MINUTES OF THE

      ASSEMBLY COMMITTEE ON WAYS AND MEANS

 

      Sixty-seventh Session

      June 16, 1993

 

 

The Assembly Committee on Ways and Means was called to order by Vice Chairman Larry Spitler, at 8:02 a.m., on Wednesday, June 16, 1993, in Room 352 of the Legislative Building, Carson City, Nevada.  EXHIBIT A is the Meeting Agenda.  EXHIBIT B is the Attendance Roster.

 

COMMITTEE MEMBERS PRESENT:

 

      Mr. Morse Arberry, Jr., Chairman

      Mr. Larry L. Spitler, Vice Chairman

      Mrs. Vonne Chowning

      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:

 

      Mr. Joseph E. Dini, Jr. (Excused)

 

STAFF MEMBERS PRESENT:

 

      Mark Stevens, Fiscal Analyst

      Gary Ghiggeri, Deputy Fiscal Analyst

     

SB273Makes appropriation to office of state controller for expenses relating to assessment of need for statewide accounting system.

 

Mr. Darryl Daines, State Controller, testified the 1991 Legislature authorized the controller's office to enter into a five year lease-purchase of equipment and software to meet the state's then present accounting needs.  The hardware was acquired at less than was appropriated.  He noted the balance was originally intended to be used to acquire software to improve our accounting system.  He explained, while this appropriation was not enough to totally upgrade the accounting system, it was enough to allow the agency to pay off the lease-purchase three years earlier than anticipated. 

 

Mr. Daines stated the Controller's Office was encouraged to make the selection and come to the Legislature for the appropriations to complete the job.  He explained members of the Controller's project team had already completed many important and improved systems.  Primary among these had been the identification and assessment of financial systems which would best meet the current needs of the Controller and Treasurer.  The analysis led to the identification of Peat Marwick's suite of financial systems solutions as the preferred application solution.

 

Mr. Daines elaborated SB273 was introduced as a one-shot appropriation to study the implementation of the FAMIS system.  As the bill moved through the Senate, the Controller's Office was encouraged to obtain a figure from Peat Marwick which would eliminate the study, but reflect the total acquisition costs.  He stressed Peat Marwick successfully tested their system on a Hewlett Packard (HP) in Washington and the State Controller's Office received a letter dated June 11 which now identified the total acquisition costs (see EXHIBIT C).  He remarked this cost can be spread over a five year lease-purchase so as not to have a large single year impact.  The Controller and Treasurer requested SB273 be amended to reflect the total acquisition cost.

 

Vice Chairman Spitler inquired what the exact amendment would be.  Mr. Daines replied the amendment would be to increase the $150,000 appropriation to $950,000 over a five-year period.  He noted his office would work with fiscal staff to create amendment language which would accomplish the desired effect within a reasonable time period.

 

Mr. Spitler asked what amount would be necessary for the next biennium.  Mr. Bob Seale, State Treasurer, replied $380,000 would be required for the first biennium of the lease-purchase.

 

Ms. Tiffany asked if a scope of work study had been completed.  Mr. Daines indicated yes, the system had been proven.  Mr. Seale detailed the system would not be a complete accounting system, but would address specific tasks for the Controller and Treasurer.  He indicated the system would be installed through an implementation phase.  Ms. Tiffany emphasized a scope of work would address exactly what the consultant would need to do to assure software implementation was accurate.  Mr. Seale reiterated the system has been proven through a study by Peat Marwick and a letter was received regarding the system and the implementation costs (see EXHIBIT C).

 

Ms. Tiffany voiced her concern regarding the lack of specific information related to transportability, utilization, networking, software, hardware, etc.  Mr. Ken West, Chief Deputy State Controller, discussed the system and noted it would be an evolutionary, not revolutionary, system with batch processing.  He explained the question about the system was not on its ability to work for the two offices, but if the system would work in the HP environment.  He emphasized the UNIX system was fully implemented on an HP9000.

 

Vice Chairman Spitler directed fiscal staff to review the letter received from Peat Marwick and draft specific questions to the Controller's and Treasurer's offices to clarify the issues related to the system and its implementation.  He emphasized more backup information would be required before the appropriation could be approved.

 

Mr. Woody Thorne, Budget Division, pointed out, recommended in The Executive Budget, was an appropriation to the State Controller for $150,000 to facilitate a study of the need for a new statewide accounting system.  He stated the Administration does not necessarily disagree with what was being proposed by Mr. Daines, but the approach taken was questionable, as Ms. Tiffany pointed out.  He remarked testimony related to Information Technology and Data Processing budget accounts was quite pertinent about looking ahead and the impact of the system enterprise wide.  He emphasized the state accounting system would be considered the most enterprise-wide system in the state.  What may be ideal for the Controller, may cause substantial problems for other state agencies which deal with the system.  Mr. Thorne stated the Administration wants to stress the importance of reviewing those issues and information within the needs assessment.

 

Mr. Daines replied the Controller and Treasurer had indicated previously that the system would be totally transparent to the other agencies.  There would be no changes to the chart of accounts or General Ledger numbering systems and this was included as a primary requirement.

 

Vice Chairman Spitler closed the hearing on SB273.

 

SB167Requires chief of purchasing division of department of general services to establish certain standards to be used by state agencies when purchasing new equipment.

 

Mr. Tom Tatro, Acting Administrator of Purchasing Division, testified SB167 requests the Purchasing Division to draft regulations to allow agencies to compare renting, leasing, or buying equipment and to determine whether to provide equipment maintenance either in-house or through contract.  He stated the Purchasing Division intends to modify some textbook models to meet the state's budget methodology and to draft the regulations within the next few months.

 

Vice Chairman Spitler asked how this issue came about.  Mr. Tatro replied it came out of the SCR2 Privatization Subcommittee as published in the LCB Bulletin 93-18.

 

Mr. Spitler asked for a review of the fiscal note.  Mr. Tatro indicated there should be no fiscal note attached to this bill.  He explained the Purchasing Division originally did not believe it could accomplish any task which was not core to the division's operation, but through budget modification this function could be accommodated without a fiscal note.

 

Vice Chairman Spitler closed the hearing on SB167.

 

SB389Specifies amount to be paid by certain public employers for group insurance for public employees for next biennium.

 

SB390Specifies amount payable by state for group insurance for retired public employees.

 

Mr. Thorne testified SB389 and SB390 implement the Executive Budget recommendation in setting the state's contribution rate toward the benefit premium of state employees and the retirees.  He stated SB389 would continue the current $213.75 per month for each employee through FY94 and it would increase to $226.50 in FY95.  He noted SB390, for the state retirees, would maintain the current contribution of $119.35 per month through FY94 and it would increase to $127.61 per month in FY95.

 

Mr. Dave Thomas, State Risk Manager, provided the committee with an outline of how the Benefits Committee arrived at the proposed contribution levels (see EXHIBIT D).  Mr. Thomas testified SB389 and SB390 would establish the state contributions for active and retired employees to the state health insurance program for the 1993-95 biennium.  These amounts are bi-annually established by the Legislature and, for active employees, have historically been designed to at least cover the amount necessary to fully fund the cost of the plan for employee-only coverage.  For retired employees there has historically been a contribution required because the state contribution has not been sufficient to fully cover the cost.  In calculating these amounts, the Risk Management Division began from the premise of maintaining the historical relationships.

 

Mr. Thomas discussed the plan benefits breakdown as included in EXHIBIT D.  He stated the current contribution level for active employees was in excess of the amount necessary to fully fund the employee-only coverage, while retired employees under age 65 are presently required to contribute $75.58 and those over age 65 are required to contribute $1.27 due to Medicare supplement.  To calculate the amount necessary to account for inflationary increases the medical component was initially increased by the total medical trend anticipated by the actuary (see page 3 of EXHIBIT D).  He emphasized the medical component of the plan would be the most susceptible component to inflationary change.  He noted the other various components would change only slightly from year to year, if at all.  Consequently, the Benefits Committee felt it most appropriate to assure the contribution level adequately reflect the anticipated inflationary changes in the medical component.  Based on the actuary's advice, the medical component was increased by the anticipated inflationary medical trend for each year of the biennium.  The total anticipated medical trend increase for each year would be 16.3 percent and would be composed of various factors the actuary included to predict claim and premium requirements of the fund.

 

Mr. Thomas emphasized the result was $172.85 per month for active employees for the medical component alone or $211.68 per month by adding the other benefit components.  Thus the current contribution level of $213.75 for active employees would be sufficient to continue to cover the actual costs of the plan or the first year of the biennium.  He noted, for the second year of the biennium, the medical, dental and vision components would increase by the anticipated medical inflation component of the trend to result in a total required increase in the state contribution of $12.75 per month for active employees and $8.26 per month for retirees.  He explained for retired employees the benefits committee used the current rate for those over age 65 as those retirees constituted the largest component of the retired employee population.  The other components would not be anticipated to increase over the biennium.

 

Mr. Al Edmundson, Retired Public Employees of Nevada, testified in support of SB389 and SB390.

 

Mr. Bob Gagnier, Executive Director of the State of Nevada Employees Association (SNEA), testified in opposition of SB389 and SB390.  He emphasized passage of these bills as written, especially SB389, would be a vote to continue the benefit cuts which were placed upon state employees last January and a vote for increased costs to state employees with dependent coverage.  He stressed it would also be a vote to increase the amount state employees have to pay for their families insurance coverage next January.

 

Dr. Jim Richardson, Nevada Faculty Alliance, concurred with Mr. Gagnier.  He stressed this was a high priority item for all Nevada state employees including University employees.  He stated approval of these bills would be a vote to allow continued deterioration of the state health plan.  He emphasized the medical inflation figures utilized by Risk Management was 16.3 percent and approximately 12 percent for dental, yet there were no increases being requested for the first year of the biennium.  He pointed out this would mean state employees and University professionals who would not be receiving any cost-of-living increase, would, in fact, receive a cut in compensation.  He urged the committee to do all they can to alleviate this situation, particularly in the first year of the biennium.

 

Mr. Spitler asked Dr. Richardson, based on his experience with his colleagues and other states' policies, was this trend typical nationwide or regionally.  Dr. Richardson replied both health care costs and lack of education funding continued to be serious problems regionally and nationally, but statistics indicate Nevada is considerably lower, on the average, in terms of the amount of money contributed for health insurance per state employee in national comparisons.

 

Dr. Richardson reiterated Nevada is in a dismal situation and it is already seriously effecting the morale of all state employees.

 

Mr. Mike Johaneson, SCIU, concurred with Mr. Gagnier and Dr. Richardson.  He emphasized the State of Nevada previously contributed 70 percent of the cost for dependent coverage for state employees.  In two years, the state contribution will be down to 30 percent.  He emphasized the passage of SB389 and SB390 would essentially increase the cost to families for dependent coverage another $100 per month and his constituents believe this would be an awful way to go about balancing the budget.  He indicated, in his testimony before the Senate Finance Committee, he had attempted to appeal to the human side of this issue and it did not work.  He noted 400 families who had dependent coverage opted out because of the increase in rates in January 1993.  He remarked this is a large number of families who no longer have dependent coverage and this will occur again if rates are increased.

 

Mr. Johaneson stressed all organizations representing state employees have been attempting to say to everyone that this is the number one issue for employees and it is "breaking the hearts of state employees."  He appealed to the committee to find a way to find some more money for this issue.

 

Mr. Price commented this is the first time an issue has been found which all the various state employee associations are in agreement.

 

Vice Chairman Spitler closed the hearing on SB389 and SB390.

 

Mr. Spitler, on direction of Chairman Arberry, appointed a subcommittee of himself, Chairman Arberry, and Ms. Tiffany to review the Motorcycle and Bicycle Safety Programs which were approved by the 1991 Legislature.  He stated a subcommittee hearing would be posted for next week to review the budgets.

 

Vice Chairman Spitler adjourned the hearing at 8:35 a.m.

 

                                                RESPECTFULLY SUBMITTED:

 

 

                                                _________________________

                                                Kerin E. Putnam

                                                Committee Secretary

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Assembly Committee on Ways and Means

June 16, 1993

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