MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
May 20, 1993
The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 7:35 a.m., on Thursday, May 20, 1993, in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the agenda and Exhibit B is the attendance roster.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry, Jr., Chairman
Mr. Larry L. Spitler, Vice Chairman
Mrs. Vonne Chowning
Mr. Joseph E. Dini, Jr.
Mrs. Jan Evans
Ms. Christina R. Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Mr. John W. Marvel
Mr. Richard Perkins
Mr. Robert E. Price
Ms. Sandra Tiffany
Mrs. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Gary Ghiggeri, Deputy Fiscal Analyst
ASSEMBLY BILL 19 Makes various changes regarding public employees.
Robert Gagnier, Executive Director of the State of Nevada Employees Association (SNEA), spoke in favor of AB 19, as amended. This bill had been requested by SNEA and in its original form, had a substantial fiscal note. That fiscal note was no longer valid as the bill had been amended. It had originally been heard in Assembly Government Affairs and it had been assigned to a subcommittee. Several subcommittee meetings had been held in an effort to both protect current retirees and establish a formula for future retirees. In the end, the first reprint had been adopted, the bill was now cost-neutral, and was in line with the state budget proposal for next year.
Mr. Gagnier said the bill had a very simple purpose, the state provided a subsidy to retirees for their health insurance and it had always been a flat amount. It did not matter if a retiree had five or twenty years of service, he/she would receive the same amount. This formula did not seem equitable because a person could work for five years, retire and receive the same amount as a person who had devoted twenty years of service. A formula had been devised to pay more to those with longer years of service and offset those with fewer years to make the payments cost neutral. With the help of Will Keating of the Public Employees Retirement System (PERS), a formula was adopted in the bill which provided that no one currently in the retirement program would see their benefits decrease, but would continue to receive increases granted by the legislature in future years. Their benefits would remain at a flat amount. Anyone who retired after the effective date of the bill, on the other hand, would be subject to the formula contained in the bill. In effect, the bill provided for a percentage of the base to be paid to retirees. If a person had five years of service, they would receive 25 percent of the base amount and the rate continues to increase to those with 20 or more years of service would receive 137 percent of the base. Mr. Gagnier explained the bill increased the contribution the state paid to state retirees with 15 or more years of service. People with 15 years or more would receive an increase, while in the future, those with fewer than 15 years would receive less contribution than if the flat rate had been retained.
Chairman Arberry requested the cost-neutral analysis be provided in writing. Mr. Gagnier indicated he would be happy to provide the information. The formula had been worked in two different ways. Mr. Keating had made calculations based on the number of people who retired in the last year. The Committee on Benefits had also been asked to provide information from their actuary as to the cost. Both those charts would be supplied to the committee.
Chairman Arberry referred to line 16 of the bill and asked if every person who retired prior to July 1, 1993, would be dealt with under the old system. Mr. Gagnier replied that was correct, and anyone who retired after that date would fall under the new system. There had been a suggestion the benefits should be calculated retroactively, but there was a problem in that benefits cannot be reduced. The benefits to those already retired could be increased, but the offset, which had been built in as funding mechanism, would be lost. Those already retired will remain at the current base amount of $119.35.
Ms. Giunchigliani inquired if this bill affected only state employees. Mr. Gagnier said that was correct. The bill did not have any effect on the amount of retirement paid to employees, it covered just health care insurance. At the present time, all retirees receive the same amount of health insurance. Future retirees would receive a graduated amount based on years of service.
Chairman Arberry realized this bill only applied to state employees, but inquired if a cost analysis had been done to add public employees to the system. Will Keating, Executive Director of PERS, explained last session a bill had been introduced which would generate a trust fund to start prefunding the system. That trust fund had been estimated to cost somewhere in excess of one-half of one percent of payroll to establish. This was a different situation, however. Providing the service to all public employees in the future would be very desirable, but the cost impact was not yet available.
David Thomas, Risk Manager, spoke in opposition to AB 19. Notwithstanding the inequities for current retirees as proposed by AB 19, and the positive aspects of this bill to base the amount of state contribution on one's years of service, the bill was not cost neutral, even in its amended form. The annual cost to the state could vary greatly depending upon how many employees retire each year. If the cost was based on the 1992 level of distribution to retirees alone, the increased annual cost for 1993-94 could be estimated at approximately $8,000. However, if the estimates were based upon the total actual distribution of current retirees in the historical pattern of retirees added each year, the increased cost could amount to $26,000 and more annually. Mr. Thomas presented the committee with Exhibit C, calculations prepared by the actuary. He referred to page 1 of Exhibit C and stated the calculations were based on the current distribution of retirees and the number of years of service. The annual added cost was in excess of $26,000. Based on last year's group of retirees, the annual cost was approximately $8,000, although Mr. Thomas stated he felt this was an aberration.
When the bill was discussed in Assembly Government Affairs subcommittee, it had been pointed out AB 19 could be made cost neutral and thereby achieve the goal of a sliding scale of state contributions based on the years of service, while at the same time not incurring added cost to the state. Mr. Thomas explained the actuary had assisted in developing a methodology for achieving this goal. Pages 3 and 4 of Exhibit C present the proposed contribution levels for three different cost neutral scenarios, 20, 25 or 30 years of service. One additional concern, Mr. Thomas pointed out, regardless of the methodology chosen, the state would incur significant programming costs to modify the data processing system to accommodate the proposal. As Ms. Giunchigliani mentioned, there would be two separate accounting systems established to track and appropriately bill the agencies for varying amounts of state contribution to the retirees. Increased programming costs would be in excess of $75,000. Because of the nature of the accounting systems, it would be impossible to accomplish this by the proposed implementation date of July 1. A more realistic date would be January 1, 1994.
Mr. Gagnier expressed dismay in what Mr. Thomas had testified to this morning before the committee. His testimony was totally contrary to information supplied to either the Government Affairs Committee or the subcommittee that had worked on the bill. The cost estimates for this bill were based on the number of retirees last year, which Mr. Gagnier agreed was an aberration. The aberration was the highest yearly figure for retirees since 30-year retirement at any age had been approved. In 1990, there were 255 retirees; in 1991, 239; in 1992, 275. The cost had been based on the highest available figure. In addition, Mr. Gagnier explained the administration did not indicate in the Government Affairs Committee that programming costs would be incurred. Mr. Thomas had participated in the subcommittee and had not at any time mentioned such costs would be incurred by the state. His statements had come as a complete surprise and Mr. Gagnier remarked that at this late date, it appeared a ploy to kill the bill. He presented the cost neutral calculations to the committee (Exhibit D).
Jim Richardson, representing the Nevada Faculty Alliance, explained he had chaired the Committee on Benefits for six years from 1984 to 1990. He had been vitally interested in the bill and felt it was a good one. Mr. Richardson maintained it was reasonable to reward employees for loyalty and long term service to the state. As had been previously explained, a system was in place whereby after five years of service, if an employees chose to retire, the state would contribute toward health care costs. This contribution, $119.75 this year, was the same amount whether a retiring employee had five years or 40 years of service. Mr. Richardson remarked he liked the concept of the bill and encouraged the committee to find a way to implement this concept of reward for long-term employment. The bill had been worked out in a subcommittee chaired by Assemblyman Roy Neighbors and there had been several meetings. Those interested in the concept compromised to the extent of agreeing to try to pass this legislation in a cost-neutral manner. Mr. Neighbors had indicated the bill would not have a chance of passing if it was not cost-neutral.
Mr. Richardson agreed there must be a cost when implementing something new, but the $75,000 as mentioned by Mr. Thomas was a surprise. However, who would bear those costs and the extent of the cost was something which had not been discussed. He believed the fund itself should bear the necessary costs. Mr. Richardson pointed out it would have been advisable to have discussed the implementation costs during the subcommittee hearings. However, he urged the committee not to let this cost deter their consideration of this logical and much needed concept. He suggested a possible amendment to the bill relating to those who would accrue more next year than the $119.75 contribution. Rather than having the money accrue to the fund, he suggested that money accrue to the retiree if they have higher charges because they have dependents on the plan. Under the complicated rate schedule, a retiree with defendants could pay considerably more, conceivably as much as $300-$400 per month. Keeping the bill revenue neutral, a certain proportion of the money would accrue to the fund instead of going to individual retirees. If the bill was not passed, all the funds would go directly to the retirees without regard to the number of years of service. In a sense, this would be indirectly penalizing longer term employees by letting the excess past $119.75 accrue to the fund. It had been understood in subcommittee the excess funds would be kept to help improve the situation of retirees and their health care costs. Mr. Richardson said his suggestion for this amendment had been presented at the subcommittee hearing, but he did want to explain it to the committee because he felt it was more fair to those employees with long term service.
Assemblyman Roy Neighbors, District 36, explained that without question, when this bill was discussed in Assembly Government Affairs, it was imperative it be revenue neutral. Numerous hearings had been held over a three-week period to ensure this bill remained revenue neutral. He expressed dismay that at this time someone would come before the committee, a person who had testified in favor of the bill during subcommittee, and present conflicting testimony. Mr. Neighbors pointed out the Government Affairs Committee would not have passed this bill out if it had not been revenue neutral. He felt this was a good bill and rewarded those retirees who had been with the system a long time.
Mr. Marvel inquired why the amendment as presented by Mr. Richardson had been rejected. Mr. Neighbors stated he was not aware of the amendment. Mr. Richardson explained his suggestion had not actually been a prepared amendment, but a recommendation to the subcommittee. The reason it was rejected was the contribution made on behalf of active employees was always slightly higher than the amount of money needed to fund the active employees. That money flowed into the fund and helped pay for expenses of the fund and kept the costs to participants low. Since the state made such a significantly lower contribution for retirees in the first place and since their dependent costs were higher, their needs were different from active employees. He felt the little bit of surplus for long term employees accrue directly to their benefit, if needed. If there were no dependents, the money could accrue to the plan. Mr. Richardson indicated he had spoken to the individual members of the committee and they all had stated they were wary of changing the approach being taken with active employees.
Mr. Neighbors added he had also spoken to most of the members of the committee and there was no appetite at that time to make a change. If there was any surplus, it should stay in the fund and over the long haul, it would benefit everyone. Mr. Richardson emphasized he supported the bill and felt it was important to get the concept in the law to reward long term employees.
Chairman Arberry requested Mr. Thomas provide breakdown information to the committee regarding the $75,000 and how the figure had been achieved.
Mr. Dini asked if the $75,000 was absorbable by the system. Mr. Thomas replied this was an initial estimate from the Price Waterhouse team which had put together the system. The cost projections were from $75,000-$200,000, but the cost would not be known until the system was analyzed. The cost would be absorbed by the fund as administrative, but in essence, it would be figured into the premium levels charged to active and retired employees. Mr. Dini inquired if this was a one-time only charge. Mr. Thomas replied affirmatively.
Mr. Perkins asked if Mr. Thomas had participated in the Government Affairs subcommittee. Mr. Thomas replied he had. Mr. Perkins inquired if there had been any reason why the $75,000 figure had not been brought out in the subcommittee. Mr. Thomas explained he had never been asked about the implementation costs. The focus of the subcommittee was strictly on implementing the sliding scale and whether the increase in state contributions for employees with longer years of service would result in added costs. It was not until the proposed methodology was decided that the data processing consultants had been conferred with to determine what impact this bill might have on the data processing system. Mr. Perkins asked Mr. Thomas if he had been aware the subcommittee's goal to have the bill revenue neutral. Mr. Thomas responded yes. Mr. Perkins expressed his concern these figures had not been brought out during the subcommittee hearings. Mr. Thomas pointed out the figures in Exhibit C had been presented to the committee. In that case, Mr. Perkins concluded, the information testified to this morning from Mr. Richardson and Mr. Neighbors about the bill being cost neutral would be incorrect. Mr. Thomas explained the information regarding the cost to reprogram the data processing system was not brought out in subcommittee. The anticipated costs from the bill itself were brought out in subcommittee and the very same documents as Exhibit C had been handed out to the subcommittee.
Mrs. Williams inquired when Price Waterhouse presented the estimate and if it was directly related to this bill. Mr. Thomas replied the estimate had been received this week and it was due to AB 19. Mrs. Williams inquired if the estimate related to all the changes which would have to be made because of the bill or was it related strictly to data processing. Mr. Thomas answered the costs related to the changes necessary to reprogram the data processing system for this bill only and no other reprogramming would be done.
Chairman Arberry inquired what had been paid to Price Waterhouse for this information. Mr. Thomas answered nothing at this time. Chairman Arberry requested the amount of the contract with Price Waterhouse. Mr. Thomas explained this had been a project in development for approximately two and one-half years. The total project cost was approximately $1.7 million and was slated to go on line July 1, 1993. The project was in the final stages of testing at this time. Chairman Arberry asked from which budget the cost was being paid. Mr. Thomas replied the Committee on Benefits budget, no. 1338.
Mrs. Williams, following up on the chairman's question, asked if the $1.7 million included what was to be paid to Price Waterhouse. She inquired how much of the $1.7 million was paid to Price Waterhouse. Mr. Thomas commented he would have to get the actual contract figure, however, the total cost included the cost of hardware and software. Mrs. Williams requested the consulting fees be itemized for the committee.
Mr. Spitler recalled in 1991, Price Waterhouse had been contacted regarding this data processing upgrade. He inquired what the proposed cost had been. Mr. Thomas replied he did not know, but the cost had been augmented by contract. Forrest Thorne, Deputy Budget Administrator, pointed out the original estimates were within the $1.6-1.8 million range. The way the contracts were structured, the upgrade went through three different phases of development. As each phase was completed, the project was further defined in order to obtain a concrete estimate of the cost of the next phase. The cost was very much in the ballpark from the original estimates.
Mr. Spitler stated he distinctly remembered a figure under $900,000 for the complete project, and the $1.7 million figure was cause for concern. Mr. Stevens presented the correct figure from testimony in 1991--$757,368. Mr. Spitler stated nothing had indicated this was a phased-in cost. He expressed dismay the project had cost $1.7 million when testimony presented to the committee stated it would cost $750,000. Mr. Thorne explained this had been presented to the committee during the last legislative session. At the time the budget had been prepared, the project had not been started and the figures were put together on a "best guess" basis. Mr. Spitler stated the difference in figures had more than adequately paid for this report and he felt the state was not getting what it had paid for. He emphasized his irritation at having to make commitments and vote on budgets only to be told later the cost was only for phase one.
Chairman Arberry closed the hearing on AB 19.
ASSEMBLY BILL 359Makes various changes regarding administration of program of deferred compensation for public employees.
Mr. Keating informed the committee he was appearing before them not as an official of PERS, but rather as a participant in the deferred compensation program. He stated Assemblyman Bache had been in the hearing, but had to step out to Assembly Government Affairs for a moment.
AB 359 had been requested by Mr. Keating. Deferred compensation was not unlike an IRA or other programs whereby a person could defer part of their salary into this investment program and have the taxes on that contribution deferred until payable. Mr. Keating explained his concern had arisen because the program was administered rather helter skelter. He referred the committee to page 2, Section 5 of the bill, the existing language stated the governor shall appoint a committee, which must include the attorney general as his designee to administer the bill. It does not provide any length of terms, it does not provide that committee members must be participants in the program, nor does it provide how many members are on the committee. Mr. Keating mentioned he was doubly concerned when he received a copy of the October 1992 Commission on Governmental Reorganization by Peat Marwick. One of the recommendations made was the consolidation of deferred compensation for state employees within the Benefits Committee since benefit issues could be better coordinated by one commission. The resulting board should be advisory to the Department of Finance. Mr. Keating explained his greatest concern was the deferred compensation program, in which approximately 4,000 state employees participate, amounting to nearly $60 million at the present time, would be under the stewardship of one trustee. This trustee would be the head of the Department of Finance. Mr. Keating stated he had contacted Assemblyman Bache and suggested a bill be introduced. Section 2 of the bill sets up the committee, and provides the governor shall appoint a committee to administer the program. The committee will consist of five members who will come from various organizations based upon the number of participants. Three members will come from those agencies whose payroll is administered by the Department of Personnel, one member from all the others and one member, as identified in subsection C would be a retiree. The members of the deferred compensation program must be participants in the program and they must be appointed from nominations from at least five other participants. The members will have four-year terms.
Mr. Keating explained Section 3 states no money may be withdrawn or appropriated from the program except as specifically authorized by federal law or regulation or by special act of the legislature. This was a concern because even though the monies in this program represent the participants' deferred salary, technically in order to qualify for IRS deferral exemption, this deduction represented an asset and liability of the public employer, the state of Nevada. Mr. Keating called attention to a situation in Los Angeles County last year in which the finance director decided that rather than having this money invested in the mutual fund, the funds could be used by the county and a set percentage would be paid to the participants of the program. Mr. Keating remarked language had been considered to preclude anyone using the funds in this program, but advice from counsel had been that to technically to meet the IRS qualifications, this could not be done. Therefore, subsection 3 was added giving the legislature the power to decide who would be able to invest the funds.
Section 6 of the bill provides the members of the committee shall be staggered so there will always be members who have served before. Mr. Keating concluded this bill represents what he considered to be a stable committee to guide this very important program. He reiterated his concern the program would be turned over to one trustee. The $60 million invested in the program was not really state money, but money belonging to the 4,000 participants in the program. Mr. Keating pointed out that over the last 15 years of investment with the program, he and his family had accumulated over $84,000. If the bill does not pass under the proposed reorganization of state government, in essence he would be turning his money over to one trustee for management.
There had been some concerns from the administration regarding the consolidation of committees and commissions. Mr. Keating stated he did not want to interfere with this concern, however, deferred compensation was not necessarily a benefit, but was a program made possible by the federal government for state employees and every other public employer to defer part of their salary to have the opportunity to utilize an investment program. Every year, the retirement system advertised statewide with a message to all employees that even though the state was generous with benefits through PERS, if a person was depending solely upon the PERS benefit for financial security in retirement, a rude awakening was in store. Mr. Keating said he tried to encourage members of the system to participate in a deferred compensation program.
Mr. Keating asserted the administration considered the nomination process cumbersome. The truth, he explained, was if a person wanted to be on the committee, it would be his/her responsibility to solicit support for nomination, the governor would choose those he felt would best represent the participants in the program and then appoint the members. He remarked he could not understand what would be cumbersome with this process. In addition, the bill provided for independent consulting, an essential product. Independent consulting was used in PERS and most other funds set up for participants.
Chairman Arberry inquired what the cost would be to administer the program. Mr. Keating replied there would be no cost to administer the program. The program pays for itself, the manager charges an investment fee, and each participant pays $12 per year.
Mr. Stevens acknowledged if the bill passed, the deferred compensation budget account which now exists, would be revised to include the costs associated with committee's activities. Mr. Keating said he believed the budget account was now set up as the business was ongoing, and included a small amount of accounting costs.
Mr. Heller referred to Section 3 and asked Mr. Keating to elaborate what the funds could be used for. His concern was whether the language in Section 3 went far enough in offering a guarantee. He had had a number of complaints from constituents and state employees about what the funds could actually be used for. Mr. Keating stated the section guaranteed as much as possible. Legal counsel was consulted regarding the possibility of prohibiting the public employer from having access to the funds. Counsel advised this could not be done because in essence, constructive receipt of those funds would not have passed and would have remained taxable income to the member. This section was as tight as was felt could be done.
Mr. Heller commented Mr. Keating had spoken to different groups regarding the importance of investing in a deferred compensation program in that the PERS system would not entirely take care of individuals upon retirement. He wanted to ensure what the administration was allowed to do with the $60 million. Mr. Heller inquired why the compensation program was not administered under the retirement system. Mr. Keating replied this was primarily for two reasons. First, this was the state of Nevada employees deferred compensation program. Every other public employer had their own deferred compensation program and the retirement system covered all those public employers. The program had been considered too narrow for PERS to handle. Secondly, Mr. Keating said the retirement system controls investment of the major asset of most public employees, the retirement system. It had been felt the deferred compensation program should be separate from the other assets.
Mr. Heller referred to Section 5 concerning qualified counsel on investments. He inquired who currently handled the investments. Mr. Keating replied the Hartford; they had been doing so for four-five years. Mr. Heller inquired if the contract had originally gone out to bid and if it had been out to bid recently. Mr. Keating replied he did not know. He assumed it would be a decision made by the new committee. Mr. Heller reiterated he was greatly concerned about the proper management of the $60 million in the fund.
Fred Hinners, a former member of the deferred compensation committee, stated he could address some of Mr. Heller's concerns. The Hartford was chosen seven years ago in a competitive contract. The deferred compensation committee hired an independent investment counselor to review Hartford's program and a decision would be made next month as to whether the program should go out to bid again.
Mr. Humke referred to the costs of the program and pointed out it was clearly contained in Section 3, subsection 2. He asked if Mr. Keating would be able to generate a proposed budget for the cost of administering the committee and the fund. Mr. Keating replied at the present time, he estimated the investment fees for $60 million would be approximately $750,000 to $1 million per year. In addition, the 4,000 participants pay $12 per year, generating approximately $48,000 per year. Other than accounting charges mentioned by Mr. Stevens, it would appear there would be more than enough money generated by the fund to pay for everything. If a budget was requested, Mr. Keating assured the committee he would put one together.
Mr. Humke pointed out Glenn Rock was the current chairman of the deferred compensation committee and he might be able to participate in establishing a proposed budget to implement the bill.
Assemblyman Doug Bache, District 11, remarked he had AB 359 drafted at the request of Mr. Keating and a number of concerned constituents. There had been concern among the members who participated in the deferred compensation plan about the administration of the plan and it had been felt those who belonged to the plan should be the ones administering it. Of great concern was that one individual, who was not a member of the plan, would be responsible for control of the plan. In the summary of the bill, Mr. Bache pointed out it referenced a program of deferred compensation for public employees. In the original bill, there had been an inadvertent reference to local governments which had been deleted in the amendment and should have been deleted in the summary to reference only state employees.
Mr. Heller asked Mr. Hinners to provide the committee with the decision reached regarding who would be investing the plan. Mr. Hinners stated the decision would be made by the deferred compensation committee members. The committee hired Mercer, Meidinger & Hansen from Los Angeles who completed a thorough study of what was provided by the Hartford and other companies providing deferred compensation packages. A comparison had been made between the companies and the committee was faced with the choice of leaving the program with the Hartford, possibly asking Hartford to revise their bid as the plan had grown considerably over the last seven years. Another choice would be to unbundle the plan and have Hartford provide record keeping and other investment options. There was a wide range of options available which the committee could choose from. Several members of the committee discussed the Mercer plan last month, but the availability of choices was overwhelming. It was decided to table the decision for a month to study options. Mr. Heller stated he had no question with the job done by Hartford, but he felt $60 million in public funds should go out for competitive bidding. A number of changes have occurred over the last seven years and they needed to be addressed. Mr. Hinners pointed out he was a former member and was no longer on the committee. However, he knew the committee would discuss bidding again and felt their decision would be made at that time. Mr. Heller reiterated he would like to be informed of the committee's decision when made.
Richard Thomas, State Risk Manager, stated he was a current member of the deferred compensation committee and chairman of the subcommittee reviewing the contract with the Hartford. The subcommittee had been meeting to negotiate a new contract with the Hartford and this contract would be brought before the full committee on June 4 for their review. The committee would have two choices at that time--approve a renegotiated contract with the Hartford for a period of time to be determined or to go out to bid for a new provider. A bundled approach with the Hartford now exists, that is, the Hartford is the investment manager for this fund, and therefore, the exclusive investment manager. They provide all the various options in terms of where the funds are invested, as opposed to an unbundled approach where there are multiple investment managers. Mr. Thomas stated he would make the decision available to Mr. Heller once it was made.
Robert Gagnier of SNEA stated the original deferred compensation program was passed by the legislature at SNEA's request. Mr. Dini worked very hard on this program and he was consulted when this bill draft was under preparation. The program went into effect in 1979 and Mr. Gagnier stated he had been the first chairman. He had been chosen because the law specifically provided no state money could be used. Someone was required to establish the program and expend the funds to compile the original bids. SNEA was able to front the money to pay for the process until it was established. Once the program was up and running and insurance in place, Mr. Gagnier remarked he had resigned from the committee because it had been the feeling the only members of the plan should be on the committee. This was still the feeling and was one of the reasons SNEA was supporting AB 359. This is a good bill, Mr. Gagnier commented. The nomination process was well put together and he wanted assurances for the people in the plan they would have some input and the members of the board be participants in the plan. Over 300 participants attended the last meeting, taking time from work, to ensure the Hartford would not be dismissed by the committee. He strongly encouraged the committee to support this bill.
Mr. Thorne stated the administration was generally opposed to the bill. The governor's reorganization proposal recommends consolidating deferred compensation committee responsibilities with the benefits committee under a new benefits commission. In addressing the concerns expressed on that issue, Mr. Thorne recommended at least three members of the benefits commission be deferred compensation participants.
Mr. Thorne added the administration supported the language in Section 3 of AB 359 and will incorporate that into the governor's proposal. He pointed out subsection 3 of Section 3, wherein it states, "[a]s specifically authorized by federal law or regulation or by a special act of the legislature" could be changed to a "confirmation" or "act in accordance with" the federal law or regulation. If the legislature were to take funds which were contrary to the federal law or regulation, it would eliminate the tax advantages of the program altogether. However, the intent of the section is fully supported by the administration.
On page 3, relating to the requirement to obtain advice from a counselor who does not otherwise provide services to the program, Mr. Thorne stated there were pros and cons to the bundling and unbundling approaches. This may restrict the flexibility of the commission, and in any event, if the commission was required to have an outside counselor in order to avoid any potential liability, additional costs would be incurred to the plan participants. With a fund this size, it could be expected to pay $50,000-$100,000 per year for that independent advice. If the committee should wish to vote for AB 359, there were concerns with Section 2 regarding restrictions on the governor's appointments. It was felt there was too much restriction of the governor's flexibility to appoint qualified personnel. There are serious problems within lines 13-16 on page 1, Section 2, concerning those eligible must have participated in the program for not less than two years and have been nominated for membership by five or more persons. Mr. Thorne commented this appears more of a popularity contest rather than focusing on the qualifications of the individual and their ability to serve on the committee.
There being no further testimony on AB 359, Chairman Arberry closed the hearing and indicated he would accept a motion.
MR. HUMKE MOVED DO PASS AB 359.
THE MOTION WAS SECONDED BY MRS. EVANS.
Mrs. Chowning pointed out Assemblyman Bache had mentioned this bill was intended for state employees only and that should be reflected in the summary.
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MR. MARVEL MOVED AMEND AND DO PASS AB 359.
THE MOTION WAS SECONDED BY MRS. EVANS.
THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE.
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ASSEMBLY JOINT RESOLUTION 32 Proposes to amend Nevada constitution to allow legislature to designate places in county other than county seat for holding terms of district court.
Donald J. Mello, Director of the Administrative Office of the Courts, explained this resolution was an offshoot from the budget hearing. During the Supreme Court budget hearing, Senior Judge Lewellyn Young testified of problems he encountered trying to hear matters in other cities within a county. Specifically, when he was a sitting judge, he heard cases in Reno regarding persons who were confined to the mental health institute. For safety reasons, he felt it would be best to hear those cases at the institute. However, the Constitution requires the district court hear matters in the county seat, but since the institute was located in Sparks, he was not able to hear the cases at the institute.
In addition, Mr. Mello explained, in Nye County, the majority of the population was located in Parumph and the residents were not happy about having to travel to Tonopah to serve as jurors. The judge in Nye County would like to have the flexibility to on occasion go to Parumph to hold district court to provide for more congenial participation from the citizenry in the jury process.
Mr. Humke remarked he had a constituent who was a member of a mental health advocacy group and their interest in the bill was in the Second Judicial District Court in Washoe County which was located in Reno. The mental health institute, as previously mentioned, was in Sparks. Mr. Humke inquired if under this bill the judge would be able to hold court in Sparks for the sanity hearings. Mr. Mello replied affirmatively, unless the legislature otherwise provided by law. The reasoning for that language was the legislature should be setting the places where court shall be held in order to eliminate any confrontations between district judges and county commissioners when a district judge decides on his own to sit someplace where the county is required to pay. If the legislature provides for the places where court shall be held, these problems should be eliminated.
Mr. Dini pointed out there must be a fiscal impact to the counties because there must be a suitable building in which to hold court. In addition, staff must be moved from the courthouse into whatever community court would be held. For some counties, there would be tremendous impact. Nye County was well equipped as it has justice courthouses in Fernley and Dayton, but Mr. Dini was not sure some of the other counties had the facilities or the ability to move the court around. Mr. Mello remarked he agreed with Mr. Dini's concerns. The time the fiscal impact issue would arise would be in the enabling legislation. Certainly there would be places where the impact would be minimal. The staff would consist of the court reporter, the judge and probably the bailiff, who could be a local law enforcement officer. The issue of the fiscal impact would more appropriately be addressed during the discussion with the enabling legislation. Mr. Mello did not envision the legislation being blanket, but a case-by-case situation. The Nye County commissioners, for instance, could come forward and object if they chose, to having court held in Parumph. It would then be the legislature's responsibility to determine if it was reasonable for court to be held in Parumph.
Assemblyman Neighbors stated he was pleasantly surprised to see AJR 32 come out earlier in the session. He said he had a bill draft with almost the same language, but he had addressed Mr. Dini's concerns in a different manner. The language would be permissive in that the county commissioners may, if they so desired, hold court in different areas. For example, in Nye County, Tonopah is 170 miles from Parumph and any fiscal impact would be a wash. People have to be brought from Parumph and paid jury and witness fees, which were at a low rate. In any event, those people are not too happy. This was not only in Nye County, but Jackpot in White Pine County, and the distance between Laughlin and Las Vegas. It was a real inconvenience for people. The constitution does provide for another district, but there would be a real impact because another judge would have to be hired.
Mr. Neighbors asserted this was good legislation and certainly takes the government to the people.
Chairman Arberry declared the hearing on AJR 32 closed and requested a motion.
* * * * *
MR. HUMKE MOVED DO PASS AJR 32.
THE MOTION WAS SECONDED BY MS. GIUNCHIGLIANI.
THE MOTION PASSED UNANIMOUSLY BY VOICE VOTE.
* * * * *
ASSEMBLY BILL 515Makes appropriation to City of Las Vegas for restoration of historic Moulin Rouge Hotel and Casino.
Assemblyman Wendell Williams, District 6, in Las Vegas, stated his support for AB 515. His indicated he wished to take a two-pronged approach to this bill, the historical significance of the hotel and what was hoped to be accomplished with the bill. Mr. Williams referred to Exhibits E, F and G which had been distributed to the committee.
After World War II, there was an increase in population in Clark County during the 1940s due to development of the major defense plant near Las Vegas and the Hoover Dam. The Las Vegas strip began to develop, and during a period of three years, most of the major casinos were constructed, bringing more people to work not only on the dam, but with other industries in the Henderson and Boulder City areas. This increase in population brought diversity to Clark County. Segregation increased with the number of people moving in, particularly African Americans moving in from the south to work in the defense plant and the Hoover Dam. As the strip developed, most of the African Americans in Las Vegas were living in the west side of Las Vegas. The use of public accommodations was prohibited at that time at the strip and downtown.
In 1955, the nation's first integrated casino opened in Las Vegas, the Moulin Rouge. Mr. Williams explained the Moulin Rouge was located on Bonanza Road in his district and adjacent to the chairman's district. The Moulin Rouge was featured on the cover of Life magazine in 1955 (Exhibit E) and billed as the nation's first integrated resort. It was extremely popular and known nationwide. The Moulin Rouge was modeled after the Sands Hotel and featured 110 rooms, a showroom, restaurant, coffee shop, lounge and casino. The shows staged at the Moulin Rouge were considered some of the best in the city with headliners such as Harry Belafonte, Sammy Davis, Jr., Nat "King" Cole, Dean Martin, Frank Sinatra, Jack Benny and a number of other entertainers. The casino became so popular a third show was developed and started about 2:15 a.m. because the strip entertainers, such as Frank Sinatra, wanted to perform at the Moulin Rouge after their other performances. (Exhibit F).
Mr. Williams stated Joe Lewis, the former heavy weight champion, served as host of the Moulin Rouge. Archie Moore, who was preparing for his championship fight with Nino Valdez, was not allowed to have his training camp on the Las Vegas strip, even though he was preparing for his fight on the strip. In addition, many other entertainers, including Nat "King" Cole and others, were performing on the strip, but were not allowed to have lodging in the hotel they were performing. In 1954, Nat "King" Cole broke that tradition at the Frontier by allowing his grandmother to sit in the front row, which began the conversations to eliminate segregation in Clark County and the gaming industry.
The Moulin Rouge was entered into the national registry of historical landmarks several months ago. The Moulin Rouge was significant in what it aspired to be and what it represented to Clark County. Mr. Williams called attention to another significant event which took place at the Moulin Rouge, which was one of the reasons it was admitted as a national landmark of historical sites. In 1960, five years after the Moulin Rouge opened, there was a significant meeting held there with Governor Grant Sawyer, Dr. James McMillan, who currently serves on the Clark County school board, but at that time was president of NAACP, and other elected and congressional officials. Out of that meeting came the consent decree which eliminated the practice of segregation in casinos in reference to accommodations in Las Vegas. This particular meeting was mediated by Hank Greenspun, the publisher and owner of the Las Vegas Sun at that time.
Mr. Williams emphasized this was a good project. Now that 20 states in the nation have initiated some form of gaming, Nevada must be more competitive in how it presents itself in order to remain competitive. Las Vegas is moving toward family theme resorts and with more competition, Nevada must remain number one. Even if every state in the nation adopts gaming, no state will be able to point to any project which has the historical significance and uniqueness of the Moulin Rouge.
The City of Las Vegas has taken part in this project by allocating $200,000 for a study to prepare the plan of operation. Part of the plan was to institute a cultural museum which lists many of the historically significant things which have occurred in Clark County, not only in the Moulin Rouge, but as a place for school children to visit. The culinary union has agreed to redo the entire kitchen, sponsor a culinary training school on the site in the areas of housekeeping, culinary skills, waiters, etc. The community has come together to make this project work. Mr. Williams asserted support from the state level would be a solid piece to help put the entire project together. It would also serve as an economic base in that area of Las Vegas.
Mr. Marvel asked what the ownership status was of the Moulin Rouge, if it was a non-profit organization. Mr. Williams replied there was a non-profit organization, the Moulin Rouge Preservation Society, which he had worked with, but the owners of the property were Sarann and Joe Preddy. Mr. Marvel pointed out AB 170, a clean up of AB 590 of the sixty-sixth session, was a cultural and historic preservation bill crafted by the speaker and himself, and this bill should be investigated because the Moulin Rouge could qualify under the guidelines of the bill. Mr. Marvel commented the bill had been introduced in an effort to preserve some of the state's history.
Mr. Williams referred to Exhibit G and stated the Nevada State Museum and Historical Society currently had a Moulin Rouge project on display. Many of the original memorabilia was on display, which opened on March 27. Among the memorabilia were the original chandeliers and stage floor.
Ms. Giunchigliani inquired if the Moulin Rouge had been placed on a request list for funding under AB 170. Mr. Williams stated there was some concern because, traditionally, projects in Clark County have not been considered. It would take some time to apply. Ms. Giunchigliani remarked she had looked at the list and most of the projects which had been recommended were in rural counties. She hoped that whomever was on the commission would reconsider some projects in Clark County. She asked Mr. Williams if there were any federal monies available. Mr. Williams replied they were trying every avenue and if a restoration fund could be established, he would pursue private donors as well. Ms. Giunchigliani asked what total budget had been projected for restoration. Mr. Williams responded it was close to $1 million, which included the roof, parking lot, the showroom and the coffee shop. Ms. Giunchigliani commented the city of Las Vegas had put up $200,000 for the initial cost of developing the plan for the whole project. Ms. Giunchigliani remarked the state would have to raise revenues in order to fund many worthwhile budgets. She felt preservation of this history was very important. Mr. Williams said it was a two-fold situation, the number of people who could be trained under the project operated by the culinary union at the site would lead to jobs and expanded business opportunities. Ms. Giunchigliani agreed and stated the Moulin Rouge would not only be preserved, but used as well. Given the committee's history this session closing budgets, she did not feel there would be any appetite by the committee to fund this project.
Mr. Marvel maintained that Mr. Williams had done much work on this project and when AB 170 was passed, he suggested Mr. Williams present a plan. When the grants were made last year, there had been some problems in Clark County because no one had come forward with a plan. The Nixon Opera House and the Yerington school had received grants because they had programs ready to go. Now that people are aware how to present a plan to the cultural resources commission, Mr. Marvel believed Mr. Williams should do so. Ms. Giunchigliani agreed a plan should be submitted for the Moulin Rouge. Mr. Marvel explained the original grant for the Nixon Opera House was over $600,000 which had not been used since the opera house had been destroyed. He believed this was very important for Nevada, which was 20 years behind the times regarding historical projects.
Mrs. Williams commented she had had the opportunity to discuss how the cultural resources commission was priortizing projects. During those discussions, she remarked that southern Nevada was a much younger community than the rest of the state and as a result, the same historical criteria could not be used. There are not many things to preserve in Las Vegas, but what was there deserved some priority treatment. Mrs. Williams concluded the commission had recognized this and had indicated the Moulin Rouge would be given priority.
Chairman Arberry stated he had been working with the historical preservation group on the Moulin Rouge since the project was initiated. This project has taken a back seat to other construction in southern Nevada. Mr. and Mrs. Preddy have been living this dream for a long time and they would like to see the project materialize before the maker calls them. The chairman stated he was glad to see Mr. Williams bring this legislation forward.
Mr. Williams added there was so much history to the Moulin Rouge, not all of it could be discussed at the hearing. Jay Florian Mitchell, a long-time photographer in Las Vegas who filmed the opening of the Moulin Rouge, was a history-making discussion in itself. She was a photographer who received national recognition and was originally from Las Vegas. This would be something that Nevada will have which exists in no other state, no matter where gaming is located. No other state in the nation will have a historical casino which could be used to keep Nevada's competitive edge.
There being no further testimony on AB 515, Chairman Arberry closed the hearing.
CONSUMER AFFAIRS - TELEMARKETING - PAGE 433
Chairman Arberry recognized John Kuminecz, Commissioner with the Consumer Affairs Division, and stated he would like to have the revised budget explained. Mr. Kuminecz stated the committee had before it the current services budget with an enhancement. He would be happy to discuss any of the budget with the committee.
Chairman Arberry referred to Exhibit H, a memorandum from Larry Struve, Director of the Department of Commerce, addressed to the Assembly Ways and Means Committee. He asked Mr. Kuminecz to walk the committee through this memorandum.
Mr. Kuminecz stated the commission had submitted a current services level budget, appeared before the Senate Finance Committee and were instructed to prepare an enhanced budget to improve regulation enforcement of the telemarketing industry in Nevada. The enhanced budget had been presented to Assembly Ways and Means and Senate Finance. The enhanced budget was funded within existing resources and within telemarketing, there were reserve funds which had resulted from fees, fines and penalties which had been used to fund the enhancement. This enhancement provided for three new positions, a deputy commissioner and hearings officer to handle administrative hearings, a chief investigator of compliance and enforcement who would head the telemarketing unit, and another compliance investigator to deal with casework, preliminary investigations and to forward cases to the attorney general.
Mr. Kuminecz explained the attorney general supported the division through one and one-half deputy attorney general positions for telemarketing. Exhibit H also contains a breakdown over the biennium of personnel and resource costs.
Chairman Arberry asked if the three new positions would be able to handle the increased workload or would an appearance have to be made before Interim Finance. Mr. Kuminecz felt the addition to the staff will help better organize the functions and better direct the existing staff. There was also some legislation which would improve NRS 599B, the Nevada statute for telemarketing. With this in hand and the additional positions, Mr. Kuminecz felt this should provide what was needed in the telemarketing unit.
Chairman Arberry referred to the out-of-state travel figure of $1,400 and asked for an explanation for the additional cost. Mr. Kuminecz stated this could be used for area conferences in administrative law enforcement and travel to nearby states to work with other investigators to obtain evidence, interview witnesses, etc. Generally, the out-of-state travel would be used to enhance training.
Chairman Arberry asked why the unit would need $5,000 each year for telephone expenses. Mr. Kuminecz stated most of the complaints that will be handled by the unit would be from out of state. There were only 22 complaints from Nevada consumers in 1992. The investigators have cellular phones available when they are conducting their investigations. The cost of the use of those two cellular phones was included in the expense line item.
Chairman Arberry requested an explanation for the need for a vehicle. Mr. Kuminecz replied the vehicle was required for travel during the investigatory process. Chairman Arberry inquired if every investigator would have a vehicle. Mr. Kuminecz replied no. There was one vehicle for three people and would be used primarily by the chief enforcement and compliance investigator.
Mr. Humke asked if the attorney general would devote additional deputies for telemarketing prosecutions. Mr. Kuminecz referred to Exhibit I, a memorandum from the attorney general to the money committees. It contained an enhancement on their side to handle the workload.
Mr. Humke asked if the criminal provisions under NRS 599B had been adopted by cities and counties by ordinance so they could enforce the laws as well. Mr. Kuminecz stated Clark County had a telemarketing ordinance, but when NRS 599B came into being, the ordinance was considered superseded by this agency's ability to enforce NRS 599B. If a case involved criminal action, at this time the case would be referred to the district attorney. The attorney general, so far, had been involved in civil actions.
Mr. Humke inquired if the division would have a policy of working with both federal agencies as well as local agencies in Nevada. Mr. Kuminecz replied telemarketing abuse was a national problem and without having connections in other states through law enforcement, some of the information would not be available to help with investigations. Similarly, since 1989, Nevada had developed telemarketing expertise and knowledge about the workings of the industry. The division had been called numerous times by other states and federal agencies.
Mr. Humke referred to page 2 of Exhibit H concerning 68 sellers and 14,500 salesmen. He asked if a "seller" was considered a licensee or a company. Mr. Kuminecz replied "seller" would be considered a company or firm. There were now 72, with one application pending. Mr. Humke asked if this increase was from March 8th when the memo was prepared. Mr. Kuminecz replied affirmatively. The original projection for this year was 120 sellers, up from what had been submitted in 1990 for this biennium. There had been a downward trend in the projections, the reserve was not as large as once projected. The 14,500 figure for salesmen represented the number licensed since 1989. The licensing was only good for a year, and currently this fiscal year, there were 2,800 licensed salesmen operating. A number of salesmen may have moved into illegal operations and a number have moved to exempt companies. Mr. Humke inquired for the geographical distribution of licensees around the state. Mr. Kuminecz replied almost 100 percent, with the exception of two companies, were located in the southern Nevada area. This included 70 companies in the Las Vegas area and one or two in the Reno/Sparks area.
Mr. Price stated some of this material had been recently discussed in Assembly Taxation. There were some companies who were doing the same job, but because of the way they were organized, the companies were not considered licensed companies. Mr. Kuminecz advised those companies most probably fell into one of the exemptions granted under NRS 599B. Mr. Price asked if there was oversight over these exempt companies. Mr. Kuminecz replied affirmatively, under NRS 599B, he could use the authority of NRS 598 regarding deceptive trade practices to handle complaints. Many of the complaints received were from the industry itself because it was felt if there were illegal operations by an exempt company, it would create unfair competition. Mr. Price asked if the scope of the division's duties extended beyond monitoring the 70+ companies. Mr. Kuminecz answered yes, citing the deceptive trade practices statutes.
Mr. Kuminecz introduced Ron Shutt, the deceptive trades compliance investigator for the last ten years. By having Mr. Shutt in the agency, Mr. Kuminecz had the ability to use the deceptive trade expertise of his own staff to augment the agency's program. Prior to 1989, telephone solicitation was lumped into telemarketing, but because of the amount of abuse found in the state and nationally, the legislature sought to set out separate laws. Mr. Price commented 99 percent of the telemarketers were operating honestly without any deceptive trade practices. Mr. Kuminecz stated approximately 3,500 complaints had been received in 1992 from consumers about companies in Nevada. It had been ascertained that a little over 1,600 could be actionable complaints. Out of those 1,600 complaints, approximately 21 of the 72 companies accounted for three quarters of the complaints.
Chairman Arberry asked if Mr. Kuminecz had any closing remarks. Mr. Kuminecz replied he had been concerned about creating a level playing field. He felt the agency had been very successful in enhancing the business climate in Nevada. There must be a healthy business climate, which was better for consumers, but until it was completely healthy, as much as possible must be done to resolve consumer complaints. The agency tried to apply equal intensity to both those missions.
Frankie Sue Del Papa, Attorney General, introduced Colette Rausch and Margaret Stanish, Deputy Attorneys General, of the Consumer Affairs Division located in Las Vegas. Ms. Del Papa referred to Exhibit J, the augmentation of the attorney general's telemarketing budget. The attorney general's office had submitted two alternative budgets for additional staffing needed to support the enforcement of the telemarketing laws. Whether SB 375 was ultimately passed would determine which budget was necessary.
Ms. Del Papa advised the responsibility for investigation and enforcement of the telemarketing laws would shift from the Consumer Affairs Division to the attorney general's office under SB 375. To carry out these additional duties, Ms. Del Papa explained the attorney general would have to increase its staffing to include investigators, attorneys and support staff. She referred to Exhibit J, attachment 1, which was the augmented budget for the office should SB 375 become law. Attachment 2 was the alternative and reflected the failure of SB 375. If SB 375 was to fail, the Consumer Affairs Division would retain responsibility for investigation and enforcement of the telemarketing laws, but the attorney general's office would still need to augment its current staffing requirements to complement the proposed augmentation of the division's investigatory and supervisory staff. Under that scenario, the attorney general would need additional attorneys and a secretary.
Ms. Del Papa called attention to Exhibit J. Included in the exhibit was a chart which provided an analysis of all deceptive trade practices in the nation by state; an analysis of the registration versus licensing model in telemarketing; a chart analysis of registration versus licensing; and at the end, a chapter out of the National Association of Attorneys General handbook concerning the powers and duties of attorney general offices throughout the country, showing the emphasis that attorneys general offices put on consumer protection.
Margaret Stanish, Deputy Attorney General, assigned to the Consumer Affairs Division, explained the difference between SB 375 and the current system under NRS 599B in two alternative budgets (Exhibit J, attachment 1). Under the current system, a licensing scheme had been set up whereby telemarketers were licensed in a similar manner to a doctor or other licensed professional. As telemarketing was a licensed profession, NRS 599B contained a realm of administrative procedures which were the responsibility of Ms. Stanish and Colette Rausch, Deputy Attorney General. Under the new system, the licensing scheme would be eliminated and the telemarketers would be required to register. The emphasis would thereby be shifted from administrative procedure enforcement to one of law enforcement. This law enforcement would include an emphasis on criminal actions as well as civil litigation and alternative dispute resolution. Ms. Stanish concluded this change would place a much greater emphasis on law enforcement rather than the existing administrative procedure enforcement.
Ms. Rausch referred to Exhibit J, attachment 1, the personnel services for augmenting the attorney general's staff if SB 375 was passed. She pointed out investigators and attorneys were included in that personnel listing. Under SB 375, the Consumer Affairs Division would obtain restitution for consumers, a very important facet of the division, and mediate complaints. Any investigative or enforcement functions would be immediately referred to the attorney general's office and the appropriate action would be taken, either civil or criminal. Ms. Rausch emphasized there would be bifurcation between the two agencies.
The Consumer Affairs Division would require appropriate staffing level to handle the complaints. A very important part of the division's responsibility was to respond to consumer complaints over the telephone. If the appropriate number of investigators and attorneys were not available to handle the complaints, the appropriate enforcement would not be available.
Ms. Rausch said as Ms. Stanish had pointed out, the Consumer Affairs Division had a staff of investigators. Once the investigation was complete, the case was turned over to Ms. Rausch and Ms. Stanish for action. The action now consisted primarily of licensing, disciplinary action against the licensees, and attendance at disciplinary hearings. This was the scenario under the current NRS 599B statute. An augmentation had been included at this point (Exhibit J, attachment 2) because if staffing was increased as proposed, there would be increased workload, and in order to meet that demand, the Consumer Affairs Division would require additional staffing. Only legal staffing would be required to compliment the investigators.
Mrs. Evans recalled a statement by Ms. Stanish concerning the registration of telemarketers as opposed to licensing. She asked if this issue was included in SB 375. Ms. Stanish replied that was correct. In most states which regulate telemarketing, and there were 12 who had specific laws dedicated to telemarketing regulation, two of them had licensing schemes, Nevada and Florida. The remaining states used registration systems, which was the subject of SB 375. The bill would eliminate the administrative and licensing procedures and create a registration system. The registration system, Ms. Stanish explained, would give the state the ability to track or monitor telemarketing businesses. Quick and appropriate action could be taken if there was a problem.
Mrs. Evans contended she was not familiar with the content of SB 375. Ms. Stanish remarked a memo would be forthcoming explaining the differences between the two systems. Mrs. Evans inquired if the attorney general believed this was a better way to proceed. Ms. Del Papa referred to Exhibit J and stated therein were the pros and cons and the differences between registration and licensing. Ms. Del Papa believed if Nevada switched to a registration system, which the new director of Consumer Affairs believed would be a good choice, the registration system would put a greater emphasis on law enforcement. Adequate staffing would be a necessity due to the number of consumer complaints received. She emphasized that in her office she did not have the capability of responding to consumer complaints. Even an individual letter was not used--the office sends out a postcard which gives the consumer the necessary information. The office could not handle the volume of complaints. Ms. Del Papa concluded if the system was changed to one of registration, she believed it would be more effective and not as cumbersome. The majority of states have a registration system as opposed to licensing.
Mr. Spitler inquired why the licensing scheme had been chosen under NRS 599B initially. Ms. Rausch stated that Nevada and California had been among the first states to establish such a statute. There was not much experience on which to draw since this was a new, growing area of fraudulent activity and this system was, at the time, considered the best available. After four years using the system, other states had looked at Nevada and how the problem had been handled. Those states have improved upon Nevada's system and have chosen to go with registration. The theory generally was fraud should not be licensed. If those in the industry were licensed and treated as another professional business, there were to many areas of hinderance for law enforcement. She commented if other state statutes were examined, one could tell immediately the framework came from Nevada. However, rather than licensing, registration was the preferred method.
Mr. Spitler acknowledged part of the success of the program was the liaison with federal agencies. Ms. Rausch stressed that was correct, the office had also been very active with other attorneys general in other states. This was an area of networking--one state would not be able to handle it alone. States have been successful linking with other states and federal agencies under their registration system and coordinating all their information.
Mr. Spitler asked if the Consumer Affairs Division was the first step interface with the customer--they would try to resolve the complaint or make the first attempt to obtain restitution. Ms. Rausch stated that was correct, the attorney general's office would then review the complaints for patterns or other problems and take prompt action without interfering with the consumer's ability to obtain prompt restitution.
Mr. Spitler inquired if the Consumer Affairs Division was providing these services at the present time. Mr. Kuminecz interjected the division consulted with the attorney general's office on a daily/weekly basis on cases which have been deemed actionable. There was give and take between the agencies regarding the best way to proceed with the cases. Mr. Spitler remarked one of the reasons he felt the program had been successful was the high profile consumer affairs director. The initial personnel in the division had been very successful garnering the press. Once the program had been initiated on the administrative side, Nevada had been very effective removing the fraudulent telemarketers from the state.
Mr. Kuminecz appreciated Mr. Spitler's comments about the start in Nevada. At the beginning there were many companies in Nevada which was why the licensing of those companies became paramount. He explained the division had been operation for three and one-half years, beginning in October of 1989. Licensing and regulation enforcement and investigation had been built up from the ground in a short amount of time in comparison to regulation of deceptive trade practices which had been in existence since 1973. The current staff size, resources and computerization have been with the division only the last year and one half. He rated complaint taking and resolution and restitution functions as excellent within the division. Enforcement actions ranked in the top ten of states regulating telemarketing, but he felt the actions could be stronger.
Mr. Kuminecz concluded registration was a good process which would clean up the inadequacies of licensing. Nevada had the best refund and restitution program for consumer victims of telemarketing scams, the second best collection of fines record and third highest fines penalized record. Nevada also had the third highest number of cases filed, third highest number of complaints and the third highest number of registered companies.
Mr. Spitler acknowledge the division had done a good job, in fact, excellent. He was fully aware of the fact in all budget cycles, the division had been shortchanged many times. On the other hand, from a consumer perspective, Mr. Spitler felt it was wrong to have administrative divisions in two separate locations as it was confusing to the public. What had contributed to the success of the division was "one stop shopping." The public was able to call the division and have everything handled at one location. Mr. Spitler felt this procedure was consumer friendly. If one division was handling the program effectively, and another was established, the costs would double. Even though the division was fee based, there would still be duplicative costs.
Mr. Kuminecz agreed with Mr. Spitler. Although Nevada had more personnel handling these cases, Mr. Kuminecz felt the better results from consumer restitution and refunds allowed Nevada to be better at enforcement. He felt it was necessary for the attorney general to receive the augmentation requested to support the division. However, this would be a decision which would have to be made by the legislature.
Ms. Stanish added she could respond to some of Mr. Spitler's questions. She understood the concept of "one stop shopping" to avoid consumer confusion. As General Del Papa had pointed out, people by the hundreds telephone the attorney general's office with consumer complaints, because across the nation, the majority of consumer affairs functions were handled within the attorney general's office. The attorney general's office was already in peoples' mind as the place to contact with consumer complaints. In addition, Ms. Stanish asserted SB 375, the telemarketing bill, was to simply shift the investigative and law enforcement function to the attorney general's office. She emphasized telemarketing was a crime, fraud. In order to fight fraud, there must be prompt criminal and civil action. The crux of the committee's budget decision would be who would receive the investigator positions. Ms. Stanish pointed out effective and prompt law enforcement meant the people who were going to court must be able to control the priorities and investigations. With few exceptions, most states have the law enforcement and investigations functions within the attorney general's office. One other point, Ms. Stanish made, the attorney general's investigators were generally experienced criminal investigators, whereas under NRS 599B, the investigators of the Consumer Affairs Division were compliance investigators with the orientation of administrative law enforcement.
Mr. Humke asked Mr. Kuminecz if he favored a registration scheme. Mr. Kuminecz replied affirmatively. This would eliminate some problems which have accumulated over the last four years. Mr. Humke asked if there was a vehicle in place to change the scheme from licensure to registration other than SB 375. Mr. Kuminecz answered AB 635 would be heard next week in Assembly Commerce and an amendment would be proposed making the change to eliminate licensing.
Mrs. Williams emphasized telemarketing was not a crime, it was not fraud. Only when telemarketing was done fraudulently or criminally was it a crime. Telemarketing was a technique used by certain businesses. She maintained the committee should be very careful not to broad brush some very fine business people with that stigma.
Ms. Del Papa concluded she would work with the money committees and whatever was ultimately decided by the legislature, her office stood ready to work. She remarked she had been put in somewhat of an adversarial position, but she pointed out her office worked very well with the Consumer Affairs Division. In her experience as attorney general, it was helpful if a team approach was used in these cases. When bifurcation occurred, it was more difficult to build cases. This did not mean cases could not be successfully prosecuted, but it was more difficult. She personally believed the team approach was more effective using shared information. This was an avenue to expand limited resources.
Chairman Arberry appointed Mrs. Evans and Mr. Humke to a subcommittee to work with the Senate on SB 375. He requested that a report to the committee be made within one week.
The chairman asked if there had been a hearing on the bill. Ms. Rausch answered SB 375 had passed Senate Commerce and had gone to the floor yesterday. Some amendments had been proposed which were still pending.
BUDGET CLOSINGS
SUBCOMMITTEE ON MENTAL HYGIENE/MENTAL RETARDATION, HEALTH AND REHABILITATION
Mrs. Williams remarked as Chairman of the Ways and Means Subcommittee on Mental Hygiene and Mental Retardation, Health and Rehabilitation, she appreciated the opportunity to report the subcommittee's recommendations for the Division of Mental Hygiene and Mental Retardation to the Committee on Ways and Means. Mrs. Williams stated she would like to publicly thank the members of the subcommittee--Ms. Giunchigliani, Mr. Perkins and Mr. Heller, for their work and assistance in formulating these recommendations.
The subcommittee conducted numerous meetings in the review of the budgets of the Division of Mental Hygiene and Mental Retardation and also received public testimony in Las Vegas on February 12, 1993.
Mrs. Williams prefaced her report by advising the committee the recommendations in this report and the Executive Budget did not provide for services to all of those who were in need. However, the Executive Budget and the recommendations of the subcommittee addressed the most pressing mental health needs by funding case managers, additional supported housing, crisis counseling and contracted day training and job placement services. As the committee was aware, the Division of Mental Hygiene and Mental Retardation suffered significant budget reductions in February 1992.
In summary, the subcommittee was recommending the general fund Appropriation for the Division of Mental Hygiene and Mental Retardation be increased by $27,242 in FY 1994 and $134,447 in FY 1995; a total of $161,689 over the 1993-95 biennium.
MENTAL HYGIENE AND MENTAL RETARDATION - PAGE 713
Mrs. Williams commented three positions were identified in this budget as the "value of" for reorganization savings. Those positions are: deputy administrator-southern Nevada; personnel officer; management assistant II. The Executive Budget had recommended the deletion of both deputy positions. This recommendation provided for the retention of the southern deputy. The subcommittee felt the division should have an administrative presence in southern Nevada due to rapid growth and the great demand for services. With the level of budget reductions experienced by the division, especially in southern Nevada, the role of management was important to ensure delivery of services to clients within the limited resources.
The personnel officer for the division was noted by the division as a critical position. The subcommittee had recommended this position be retained. The division routinely had many hard-to-fill positions such as psychiatrists, nurses and pharmacists that require ongoing recruitment efforts. Hiring of direct care staff requires medical clearance, checking licenses and police records, and providing and tracking orientations. Routine records maintenance included maintenance of licensure, training received, and technician certification courses. If these functions were not carried out, units could lose licensure and certification for federal funding. If vacancies were not filled in a timely fashion and staffing levels maintained, client and staff safety could be jeopardized.
Finally, the subcommittee was recommending the management assistant be retained to assist the division in grant reporting, office paperwork, minutes of commission meetings, and routine distributions both within the division and to outside agencies.
The elimination of this position would have resulted in the division having three secretaries assigned to the central office; a reduction in two from the current staffing level. Information provided by the division indicated the elimination of this position would result in a shift of workloads so that less important tasks were dropped. Examples provided by the division were: the central office would cease preparing minutes for the commission advisory board and planning council meetings; summaries of management reports, such as census and caseload, would be discontinued; personnel and budgetary correspondence and other forms would be handwritten and not typed; staff would open and date-stamp their own mail; checks would be opened and logged by accounting instead of the front desk; and the telephone would be converted to direct dial with a separate number for messages.
Funding for these positions were displayed as coming from the general fund in this budget; however, information provided by the division indicated revenue collections for Title 18 (Medicare) could be increased in the budgets for both the Southern Nevada Adult Mental Health Services and the Nevada Mental Health Institute. Accordingly, when the committee reviewed the recommended closings for those budgets, increases for Title 18 collections would be recommended to offset the increase in general fund support recommended in this budget.
The Executive Budget in Brief displayed consolidation of the northern, southern and rural Nevada advisory boards for mental health and mental retardation into the Commission on Mental Health and Mental Retardation. Mrs. Williams explained questions, as posed to the division, have revealed the advisory boards and the commission have followed "non-overlapping" agendas in that the advisory boards deal with local issues. Accordingly, the subcommittee was recommending the advisory boards continue as they currently exist and not be consolidated with the commission. The advisory boards consist of experts in a variety of fields and family members of clients. These advisory boards serve as unpaid volunteers.
MENTAL HYGIENE/RETARDATION - REGIONAL TRAINING - PAGE 719
Mrs. Williams said the subcommittee recommended this budget be closed governor recommends.
SOUTHERN NEVADA ADULT MENTAL HEALTH SERVICES - PAGE 721
Information, as provided to the subcommittee, indicated it could take as long as two hours (in each direction) to commute from the Henderson area to the West Charleston office to receive services. Mrs. Williams added the division provided information which indicated 217 clients were receiving services at the Henderson counseling center prior to closure and that 44 clients from the Henderson area were receiving services at the West Charleston office on January 31, 1993. In response to questions, the division had provided a budget which would require minimal additional general fund support as well as relocate personnel and other resources recommended in the Executive Budget to establish an office in southeast Las Vegas. The funding, as recommended by the subcommittee, would provide for the establishment of a community services satellite office in southeast Las Vegas and redirect the following existing resources: a program manager to run the office and make referrals for contracted crisis counseling; four case managers to serve severely mentally ill persons; one-fourth of the proposed crisis counseling, housing and living skills allotments; and, physician, nurse and secretarial time sufficient to operate a medication clinic 2 to 4 days a week.
New funding was provided for a psychologist and a management assistant to provide billing services. Additionally, funding was recommended for rent, utilities, equipment, and a pharmacy contract. The estimated cost for the establishment of this office was $118,059 in FY 1994 and $135,663 in FY 1995. The impact to the general fund was $50,074 in FY 1994 and $131,923 in FY 1995; the division identified available block grant funds which were applied to the FY 1994 cost to reduce the general fund impact.
Mrs. Williams pointed out the division advised the opening of this office with the redirection of resources would provide: crisis counseling for 290 persons per year; case management services for 140 clients; 74 housing placements; medication clinic services for up to 700 clients; and, training in living skills for 30 additional clients.
Other recommended adjustments for this budget were: an increase in the Title 18 revenue to offset the increased general fund support for the director's office; a reduction in the medical services charge associated with the positions that were transferred to the budget for the facility for the mental offender (Lakes Crossing); and, an increase in vacancy savings and a reduction in reorganization savings reflecting the "value of" the public service intern assigned to the personnel office.
SOUTHERN NEVADA MH/MR FOOD SERVICES - PAGE 730
Mrs. Williams advised the subcommittee recommended this budget be closed governor recommends.
The existing food service contract expires June 30, 1993. The division had re-bid that contract receiving one bid, which, if accepted, would require the addition of $130,034 in FY 1994 and $149,895 in FY 1995.
Additionally, funding would also be required to augment the food services budget for the preparation of meals "off-site" during the renovation of the facility, as approved by the 1991 legislature. This renovation was scheduled to begin in July 1993 with an estimated project construction time of 12 to 16 weeks which would correspondingly require the meals be provided off-site. A "ball-park" estimate for the additional funding (based on a 16-week project) was $89,000.
This additional funding (for both the new food service contract and off-site meals) was not included in the recommendations as presented by the subcommittee. Instead, the subcommittee had recommended the division re-bid the contract in an attempt to secure more than one bid and approach the interim finance committee with a request for additional funding once the food service contract is re-bid and a firm cost per meal was determined.
NEVADA MENTAL HEALTH INSTITUTE - PAGE 734
Mrs. Williams explained the adjustments, as recommended by the subcommittee, will provide for: an increase in the Title 18 revenue to offset the increased general fund support in the director's office; an increase in vacancy savings and a reduction in reorganization savings for the "value of" the personnel analyst; and, technical adjustments to facilitate the recommended conversion to contract meal service at this facility in January 1994. The Executive Budget recommended the conversion to contract meal service with a corresponding reduction in the cost of meals from the current cost of approximately $4.94 per meal to $3.37 per meal. However, the revenue for canteen sales was not deleted and the food line item was not deleted accurately. This adjustment deleted the canteen sales, made an adjustment to the food line item, displayed the positions that will be eliminated and balanced the adjustment to additional Title 18 revenue at this facility.
FACILITY FOR THE MENTAL OFFENDER - PAGE 744
The adjustments recommended by the subcommittee would provide an increase in the county reimbursement with a corresponding decrease in the general fund appropriation. Mrs. Williams pointed out this was the offset to the recommended adjustment in the budget for the Southern Nevada Adult Mental Health Services and aligned the revenue with the positions that had been transferred from Southern Nevada Adult Mental Health services to this budget. Also recommended was a technical adjustment to the food line item under m-200. The food line item was reduced by $4,500 in FY 1992 and $9,000 in FY 1993 to enable the division to budget within their allotment. This adjustment reversed that reduction. It should be noted the Executive Budget recommended the conversion to contract meal service and accordingly reduced the food funding from $4.94 per meal to $3.37 per meal. However, Mrs. Williams advised, without the addition of the $4,500 in FY 1994 and $9,000 in FY 1995, the agency would not be budgeted at $4.94 per meal.
RURAL CLINICS - PAGE 750
The adjustments, as recommended by the subcommittee, provide for: the re-establishment of the micro-computer specialist and related support costs. This recommendation was in accordance with the direction of the data processing subcommittee to unbundle the consolidation of data processing.
A technical adjustment was made to E-710 which provided for the relocation of the rural clinics administration office to the Nevada Mental Health Institute. The adjustment reduced the recommended funding for the wiring for the computer and pcs and deleted the recommended new phone system. Funding was provided to move the existing phone system and to interface that system with the Centrex system at the Nevada Mental Health Institute.
SOUTHERN NEVADA MENTAL RETARDATION SERVICES - PAGE 757
Mrs. Williams said the subcommittee recommended this budget be closed governor recommends.
NORTHERN NEVADA MENTAL RETARDATION SERVICES - PAGE 765
The only adjustment for this budget was the increase in vacancy
savings and the reduction in reorganization savings for the "value of" the personnel analyst.
COMMUNITY TRAINING CENTER FUND - PAGE 773
RESIDENTIAL PLACEMENT - PAGE 778
MENTAL RETARDATION HOME CARE - PAGE 783
Mrs. Williams advised the subcommittee recommended these budgets be closed governor's recommendation.
Mrs. Evans commented a job well done. In northern Nevada, there have been dramatic cutbacks during the biennium for outpatient services. The Mental Health Institute was doing only inpatient and medication services. She asked how secure was the monies being set aside for contract services and other outpatient services. Mrs. Williams answered she would have to defer to the budget office for an answer. Mr. Ghiggeri added in the Executive Budget in Brief there was a statement the Nevada Mental Health Institute would provide crisis counseling and outpatient services for 250 clients per year at a cost of $264,000. This was a recommendation which had been included in the Executive Budget. When the budget office worked with the Division of MH/MR, the division was told they had "X" amount of dollars, which was more than the other agencies were given. They were given an opportunity to re-establish services which had been cut during the last biennium. The division was given the choice of what services they felt would provide the most "bang for the buck." Mrs. Evans countered the division was essentially doing crisis management, still low end, low grade, poor service. However, working within these limitations, it was understandable, but she felt the state had regressed a decade or further in terms of helping mental health patients.
Ms. Giunchigliani reiterated the subcommittee had difficult decisions to make. She confessed she had voted against two budget closings in the subcommittee and would not be supporting the overall closing. Ms. Giunchigliani asserted there was an obligation to raise revenues and restore some of the budgets. The state has left the most vulnerable unattended and at the very least the growth should be funded.
Ms. Tiffany commented Mrs. Williams had done a commendable job. She mentioned the newspapers had reported this budget would be cut by $30 million and asked if that was an accurate figure. Mrs. Williams said she had not seen the newspaper. If that were the case, however, the entire program might as well be eliminated. There was nothing left to the program now but the structure.
Mr. Thorne interjected the request to the agency heads was to find ways to meet the reduced revenues in the event some of the governor's revenue recommendations were not approved. The agencies who were eliminated from those reductions were K-12, higher education and the prisons. The bulk of the reductions would fall on the remainder of the general fund agencies, if the revenue enhancements were not passed.
Mr. Dini referred to the Mental Health Institute and said the director had mentioned there was a possibility of contracting the services out to a private hospital in Reno. He asked if that had been discussed in the subcommittee. Mrs. Williams responded it had not come up in subcommittee, but information had been provided. There was some confusion over the land and the ability to sell it as one parcel. Mr. Ghiggeri explained that would take more than a month or two to look into should the legislature choose to do so. He believed there was approximately 80 acres which could provide revenue for the state, if the state should decide to sell the property. There was correspondence between the Public Works Board and with the Division of State Lands. Some initial information was received concerning deed restrictions, water rights and what it would cost to mothball that facility. If the state determined it wanted to close the facility and the land was sold or leased, it would not cost that much to construct a facility for the number of inpatients currently being treated. The census last month accounted for an inpatient population of approximately 40. Mrs. Williams added there had just not been enough time.
Mr. Dini inquired what had happened to the rural clinics and if any would be reopened. Mr. Ghiggeri commented he did not believe there was any funding provided for the reopening of the clinics. Funding had been provided for satellite services. In addition, the central office was being consolidated at the Mental Health Institute.
Mr. Perkins thanked Mrs. Williams and the other members of the committee for their guidance in working with these budgets. He said it was frustrating to deal with a budget such as this and trying to speak for those who could not speak for themselves. There never seems to be the ability to do enough for them. Mr. Perkins extended a special thanks to the staff who worked long hours putting the budgets together.
* * * * *
MR. PERKINS MOVED TO APPROVE THE SUBCOMMITTEE RECOMMENDATIONS FOR BUDGET CLOSURE.
MR. HELLER SECONDED THE MOTION.
Mrs. Chowning mentioned the satellite clinic in North Las Vegas which had been closed. She asked if services would be restored. Mrs. Williams answered that unfortunately the minimum travel time to the southeast office was two hours in each direction. If service could be reestablished, it would be in that location. Mrs. Chowning added the need for service still exists. Mrs. Williams pointed out it was not just time, it was the ability for those who require service to even get to the office.
THE MOTION CARRIED BY VOICE VOTE WITH MS. GIUNCHIGLIANI VOTING NO. MR. PRICE WAS ABSENT AT THE TIME OF THE VOTE.
BUDGETS CLOSED.
* * * * *
Mrs. Williams called attention to AB 431 and stated she had the amendments ready. She commented the amendments were very simple, the bill had been gutted and there were a few sections remaining. Those sections remaining were Sections 2, 9, 11, 12, 16, and on page 10, lines 25-29 were deleted.
Mr. Humke asked if the durable power of attorney had been retained in Section 1. Mrs. Williams answered the section had been deleted.
* * * * *
MR. PERKINS MOVED TO AMEND AND DO PASS AB 431.
MRS. EVANS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE.
* * * * *
Chairman Arberry requested a committee introduction of BDR No. 45-2048, an administration request which requires mining operations who use cyanide or other chemicals hazardous to wildlife to obtain a permit from the Department of Wildlife.
* * * * *
MRS. WILLIAMS MOVED TO INTRODUCE BDR NO. 45-2048.
MRS. EVANS SECONDED THE MOTION.
THE MOTION CARRIED BY VOICE VOTE WITH MR. MARVEL VOTING NO.
* * * * *
Chairman Arberry requested a committee introduction of BDR No. 41-2055 which makes various changes to unarmed combat, a request by the Athletic Commission.
* * * * *
MRS. GIUNCHIGLIANI MOVED TO INTRODUCE BDR NO. 41-2055.
MR. SPITLER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE.
* * * * *
Chairman Arberry requested a committee introduction of BDR No. S-2059 to make an appropriation to Lifeline Pregnancy Assistance and Vocational Training.
* * * * *
MRS. EVANS MOVED TO INTRODUCE BDR NO. S-2059.
MR. PERKINS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE.
* * * * *
There being no further business before the committee, Chairman Arberry adjourned the hearing at 10:55 a.m.
Respectfully submitted,
______________________________
Reba Coombs, Secretary
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Assembly Committee on Ways and Means
May 20, 1993
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