MINUTES OF THE
SENATE COMMITTEE ON FINANCE
Sixty-seventh Session
April 9, 1993
The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Friday, April 9, 1993, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Bob Coffin
Senator Diana M. Glomb
Senator William R. O'Donnell
Senator Matthew Q. Callister
STAFF MEMBERS PRESENT:
Daniel G. Miles, Fiscal Analyst
Robert Guernsey, Principal Deputy Fiscal Analyst
Judy Jacobs, Committee Secretary
OTHERS PRESENT:
Judy Matteucci, Director, Department of Administration
James T. Spencer, Deputy Attorney General, Office of the Attorney General
Glenn Rock, Director, Department of Personnel
Robert J. Gagnier, Executive Director, State of Nevada Employees Association
Norah Ann McCoy, Legal Counsel, State of Nevada Employees Association
Annette R. Swainston, Senior Management Analyst, Division of Child and Family Services, Department of Human Resources
The Honorable Sue Wagner, Lieutenant Governor, Office of the Lieutenant Governor
Dr. David N. McNelis, Executive Vice President of Nevada Industry, Science, Engineering and Technology (NISET) Inc.; Associate Vice President for Research at University of Nevada, Las Vegas
Tim Carlson, Director, Commission on Economic Development
Senator Raggio opened the meeting with the presentation of two bill draft requests (BDRs).
BILL DRAFT REQUEST 16-1913: Increases balance of prison revolving account.
Senator Raggio reported the request to increase the fund from $5,000 to $10,000 included in BDR 16-1913 had been made by the Department of Administration.
Judy Matteucci, Director, Department of Administration, confirmed his statement and explained the Department of Prisons had requested the increase in the revolving fund. She said prison officials had indicated the bill would secure some savings in their budget account from which they could make reimbursement.
SENATOR COFFIN MOVED TO INTRODUCE BDR 16-1913.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS O'DONNELL, GLOMB AND CALLISTER WERE ABSENT FOR THE VOTE.)
* * * * *
BILL DRAFT REQUEST 22-1860: Makes various changes relating to administration of Nevada Tahoe regional planning agency.
Senator Raggio stated BDR 22-1860 also had been requested by the Department of Administration. Ms. Matteucci explained the measure came about as the result of a recommendation in the Executive Budget for the TRPA (Tahoe Regional Planning Agency) to be administered out of the Division of State Lands. She declared the attorney general's office and the Legislative Counsel Bureau both felt statutory changes were in order.
Senator Raggio acknowledged there had been some concerns expressed regarding the bill draft but suggested BDR 22-1860 be introduced in order to initiate meaningful discussions on the issue.
SENATOR COFFIN MOVED FOR COMMITTEE INTRODUCTION OF BDR 22-1860.
SENATOR RAWSON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS O'DONNELL, GLOMB AND CALLISTER WERE ABSENT FOR THE VOTE.)
* * * * *
Senator Raggio announced the hearing should be expedited because the floor session was scheduled to commence at 10:00. He indicated he would attempt to accommodate those from out-of-town during the proceedings.
ASSEMBLY BILL 316: Makes appropriation to state board of examiners for settlement of claim on behalf of certain state employees.
Senator Raggio explained the measure was drafted pursuant to the decision in the Benzler v. State of Nevada [Janice Benzler v. State of Nevada, 804 F. Supp. 1303] case. He noted the bill before the committee was the first reprint. He edified the committee by explaining the first bill had appropriated money for the contemplated exempt-merit plan while the reprint refers only to the sum necessary for settlement of the claim in the court decision.
Ms. Matteucci explained the prospective compensatory payments for those classes of employees that will move from current unclassified or classified employment into exempt-merit was being held by the Assembly Committee on Ways and Means until after they have an opportunity to review the exempt-merit service. She observed the bill on exempt-merit is one being introduced by the Senate Committee on Finance.
Ms. Matteucci called attention to two packets of information. The first, Exhibit C (Original is on file in the Research Library.), defines the appropriation request to the State Board of Examiners in order to comply with the Fair Labor Standards Act (FLSA). She said the amount requested is actually $3,389,471, not the erroneous amount delineated at the top of the first page of the exhibit.
Ms. Matteucci stated in December the State Board of Examiners had entered into a settlement agreement with the plaintiffs who had been seeking overtime compensation for a 2-year period at time and a half rather than the straight time compensation they had received.
Ms. Matteucci pointed out there are three distinct sections in the bill as depicted on the first page of Exhibit C. She said retroactive liability payments in the amount of $2,231,866 would apply to the half-time portion of overtime that was accrued prior to fiscal year 1993 by both plaintiffs and non-plaintiffs. In response to a question by Senator Raggio, Ms. Matteucci answered she was unable to state exactly how far back the claims would apply. She thought it was about 2 years to July of 1992 and it depended upon when people joined in the lawsuit.
Ms. Matteucci stated the amount proposed for plaintiff and SNEA (State of Nevada Employees Association) liability would provide retroactive payments for the current fiscal year through December 18, 1992. She explained the payments for compensatory time liability for SNEA members for both exempt and nonexempt non-plaintiffs came about as a result of the ruling and settlement discussions which require that all SNEA members be paid for overtime in cash for accumulated time. She surmised the latter will be the subject of much discussion.
Senator Raggio asked for clarification. Ms. Matteucci explained the term "nonexempt" refers to people who are currently classified who earn overtime at time and a half. She explained part of the settlement as agreed to by the State Board of Examiners and SNEA would provide that all SNEA employees in either classified or unclassified service be paid compensatory time.
Senator Raggio inquired if that meant employees would receive payment even if they preferred compensatory time. Ms. Matteucci affirmed his opinion, which she ascribed to a request by SNEA.
James T. Spencer, Deputy Attorney General, Office of the Attorney General, indicated the issue will be discussed by the employees association because it is a point of contention. He declared SNEA filed and won the Benzler v. State of Nevada lawsuit asking for overtime cash based upon alleged Fair Labor Standards Act violations. He said the court ordered cash payments because there had been no prework agreement regarding compensatory time established according to federal regulations.
Mr. Spencer said during settlement negotiations with SNEA a discussion which was held requesting payment of partial compensatory time instead of all cash failed. Thus, he said, the final document submitted and signed by the Honorable Edward C. Reed, United States District Court Judge, granted all cash payments to employees.
Mr. Spencer attributed the problem to the lack of a preemployment agreement regarding compensatory time. He warned the state will be subject to another lawsuit if it does not pay the judgement ordered by the court in cash and the state could even be subject to double liquidated damages. He declared the Office of the Attorney General had determined that the balances must be paid in cash under the settlement agreement and under the regulation which requires a prework agreement in order to remove the liability from the state and to comply with Judge Reed's order.
Senator Raggio asked if that meant plaintiffs in the case could not waive cash payment if they preferred to keep compensatory time. Mr. Spencer replied that was correct, that they cannot waive their rights under the provisions of FLSA. He cautioned the state might continue to have liability if anyone did waive the cash because any such persons could sue the state at a later date.
Mr. Spencer claimed his prime concern was to ensure the state complies with the order of the judge as entered which requires the payment of cash. He asserted when an employees' association, such as SNEA, has been recognized as the bargaining agent for FLSA purposes agreement to use compensatory time must be achieved with the association before any work is performed. He said:
We had comp [compensatory] time on the books because we weren't aware of that until the Benzler case, and now with the Benzler case we're advising the Department of Administration...those comp-time balances were erroneously credited as comp time because we should have put it down as cash until there was a working agreement between the administration or the employer agency and SNEA. Absent that agreement, putting it down as comp time subjects the state to some liability.
He reiterated his advice pay Judge Reed's order in cash. He said compliance will absolve the state from liability in the future because there is another regulation that allows for the payment of compensatory time at the option of the employer under FLSA.
Ms. Matteucci continued to say the third portion of the payment under subsection (c) of section 1 of A.B. 316 is the retroactive payment to non-plaintiffs for $449,995. She enumerated the total due at $3,389,471.
Ms. Matteucci noted the first reprint of the bill includes $344,468 for half-time costs incurred for employees in the Department of Motor Vehicles and Public Safety and in the Public Service Commission of Nevada affected by the Benzler decision. She said that sum was for payment of expenses incurred prior to July 1993.
Senator Raggio restated the decision as calling for payment across the board whether or not the individuals were plaintiffs. Ms. Matteucci responded the settlement extended payment to non-plaintiffs as well as plaintiffs because the Board of Examiners felt there was an inequity issue. She explained they assumed it was only a matter of time before the non-plaintiffs became plaintiffs in order to also claim cash payments.
Ms. Matteucci voiced the intention that any compensation made for highway fund payments for the current fiscal year under sections 1 (b) and (c) would be treated as would any other normal salary adjustment by using any available funds within the agencies. If there are not sufficient funds she indicated those sums would be supplemented. However, she said, that cannot be done for prior fiscal periods, because current appropriations cannot be used for prior periods, hence the appropriation of $344,468. She asserted the rest of the payments for the current fiscal year can be absorbed by their budgets because they were not subject to budget cuts.
Ms. Matteucci said the next pages of Exhibit C include copies of the minutes of the State Board of Examiners wherein agreement was reached on the settlement. Other attachments include a letter from Mr. Spencer describing the settlement (Exhibit D. Original is on file in the Research Library.) and a letter from the State Gaming Control Board (Exhibit C).
Ms. Matteucci stated the State Gaming Control Board had not included all accumulated overtime because the members were under the impression they were restricted to 80 hours. She said:
As people submitted more than 80 hours...the payroll clerk would take that off of their time sheets. Nevertheless that time had been recorded on the time sheets. It is the attorney general's office's opinion...those individuals are indeed entitled to that payment, and the adjustments that were made in the ways and means committee take care of that.
She admitted she had not been supplied with a written opinion by the Office of the Attorney General. Acknowledging the reports in the press regarding overtime payments, she continued to say:
The amounts that were not included in the overtime liability you're looking at for people that are now eligible for time and a half that were not eligible...which gets to the issue of why we want to convert people to the exempt-merit shows itself...most clearly on the overtime liability list number two [page 15 of Exhibit C] which is two pages in back of Mr. Elges' letter [from the State Gaming Control Board].... It shows you there that you have people that are currently on the gaming control board that are entitled to back payments....
Senator Raggio inquired what the salaries were for members of the State Gaming Control Board. Ms. Matteucci recollected the salaries for members were in the $82,000 range while the salary for the chairman was about $85,000.
Senator Raggio asked if the overtime liability list went back to 1990 and it was correct that one salary had incurred $121,000 over and above salary in that period of time. Ms. Matteucci replied that was correct. Senator Raggio asked how that could occur. Ms. Matteucci responded:
The current understanding as we entered into this current interim was that...most of these people were only entitled to 80 hours of overtime.... Most of the directors and...many of the people in the unclassified service are currently restricted to only carrying 80 hours, and what the Fair Labor Standards Act says is, no, that's not correct, you cannot do that. If you're going to require these people to essentially be hourly employees...then they are entitled to as much overtime as they work and they are entitled to it, in the case of the gaming control members, largely because they are term appointments and do not serve at the pleasure of an elected official. They are entitled to it not only at straight time but time and a half. That is why you see these kinds of liabilities being incurred as a result of...those people recording that time which they are obligated to do.... You cannot waive overtime.
Ms. Matteucci stated the list in question was a good example of why it is appropriate to move into exempt-merit service. She asserted there will be requirements to pay time and a half for anyone working overtime without use of the exempt-merit service.
Senator Raggio asked when it was first discovered that there would be requirements to pay for the overtime. Ms. Matteucci replied it was first discovered in February. She explained the second list was attached because the overtime had not appeared in personnel files. The overtime requests had not been submitted by those people who, along with the payroll clerks, understood they were only entitled to 80 hours of overtime. She said once the FLSA settlement became known, in February, the charges for overtime were recovered in the personnel payroll files to enable payment according to FLSA requirements.
Senator Raggio asked if all the positions on the list were unclassified. Ms. Matteucci was unable to confirm that all the positions were unclassified; but she surmised most of them were, especially all those in gaming.
Senator Raggio stated salaries for the State Gaming Control Board had been set taking into consideration their duties and responsibilities and with the understanding the salaries were all they would receive. He said there had never been any indication those people would receive overtime pay.
Ms. Matteucci agreed and said she felt that had been everyone's understanding. She said many employees had simply not reported overtime worked because they had the same understanding. However, she declared, some individuals did record the overtime; and since the recording constitutes a valid record of the work performed, the attorney general's office made a verbal opinion that they are entitled to the overtime payments.
Senator Raggio reiterated he had some problem with payments going to the State Gaming Control Board. He asked if the overtime applied to those, like the gaming control board members, who manage agencies and who control the amount of overtime. Ms. Matteucci responded Mr. Spencer could define the requirements of the Fair Labor Standards Act more clearly than she. However she expressed the understanding that even a person appointed by an elected official is subject to time and a half as long as the appointment is for a specific term and is not at the pleasure of the elected official or body.
Mr. Spencer declared the issue is whether the employees in question must meet a salary-basis test in order to receive an exemption under the Fair Labor Standards Act. He explained the Benzler case pointed up several areas of Nevada state law in which there was a failure to meet the salary-basis test. Those included, he said,
"having a program...for suspensions for discipline, keeping records and some other things in cases that came up after the Benzler case was filed."
Mr. Spencer attributed the problem to the fact many of those people do not meet the appointed-official exemption. As an example of a person who meets the appointed-official exemption and does not have to meet the salary-basis test, he cited Scott M. Craigie, Chief of Staff for the Governor's Office who was appointed by and serves at the will of the Governor and thus is exempt from time and a half requirements.
Mr. Spencer declared:
The problem with this class of employees with the extremely high overtime is that they are appointed to a term, the Governor has some conditional termination causes that must be met, and they do not meet that specific exemption. Therefore they have to meet the salary-basis test.
Senator Raggio declared there had been no expectation that they would be entitled to any pay other than fixed salary on the part of members of the gaming control board. He inquired if the claims being made were also being made on their behalf. Mr. Spencer responded, "They're entitled to it under the Fair Labor Standards Act." He pointed out the FLSA applied to many jurisdictions and had caught everybody by surprise. When asked if the overtime payments could be waived, he responded, "That's another right under the Fair Labor Standards Act. What they do with the money when they get it is another question."
Senator Coffin related a similar situation he had faced many years earlier wherein he preferred to be paid on a commission basis and not to take overtime. He resolved his dilemma, which he attributed to the FLSA, by resigning from the company. He called the FLSA position inflexible and concluded, "It's a fact, it's incredible."
Senator Raggio requested that a breakdown of the computations for overtime be furnished to the committee. Ms. Matteucci agreed to do so.
Senator Callister said:
I'm not certain that we're going to have a more in-depth analysis of the Benzler decision but I want to...get a summary handle on what you're suggesting is the test.... It sounds like the first question you ask is whether or not this is an exempt category, and if it's not then you apply this which you referred to as the salary test?
Mr. Spencer replied that was "fair." He stated there are very few exemptions under the Fair Labor Standards Act, one being for attorneys and another for teachers. He said there are specific categories named in the act which are based upon historical reasons that are exempt. He continued to say the test is a two-part duties test. When asked by Senator Callister what a duties test is, Mr. Spencer replied:
One exemption would be a professional. Do you perform professional duties in your job. And there are two, there's a short test and a long test for that.... If you meet that test, then under the current Fair Labor Standards Act...you have to meet a salary-basis test, meaning that you're not paid on an hourly wage, you're paid on a fixed amount of money for...work and...your income does not change based on a change in the amount or the quality of work.
Senator Callister inquired:
So you're either in the exempt category by the nature of the job, i.e. teachers, lawyers.... who are just automatically exempt, but then you go back and...look at the duties, and if they are...`professional'...then the second half of that follow-up test, after you determine whether you are in the exempt category or not...the salary-basis test, and that's to ask whether or not you're paid on an hourly or fixed salary per year.
Mr. Spencer replied "That's a fair characteristic."
Senator Callister continued his questioning, "Using the example of either Mr. DuCharme or Mr. Roche [on List 2 in Exhibit C] how did that apply?... Why aren't they a professional?" Mr. Spencer answered they may be professional, but even if it is assumed they are professional they failed the salary-basis test because they had to fill out BTAs [biweekly time adjustment sheets]. He declared the massive impact of the FLSA is due to the fact so many state employees must fill out BTAs. He added there have been statutes in effect since 1953 wherein classified employees may be suspended for disciplinary purposes, and under California case law it was shown that if pay can be reduced for disciplinary reasons the pay has not been on a salary basis which is a failure of the salary-basis test. He said that was determined from developments that took place in January and February of 1992.
Senator Callister continued to conjecture that even if a salary were fixed, if the employee were compelled to fill in a BTA, the employee would fail the salary test. He attributed the failure to the requirement of filling in a time sheet.
Senator Callister asked how long the FLSA had been in effect. Mr. Spencer said it was first adopted in 1938 and a decision in 1985 applied the FLSA standards to states. He said amendments were added in 1986 which modified the application to public entities.
Senator Callister asked why the problem had not been foreseen if it had been causing similar problems around the nation. Mr. Spencer admitted:
We saw it coming last session... with the first case that said if you have a part-day absence you fail the salary-basis test, and if you have a policy of that it applies to all employees, not to one person, in the work week where they have the part-day absence, which is what happens in some of the other jurisdictions.... In the ninth circuit [United States Court of Appeals for the Ninth Circuit] we're unique. We have a situation that if you have a policy for having a part-day absence...then it applies to all employees and they all fail the salary-basis test and must be paid at time and a half.
Mr. Spencer reminded the committee a bill had been enacted last session designed to resolve some of the problems regarding leave. He said recent case law had come as a surprise because it had been assumed the 1991 legislation had resolved part-day absence problems.
Senator Callister asked if it was something other than the part-day absence problem that was generating large payments such as the $121,000 payment that had been made in one instance. He reiterated his concern such payments were attributable to compelling unclassified employees to keep time sheets.
Mr. Spencer responded that was one of the reasons. He said:
In Benzler there were three basic grounds in new case authority that came out besides the part-day absence issue.... Judge Reed said, `Well, if you have this, it's an indication of non-salary basis, or if you have this, disciplinary suspension, it's an indication that you're not paid on a salary basis.' So that may be one thing that we require people to fill out their time and that it's possible if they take 4 hours off in a day their salary will be reduced. That would be one reason you could fail.
Senator Callister admitted while he had been cognizant there was a problem last year he recalled:
What we thought we may have occur in a worst-case scenario was a series of $100 or $200 or $300 claims from a number of employees. And yes, that's expensive in its totality and yes, maybe we'd have to respond to it, but what's extraordinary, and what I don't think anyone had alerted us to the possibility of was this notion of we're going to get $50-60-70-120,000 claims...from some our most highly paid state employees. ...It's all a bitter pill to swallow, but that part is extraordinary.
Mr. Spencer agreed. He acknowledged the Office of the Attorney General had not foreseen the results either. Senator Callister queried:
Is Nevada the first case that you're aware of where that has happened, where when there's finally been a determination made that you're not in compliance with fair labor standards, that you've had as a component of the adjudication a determination that some of your most highly paid, typically what you call exempt-merit or unclassified, whatever you want to call them.... We're trying to call it something different in hopes that we'll immunize ourselves from next case, which almost certainly is going to come down the pipeline. ...Is Nevada the first...state that's had this problem with its highest-paid employees because they were keeping time?
Mr. Spencer replied, "The cases I'm aware of were the San Diego case and the Sacramento case and I don't have any dollar figures on that. One of the cases was having to do with battalion fire chiefs only."
Senator Callister requested, "I would appreciate...if...you...take a look and see if this...aberrational component is really unique to Nevada, or if that's a problem that's manifesting itself throughout the states as the Fair Labor Standards Act is involved...."
Ms. Matteucci interjected:
I might add...it's my understanding...that those us of that are in the ninth circuit are perhaps leading the way on a number of these issues. The ninth circuit has been tremendously difficult for management to satisfy relative to Fair Labor Standards Act, and I know in my discussions that there are a number of...southern states that are now beginning to get concerned because they're seeing some of these decisions come their way, and we have been trying to attempt to notify other agencies of the problem, but...some of it...depends on what circuit you're in, and we do have a tough circuit relative to the way they look at the Fair Labor Standards Act, and I don't even think that they'll even entertain another circuit opinion on issues which kind of prohibits--
Ms. Matteucci declared:
On exempt-merit I want to make it very clear that we don't intend to just call it something else. We have to make good-faith efforts to change the system so that it does meet the fair labor standards requirement and the Department of Personnel had been meeting with the DOL [Department of Labor]. They've made every effort to make sincere and actual changes and not just do something and quick just tell all these people you don't have to keep your time sheets and therefore we qualify `cause that isn't all the issue.
Senator Callister expressed the opinion it was obvious the Senate Committee on Finance has to pay very close attention to that. He defined it as "a very extraordinary, complex legal issue" for which the legislature will have to appropriate funds. He asserted the legislature should be very cautious about the procedure in resolving the problem.
Ms. Matteucci agreed and added that was one reason for a decision to examine the personnel issue separately from the proposed reorganization bill. She averred the personnel issue should be examined by itself. She said, "You do have that skeleton committee. We'll be working very closely with you on what our proposal is."
Senator Coffin said:
The GCB [State Gaming Control Board] is a unique organization. ...Perhaps the reason why we're in this jackpot here with this one is because we directly assess the clients or the casinos for the time that employees spend in investigatory work on their licensing, and is it possible that we could avoid...the problem with the GCB in the future by changing the statutes regarding how the licensees are charged? Because I understand why these chiefs are keeping track of their time. They're only doing it for that purpose because the industry has screamed long and loud that `We're getting overassessed, we're getting overcharged for the time,' and you want to be able to prove it. So the agency...and all these other guys are charging like attorneys will do...and accountants...by the quarter hour, probably.
Senator Coffin asked if there was a way to change the statutes that would "step-aside" from the Benzler decision.
Ms. Matteucci responded:
I'm not sure that the gaming control board goes to the...degree of allocating each one of the gaming control board member's time to investigatory charges. You would have to ask chairman Bible [William A. Bible, Chairman, State Gaming Control Board] exactly how he works up his hourly charge, but I'm not sure that it's allocated quite as finitely as would be indicated here...for the charges. Certainly there are hourly rates, and as you know the gaming control board has proposed an increase in the hourly rates for their investigative fees, but whether or not it goes, you know it's a time-allocation process all the way through the gaming control board. I doubt...that I can get that information for you.
Senator Coffin responded, "I almost instinctively think that that's the case.... I think we ought to...consider the possibility of making a change in the assessment procedures on the casinos."
Senator Raggio asked if the information had been furnished to the Assembly Committee on Ways and Means. Ms. Matteucci replied in the affirmative and said the information had been included in the first reprint of A.B. 316 so the amount of appropriations would not have to be adjusted. She said, "It did have a $339,000 upward impact on the appropriation that we had proposed originally."
Senator Raggio reiterated he was concerned because the legislature had been very cognizant of the fact that the members of the State Gaming Control Board were doing a great deal of work and overtime when the salaries for them had been set. He said:
Those were the representations made, and when we set the unclassified salaries they were purposely given a large increase in salary a couple of sessions ago for that very reason. I'm sure none of these four expected, anticipated nor do I believe really want extra salary or payment. I really have a concern about this, and this is the first I have received this information. Those four persons alone represent over $200,000 of this total amount of $334,000.
Senator Raggio asked Ms. Matteucci if she had visited with those people regarding their desire to be compensated. She replied she had spoken with the chairman who, she said, "absolutely shares your understanding of where their salary was established, and I have read the accounts of some of the other members and their concerns." She added she did not believe the FLSA allowed anyone to waive the money.
Senator Raggio responded he did not believe a person could not waive the money. Ms. Matteucci said she believed the attorney general's office had come to the same conclusion. Senator Raggio declared he was astounded at the overtime being recorded.
Senator Glomb asked why the people on the State Gaming Control Board took such meticulous effort to keep time sheets for 2 years if they were not expecting overtime pay. From her own experience she asserted it is inconvenient and bothersome to be required to keep track of every minute or hour.
Ms. Matteucci said she could not answer that question but she surmised from the uneven distribution of overtime tracked those people did not all keep meticulous time records.
Senator Callister asked if there were any value in going back to the judge with a motion for reconsideration and ask him to be aware of documented legislative history that salaries were reestablished at significantly higher levels because of the anticipated time. He suggested the judge might reconsider as to some of the highly paid State Gaming Control Board salaries the inequity of awarding a range of $349 to $121,000.
Senator Callister continued:
Ought not the judge be made aware of the fact that as Judy [Ms. Matteucci] just responded, some within that elite cadre...that makes up this $250,000, they all could have been at the $121,000 if they'd all just kept the records.... That...there's going to be enormous inequity between those members of the gaming control board simply because somebody kept better track of his time than somebody else. It just occurs to me that there might be a useable distinction there....
He suggested it might be worth investigating his proposal if it would save $250,000.
Mr. Spencer pointed out that if the analysis did apply to the four positions it would probably be applicable to any unclassified employee who took a higher salary and gave up the merit system. He stated he had no knowledge of any exemption because a person was paid more or because of any understanding between the employee and the state. He said the state had expected that all such employees were paid fairly and all the employees took their jobs under the assumption that they would be paid fairly. He called the overtime being paid under FLSA a windfall.
Senator Callister said he understood that argument as it applied to all unclassified workers but opined the argument was even more refined as it applies to the members of the State Gaming Control Board. He described it as "a unique notion that they spent an inordinate amount of preparatory time." He declared that was the understanding under which their salaries had been raised by the legislature. He said affidavits could be obtained from those who had served on the money committees supporting that viewpoint. He stated testimony could be found from representatives of those who had presented the budget two years earlier at which time the argument had been made to raise those salaries. He added testimony could be found from the money committees discussing the subject. He argued his points make a distinction between someone in a traditional agency and the members of the State Gaming Control Board.
While excluding any individuals, Senator Raggio voiced his concern, "If a person heads an agency and has the power to delegate or control overtime, where's the practical control over that?" He stated he could not understand the rationale because, if a person wanted to, he could control his own overtime.
Ms. Matteucci concurred and declared that gets to the heart of the reason for the proposal being made to establish an exempt-merit class. She said the exempt-merit class will have different recruitment standards, different disciplinary standards, and no timekeeping so that it will be very clear that no overtime will be accrued. She told the committee the attorney general's office has concluded the same problem may continue if no change is made.
In response to Senator Raggio, Ms. Matteucci said, "Your question is, not all of the heads of offices are entitled to the overtime." Senator Raggio interjected, "If they have a fixed term. So obviously...we should take away that situation for anybody who has a fixed term." Ms. Matteucci agreed that was one of the areas in which people should be placed in exempt-merit service. She stated if people were placed in exempt-merit service or exempt-appointed service the overtime issues would be addressed. She declared it is not just the time sheets that serve as a basis for the interpretation of overtime.
Senator Raggio inquired what other agencies that have fixed terms would be included, such as the Public Service Commission (PSC). Ms. Matteucci replied the PSC would be included, although it is not a general fund agency, if the members had any overtime. She said:
One of the proposed amendments I'm going to give you today that was taken out of the assembly ways and means committee, is they took out...Mr. Teglia's [Wayne R. Teglia, Coordinator Continuing Education, Peace Officer Standards and Training/Nevada Law Enforcement Academy] salary. He is appointed to a term.... So he is entitled to time and a half.
Senator Raggio asked Ms. Matteucci to provide the committee with all backup on any claims for any individuals in excess of $10,000. She admitted the information had not been delivered to the committee, only the summary and total amounts. She did not believe there were many individuals with claims over $10,000.
Referring to a copy of the settlement agreement (Exhibit D), Senator O'Donnell noted A.B. 316 was the funding mechanism for a settlement for the particular cases involving overtime that had already been agreed upon by the attorney general. Ms. Matteucci interjected the settlement had also been agreed upon by the State Board of Examiners.
Senator O'Donnell asked if the settlement was agreed upon outside of the court. Mr. Spencer responded that was not completely correct because the agreement had also been approved and signed by Judge Reed. In response to another question, Mr. Spencer said the matter had gone through a complete trial under a motion for summary judgement in which the state lost. He said the settlement terms that had been discussed included a protracted payment requested by the state employees association and other plaintiffs which they subsequently gave up. The ultimate solution, which had been offered by the state, was to pay cash in a lump sum in exchange for an agreement not to appeal.
Mr. Spencer said the parties including the employees association took the agreed upon settlement to the State Board of Examiners with a recommendation for approval by the attorney general. The board approved the recommendation and it was later approved by the court.
Senator O'Donnell asked what would happen if A.B. 316 failed to pass. Mr. Spencer opined the matter would probably return to court under the order which had been signed at the end of the settlement agreement.
Senator Raggio asked when the sum was scheduled for payment. Ms. Matteucci replied the first payment was due on April 23, 1993. She said the State Board of Examiners had approved payment to the agencies on March 25, 1993, pending approval of A.B. 316. She conceded the agencies would have to make the payments even if A.B. 316 failed to pass.
Glenn Rock, Director, Department of Personnel, came forward to report the entire issue of the definition of classified or unclassified employment versus exempt and nonexempt employment is being challenged throughout the country. He said the United States Department of Labor has used the language "exempt" and "nonexempt," whereas most of the states have used the terminology "classified" and "unclassified." He declared the definitions are not necessarily consistent. He said, "We've got unclassified people that don't necessarily meet the exempt categories."
Mr. Rock offered the opinion it is immaterial to get into the so-called duties test unless the salary-test issue can be corrected. He related he had read a recent newspaper article in which the employees of the City of San Francisco who are paid salaries of $50,000 to $100,000 were filing a lawsuit because they have been required to note the time if they come in even 15 minutes late. He reported they are claiming that is a violation of the FLSA and thus they are entitled to time and a half.
Senator Raggio asked if that means no record may be kept of employees who arrive late. Mr. Rock answered:
The issue on this case is if you dock them for less than a day, that's the issue that I'm assuming that they're going to pursue, then you in fact have to consider them time and a half type employees, and they are waged as an hourly employee not as a salaried employee even though they're paid up to $100,000 a year.
Mr. Rock asserted those in the ninth circuit are subject to the provisions of Abshire v. County of Kern 908 F.2nd 483 (9th Cir. 1990) Cert. Denied 111 S. Cp. 785 (1991). He voiced his impression the Benzler case will figure in more wage decisions. He said the State of Utah had recently been subjected to a number of charges as a result of which they have commenced paying everyone time and a half with the exception of those that are appointed by elected officials and who serve at their will.
In response to a question as to whether legislators are exempt, Mr. Rock replied the congressional act specifically exempted congress and the legislature.
Ms. Matteucci said attorneys' fees are also due which had not been included in the original bill. She stated those will amount to $15,000 as ordered by the court in the Settlement Agreement included in Exhibit C.
Ms. Matteucci concluded:
We'd also like to request that you increase the DMV amount by $1,687, the amount that came from the highway fund. That was deleted in the ways and means under the understanding that the former director of the department of motor vehicles was not entitled and since he's a term appointment he is entitled....
Robert J. Gagnier, Executive Director, State of Nevada Employees Association (SNEA), endorsed A.B. 316 and offered copies of a proposed amendment (Exhibit E. Original is on file in the Research Library.). He acknowledged the issue is very complex and very important for which he felt obliged to give a history to enable the senators to understand it from the perspective of employees. His testimony is included as part of Exhibit E.
Mr. Gagnier said the agreement referred to in his remarks would allow SNEA members a choice of either cash or compensatory time when they work overtime. He asserted since the agreement has been in effect 57 percent of members of SNEA within the Department of Prisons have elected to receive compensatory time while the remainder took cash.
Mr. Gagnier stated a bill proposed 2 years ago which would have permitted employees a choice of compensatory time or overtime had a $6 million fiscal note. He averred the administration is now demanding that the members receive all cash. He concluded his remarks with the declaration SNEA can demonstrate a way to lessen the amounts to be paid by several hundred thousand dollars through negotiated agreements.
Senator Raggio asked which agencies presently have agreements with SNEA regarding either compensatory time or overtime pay. Mr. Gagnier drew attention to a list included in the packet which he admitted is outdated. He offered a copy of a list updated as of April 8, 1993 (Exhibit F). Senator Raggio read aloud those agencies with which agreements have been made.
Mr. Gagnier said the agency agreements have been in effect for varying amounts of time, one only as of the previous day. He said the legal counsel for SNEA would like to address the issue raised by the attorney general regarding the agreements.
Norah Ann McCoy, Legal Counsel, State of Nevada Employees Association, explained the point of contention comes from a section of the Fair Labor Standards Act and the regulation which construes it in the Code of Federal Regulations (C.F.R.). She called attention to a memorandum she had written to Mr. Gagnier on March 15, 1993, included in Exhibit F which describes her disagreement with the Office of the Attorney General.
Ms. McCoy spelled out Section 207 (o) of the FLSA (also included in Exhibit F) to permit compensatory time if an agreement has been made with a representative of the employee. She cited 29 C.F.R. 553.23 which she also interpreted as allowing agreements to be entered into after the work has been performed by employee representatives. She said:
That language [in the code section cited] is repeated. Further on in the regulation...the agreement or understanding between the agency and representative makes no mention of it being done prior to the performance of the work. The agreement or understanding between the individual or unrepresented employee must be done prior to the performance of the work.
Ms. McCoy declared the statute itself says essentially the same thing. She averred there is a logical and reasonable distinction that when employees are represented there is less potential for coercion that there is for an individual employee. She felt the requirement for an agreement prior to performance of work was designed to protect the individual employee. She surmised when employees are represented the representative has their best interests in mind.
Ms. McCoy said SNEA had put together the agreements which were subsequently signed by many agencies because of the large overtime liability and cash payment due and because so many SNEA members had stated a preference for compensatory time. She alleged the choice of compensatory time had been contemplated by all parties within the Department of Human Resources even though the agreement was signed after the lawsuit (Benzler v. State of Nevada) had been concluded.
Senator Raggio asked if that would apply only to those who were represented. Ms. McCoy concurred. The senator inquired if she felt those unrepresented would have to be paid in cash. Ms. McCoy responded:
Accrued comp. [compensatory] time for the unrepresented employees is being...given as their choice. I don't think they're getting cash for it. They're forcing SNEA people to accept cash but the individual employees--an earlier court case determined that the rules for the...personnel regulations constitute the agreement...
Senator Raggio averred he thought Ms. McCoy's opinion indicated that the attorney general was relying only upon the initial sentence of the C.F.R. she had cited which required that an agreement be reached prior to performance of work. Ms. McCoy concurred with his statement.
Senator Raggio reiterated his question as to whether the Office of the Attorney General was taking the position the rule would apply across the board to pay cash unless there had been a prior agreement. Ms. McCoy replied, "Except that they're going further and saying, `Well, we have a prior agreement with the individuals, and that is found in the personnel regulations.'" She declared the personnel regulations constitute the prior agreement.
Ms. McCoy alleged unrepresented people are being given a choice while SNEA members are being directed to take all cash. Mr. Gagnier interjected much emphasis has been placed on the wording of the judge's decision. He read, "Plaintiffs...are entitled to cash payment for all overtime work because no contract exists." He averred that sentence means SNEA members are "entitled" to cash but not forced to take cash. He asserted SNEA has consistently maintained that members are entitled to cash unless there is an agreement to the contrary. He argued agreements which have been entered into with agencies should be followed.
Senator Coffin commented some SNEA members who are in one tax bracket may be "bounced up" to another tax bracket when the cash payments are made. Added to an anticipated increase in tax rates he asserted those employees will be subject to a net receipt of value considerably less than compensatory time.
Mr. Gagnier commented that the settlement agreement (included in Exhibit C) makes no mention of SNEA members receiving cash for existing compensatory time even though an implication has been made to that effect. He declared the first indication received by SNEA that the attorney general had made that determination came about at a meeting of the State Board of Examiners in which the settlement was agreed upon. He alleged the attorney representing SNEA had been puzzled by the discussion.
As a result of that meeting Mr. Gagnier declared he sent a letter to the Governor which is included in Exhibit E. He claimed the proposal made by SNEA could save $700,000 to $800,000.
Mr. Gagnier distributed a proposed amendment (Exhibit G) to A.B. 316 which he declared would honor agreements in existence. Also included in Exhibit G is a copy of an agreement developed for use between SNEA members and the State Industrial Insurance System (SIIS). Mr. Gagnier said the legal counsel for SIIS has advised them they are not obligated to abide by the attorney general's decision and SNEA has accepted the agreements. He pointed out the agreement states that the employee is entitled to cash and there is an agreement with SIIS.
Mr. Gagnier declared the proposed amendment not only would save money but also would make some of the employees happy.
In the absence of further testimony on A.B. 316 Senator Raggio closed the hearing.
ASSEMBLY BILL 318: Makes supplemental appropriation to division of child and family services of department of human resources for certain expenses.
Senator Raggio stated A.B. 318 would appropriate $62,726 to the Department of Human Resources.
Annette R. Swainston, Senior Management Analyst, Division of Child and Family Services, Department of Human Resources, described the provisions of A.B. 318 as supplemental appropriations. She said $42,056 was payable to the Correctional Corporation of America (CCA) for fiscal year 1991 and $20,670 was payable to various youth community service budget accounts.
Senator Raggio inquired if the payment to CCA was made for children who have been placed out-of-state. Ms. Swainston acknowledged his query and explained the final bill for the contract for a guaranteed number of days had been presented after the close of the legislative session in 1991.
Ms. Swainston said the $20,670 was a combination of various items within budget account 3229. She specified, "Out of category 11 which is a substitute foster care category a total of $18,815, that is, for 18 days at the McDowell Youth Home; Doris Clarkson $50 for a sheltered-care retainer fee; and Truckee Meadows Community Hospital $17,325 comprise that $18,815." She said the Truckee Meadows Community Hospital bill was for services to three clients at the end of fiscal 1991. She added $1,855 was used to transport children to and from out-of-state facilities.
Senator Glomb asked how much the 18 days at the McDowell Youth Home had cost. Ms. Swainston answered the cost was $80 per day for a total of $1,440.
Senator Raggio declared that his law firm represents Truckee Meadows Community Hospital. He said because he had been unaware the hospital was involved in the bill he wished to put the declaration on the record. There being no further testimony he closed the hearing on A.B. 318.
SENATE BILL 361: Establishes office of science, engineering and technology within the commission on economic development.
Senator Raggio recalled the bill had been requested by the Senate Committee on Finance. Senator Rawson commented S.B. 361 would comply with the recommendation in the Governor's Executive Budget to provide a science advisor for the governor. He noted the office would be placed within the Division of Economic Development.
The Honorable Sue Wagner, Lieutenant (Lt.) Governor, Office of the Lieutenant Governor, came forward to endorse S.B. 361. Lt. Governor Wagner pointed out she was the chairman of the Commission on Economic Development (CED), and she had a long association with the scientific community both personally and professionally. The history of her scientific associations is included with her testimony as Exhibit H.
Along with her testimony, Lt. Governor Wagner submitted a copy of a joint resolution sponsored by the Nevada State Legislature in 1981 which urged the United States Congress to use the Nevada test site for development of solar and other renewable sources of energy. That resolution is attached to Exhibit H. She noted Senator Raggio had been one of the sponsors of that resolution.
Lt. Governor Wagner remarked, "This plan clearly identifies, as a primary goal, the attraction of outside scientific and technological firms and the development of such businesses within the state." She presented as part of the record a letter (Exhibit I) signed by the members of the Commission on Economic Development in support of S.B. 361.
Lt. Governor Wagner read a letter from Sandy Miller, first lady of the State of Nevada, to Senator Rawson (Exhibit J) in which support for the position of science advisor to the Lt. Governor was offered.
Senator O'Donnell proclaimed, "You understand being scientific commands some sort of autonomy in terms of political influence or...being swayed by any other member in terms of scientific data." He asked if the office would be technically oriented rather than subject to political maneuvering or posturing. Lt. Governor Wagner responded that was her idea of the proposed office. She said, as one whose whole life has been associated with science, she could not envision the position as a political one.
Lt. Governor Wagner reiterated her belief the position would be an asset to the state. She noted there are opportunities for grants through the congressional delegation. She advised a broadening of the base of science and technology, especially in the fields of bio-technology and other areas for which the state is not equipped at the present time. She admitted the state does not have the personnel or expertise for many scientific endeavors.
Senator O'Donnell referred to the provisions under section 4 of the bill which says the office should "not be used solely for bringing projects relating to science, engineering or technology to this state that benefit only...cities or unincorporated areas whose population is less than 30,000." He suggested any scientific project that would benefit a small town would benefit the state as a whole. He asked why the referenced language was in the bill.
Lt. Governor Wagner responded that language had been deleted from the bill. She conjectured the committee might not have the final version of the bill. Senator O'Donnell agreed the phrasing was inconsistent.
Senator Rawson interjected he had an amendment for the bill. Senator Raggio declared the bill would not be processed during the day's hearing so asked Senator Rawson to delay a discussion of the amendment and continue only discussion of the general concept.
Dr. David N. McNelis, Executive Vice President of Nevada Industry, Science, Engineering and Technology (NISET) Inc.; Associate Vice President for Research at University of Nevada, Las Vegas, spoke in favor of S.B. 361. His declaration is attached as Exhibit K.
Senator Jacobsen stated, "I'm not ready to have another person that's going to line up and say go away, Yucca Mountain." He inquired, "Are you going to be able to...look at it in an objective manner? Or is this position...just going to add one more on the other side?" He expressed concern the new position would not support having a study of Yucca Mountain done without due consideration.
Dr. McNelis responded as a scientific entity the role of NISET is to provide independent and objective reviews of any issue on request. He stressed the words "independent" and "objective." Senator Jacobsen declared, "I'd have to see that before I'd believe it."
Senator Rawson indicated he had worked with Erich W. Bretthauer, the newly appointed executive director of NISET, some 20 years earlier, and he expressed his pleasure at Mr. Bretthauer's association with NISET. He added he felt the people involved with NISET had been very careful to not get involved in the Yucca Mountain controversy.
Senator O'Donnell applauded NISET as a good step forward in the development of economics in the State of Nevada. He related he, his father and his grandfather had all worked at the Nevada Test Site, and from that he had knowledge there are "far greater projects out there than just detonating overgrown firecrackers." He called Nevada an integral part of technological advancements that have their beginnings within the Pentagon.
Senator O'Donnell noted it is the intention to take the office of science, engineering and technology to glean information necessary to expose NISET to information coming from not only the Pentagon but also from other agencies of the federal government. He suggested that information will aid in the production of more projects such as energy or defense mechanisms. He asked if the office was scheduled to work closely with officials in Washington, D.C., in order to obtain contracts for Nevada.
Dr. McNelis replied he had served at the test site as the manager for environment and health issues up until 2 1/2 years ago with a staff of 500. He said, "Mr. Bretthauer...led this country's stand on the Three Mile Island accident and served as the EPA's (Environmental Protection Agency) interface with that issue."
Dr. McNelis said the three vice presidents for research of three institutions, Desert Research institute (DRI), University of Nevada, Reno (UNR) and the Nevada Test Site had worked in Washington regularly to develop programs for the universities and with the congressional delegation. He said all three had served on the Governor's recently appointed committee for alternative uses of the test site. He declared they had the expertise to deal with opportunities for the test site and to know what kinds of activities might be instituted there.
Dr. McNelis agreed the view in terms of applications should be as broad as possible and that other agencies and entities within the Department of Energy should be considered. He offered his opinion the Office of Energy Research "has not been adequately tapped."
Tim Carlson, Director, Commission on Economic Development, corroborated the comments made by Dr. McNelis. He asserted the activities at the test site are extremely important to the state. He said for the first time in his 20 years in Nevada the Department of Energy is willing to diversify the activities at the test site.
Mr. Carlson recommended the state work with DOE to diversify and to bring in new industry. He opined the science and technology advisor would be extremely helpful in order to accomplish those ends.
Senator Raggio said he had received information that within 3 years there is a potential for losing 10,000 jobs at the test site. He declared it is incumbent upon the state to act in a direct and timely fashion. He suggested without such a position operating in complete objectivity and with a scientific basis the state might face an economic disaster.
Senator Raggio announced there would be further opportunity to discuss S.B. 361 and the amendment being proposed. He suggested specific comments be made at the next hearing.
Senator Glomb asked for clarification as to how Dr. McNelis' agency would interface with the new office. Dr. McNelis replied NISET is an all voluntary organization with the exception of the director. He declared the sole purpose of NISET is to serve the state by providing an infrastructure in networking. He stated NISET would function as a staff for the new office just as for the regional development authorities or anywhere in the state where the expertise is needed.
Dr. McNelis pointed out the bill includes a provision that NISET and the Commission on Economic Development would do the recruitment for the position and would develop a short list to give the Governor for his selection. Thus, he said, NISET will be intimately involved with the process. He explained the executive officer of the new office would work closely with the executive director of NISET. He added NISET volunteers are found statewide within government offices, the university system and private industry.
Mr. Carlson interjected the actual person would be housed within the Commission on Economic Development and work in coordination with that staff and with the NISET executive director. He called it a combined effort by industry and science personnel and CED to resolve state problems relating to science.
Senator Raggio closed the hearing on S.B. 361. He announced it would be rescheduled for the following Thursday. He invited action on A.B. 318.
SENATOR JACOBSEN MOVED TO DO PASS ASSEMBLY BILL 318.
SENATOR RAWSON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR RAGGIO ABSTAINED FROM THE VOTE.)
* * * * *
The meeting adjourned at 9:55 a.m.
RESPECTFULLY SUBMITTED:
Judy Jacobs,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE:
??
Senate Committee on Finance
April 9, 1993
Page 1