 45 days because they were more formal proceedings.
Ms. Giunchigliani inquired whether the division was drafting any legislation. Mr. Nix responded he had worked with the consensus group on issues relating to the hearings and appeals process. He had requested modification to loosen some of the time restrictions imposed by S.B. 7 of the Sixty-sixth Legislative Session. The division had requested one bill relating to education requirements for non-attorneys.
Mr. Spitler questioned whether the division would be able to keep up with projected caseload growth if proposed changes to SIIS were not made. Mr. Nix said the division could keep up with the growth. It had worked hard to streamline the claims handling process. Mr. Spitler commended Mr. Nix for dealing with such phenomenal growth with limited staff.
WORKER'S COMPENSATION HEARINGS RESERVE - PAGE 313
Ms. Matteucci reported this budget account would be used to fund additional positions for the hearings and appeals division or the attorney for injured workers which might be required during the interim as a result of growth.
VICTIMS OF CRIME PROGRAM - PAGE 315
Mr. Nix distributed copies of an information packet (Exhibit G). He explained the victims of crime program was responsible for evaluating and paying claims up to $15,000 made by victims of violent crime committed in the State of Nevada. Benefits were generally for medical care, hospitalization, lost wages, psychological counseling, funeral expenses and miscellaneous expenses related to the crime.
Mr. Nix said the program had offices in Reno and Las Vegas. Compensation officers investigated claims and determined whether claimants were eligible for crime relief benefits. The primary reason for denial of benefits was failure to meet statutory requirements such as residency and financial need. Additionally, claimants had to be innocent victims and not participants in the crime.
Mr. Nix referred to page 2 of Exhibit G which graphed growth in the number of claims filed since fiscal year 1981-82. He indicated the significant growth over the past few years could be attributed to awareness in the community of the availability of the benefits. Various victims assistance programs as well as medical providers and law enforcement agencies made victims aware of the availability of funds.
Mr. Nix stated there were no changes in the base budget. Caseload changes in the maintenance budget were driven by growth. In the enhancement budget the agency requested funding for data processing equipment and a fax machine to upgrade older equipment and improve claims processing.
Mr. Humke asked how residency was determined. Mr. Nix replied there was no firm definition of residency. There was no time requirement. However, victims were required to provide utility bills or proof of employment in Nevada. Cases were fairly clear cut. A victim was either a resident or a visitor. He said residency was not an issue which had been challenged but he would review the cases which had been denied on the basis of residency to determine if there was a problem.
Mr. Humke inquired about funding for the program. Mr. Nix referred to page 10 of Exhibit G which reflected the various sources of funding. He noted the primary funding source was court assessments. There was no General Fund revenue in this budget account.
Mr. Humke asked if administrative assessments from state agencies were coming in as projected. Ms. Matteucci said they were. The distribution methodology adopted by the 1991 Legislature was working. She indicated some agencies would be proposing additional changes to the distribution methodology.
Mr. Humke asked where fines/forfeiture/penalty revenues came from. Mr. Nix answered those funds represented a portion of fines and penalties imposed for crimes. Ms. Matteucci added some of the funding represented a percentage of bail bond forfeitures.
Mr. Marvel asked how much Prison Industries inmates had contributed to the restitution revenue. Mr. Nix said he did not have a breakdown of individual contributions. Mr. Marvel noted the contribution was a vital part of the Prison Industries program and should be publicized. Ms. Matteucci indicated she would provide a breakdown of the restitution sources.
Ms. Giunchigliani noted figures for spousal abuse were low. She questioned whether those statistics might be lumped into general assault statistics. Mr. Nix said that was possible. He noted the method for gathering statistics had been changed within the past year so they could be better categorized.
Ms. Giunchigliani asked if payments were prorated. Mr. Nix indicated benefits were currently paid at 90 percent.
Ms. Giunchigliani inquired about the new reporting lines under the proposed reorganization. Ms. Matteucci stated the program would remain in the Department of Administration with the Board of Examiners as the final adjudicatory body. She noted for the record, if there were significant changes made to the hearings and appeals process as a result of SIIS reform, this budget account would have to be revisited.
Mr. Perkins asked if the state publicized this program. Mr. Nix replied the program was not advertised. Public awareness came largely by word of mouth. He noted increased awareness accounted more for growth in number of claims than did growth in crime. There was no intent to advertise the program.
PURCHASING - PAGE 236
Mr. Tom Tatro, Acting Administrator, Division of Purchasing, reported improvements to purchasing operations over the past biennium included institution of training classes on how to procure products and deal with the Purchasing Division. A number of meetings were held with representatives of the Department of Transportation, the Employment Security Department, the Health Division, the Department of Motor Vehicles and the Department of Commerce to hear suggestions for improving purchasing operations.
Mr. Tatro distributed copies of a memo (Exhibit H) from his predecessor, Phyllis Williams, to the Department of Motor Vehicles responding to a purchasing complaint. The memo explained the products had not been procured because the requisition had not been received. He explained there were a number of steps in procurement which delayed the process. Length of time to procure equipment averaged 57 days.
Mr. Tatro indicated open-term contracting had increased. As a result bids were decreased from approximately 100 per month to approximately 45 per month. Additionally, the division was contracting for items normally carried as warehouse stock so those items would no longer have to be warehoused. He noted the Department of Transportation, the Department of Motor Vehicles and the Employment Security Department had objected to this change. It was determined, however, doing so would prove a benefit to the state.
Mr. Tatro also noted several experienced staff members had left the division. However, cross training within the division was increased so when additional personnel were lost their duties could be assumed by remaining staff.
Mr. Tatro stated the division had become a member of the Western States Contracting Alliance which was formed to combine the purchasing power of individual states and to promote more efficient and environmentally sound manufacturing processes. The alliance was currently bidding on recycled xerographic paper.
Mr. Tatro noted over the past biennium the division had undergone a performance review by KPMG Peat Marwick and an audit by the Legislative Counsel Bureau. The results of the legislative audit were not yet complete. He expected them within a month or two.
Mr. Marvel asked if the Las Vegas warehouse was for sale. Mr. Tatro answered affirmatively. Mr. Marvel questioned where products would be warehoused in southern Nevada. Mr. Tatro responded the division would not maintain a warehouse operation in southern Nevada. Products would be supplied by vendors directly to the user agency. The division would contract with the private sector for the disposal of excess property. The practice of warehousing federal surplus property would be discontinued.
Mr. Marvel inquired whether products were delivered from northern Nevada to southern Nevada. Mr. Tatro stated several items were delivered from the north. Mr. Marvel questioned whether deliveries could be made on a timely basis without a warehouse in the south. Mr. Tatro responded the division intended to establish contracts with vendors in southern Nevada to deliver products to southern Nevada agencies within one day.
Mr. Marvel asked if the vendors were willing to serve as warehousing agents. Mr. Tatro replied vendors were competing for state contracts. Mr. Marvel asked if any requests for proposal had been formulated. Ms. Matteucci stated requests for proposal would be developed if the reorganization was approved.
Mr. Marvel inquired about the status of the Reno warehouse. Mr. Tatro stated the Reno warehouse would no longer be involved in product distribution to state agencies. Its use would be limited to commodity food storage and distribution. All other functions of the Reno warehouse would either be privatized or eliminated.
Mr. Marvel asked if it was more efficient to discontinue the warehouse operations. Mr. Tatro replied state agencies would receive needed goods more quickly and in that respect it would be more efficient.
Chairman Arberry questioned whether the warehoused stock could be distributed within the next several months. Mr. Tatro answered the transition could not begin until NRS 333.450, which required the division to conduct all financial transactions for which it contracted, was repealed. Thereafter, the division could stop replenishing warehouse stock and distribute it. October 1, 1993, would be the target date for implementation of the new program. At that time the Division would attempt to sell remaining stock to the vendors.
Chairman Arberry asked if the transition plan was complete. Mr. Tatro said the plan details depended on the details of the revisions to the State Purchasing Act. At this time the division could only address the major areas of concern and attempt to develop a time frame for accomplishing those goals. Ms. Matteucci stated this was a component of the proposed reorganization. If the Legislature approved proceeding with the reorganization plan detailed statutory language would be drafted.
Mrs. Williams asked what would happen to commodity foods in southern Nevada. Mr. Tatro indicated Reno would serve as the primary facility for receiving commodity foods. In southern Nevada private storage facilities would be utilized.
Mr. Heller asked how the accounting system would change. Mr. Tatro responded the current process involved an agency writing a purchase requisition which was transmitted to pre-audit to ensure accurate coding. A copy of the requisition would be sent to the Controller's Office to establish the encumbrance against the account. Another copy of the requisition would be sent to the Budget Division and other appropriate departments for review. Once those reviews were secured the purchase would be made either against a vendor contract or through request for bid. Next a purchase order would be issued to the vendor. A copy of the purchase order would go to the agency to confirm the purchase and to serve as an invoice for the goods. On delivery of the goods the agency would sign off on the purchase order and return it to the Purchasing Division which would make an electronic transfer to the Controller's Office. The Controller's Office would then generate payment to the vendor.
Mr. Heller asked how the current level of control would be maintained under the new system. Mr. Tatro replied the new system would limit Purchasing Division involvement to obtaining contracts. Purchasing would not be involved in the financial transaction. Ms. Matteucci stated KPMG Peat Marwick had suggested the current level of control was too high. The proposal was for the Purchasing Division to negotiate master purchasing contracts from which the agencies would purchase goods. The agencies would issue purchase orders. A copy of the purchase order would be sent to the Purchasing Division for inventory control purposes but the Purchasing Division would not be performing accounting functions. A copy of the purchase order would still go to the Controller's Office to encumber the funds. If funds were not available the purchase order would be rejected at that point. Pre-audit would no longer review the purchase orders. The proposal was not intended to remove the Purchasing Division from the purchasing process but to remove it from payment of invoices and accelerate the process.
Mr. Price said he was still uncertain about the proposed $7,500 purchasing limit. He asked if agency directors could authorize staff to purchase directly with vendors for goods up to $7,500. He cited an incident of misuse of state funds by the California Superintendent of Schools in guiding contracts to a company in which his wife was a principal. He questioned how such misuse of funds could be controlled under the proposed system.
Ms. Matteucci explained the direct purchase authority limit recommended by the Governor was $10,000, not $7,500, and only applied to items not covered by master purchasing contracts. It was anticipated the purchasing and bidding process would be maintained by the Purchasing Division. Agencies would be required to purchase items covered by the master contracts from contracted vendors. She noted master contracts covered a wide range of products and the number of products not covered would be limited.
Mr. Price questioned whether the $10,000 limit was per division. Ms. Matteucci responded the limit would be $10,000 per purchase of items not included in master contracts.
Ms. Giunchigliani asked if state surplus equipment was warehoused and reused. Mr. Tatro replied the state excess property program sold excess equipment to state agencies through fund transfers.
Ms. Tiffany questioned whether budget shifting could occur under the proposed system. She said it appeared the control element was missing. Mr. Tatro responded the KPMG Peat Marwick proposal did not address the fiscal impact of the change. Essentially the functions currently performed by the Purchasing Division would be performed by the agencies. Ms. Matteucci noted the pre-audit function would not be removed entirely. It was simply being removed for review of purchase requisitions. Claims for payment would still pass through pre-audit and would have to be valid to receive approval from the Board of Examiners. Pre-audit would occur once funds for the purchase were encumbered by the Controller's Office. Pre-audit would look at purchases to determine whether they should be applied against master contracts.
Ms. Tiffany asked how many claims were currently being processed by pre-audit. Ms. Matteucci replied the number of claim documents reviewed for fiscal year 1991-92 was 351,000. Ms. Tiffany asked if all of those claims were reviewed. Ms. Matteucci answered the claims were reviewed by sample based on statistically valid sampling techniques and the procedure would not change.
Ms. Matteucci stated the main control device was encumbrance of funds by the Controller's Office. It could not be assumed agencies would be fraudulent with limited funds.
Mr. Marvel asked if the new process would reduce stale claims. Ms. Matteucci answered stale claims could be reduced if the agencies processed their claims quickly.
Ms. Matteucci explained the change in the purchasing process would give more authority and autonomy to agency directors to purchase products and they would be held accountable for those purchases.
Mr. Marvel asked how detailed the KPMG Peat Marwick study was. Ms. Matteucci replied the consultant was familiar with purchasing systems in several other states and in private industry. She indicated the consultant appeared thorough in his survey of state agencies.
Mr. Terry Sullivan, Director, Department of General Services, indicated he had prepared an opening statement (a copy of which is attached as Exhibit I). He noted he had planned to retire in February 1995; however, after the Governor's State of the State address he no longer wished to work in this administration. He made this statement in order to assure the committee he had nothing to gain from criticizing the Governor's reorganization plan regarding the Purchasing Division. He said he could lose two years of employment and would give up work on his favorite project--the Las Vegas office building--by disagreeing publicly with the reorganization plan. He also said he could maintain his allegiance to the Governor and follow a plan which he believed had no merit or he could retain his integrity and speak out.
Mr. Sullivan noted he had issued a press release stating the proposed reorganization would cost the taxpayers $15 million. Equally important were the feelings of 35 purchasing employees which were being trampled by the Governor's derogatory remarks.
Mr. Sullivan said he had loyally served six Nevada governors, done the best he could to protect taxpayers and was always willing to assist agencies in emergencies. The choice of protecting the taxpayers and supporting purchasing employees or supporting the Governor's reorganization plan was an easy one. The choice to issue a press release opposing the Governor was difficult.
Mr. Sullivan stated his prime concern had always been the taxpayers. He expressed concern for state employees and said he was proud to represent them. He said he could prove the reorganization plan as it applied to purchasing would guarantee the state would suffer a substantial economic loss.
Mr. Sullivan distributed copies of an excerpt from the State Administrative Manual (Exhibit J). He explained Exhibit J contained a list of purchases which agencies were authorized to make directly. The list contained 33 categories of materials and provided reasonable purchasing autonomy for the agencies. He noted very few complaints had been received about purchasing policy. Additionally, any agency could request special authorization to purchase goods unique to the agency. The Purchasing Division granted such authorizations fairly readily.
Mr. Sullivan pointed out agencies prepared their budgets three years in advance and failure to order goods on time was an agency problem. He said he did not believe the Purchasing Division had ever held up an agency to the detriment of its daily operation.
Mr. Sullivan questioned how purchasing control would be maintained if the purchasing limit was increased to $10,000.
Mr. Sullivan stated the Purchasing Division had planned to discontinue warehouse operations. The plan was not implemented pending announcement of the Governor's reorganization plan and because three agencies had opposed the plan. He noted the purchase of office supplies represented a minimal portion of purchasing operations.
Mr. Sullivan spoke to the issue of removing the accounting function from the Purchasing Division. He explained bill paying provided the Purchasing Division with a means of tracking quantities purchased and a basis for contracting for future purchases. He estimated approximately 70 percent of this information would not flow through the Purchasing Division under the proposed purchasing system.
Mr. Sullivan displayed a sign posted in the Purchasing Division office which read, "The Nevada State Purchasing Division and its employees are committed to high ethical standards. Our policy prohibits purchasing employees from receiving any gift, gratuity or premium in connection with purchasing activity. Your cooperation respecting this commitment is appreciated." He pointed out this policy would not be maintained in the open-ended purchasing program proposed by the Governor. He stated leaving the Purchasing Division intact would save millions of dollars and prevent fraud.
Chairman Arberry asked Mr. Sullivan if he had any recommendations for downsizing or streamlining the Purchasing Division. Mr. Sullivan replied he would not close the warehouses entirely. The direct delivery system would only work satisfactorily in the Reno, Carson City and Las Vegas areas. Removing warehoused goods from the state delivery system would not significantly decrease the annual mileage for state delivery trucks, and it would cost the same amount to send a delivery truck to Elko whether it was fully loaded or only partially loaded. Also, it was not feasible to discontinue warehousing bulk items such as paper. He suggested there was room for compromise within the proposed plan; however, KPMG Peat Marwick representatives were not interested in discussing the matter.
Mr. Sullivan noted KPMG Peat Marwick's recommendations were based on agency complaints. He said the Purchasing Division had not received any complaints from agencies. In fact, the Purchasing Division had held meetings with the agencies in order to improve the purchasing process. In a meeting with the Department of Motor Vehicles it was discovered purchasing delays were within the agency, not within the Purchasing Division.
Chairman Arberry asked Mr. Sullivan to put his concerns and recommendations for cost savings in writing and provide them to the committee.
Ms. Giunchigliani asked Mr. Sullivan to provided an analysis of why the KPMG Peat Marwick proposal would cost the state $15 million. She also requested Mr. Sullivan's specific recommendations for reorganizing the Purchasing Division, maintaining purchasing controls and becoming more service oriented. She commended Mr. Sullivan for standing by his department.
Ms. Matteucci pointed out agency representatives were in attendance who could testify to the problems they had experienced with the Purchasing Division and the benefits of the new proposal.
Chairman Arberry asked to hear the remaining budgets prior to the agency testimony.
Mr. Tatro explained the Executive Budget represented elimination of 25 jobs and a transfer of a number of functions from a centralized purchasing office to the agencies. Revenues included an additional 5 percent surcharge from 10 percent to 15 percent on each purchase. The administrative charge would be discontinued as a result of discontinuing handling individual transactions. Personnel expenses reflected a decrease of positions from 36 to 11. Travel expenses remained the same. Operating expenses were reduced in proportion to the decrease in employees and also reflected discontinuance of the warehouse operations.
Mr. Arberry asked why travel expenses were not reduced. Mr. Tatro replied travel expenses were minimal and the need to travel would increase if Purchasing Division staff was required to meet with agencies to help them implement their purchasing programs and coordinate purchasing activity.
Mr. Tatro indicated transfers to the food distribution program and the surplus property program requested by the agency would be handled as an accounting change. Reduced utility expenses reflected closure of the Las Vegas warehouse and transfer of utility expenses for the Reno warehouse to the commodity food program. Reduced shipping expenses would be the result of reducing the distribution system. Data processing expenses were reduced as a result of termination of the automated payment processing system. However, it was anticipated some other data gathering software package would have to be created to provide information needed to project purchasing requirements.
Mr. Tatro explained the performance indicators needed to be changed because they tracked a level of volume but not a level of performance.
Ms. Giunchigliani asked Ms. Matteucci to provide to the committee in writing the current purchasing procedure, including internal audit functions, and the proposed purchasing procedure, including the pre-audit functions. Ms. Matteucci agreed to do so.
Mrs. Williams asked which states were using purchasing programs similar to the consultants' proposal. Ms. Matteucci said she would attempt to get that information.
COMMODITY FOOD PROGRAM - PAGE 241
Ms. Debbie Meizel, Program Chief, Food Distribution Program, reported the program was managed in accordance with federal law. It distributed U.S. Department of Agriculture (USDA) food to approximately 210 agencies, including schools, senior nutrition sites, non-profit organizations, public assistance programs and emergency assistance programs. The bulk value of annual volume of food distributed equaled approximately $4.5 million. The cost would be greater if agencies had to purchase the food on the outside market.
Ms. Meizel said the program had always worked in conjunction with the Purchasing Division; however, the program could continue to maintain a cost-effective food distribution system on its own. The majority of commodities had always been maintained in the northern Nevada warehouse despite the fact most assistance was provided to southern Nevada. She explained the USDA paid for all shipments into Nevada and encouraged direct shipments to agencies entitled to commodities, including Clark County School District, the major southern Nevada recipient. Nevada Cold Storage provided frozen food storage under a joint contract. She had been notified by the Clark County School District it planned to build a 16,000 square foot freezer and would contract with the program for food storage.
Ms. Meizel said approximately 136 truckloads of food were currently being shipped to southern Nevada via state trucks.
Chairman Arberry asked if the commodity food program would retain any warehouse space. Ms. Meizel responded the program would retain warehouse space in the Reno warehouse, which included a large freezer and cooler. Frozen products in Las Vegas would continue to be commercially stored. There were no state cold storage facilities in Las Vegas. The Las Vegas Rescue Mission was attempting to secure funding for additional cold storage facilities for direct shipment. A balance of approximately 20,000 pounds of food would then either have to be stored in the Reno warehouse or commercially stored in Las Vegas. If stored in Las Vegas, it would have to be commercially trucked to distribution points or drivers from Reno would have to be flown to Las Vegas to deliver the food.
Chairman Arberry asked Ms. Meizel to provide a breakdown of storage costs. Ms. Meizel said she would provide the information.
Mrs. Williams asked Ms. Meizel to provide the percentage of commodity food which required refrigeration. She questioned why the bulk of the food was delivered to northern Nevada when it was used in southern Nevada. Ms. Meizel stated the food was being shipped directly to southern Nevada by the USDA. The paperwork and federal compliance aspects of the program were handled in northern Nevada.
Mrs. Evans asked Ms. Meizel to address revenue. Ms. Meizel said $317,005 was federal funds. Other revenue totaled approximately $1.2 million. Federal funding paid for 55 percent of actual operating expenses. The other revenue included program income of $2.50 per case for food delivered to feeding sites. Although other revenue appeared as $1.2 million in the Executive Budget, actual amounts received as other revenue never exceeded $264,000. Direct sale revenue was received from recipient agencies on a pass through basis.
Mrs. Evans noted this was not a growth budget. She questioned whether food distribution would increase. Ms. Meizel replied the amount of federal assistance was based on entitlement and it fluctuated from year to year. Ms. Evans pointed out entitlements had been increasing.
Mr. Marvel questioned how rural Nevada would be serviced under the proposed reorganization. Ms. Meizel replied the details had not been worked out. However, a peak delivery month required approximately 64 hours of delivery time in rural southern Nevada. The probable scenario would be to base two trucks in Las Vegas and fly drivers from Reno to handle the distribution. The food would be stored commercially.
PURCHASING - EQUIPMENT - PAGE 246
Mr. Tatro stated in fiscal year 1993-94 the agency requested funding totaling $2,500 for several items to be used within the warehouse operation. The Governor's recommendation did not include those items. In fiscal year 1994-95 the agency requested funding for additional printers and calculators. The Governor recommended the funding for those items.
SURPLUS PROPERTY - PAGE 248
Mr. Tatro stated the Executive Budget reflected deletion of one program assistant position associated with the warehouse operation.
Mr. Marvel asked about state surplus property. Mr. Tatro replied state surplus property was handled by the excess property program. It was anticipated the surplus property program and the excess property program would operate more closely under the reorganization.
Ms. Matteucci said in the interest of time the remaining witnesses would submit their testimony in writing.
There being no further business, the meeting was adjourned at 10:45 a.m.
RESPECTFULLY SUBMITTED:
_________________________
C. Dale Gray
Committee Secretary
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Assembly Committee on Ways and Means
February 26, 1993
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