MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
March 18, 1993
The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 8:06 a.m., on Thursday, March 18, 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
ATHLETIC COMMISSION - PAGE 569
Dr. Elias Ghanem, Chairman, stated the agency wished to increase its budget from the $119,000 recommended by the Governor to approximately $190,000 to $200,000.
Dr. Ghanem noted the agency had been without an executive director since May 1992. Staff currently consisted of an office management assistant and a program assistant. He explained the agency brought $1 million to $1.5 million in annual revenue to the state and the budget was too small to support its operation. The Governor recommended filling the executive director position on October 1, 1993; however, the commission felt the position should be filled at least by July 1, 1993, if not sooner. He distributed an information packet entitled "1993-1995 Budget Presentation" (Exhibit C) which contained a comparison of executive director salaries in other states. He expressed the need to increase the executive director salary in order to hire someone to coordinate boxing events. He indicated the agency requested funding for 100 hours of overtime compensation for the two classified staff members.
Dr. Ghanem pointed out since January 1992 the commissioners had been paying their own expenses for travel associated with commission business. In addition, the commission's computer was currently at 74 percent of capacity and funding was required to purchase expanded memory as well as hardware and software to network the system.
Mr. Marvel expressed concern with elimination of out-of-state travel from the budget. He inquired about the importance of commissioners traveling throughout the United States to coordinate boxing matches. Dr. Ghanem replied it was imperative for commissioners to meet with commission members from other states in order to ensure the integrity of boxing.
Mr. Marvel asked the rationale for eliminating out-of-state travel from the Executive Budget. Mr. Forrest "Woody" Thorne, Deputy Budget Administrator, explained out-of-state travel was not contained in the agency request.
Ms. Sandy Johnson, Management Office Assistant, stated out-of-state travel was not requested because the agency had suffered budget cuts of 12.75 percent in 1992. Out-of-state travel funding had to be eliminated from the budget at that time. In 1993 the commission was asked by the Budget Division to hold its budget at $119,000. The only way the commission could comply with the request without cutting staff was to forego funding for out-of-state travel.
Chairman Arberry inquired how much funding was needed for out-of-state travel. Ms. Johnson said $2,000 to $2,500 would be adequate funding.
Ms. Johnson added a disciplinary hearing was scheduled for the end of March 1993 and there was no funding to cover the cost of bringing in out-of-state witnesses. As a result, evidence could not be presented properly.
Chairman Arberry asked how often this situation could occur over the coming biennium. Ms. Johnson replied hearings which required out-of-state witnesses were held at least once per fiscal year.
Mr. Spitler asked how much revenue the commission could bring into the state if travel was not restricted and the commissioners were able to travel and promote boxing the way other states did. Dr. Ghanem noted each boxing event added between $50 million and $100 million to the tourism economy. The state collected 4 percent of the gross revenues of the gate as well as 3 percent of the first $1 million and 1 percent of the next $2 million of gross revenue for pay-per-view television. Additionally, meeting with other boxing organizations outside Nevada promoted uniform standards for boxing and enhanced the safety of the sport.
Mr. Spitler addressed the Budget Division. He questioned why budgets such as this with the potential to generate enormous revenue for the state were being prevented from doing do by severe cuts in funding. He asked who in the Budget Division made those decisions. He noted the state's major industry--tourism--would benefit from this agency being allowed to travel to stimulate interest in boxing in Nevada. Mr. Thorne responded the Budget Division had given more latitude to the Athletic Commission's budget request than it had to other agencies' requests for the reason stated by Mr. Spitler. He noted the agency had submitted a conservative budget because of the fiscal constraints of the state.
Mr. Spitler said he appreciated the fiscal constraints; however, the time when the state needed to attract more tourism was not the time to cut down on the advertising budget. He noted some budgets had to increase during a recession to offset other losses. He expressed concern that the potential revenue and benefit to the state of commissions such as this or in the area of tourism were overlooked in the budget process.
Mrs. Evans noted all of the agencies had been given target budgets by the Budget Division. She asked if the Athletic Commission had been given such a target. Mr. Thorne responded the Athletic Commission had not been given a target.
Mr. Marvel asked how much the commission would generate for the General Fund over the coming biennium. Dr. Ghanem responded the commission had generated $1 million to date in fiscal year 1992-93 and anticipated generating an additional $500,000 by the end of the fiscal year.
Dr. Ghanem noted the agency also required the services of a part-time investigator in order to perform background checks on boxing promoters and managers and ensure the welfare of the boxers. Chairman Arberry asked how much funding would be required for an investigator. Ms. Johnson explained the agency could use the services of an independent contractor. A contract would have to be negotiated for those services.
Chairman Arberry requested an estimate of fees for investigative services.
Attorney General Frankie Sue Del Papa introduced Chief Deputy Attorney General John Redlein, counsel for the Athletic Commission. She said she agreed with Mr. Spitler that the commission budget needed to be sufficiently funded to enable promotion of Nevada boxing. She noted the commission was facing serious challenges and suggested the committee appoint a subcommittee to investigate the situation. She stated the United States Senate was conducting an investigation of boxing nationally which impacted the commission. She noted the commission had been functioning without an executive director and while the staff had been doing a very credible job they could not continue to do so in the face of further budget cuts and the continued vacancy of the executive director position. She said the commission was performing economic development for the state and the state could not afford to hinder the efforts of agencies such as this which generated General Fund and ancillary revenue. Budget cuts at this time were imprudent.
Attorney General Del Papa added the commission required regulatory revisions of pertinent statutes.
Attorney General Del Papa reiterated the commission's need for an investigator. She said there was a potential for the commission to generate greater revenue but there was also the potential for embarrassment to the state if this situation was not handled correctly.
Chairman Arberry appointed Mr. Spitler and Mr. Marvel to sit on a subcommittee to investigate the Athletic Commission budget.
Mr. Marvel asked if there would be resistance to increasing the state's share of the gate. Dr. Ghanem answered the hotels and promoters paid substantial amounts for those gates. He did not recommend increasing the percentage rate because doing so could discourage promoters from staging boxing events in Nevada. He noted the 1989 Legislature had provided for the collection of an additional $.50 per ticket to fund grants to amateur boxing clubs. He stated he was reluctant to impose additional fees on the promoters.
Mr. Dini inquired whether television revenue could be increased. Dr. Ghanem said he was not opposed to increasing television revenue. Ms. Johnson suggested increasing the limit on gross revenue from $3 million to $5 million or $6 million. She pointed out the state was not realizing any revenue on television proceeds exceeding $3 million.
Mr. Dini asked if a statutory change would be required to increase the limit. Ms. Johnson replied a statutory change would be required. Chairman Arberry asked the subcommittee to consider this issue.
Mr. Price noted the Taxation Committee had established the scheme for boxing sales and taxes. The Taxation Committee had considered increasing revenue from television. He noted Nevada's chief competitor for boxing events was New York, and New York also had an artificially low ceiling on television revenue. The Taxation Committee's concern with raising the taxable limit on television revenue was that doing so would make Nevada less competitive.
Chairman Arberry asked Dr. Ghanem how he felt about the Governor's proposed reorganization and whether the commission would be able to retain its current flexibility. Dr. Ghanem stated he was unaware of the proposed reorganization. Ms. Johnson explained the commission had not been contacted by the Governor's Office prior to the formulation of the reorganization plan. She did not know what constraints would be imposed on the commission by the reorganization.
Chairman Arberry noted under the reorganization proposal the commission would become advisory. Mr. Thorne said to his knowledge there was no change in the commission's statutory authority and it would continue to serve a regulatory function.
Dr. Ghanem voiced objection to the reorganization proposal. He stressed the commission was an independent agency and was functioning very well.
Mr. Dini questioned whether relocation of the commission to the Department of Business and Industry meant the Director of Business and Industry would have direct control of the commission or if the commission would continue to be an independent agency. Mr. Thorne said he understood there was no change in the way the commission would function.
Mr. Dini asked if the reorganization plan would add budgetary control. Mr. Thorne replied the budget had always gone through the budgetary process pursuant to NRS 353. He did not expect this to change.
Mr. Price pointed out the latest material distributed by the Budget Division to the Reorganization Committee indicated the commission would serve in an advisory capacity. Mr. Thorne said he would look into the matter.
Mrs. Williams said her understanding of the reorganization plan was if a board or commission served as liaison or in an administrative support capacity, it would retain its independent status. Advisory boards or commissions would be accountable to someone else. She asked if her understanding was correct. Mr. Thorne said Mrs. Williams' understanding was correct. He noted the boards and commissions addressed by the Reorganization Committee at its March 17, 1993, meeting were professional licensing boards. Very few of the boards and commissions currently performing policy making or regulatory functions would be changed to advisory boards.
Mr. Marvel noted the Athletic Commission licensed boxers and boxing promoters.
Chairman Arberry informed Dr. Ghanem the subcommittee would meet with him in the near future.
POSTSECONDARY EDUCATION REGULATION - PAGE 580
Mr. David Perlman, Administrator, Nevada Commission on Postsecondary Education, submitted a written copy of his testimony (see Exhibit D). He explained the commission was authorized by NRS 394 to regulate and oversee proprietary postsecondary schools in Nevada. The commission currently licensed 96 vocational and 13 degree granting institutions.
Mr. Perlman explained the commission consisted of seven members appointed by the Governor. Staff consisted of the administrator, two education specialists and a program assistant. A half-time management assistant position was eliminated in July 1992.
Mr. Perlman indicated 85 percent of this budget covered personnel expenses. The remainder covered operating and travel expenses. Approximately $75,000 of revenue was derived from a contract with the Veterans Administration (VA). Over the past several years this revenue had become increasingly difficult to project since all states drew from a single source which was capped at $12 million. When the cap was exceeded, states were granted a percentage of their request. The fiscal year 1992-93 allocation to Nevada fell $16,000 short of the request. Continued reductions in VA funding would require an equal increase from the General Fund for the commission to continue operating pursuant to statute.
Mr. Perlman noted the commission deposited approximately $196,000 into the General Fund in fiscal year 1991-92. This represented an approximately 7 percent increase over fiscal year 1990-91; however, licensure fee revenues were likely to decline over the coming 12 to 18 months as the result of adjustments to new U.S. Department of Education regulations.
Mr. Perlman explained performance indicators were influenced by economic pressures on the industry. For example, if demand for training increased, licensure applications would increase. Changes to the regulations of major funding sources such as the U.S. Department of Education or the State Industrial Insurance System (SIIS) would result in school program changes, thereby increasing the commission's work load.
Mr. Perlman stated increases in compliance inspections would result in decreased student complaints and school closures. However, with such a small staff significant events could severely detract from the commission's ability to perform compliance inspections. For example, when the Columbia School of Broadcasting fell into bankruptcy in 1992, the commission was forced to take custody of the files of over 4,000 students. He noted school closures also increased the number of student complaints and the commission's work load. Additionally, school closures resulted in increased licensure of replacement schools.
Mr. Perlman added the VA had developed an outreach program which required increased participation on the part of the commission.
Mr. Perlman reported the U.S. Department of Education had implemented a program to monitor and oversee institutions participating in Title IV programs. In the next several months the Governor would be required to appoint an agency to perform those duties. If the commission was the agency selected, it would have to make regulation changes and increase staff.
Mr. Perlman noted the commission had assumed a more aggressive regulatory role which demanded increased personnel time but resulted in increased identification of applicants with criminal backgrounds.
Mr. Perlman stated regulations were revised continually in order to improve the quality of the application process and minimize the impact of external events. Several bills had been drafted to change statutes and regulations to keep pace with changes in the industry. Additionally, a long-range goal was to automate the agency to simplify procedures and increase accuracy.
Chairman Arberry questioned why in-state travel expenses had been reduced in the budget. Mr. Don Hataway, Chief Assistant Budget Administrator, Budget Division, responded the reduction was part of the agency request in order to meet its target budget. Mr. Perlman indicated Mr. Hataway's statement was correct.
Ms. Tiffany asked how much federal funding could be anticipated. Mr. Perlman stated President Clinton did not have a very high opinion of vocational education; however, the VA was attempting to raise its cap from $12 million to $13 million so funding could keep pace with past levels.
Ms. Tiffany asked if someone was tracking the availability of federal funds. Mr. Perlman replied the commission had met with representatives of the Veterans Affairs Committee and the VA.
Ms. Tiffany questioned whether President Clinton's plan to increase vocational training was reflected in the commission's budget. Mr. Perlman responded President Clinton had not yet developed any specific plans. The only federal program anticipated to impact the budget was the contract with the U.S. Department of Education referred to previously.
Ms. Tiffany asked if the agency would be shrinking or growing. Mr. Perlman answered the agency would be growing. Ms. Tiffany questioned whether the agency would have to return to the Interim Finance Committee to request additional funding. Mr. Perlman responded the revenue available from the U.S. Department of Education would be four times greater than the revenue available from the VA and should be sufficient to fund the budget without offsets from the General Fund. Mr. Hataway added it was anticipated the Governor would appoint the Commission on Postsecondary Education to contract with the U.S. Department of Education and the federal money would be forthcoming.
Mrs. Williams said she found it amazing that Mr. Perlman had interpreted President Clinton's position on vocational education in the way he had. Clearly the President's emphasis had been on both academic and occupational/vocational education. She asked if other states required surety bonds from vocational schools. Mr. Perlman responded some states did not require licensure beyond a business license. Other states had very high bond levels. Some states had tuition recovery funds.
Mrs. Williams inquired whether the agency had requested bond requirements in the past. Mr. Perlman stated it had not.
Mr. Perkins noted the budget did not include funds for rental increases. Mr. Perlman stated a new lease would be negotiated at the same rental rate. Mr. Hataway indicated he would provide lease information to the committee.
Mr. Marvel asked about the status of Title IV Pell Grants. Mr. Perlman answered some of the funding for the new federal program would be taken from Title IV. Mr. Hataway said the trend was to cap or cut back on the grant process. New policies emphasized student loan programs with community services as a means of repaying a portion of the obligation. Grants were not a high priority because of federal budget limitations.
Mr. Marvel stated elimination of the Pell Grants could adversely impact the Prison Industries program. He asked Mr. Perlman to research this issue and present any pertinent information to the committee. Mr. Perlman agreed to do so.
Mr. Price noted the performance indicators reflected actual student complaints arbitted was three times more than projected. He asked what had caused the escalated number. Mr. Perlman replied the student complaints had been the result of three schools entering bankruptcy that year.
Chairman Arberry asked what efforts the commission was making to improve background investigations. Mr. Perlman stated the commission filed fingerprint cards with the FBI.
OFFICE OF EQUAL RIGHTS - PAGE 1103
EQUAL EMPLOYMENT OPPORTUNITY - 1107
Mr. Fernando Romero, Executive Director, Nevada Equal Rights Commission, stated he had served in his current position since July 1992. One of the first tasks which confronted him was drafting of the agency budget. He stated he had done so with the assistance of the Budget Division.
Mr. Romero stated the budget was funded 50 percent from the General Fund and 50 percent from a grant from the Equal Employment Opportunity Commission (EEOC). He explained five positions had been cut from the budget in 1992. Additionally, an investigator and a clerical staff member had resigned.
Mr. Romero expressed concern about the current staffing level and the amount of the budget. He said the agency would like to see the lost positions reinstated in order to keep up with the increase in cases being filed. Southern Nevada investigators currently had caseloads of over 300 cases. Northern Nevada investigators had caseloads of approximately 160 cases. The norm for caseloads in similar agencies was 115. Claims were expected to increase dramatically over the coming biennium based on projections of population growth and increasing job opportunities in southern Nevada and because people were becoming more aware of their rights under equal employment laws.
Chairman Arberry questioned how the agency could perform its function with such a small staff. He inquired what the agency needed to provide adequate services to the public. Mr. Romero responded the grant contract with the EEOC required that the oldest cases be handled before the more recent cases. Pursuant to the EEOC mandate 67 percent of the caseload had to be comprised of cases at least 520 days old.
Chairman Arberry asked how far the backlog extended. Mr. Romero answered some cases had been open since 1986. The agency was currently handling the old cases and the new cases. Cases in the middle were being held in abeyance.
Chairman Arberry asked how many staff positions were required for the agency to close the backlogged cases. Mr. Romero replied all cases could be brought up to date over the next year if the agency was given three additional investigators, two additional clerical positions and a computer system.
Chairman Arberry questioned whether the additional positions had been requested by the agency. Mr. Romero stated the positions were requested but had been eliminated as a result of budget cuts.
Mr. Humke asked how long it would take to close all of the backlogged cases if additional staff was provided. Mr. Romero responded additional staff would enable the agency to decrease the average ongoing caseload per investigator to between 80 and 100. The eventual objective was to close cases within 9 to 12 months. Currently average closure took from 3 to 4 years.
Mr. Humke pointed out the Legislature had fought for increased staffing for this agency in 1991. The current situation was not satisfactory to workers or to members of the business community.
Chairman Arberry asked if there was a high turnover of staff as a result of the heavy work load. Mr. Romero answered there was not a high degree of staff turnover. The investigator with the least seniority had been in the position three years and with the agency five and one-half years.
Mrs. Williams asked if cases were being given adequate attention or if quick solutions were being sought in order to close cases. Mr. Romero answered cases were given the attention they merited, which was one reason for the backlog.
Mrs. Williams questioned whether the EEOC imposed any time limits on the handling of cases to ensure grant funding. Mr. Romero replied the current contract with the EEOC required closure of all cases filed on or before May 27, 1990, by September 5, 1993. The EEOC paid $450 for each closed case. However, if cases were not closed within 180 days the funding was lost.
Mrs. Williams noted in cases of age discrimination the claimants who filed claims in 1986 could be dead before their case was closed. Mr. Romero said this had been true in some cases.
Mrs. Evans asked if there was any federal requirement for the existence of the Nevada Equal Rights Commission. Mr. Romero said there was no such federal requirement.
Mrs. Evans inquired of the Budget Division why the agency was not abolished if its budget could not be adequately funded to allow it the capability to perform its function. She expressed her belief the state was perpetrating fraud on the people of Nevada by claiming to provide an Office of Equal Rights when that office was unable to function. She requested a response from the Budget Division regarding whether this office was sufficiently valued to continue its operation or whether it should be abolished.
Mr. Romero stated he could not argue Mrs. Evans' point. However, he said the agency had the expertise to do the job if it had funding support for additional staff and a computer system.
Chairman Arberry expressed agreement with Mrs. Evans.
Mr. Romero indicated there were measures which could be taken to increase revenue to the agency. He noted state fair housing laws were outside the guidelines of the federal Department of Housing and Urban Development (HUD). As a result, a $100,000 HUD grant had been lost. If the Nevada statutes were amended according to HUD requirements, the funding would again be available. Further, the Nevada Equal Rights Commission could raise revenue if it were allowed to charge fees for training services. However, the current statutes did not provide for such fees.
Chairman Arberry inquired about the lost HUD grant. Mr. Romero responded he had been unable to locate documentation explaining why the grant had been lost. His understanding was the state had not followed through on grant requirements and had lost the grant as a result. On assuming the position of Executive Director, he had been surprised to learn no one in the Budget Division or in the Legislature appeared aware this grant had been lost. When he tried to have the grant reinstated, he was informed the Nevada statutes would have to be amended to meet HUD guidelines.
Mr. Perkins inquired whether the performance indicators accurately reflected what was happening in the agency. He noted reference to the backlog of cases was conspicuously absent. Mr. Romero said the performance indicators were accurate.
Mr. Perkins questioned whether the agency would be able to handle cases within the time frames projected even with the current lack of staff. Mr. Romero stated the agency would be able to accomplish the work projected.
Mr. Perkins stated he was appalled by the backlog. He indicated six years to resolve a case would not be acceptable in his profession and it was not acceptable for equal rights claimants. Mr. Romero concurred with Mr. Perkins' statement. He said the agency was willing and capable of performing its function provided it was given adequate resources. Mr. Perkins stated his criticism was not directed at Mr. Romero.
Mr. Marvel noted the Governor had recommended no funds to pay commission members. He asked the Budget Division what the fate of the Nevada Equal Rights Commission was. Mr. Thorne stated the agency had not requested funding for the commissioners to attend commission meetings. There had been no expenditures for board and commission pay in fiscal year 1991-92.
Mr. Marvel asked if the commissioners would be serving. Mr. Romero said he understood the commission had not met in five years. He stated he would be meeting with the commission chairman for the first time following this hearing. He said his original budget request contained funding for commissioners to meet twice a year.
Mr. Marvel asked if there would continue to be a commission absent funding. Mr. Thorne replied there would be a commission. However, funding was not requested or allocated for the commission to meet.
Mrs. Chowning said she too was appalled at this situation. At the very least it was an embarrassment to the state. She stated the performance indicators were optimistic and did not provide adequate information. She indicated the committee needed a better picture and requested more accurate information about the capability of existing staff and what could be accomplished with additional staff. Mr. Romero stated he would provide more accurate figures.
Mrs. Chowning inquired whether office rental increases were projected in the Executive Budget. Mr. Romero indicated he had negotiated a new lease agreement for the Las Vegas office and was awaiting approval from the Budget Division. He would be seeking a new location for the Reno office when the current lease expired because the landlord wanted to expand the leasehold of another tenant. The agency would seek reimbursement for moving expenses from the current landlord. Mr. Thorne stated the Executive Budget contained funding for office rent at the current rate. It would not be known if additional funding was required until the new leases were negotiated. Mr. Romero indicated the new lease was being negotiated at the current rate. He suggested, however, the agency be allowed to relocate into the new state office building in Las Vegas where it would be accessible to the people who need its services. Mr. Price noted there were some accessible office facilities in North Las Vegas.
Chairman Arberry noted pursuant to NRS 233.210: "Any person who willfully resists, prevents, impedes or interferes with the commission, its members, the director or agents in the performance of duties pursuant to this chapter shall be fined not more than $500." He questioned whether the Budget Division should be fined for its actions. Mr. Thorne responded if the committee felt it was necessary to fine the Budget Division, it was the committee's prerogative to do so. However, the base budget was projected based on fiscal year 1991-92 figures which included no funding for meetings of the commission and there was no request from the agency for funds for the commission to meet. Therefore, in his view the Budget Division's actions did not in any way impede the commission. Chairman Arberry expressed disagreement with Mr. Thorne's position.
Mr. Spitler commented the budget process required more than a review of numbers and the Budget Division had to be more proactive in letting agencies know budget cuts could be rescinded. Further, when boards and commissions were statutorily required to meet but agency requests did not provide for meeting expenses, the Budget Office should be responsible for advising the agency of its statutory requirements.
Mr. Spitler stated after seeing how the Budget Division had handled the budget process for the two commissions heard during this meeting he was less inclined to agree that the people of Nevada would receive better service from boards and commissions if they were placed under the authority of the Department of Business and Industry.
Chairman Arberry asked Mr. Romero to meet with fiscal staff to develop a schedule for training fees and to determine why the HUD funding had been discontinued. Mr. Romero agreed to do so.
COLORADO RIVER COMMISSION - PAGE 1491
CRC FEDERAL PUMPING & TRANSMISSION FACILITIES - PAGE 1497
CRC RESEARCH & DEVELOPMENT - PAGE 1499
POWER MARKETING FUND - PAGE 1501
FORT MOHAVE DEVELOPMENT FUND - PAGE 1503
ALFRED MERRITT SMITH WATER TREATMENT FACILITY - 1505
Mr. Thomas Cahill, Director, introduced Mr. Doug Beatty, Chief Financial Officer, Ms. Karen Galitz, Chairman, and Mr. Robert Crowell, Vice Chairman.
Mr. Cahill distributed copies of his testimony to the committee (Exhibit E). He noted the commission's goals and objective were mandated by statute. Necessary activities, programs and objectives were funded by four budget accounts. General government activity was recorded within budget account no. 296-4490 (Colorado River Commission), which served a similar function to the state's General Fund. Revenue was derived from administrative charges from power and water sales as well as interest earnings from investment of cash balances. Personnel, office supplies, equipment and operating expenses were charged against this account.
Budget account no. 296-4496 (Fort Mohave Development Fund) was funded primarily through proceeds from the sale of state lands.
Budget account no. 296-4497 (CRC Research & Development) was established to defray the costs of engineering studies, analyses, negotiations and other efforts to protect the state's interests in development and acquisition of water and power. The primary funding source was an administrative charge on the sale of power.
Three enterprise funds--two for water and one for power--were established for marketing purposes. Budget account no. 501-4500 (Alfred Merritt Smith Water Treatment Facility) provided for operational costs associated with the treatment of Colorado River water taken from Lake Mead. Budget account no. 502 (CRC Federal Pumping & Transmission Facilities) provided for costs associated with the delivery of treated Colorado River water to commission customers. Funding for both accounts was derived from the sale of water.
Budget account no. 505-4502 (Power Marketing Fund) provided for the purchase and sale of Nevada's share of hydro power from various generating plants on the Colorado River. Revenue was derived from the sale of power.
Mr. Doug Beatty, Chief of Financial Management, distributed copies of his testimony (Exhibit F). He asked the committee to hear the budgets out of order, beginning with the Alfred Merritt Smith Water Treatment Fund account (Fund 501) and the Federal Pumping and Transmission Facilities account (Fund 502).
Mr. Beatty explained Fund 501 and Fund 502 were companion enterprise funds supporting the operation and maintenance of the Southern Nevada Water System (SNWS), which was operated and maintained on a contractual basis by the Las Vegas Valley Water District. The Alfred Merritt Smith Water Treatment Facility was a state-owned water treatment plant with a maximum capacity of 400 million gallons per day. Funding to construct the facility was provided through the sale of general obligation bonds. Fund 502 supported the federally-owned Robert B. Griffith Water Project. The project was initially funded by a 50-year loan from the federal government.
Mr. Beatty stated revenues for both funds were derived from the sale of water to Boulder City, Henderson, North Las Vegas, Nellis Air Force Base and the Las Vegas Valley Water District. Both budgets were based on the cost of providing water to those entities. The enhancement budget provided for increased cost of power, treatment and maintenance based on customer water use projections.
Mr. Beatty next referred to the Power Marketing Fund account (Fund 505). He explained this was also an enterprise fund. Revenue was derived from the sale of hydro power from Hoover Dam, Parker Dam, Davis Dam, the Colorado River Storage Project and the Salt Lake Area Integrated Project. Budget requests were based on estimated power sales and costs over the biennium.
Mr. Beatty stated the Colorado River Commission account (Fund 296-4490) covered all activities of the commission not directly attributable to the SNWS, including personnel expenses for all commission staff. Revenues were derived from administrative charges added to the sale of power and water and from reimbursement from the water funds and from the Fort Mohave Development Fund account and the CRC Research & Development account. Budget increases reflected increased costs to protect state resources and to secure additional water and power. Budget projections took into consideration the cost of additional resources required to participate in Western Area Power Administration rate cases, Nevada power rate filings and exploration of long-term water supplies.
Chairman Arberry inquired about the agency request for $120,000 for consulting services associated with the Orion bankruptcy. Mr. Beatty said the Orion case was nearly settled. The request for $120,000 actually related to contract services for water augmentation.
Chairman Arberry asked why there was no sand and gravel revenue projected for fiscal year 1993-94. Mr. Cahill explained the Executive Budget reflected the anticipated resumption of land sales pending resolution of the Orion bankruptcy case.
Chairman Arberry inquired how out-of-state travel funding would be used. Mr. Beatty said out-of-state travel expenses were incurred in the exploration of water and power sources outside Nevada as well as for attendance at out-of-state hearings.
Mr. Price asked if out-of-state travel money was used to cover expenses to travel to Denver for water negotiations. Mr. Cahill said he had made one trip to Denver. He said he did not characterize the purpose of the meeting as negotiations but rather discussions. Getty Oil Company and Chevron Oil Company had made a proposal which was worth pursuing and had a potential to reach fruition. Specific contract terms had not been addressed.
Mr. Price pointed out there was a philosophical debate within the Legislature regarding the proper use of public money. He questioned whether the discussions in Denver had to be held in private. Mr. Cahill stated the prospective water contractors requested confidentiality because the political climate in Colorado at the time the proposal was made was such that public disclosure would result in immediate public opposition. In the meantime, they had been somewhat successful in reversing that political climate. In fact, the trip to Denver took place after the proposal became public.
Mr. Cahill noted due to the sensitivity of water-related issues, there were times when he had to maintain confidentiality in order to receive valid proposals. Mr. Price stated this was an ongoing problem within state government. It was sometimes difficult for agencies to operate using the public's money. It would be unfortunate if the type of confidentiality Mr. Cahill described was found to be a violation of law.
Ms. Karen Galitz, Chairman of the Colorado River Commission, pointed out the Legislature had expressly mandated the commission, through passage of S.B. 124 of the Sixty-sixth Legislative Session, to take the lead in negotiations with other states, the federal government, other countries and non-governmental entities. She said in her mind a violation of the Open Meeting Law would have occurred only if Mr. Cahill had signed a contract committing the state to pay for something without involving the local community. The discussion in question as well as other similar discussions represented the commission's attempt to meet the Legislature's mandate to look for water.
Mr. Price indicated he had co-sponsored the Open Meeting Law and one of its purposes was to provide public access to the rationale behind decisions regarding the expenditure of state funds.
Mr. Cahill stated the natural resource and agricultural committees of the Colorado assembly and senate had met jointly on March 17, 1993, to hear the Getty Oil Company and Chevron Oil Company proposal. While there were questions about the proposal, no opposition was expressed at the joint meeting. The local newspaper at the site of the proposed dam reported the town was in favor of the project.
Chairman Arberry asked Mr. Cahill to address the issue of leasing Indian water rights. Mr. Cahill responded he had received a communication from an attorney representing a partnership of 10 Indian tribes who held water rights within the Colorado River Basin. The partnership was interested in possibly leasing water to Nevada or California. The commission entered into discussions with the partnership and agreed any lease arrangement would have to be discussed with representatives of the 7 Colorado River Basin states and the 10 tribes. The Hickory Apache tribe indicated they had approximately 25,500 acre feet of water which might be available for lease at some time in the future. No other proposal had been made thus far. It was anticipated other tribes would identify additional water resources in the future and possibly some lease arrangement could be agreed upon. He reiterated there had been no negotiations between the state and any Indian tribe.
Mr. Marvel inquired who was presently receiving the benefit of the water. Mr. Cahill replied California was probably the beneficiary of some of the water.
Mr. Marvel said it was his understanding the Indians were not using the water. Mr. Cahill stated some tribes were using some of their water. Other tribes were not. The Mohave tribe in Nevada had the rights to over 12,500 acre feet of water which was not currently being used. The Mohaves were considering whether to lease some of those water rights. Mr. Marvel asked if it would be a long-term lease. Mr. Cahill said the lease would have to be long-term in order to meet the commission's needs.
Mr. Marvel asked if the water could be utilized by Laughlin. Mr. Cahill replied the Southern Nevada Water Authority would make that determination.
Ms. Giunchigliani asked the definition of a long-term lease. Mr. Cahill answered a 99-year lease was the rule of thumb; however, there was no history of interstate leasing on the Colorado River.
Ms. Giunchigliani inquired whether the Columbia River had been explored as a water source. Mr. Cahill answered the permanent answer to southern Nevada's water supply problem was to acquire some water from outside the Colorado River Basin. The commission's current water management policy consisted essentially of shifting water shortages from one location to another. The unused water flowing from the Columbia River into the Pacific Ocean represented approximately eight times the flow of the Colorado River. The commission would like to acquire the use of some of that water. The most likely route for importing water to Nevada would be from the mouth of the Columbia River, across Oregon and northeastern California, through Nevada providing the potential for improving wildlife areas, flyways and wetlands and eventually emptying into the Colorado River above Lake Mead to provide generation of hydro-electric energy as well as water to satisfy increasing demands in the southwest.
Ms. Giunchigliani asked Mr. Cahill to explain how the commission interacted with the SNWS. Mr. Cahill responded the SNWS was a local government entity. The representatives of the commission and the SNWS met monthly with the individual purveyors of water. The commission also met with the SNWS to discuss options and set strategies. Ms. Giunchigliani questioned whether there was a need for both the commission and the SNWS. Mr. Cahill said most Colorado River water dealings were with other states rather than with local government entities and it was necessary for that to continue.
Mr. Price asked if the commission had a relationship with the water treatment plant. Mr. Cahill stated there was a relationship between the commission and the third stage water treatment plant. The third stage water treatment plant would provide the facilities to supply additional water to the valley. Mr. Price inquired whether this was a responsibility of the commission. Mr. Cahill replied the water district operated the water treatment plant under contract with the commission. However, until a study was conducted to determine future needs, the relationship with the commission was unclear.
Mr. Price inquired who would do the study. Mr. Cahill stated the commission had not received approval for the study from the purveyor authorities. The SNWS was currently preparing requests for proposals to be let in March or April 1993.
Mr. Dini said he would like to come to the defense of the commission. He noted it was created to give Nevada more strength in complicated interstate water negotiations. The commission developed working relationships with other states to facilitate future negotiations. He noted the people of the state had displayed their confidence in the SNWS when they approved the issuance of bonds for water projects. The state needed the commission to ensure the state's best interests regarding Colorado River water were protected.
Mrs. Evans pointed out northern Nevada benefitted from the cloud seeding expertise of the Desert Research Institute. She questioned whether there was a potential for a weather modification program in the Colorado River Basin. Mr. Cahill replied the seven states of the basin were working with the Bureau of Reclamation to evaluate the potential benefit of a weather modification program. The Bureau of Reclamation had indicated it could augment the supply of Colorado River water by 1.5 million acre feet.
Mrs. Evans questioned whether the Desert Research Institute was involved in the evaluation process. Mr. Cahill said the Desert Research Institute was not presently involved. He said he recognized the expertise which the Desert Research Institute could offer.
Mr. Beatty stated the commission requested $150,000 be added to the Research and Development budget in both years of the biennium to acquire federal power transmission facilities.
Ms. Giunchigliani requested an explanation of the rate filing process. Mr. Cahill stated the commission attended rate cases in their capacity as a major user in order to monitor rates and keep them as low as possible.
Ms. Giunchigliani asked for a breakdown of the expenditures for rate case filings requested in the Executive Budget. Mr. Beatty agreed to provide the schedule.
Chairman Arberry stated the Taxicab Authority budget would be heard on March 19, 1993.
Chairman Arberry requested a committee introduction of a bill for supplemental appropriations to the Department of Commerce.
ASSEMBLYMAN PERKINS MOVED FOR COMMITTEE INTRODUCTION.
ASSEMBLYMAN GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
There being no further business, the meeting was adjourned at 10:55 a.m.
RESPECTFULLY SUBMITTED:
_________________________
C. Dale Gray
Committee Secretary
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Assembly Committee on Ways and Means
March 18, 1993
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