MINUTES OF THE
SENATE COMMITTEE ON FINANCE
Sixty-seventh Session
June 2, 1993
The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:10 a.m., on Wednesday, June 2, 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
GUEST LEGISLATORS PRESENT:
Senator Mike McGinness
Assemblyman Dean Heller
Senator Dina Titus
STAFF MEMBERS PRESENT:
Dan Miles, Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Dee Crawford, Committee Secretary
OTHERS PRESENT:
Dave Thomas, State Risk Manager, Risk Management Division, Department of Administration
Marty Bibb, Retired Public Employees of Nevada
Al Edmundson, President, Retired Public Employees of Nevada
Douglas Byington, Nevada Association of School Administrators
Lindsey Jydstrup, Nevada State Education Association
Bob Gagnier, Executive Director, State of Nevada Employees Association
Ron Dewsnup, Actuary and Consultant, Health, Welfare and Communications Practice, W.F. Corroon Corporation, Cleveland, Ohio
Will Keating, Executive Director, Public Employees' Retirement System
O.C. Lee, Nevada Conference of Police and Sheriffs
George Pyne, Operations Officer, Public Employees' Retirement System
Tom Ray, Deputy Attorney General, Office of the Attorney General
Judy Matteucci, Director, Department of Administration
Senator Raggio opened the hearing for discussion on Senate Bill (S.B.) 278.
SENATE BILL 278: Requires committee on benefits to provide group insurance to certain retired public employees.
Senator Mike McGinness distributed Amendment No. 421, Exhibit C, to the committee and testified in support of that document.
Senator Raggio clarified that in lieu of S.B. 278, the committee will be considering the entire amendment, which is a complete rewrite of the bill.
Senator McGinness explained the amendment changes S.B. 278 by deleting sections l through 3 and adding new sections designated as sections l through 4. The intent of the amendment is to allow those people vested in the Public Employees' Retirement System (PERS), i.e., teachers, county or city employees, to be allowed coverage in the State of Nevada group health insurance plan. He explained an open enrollment would be offered to those individuals currently retired without providing evidence of insurability. Additionally, those individuals anticipating retirement under the Public Employees' Retirement System would be allowed 30 days in which to apply for continuance of the State of Nevada group health insurance plan.
Senator McGinness declared:
...There are some people here from the Retired Public Employees Association that will tell you...they are willing to pay their entire premium. There will be absolutely no cost to the state or their public agency, unless their public agency has agreed to pay a portion of their insurance.....
Senator Raggio clarified the amendment provides that a retired person who continues coverage under the state's group health insurance plan assumes any portion of the premium or cost which is not paid by that governing body on behalf of the retiree. Upon retirement, if an individual has not been previously covered under the program, that individual would have the opportunity to obtain coverage and assume all costs therein.
Senator Raggio asked for information regarding noticing those eligible individuals.
Senator McGinness answered the risk manager would notify the eligible individuals. It was explained a computer printout would be obtained from PERS outlining all PERS members not currently enrolled in the health insurance plan. Using that printout, notice would be mailed regarding the option to enroll.
Dave Thomas, State Risk Manager, Risk Management Division, Department of Administration, clarified the notice procedures. He testified for those individuals currently not participating in the health insurance plan, the amendment would allow a 3-month window of opportunity. The State Risk Manager would notice those individuals and provide them with information regarding the open enrollment period. Subsequent to that time period, as individuals retire from their respective agencies, the State Risk Manager would provide them a 30-day notice period outlining their opportunity to join the plan, as indicated in Exhibit C, page 3, Section 2, subsection 5.
Senator Raggio asked if the amendment called for a fiscal note.
Mr. Thomas responded there is no fiscal note.
Senator Raggio invited public testimony from proponents of the amendment.
Marty Bibb, Retired Public Employees of Nevada, distributed Exhibit D, written testimony, to the committee and testified in support of the amendment. He contended approval of the amendment would give former public employees the opportunity to participate in the state group health insurance program. He explained the dilemma wherein a public employee presently retires with coverage under the state group insurance plan, and his previous employer drops the state health plan. That retiree loses coverage. Approval of the amendment would allow those retirees to reenter the group insurance
program on an individual basis. He provided statistics explaining that 3,800 Nevada public retirees, or 32 percent of all public employees retired, have no private health insurance. Approximately 3,000 of that group desire to participate in the state group health insurance and an additional l,500 individuals desire to obtain coverage based on the low cost, he attested.
Al Edmundson, President, Retired Public Employees of Nevada, testified briefly in favor of the amendment. He declared he polled the members of the l5 chapters throughout the state and a majority of the retirees expressed a desire to change to the state health insurance self-funded program.
Douglas Byington, Nevada Association of School Administrators, testified briefly in support of the amendment.
Lindsey Jydstrup, Nevada State Education Association, testified briefly in support of the amendment.
Senator Raggio invited public testimony from opponents of the amendment.
Bob Gagnier, Executive Director, State of Nevada Employees Association, testified the original bill "has some very good purposes to it. But this amendment will allow for adverse selection whereby people who are in local governments will be able to opt whether they will be able to stay with their local government plan or come into the state plan...." Continuing, he expounded:
We agree there is a very real need to take care of retirees. We try to take care of state retirees, we think local government should take care of their own retirees....When the local governments allowed retirees...who let their plan expire to opt back in, they wanted evidence of insurability. There is no evidence of insurability in this bill. What we can have is this 3-month window of people who maybe have extensive illnesses, or will impact the plan to opt in....We have been told in the past that there is this idea of providing a plan for local government retirees where they will be rated separately from our state retirees and will pay whatever the rate is. There is nothing in this bill that provides that....At the very least, this group of people who are not participants in the state plan when they retire should at least constitute a separate group and be rated accordingly and pay that rate....We are not talking about the local governments that are in the state plan, because if the active employees are in the plan, the retirees should be in the plan....But people who are not in our plan should not be able to opt in or out of that plan when they retire. I think if you do this, you will do nothing but increase the costs for our retirees in state government. Those people who have participated in the state plan, have helped fund the state plan and then retire and expect to have a decent rate....Our retirees, between the time they retire and the time they're eligible for Medicare, pay approximately the same as active employees. Now, is that going to continue with this group? That's why we think it should be rated separately if you're going to open the door for them to come into the state plan and allow the state plan to be a dumping ground....I'm sorry to have to oppose this legislation. I think the retirees need to be taken care of, but they either need to be taken care of under a PERS-sponsored plan or by their own local government entity.
Senator Raggio asked Mr. Thomas to respond to the concerns expressed by Mr. Gagnier.
Mr. Thomas responded:
Currently, all retirees are pooled into one pool and pay the same rates, regardless whether they retire from the state or a non-state agency. As you know, presently, we have approximately 30 non-state agencies participating in the plan. I know of no ideas on behalf of the committee on benefits to change that pooling structure and do anything other than leave all retirees into one pool. From a risk standpoint, we're spreading that risk over the largest amount of individuals in that pool. Our actuary is here today....
Senator Coffin asked if Mr. Thomas felt there would be an added cost and did he support the bill.
Mr. Thomas stated there would be no added cost and he did support the bill.
Senator Coffin agreed with Mr. Gagnier's opinion and stated:
You do leave yourself wide open with a window to create adverse selection in the area of employees from local governments in not requiring evidence of insurability. You still don't think that would increase the cost?
Mr. Thomas responded, "No."
Senator Coffin asked if Mr. Thomas felt it would invite adverse selection.
Mr. Thomas responded, "Not over the total pool, no."
Senator Raggio invited testimony from the actuary employed by Risk Management.
Ron Dewsnup, Actuary and Consultant, Health, Welfare and Communications Practice, W.F. Corroon Corporation, Cleveland, Ohio, agreed the possibility for adverse selection exists. Mr. Dewsnup stated he does not know what type of loss ratio might exist on the individuals who are currently covered. Without access to that type of data, he explained, he is unable to perform any specific analysis as to what impact it might have on the state health plan.
Senator Raggio asked Mr. Dewsnup if he was aware of any other programs which may have created this same option and the effects on those respective programs.
Mr. Dewsnup said most programs require enrollment as an active employee before moving into retiree coverage.
Senator Raggio queried, "So this would be new, in your experience."
Mr. Dewsnup responded in the affirmative.
Senator Coffin opined since no previous experience was available regarding this type of system, one would be inclined to manually rate the individuals based on demographics.
Mr. Dewsnup responded in the affirmative.
Senator Coffin asked if the separate pooling concept was adopted, as suggested by Mr. Gagnier, would Mr. Dewsnup feel likely they would have the same experience in that pool as the other retirees.
Mr. Dewsnup responded:
As an initial rating program, we would probably look at a straight amount to bring them across at the same amount the current retirees are rating, given the size of the pool. If the pool weren't the size that it were, we might have a tendency to be more conservative in that estimate. But given the size of that pool, we would feel comfortable starting off at that level. Where it would go from there would depend...on the loss ratio of the individual.
Senator Coffin queried, "But...you don't really know how large that pool would be, do you?"
Mr. Dewsnup responded, "That's why we would start off at the same level as the current retirees, given the fact they are a large group."
Senator Coffin maintained:
...I have some experience in this area and I would be nervous in letting them in, if I didn't know their loss experience. You and I don't know their loss experience. You've already said there could, and probably would, be some adverse selection because you have an open enrollment period of retirees....If you were to pool them separate, at least for the first couple of years, you'd know whether or not that rate was valid, wouldn't you?
Mr. Dewsnup replied:
It's my understanding, they would be part of the same funding pool. The premium rates would be tracked separately, based on their loss ratio, so that although their experience would be tracked separately in subsequent years, the premiums could be, under Mr. Gagnier's suggestion, set specific to that group. For the initial enrollment, because we do not have the data, we would have the tendency to enroll them at the same level the current larger group of retirees from both state and non-state agencies.
Senator Coffin suggested:
There might be a way to do it, if you separately approve them, for purposes of passage of the bill, but then hold harmless the group experience and supplement from the General Fund, should there be a deviation from the state employees retired pool, isn't that true?
Mr. Dewsnup responded, "Again, as far as where the money comes from, I could estimate what the projected cost would be after some years of experience, but where that shortfall, if there were to be any, would be made up."
Senator Coffin concluded, "I can see a way to do it...but I think you've got to hold harmless the pool that is in existence, in some way, with some additional funds in the event the loss ratio proves out higher than the standard state employees, which is my suspicion."
Senator Coffin requested the bill be held in order to develop appropriate language to address the hold-harmless issue.
Senator Raggio closed discussion on S.B. 278 and opened the hearing for discussion on Assembly Joint Resolution (A.J.R.) 19.
ASSEMBLY JOINT RESOLUTION 19:Proposes to amend Nevada constitution to prescribe additional restrictions on public employees' retirement system.
Assemblyman Dean Heller distributed Exhibit E, Nevada Pension Protection Act, to the committee and testified in support of A.J.R. 19 while referencing that document.
Assemblyman Heller contended the biggest threat to government pension funds today is not the fluctuation of the stock market, nor the fluctuation of interest rates, but the manipulation by government administrators.
Assemblyman Heller declared the basic thrust of the initiative is to protect the Public Employees' Retirement System from raids orchestrated by the administration or any legislative body. He explained to accomplish the objective, the state constitution would be strengthened in the following respects: the constitution would prohibit the administration or any legislative body from taking loans from the pension fund; the constitution would declare that a retirement board will have sole and exclusive authority for managing the PERS assets and for administering the benefit delivery system; the constitution would assure the independence of the executive director by requiring employment by a retirement board; and the constitution would also declare that a retirement board has the sole and exclusive power to provide for actuarial services.
Senator Coffin asked Assemblyman Heller how A.J.R. 19 differs from Senate Joint Resolution (S.J.R.) 28.
SENATE JOINT RESOLUTION 28: Proposes to amend Nevada constitution to prohibit money from public employees' retirement system from being loaned to state.
Assemblyman Heller declared S.J.R. 28 is encompassed in A.J.R. 19. He stated, "Assemblywoman De Braga had almost an identical bill on the assembly side, which was encompassed into A.J.R. l9. If you look at section 3, of A.J.R. l9, that is exactly what S.J.R. 28 is all about."
Will Keating, Executive Director, Public Employees' Retirement System, testified the PERS board strongly endorses S.J.R. 28 as well as A.J.R. l9, however, they would defer to the more complete language in A.J.R. l9.
Lindsey Jydstrup, Nevada State Education Association, testified briefly in support of both measures.
O.C. Lee, Nevada Conference of Police and Sheriffs, testified briefly in support of both measures.
Al Edmundson, President, Retired Public Employees of Nevada, testified in support of both measures. Mr. Edmundson testified the association expressed preference for A.J.R. l9.
Bob Gagnier, Executive Director, State of Nevada Employees Association, testified in support of A.J.R. l9.
Senator Coffin pointed out that S.J.R. 28 was submitted by Senator Dina Titus nearly one year previous. Senator Coffin asked Assemblyman Heller if he had the opportunity to hear previous testimony.
Assemblyman Heller answered most of the information he obtained for development of A.J.R. l9 came from seminars he attended by the PERS.
Senator Dina Titus came forward to testify in support of S.J.R. 28 and explained it is exactly the same as A.J.R. l9, with the exception of a new section 2, subsection 4, that establishes the board and independent actuary. Senator Titus distributed Exhibit F, newspaper article from the Las Vegas Review Journal, to the committee, which provided illustration as to what happened in other states whereupon they "did dip into the pension fund." Senator Titus pointed out that private pension funds are protected by federal statutes, yet public pension funds are not.
Senator Coffin stated:
It's troublesome to me when you have identical bills coming from both houses, particularly when the author of S.J.R. 28 requested this bill more than a year ago and publicly so stated and find that a member of the other house has copied the bill. Sometimes, as a matter of courtesy...within the house, you would support the bill from your own house first, or perhaps there is a way to support both....
Senator O'Donnell declared:
That very thing happened to me last session....Even though I had a lower number, his bill was introduced first, then my bill. Because he had introduced his bill first, I pulled my bill, even though it was almost the exact language. I pulled it out of courtesy because he was first. If you look on the dates of introduction, Assemblyman Heller's bill was introduced in February and the Senator Titus bill was introduced in May.
Senator Coffin suggested to pass both S.J.R. 28 and A.J.R. 19.
Senator Raggio drew the committee's attention to the merits of the bill. He stated:
One thing we ought to do when we come over here is consider issues and not who is going to get the credit for the bill. I had a stalking bill this time that I deferred to let somebody else pass the stalking bill. If we're going to sit here and worry about whose name is on a bill, I think we're going to have a major problem in closing down this session.
Senator Raggio invited Senator Titus to come forward. He explained the two bills include the same language and the committee desires to process A.J.R. l9. He asked, "Do you have a personal concern over which bill is passed out of this committee?"
Senator Titus testified:
I'm concerned about the substance of the bill and if it's passed, that's alright. I just hope that whatever policy is established here, will be a policy from this point forward with other people who have contradictory bills and calendars and that sort of thing.
Senator Raggio explained his concern:
Senator Titus should certainly get credit for the concept, and I would endorse that. The problem is, we're now into June and we have an assembly bill that will accomplish this. This has to go to a vote of the people and Senator Titus should get equal credit with all the other people who are on the other bill. There are both democrats and republicans on this bill. I would appreciate your statement on that so we can get this thing moving.
Senator Titus responded, "That's fine. I'll just speak to the bill when it comes to the floor of the senate."
Senator Raggio stated, "I appreciate that and we would assign you, if you'd like to speak to the bill for this committee."
Senator Titus countered, "I'll do it without the assignment."
SENATOR O'DONNELL MOVED TO DO PASS A.J.R. 19.
SENATOR JACOBSEN SECONDED THE MOTION.
Senator Coffin asked to amend the motion to add paragraph 3, section 2, "which leaves in the new PERS language and leaves a good bill. You just pass A.J.R. l9 with my amendment by excluding paragraph 3 of section 2, which is contained in S.J.R. 28...."
Senator Raggio stated, "I thought Senator Titus agreed that we should pass A.J.R. l9 and she will speak to it on the floor. I think we're just confusing this issue. Chair will not accept the [amended] motion."
THE MOTION CARRIED. (SENATOR COFFIN VOTED NO.)
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Senator Raggio closed the hearing on S.J.R. 28 and A.J.R. l9 and opened the hearing for discussion on Assembly Bill (A.B.) 555.
ASSEMBLY BILL 555: Makes various changes relating to public employees' retirement system.
George Pyne, Operations Officer, Public Employees' Retirement System, testified in favor of the measure. Mr. Pyne testified from written testimony as outlined in Exhibit G. He pointed out the purpose of the legislation is to reemphasize to the courts that before the retirement system will comply with a court order with respect to dividing a retirees', or members', benefits with his or her divorced spouse, the court order shall comply with the provisions and terms of the retirement act, respectively.
Mr. Pyne stated increasingly the court orders reflect "the courts are doing their own legislating." The purpose of the legislation, he explained, is to protect the system and members of the system from these types of orders which fall outside the scope of the act.
Drawing the committee's attention to section l of the bill, Mr. Pyne stated that section is the heart of the legislation because the court orders could not require the system to provide an allowance, benefit, or option not otherwise provided under that chapter and cannot require the payment of an allowance or benefit to an alternate payee before the retirement of a member, or the distribution to, or withdrawal of, contributions by a member.
Mr. Pyne explained the system is funded on an actuarial-reserve basis, which means contributions are set aside today to pay out benefits in the future.
Senator Raggio asked what is the difference between the present term and actuarially funded system with one that is funded on an actuarial-reserve basis.
Mr. Pyne responded he was not aware if there was any difference other than it is more accurately stated.
Senator Glomb referenced page l, section 3, domestic relations order, and asked, "If you don't agree with the court order...that someone is entitled to a portion of the retirement benefit, how do you handle that?"
Mr. Pyne answered pursuant to this statute and policies adopted by the board, the court order would be returned to the parties in the courts involved to have it amended to comply with the provisions of the retirement act.
Senator Glomb queried what action would be taken if the judge did not comply with the specifics of the PERS requirements.
Mr. Pyne said if they did not comply with all the specifications, "we would return that to the parties to have it amended to comply, or we would not pay benefits."
Senator Glomb clarified, "So you could not honor a judge's order because it didn't comply with your rules and regulations?"
Mr. Pyne responded in the affirmative.
Tom Ray, Deputy Attorney General, Office of the Attorney General, testified in favor of the measure. He clarified:
The problem we find happening is, typically, where the court would enter a divorce decree...would provide that the nonparticipating spouse could receive retirement benefits, while the participating member is still an active employee. That is totally contrary to the system. That spouse would present that decree to the system, which they would have to reject....How can we not honor a court order? The PERS was not a party to that lawsuit, so that order is not binding on the retirement system. So what happens if the parties can't work it out...? Then the parties have to bring a new lawsuit against the retirement system to try and get enforcement of that order. At that time we try to point out to the court they can't do that, because it's not in compliance with Chapter 286.
Judy Matteucci, Director, Department of Administration, requested clarification of sections 4, 5 and 6 of A.B. 555. She queried what effect the restrictions and the rounding proposals included in sections 4, 5 and 6 would have on preparation of the Governor's Executive Budget. She expounded:
Each year, as we get the actuarial evaluation from the PERS, we put the new rate in. For the last three bienniums, the actuarial evaluation has been less than the rate we've been paying. It appears to me that we would have to forego, in the future if that same situation were to continue, the savings that are attributable to the state if the particular provisions that restrict the adjustment are enacted. Also...it looks to me like you might get some very strange deviations on the rates between the employer-paid and shared retirement, as a result of the restrictions on the one-quarter percent....
For example, in the l99l session, the employer-shared rate went from l9 percent to l8.47. I'm not sure if the rounding takes place and moves that up to the nearest quarter...and then the restriction against adjusting the rate downward, which we did and saved about $4 million each fiscal year of the biennium in General Funds....and whether or not you don't want to be able to adjust that rate downward....
Currently we use the actuarial valuation, and we are not restricted from adjusting it upward or downward. We have been adjusting it downward for the last bienniums when that actuarial valuation has come in lower than what the rate was established in law. If this were to be enacted, as it is currently proposed, we would not have that flexibility. If you could adjust it down, but are restricted pursuant to this, then you'll be giving extra money to the fund that is not actuarially needed....
I think what you're saying is, you look at the rate first, then round up. The way I read this, you would have been prohibited from doing that, if this law were in effect.
Mr. Pyne said, "You would have gone from l9 to l8.5 [percent] rather than l8.47, under this legislation."
Ms. Matteucci asked, "This year, it goes from l8.47 to l8.22. That would not have allowed us, then, to reduce that, right?"
Mr. Pyne answered in the affirmative and added, "Again, this legislation really would not become effective until the l995 session."
Senator Raggio agreed with Ms. Matteucci and stated, "We don't want to bind either the employee, or the employer, to paying more in contribution rates than is necessary to actuarially fund the program. I think it's an issue we have to talk about."
Senator O'Donnell declared if the actuarial rates are placed into the system, that becomes the base for the next actuarial calculation the next year. He opined
So, essentially, you are just smoothing out. There may be a reduction because of the fact that there may have been slightly more introduced into the system in this biennium. The next biennium, the rate would actually be lower, because of the amount of money that was over and above the amount that was necessary, it would drive the next rate lower. Is that correct?
Mr. Pyne responded, "That's a possibility."
Ms. Matteucci interjected, "In reading the actuarial reports from PERS, they report what their investment return has been, but they use an assumption for out years, which has its own leveling affect."
Mr. Pyne said the actuary is appointed by the PERS board. The actuary's sole purpose is "to determine the level percentage of payroll contribution rate needed to fund benefits of the system."
SENATOR O'DONNELL MOVED TO DO PASS A.B. 555.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Senator Raggio closed the hearing on A.B. 555.
The meeting was recessed at 9:35 a.m. and reconvened at 9:45 a.m. with the opening of the hearing on Senate Bill (S.B.) 338.
SENATE BILL 338: Establishes emergency procedure for reducing number of offenders in facilities and institutions of department of prisons.
A copy of Exhibit H, memorandum dated June 2, l993, from Judy Matteucci regarding proposed amendment for meritorious good-time credits, was distributed to the committee.
Senator Raggio stated Exhibit I, the proposal submitted as Plan B, (Exhibit I - Original on File in the Research Library) was presented with the suggestion the Department of Parole and Probation be placed within the Department of Corrections. Senator Raggio announced he would allow each committee member to comment on the issue before voting on the measure.
Senator Callister testified:
I have already expressed my initial concern...for the first proposal, then referred to as the Facility Capacity Act. We studied, at length, under the good auspices of your subcommittee chairman, Senator Jacobsen. We had the opportunity to take testimony, both in full committee and subcommittee, from a number of likely participants in any...plan. Finally, that culminated into the revised plan, as presented by Dr. Austin [Exhibit I]. I do want to express my support for the newly proposed plan...referred to as Plan B. In large measure, it seems to be a radically scaled-down version as this language we've just been presented with indicates, we've now been given the assurances that I believe many of us sought early on. Assurances that, in no instances, would it go beyond a 90-day early release. That, in no instance, would it be a violent offender. Quite frankly, I think it's been useful for me to go back and leaf through the document provided on May l9, entitled Correctional Options for the State of Nevada, prepared by Dr. Austin. I'm referring to page 9 or l0 in the booklet in which he addresses the option, and I think is the only option, now requires some legislative action, as opposed to a change in policy by the administration. That, of course, is the option that would grant the Director of Corrections the authority to award up to 90-days good-time credits for inmates who are nearing their mandatory parole or discharge dates. He is only allowed to do that, as I understand it...when the prison system becomes over-crowded for more than 30 consecutive days. So he's not allowed to do that at just any point in time, he's only allowed to utilize this 90-day additional good-time credit device when the system has been overcrowded for more than a month. He goes on to point out that this option would only be employed if the other three options fail to produce the desired effects. Of course, those other options are parole technical violators. He's targeted a 50 percent reduction and limitation of 90 days on the time they would serve and a similar kind of reduction for probation technical violators. Then...he's proposed to consolidate a probation, parole and prisons department into a unified corrections department. Then he suggests that only if those three components are not successful, would the 90-day good-time credit device be available. I feel comfortable that's an adequate limitation.
Turning to the issue of public safety, and as testified by Dr. Austin when he was here before us, the closing line is 'moderating admissions and releases will have only a minor effect on the state's crime rate.' We are confronted with a budget of...choices. We have, over the past 2 years, the executive branch has compelled more than $170,000,000 in reductions across the board. Every single agency of state government has felt that knife. There has been a collective reduction, by my calculation of roughly ll to l2 percent from the standard we were at 2 years ago. Over that same period of time that we've had that l2 percent reduction in staffing, we've gone backwards by l2 percent. We've had an additional ll to l2 percent growth in state demands for services in every component from kindergarten to university to mental health.
I guess my fundamental decision is not one that I arrive at easily, but it's certainly one that I think reflects the fiscal circumstances we find ourselves in. To not adopt this measure, which we are told would not create an increase in the crime rate, is to, in the same breath, commit ourselves to another $l6 to $23 million...of obligation that the state now has. So I don't think you can divide those two decisions. I think it's only appropriate when one suggests to take an action, or not take an action to, in the same breath, indicate where the revenues would come from. I say this as one who has proposed new spending...but have at the same time attempted to characterize where I think those revenues should come from. So I would hope whatever motion is made here today, considers both sides of that equation. Not just the issue of do we close the honor camps or not. Let's call a horse, a horse, at this point when the only expert testimony we've had is that there will not be an increase in crime rate, that there won't be an incidence of increased risk to public safety. What we're really talking about is, do we continue an urban subsidy of programs that largely benefit rural areas of the state. If we're going to embark upon that, then I think we need to know where the dollars are going to come from in the same vote. That would be my hope for any motion, Mr. Chairman.
Senator Glomb testified:
This has been a hard decision for everyone. We've heard a lot of testimony....I have two reasons for supporting Plan B....One, of course, is monetary issues we're facing, and it's driving a lot of decisions. I also feel we do need some reform in the way we deliver correctional services....I think there are ways we can cut costs in this area, and I think Plan B is an attempt to do so and is a way to reform the system so that we are not spending as much on corrections and on the delivery of services in that area. So that we can, in fact, spend more where it is needed, in education and human resources. For that reason, I'm going to be in support of Plan B. I have some real concerns about the fact that I'm aware there are a number of members here today who have some real doubts about Plan B and will probably be voting against it. But I, too, ask the question where are we going to find the needed revenue and needed resources to provide for the children of this state as well as the needy adults of this state? We're looking at a reduced foster care budget. I don't know how we're going to provide for children in foster care. Our class-size reduction program is in serious jeopardy. I don't know what we're going to do about that. Children whose families are on welfare have already seen their subsidies reduced. We're looking at the possibility of having to go back and do that again. We threw l,000 people off the caseloads in mental health and mental retardation. We did nothing to be able to bring those people back on to provide services for them. I have real concerns if this measure fails. I hope someone has the answer today about where we are going to find the necessary resources to provide the services.
Senator Coffin advised he would speak to the motion.
Senator Rawson stated:
I think this measure before us represents a significant budget savings. The budget is built on those savings. Voting against this bill, certainly creates a shortage; and we don't have all of that resolved to this point. I think voting for it creates this public safety issue. So we have to weigh those issues. I'm prepared to vote against this measure, but with some understandings that as we see the budget come together this week, that we will find the resources to be able to deal with the budget that we are finally presented with as our committee finishes the work. We've gone through and spent a significant amount of time cutting, trimming, readjusting these budgets; and I'd like to think that time hasn't been wasted. We've tried to point out those areas we can't cut and those that we can, and I think it raises the issue of other public safety concerns to go more deeply into some of these budgets....I think the prudent thing at this point is to vote against this measure in favor of public safety and then weighing that against whatever serious conditions we create as we have to balance the final budget.
Senator Jacobsen testified:
I think Senator Callister probably set the basics of what the subcommittee dealt with in realizing the situation that we wish weren't here. I certainly am in opposition to it. I guess I wanted to put some faith in Plan B and after I listened to Dr. Austin, and even with his guarantee that maybe there wouldn't be any more increase in crime and things like that....I guess I've always had a feeling I'm not too interested in experts that come from outside of our state. I think we're just as well qualified as anybody to make those kinds of decisions that affect each and everyone of us. I think public safety is probably paramount in my mind. Those inmates weren't sent to prison to be released early. Our system sent them there, and I think it's our obligation to keep them there and fill out their term and go through the parole and probation where there is some guidance after they are released. Just about 20 minutes ago, I received a telegram from a legislative friend in Florida, and yesterday they released 73 people by error. Murderers, they've only found 7 at this moment. Now, I guess, there again, that's in another state and maybe not one of our concerns, but...there's always a reason for error. In regard to the money, and I agree with Senator Glomb, that we've got demands in every turn. We've suggested a few here. I thought Beatty was an ideal situation. I still think it is today, but the Governor's got to come forward and make that decision. I suggested l0 cents on a pack of cigarettes, which I think is a reasonable approach, would raise $22 million....I don't think you're going to object to l0 cents on a pack of cigarettes.
There are many other areas we haven't had time to explore and I realize that the ball is in our camp and we've got to do something with it. My favorite project, of course, is saving the honor camp. I think I have a little better insight into those than almost anyone here that serve on this committee. For the last two summers, I've worked with them, 3 months each summer, about 500 hours. I came to realize they are no different from you and I as far as being incarcerated. I can see the effort they can put forth and the jobs they can do that wouldn't be done otherwise. Where we get $22 million to retain them, I just don't know. But I think there are some areas and I want to say that without the honor camps, our two national cemeteries can't survive today. It just isn't possible. Each cemetery has one or two employees and here in the north we have about 500 buried now and there's more increasing daily. Down south, it's much more.
I guess it's difficult in just a few seconds to explain how you feel about these kinds of issues. I think we have the facts before us and I know for the administration, it's really tough. But I just want to say again, I'm not in favor of any kind of early release for anybody. I'd hate to live in a community, even this one, if you're going to early release prisoners in Carson City and have them discharged right here with probably no means to get home, other than the $26 or $27 we might give them. The south is probably in a little better position because the prisons aren't located close by. I guess I'd also feel if anybody's going to be released early, then I think it's the people in the inmate camps. I think they deserve that and they're the ones that really aren't too much in question, because they are not a threat to public safety. Our justice system, I think, has kind of fallen apart. When you look at the people on death row...and the kind of money we have to generate to keep them there, realizing, I guess, Lovelock enters into this picture and I was thinking this morning, I'm sure those people in Lovelock wouldn't have agreed to have that prison there if they knew there was going to be early release. I just don't want to force that on a little local community, have them be subject to that. Mr. Chairman, I want to indicate again, I just think early release is not the way to go. Not that we should look at Florida, or any other state that maybe has already promoted it, and found it to be a disaster. I don't want it to be a disaster in Nevada.
Senator O'Donnell testified:
This has not been a hard decision for me at all. I used to work the streets and testified in court against criminals. The primary reason for a government is to protect the life, liberty and the property of individuals who live within our country. With this bill, we will be letting out prisoners to affect our life, our liberty and our property. What justice is this, when you sit in a courtroom and you listen to testimony from a 65-year-old woman who has been raped and you tell that woman you are going to give that man l0 years for that infraction. Then on the other side of the coin, the prison system tells you that they're going to let that person go in about 220 days for good time and because he's up for parole. That's not justice. When you limit the number of beds in a prison system, you cannot say with this letter, that you're only going to let go 90 days maximum. This is nonsense. The judicial system controls the number of people that go in the door. The number of people that go in the door are not controlled by the prison system, so therefore, if the prison's beds are limited, you can't control how many come out the back door. It's ludicrous! The first sentence here, in this statement, 'when the safety and the welfare of the prison system is threatened.' What about the safety and the welfare of the people of the State of Nevada? It's not even mentioned in here.
I've received numerous calls from individuals telling me not to vote for this. Only the technical violators will be released, someone said. That's not true. We heard in testimony that individuals who may be violated, or may be put back into prison because of a technical violation may have incurred a far more serious infraction. Yes, we've got some...choice, we're affected by that. But I think it's a philosophical choice. What the real role of government is, I believe, is to protect the citizenry. The obligation didn't go away because we had this bill. The obligation of paying for our prison systems didn't go away because this bill exists. The obligation has always been there. It's whether or not we want to fund it, or not. That's the question. Finally, urban subsidy was mentioned. This is not an urban subsidy, believe me. The prisoners that will be released, are going to be released in my community and I don't want them there. We spend a lot of money putting them in prison. I don't want them back. So if anything, this is a subsidy of our own communities and I'm going to vote against this bill.
Senator Raggio testified:
As the chair of this committee, I resent greatly the position in which this committee and this legislature has been placed. A bill of this kind, no matter how it's massaged, should never be the basis on which we balance a budget. I think that is completely intolerable and inappropriate. I've reserved some judgment on this, although I spoke out early. This is not a facilities capacities act, it is an early release bill. No matter who you exclude from the program, you are bound to be releasing dangerous offenders, those who will prey on society at a time before they are otherwise eligible for release. This bill, if it were a bill, designed to address prison reform only, could conceivably have some merit. But when it is a bill proposed by the Governor as a means of balancing a budget, it has no place in a legislative session.
I resent greatly that we are asked to pass this as a device, we are told, to provide funding in some manner for programs that are essential to this state. This is not a matter of kids versus cons. It is not a matter of university versus cons. As Senator O'Donnell has correctly stated, a primary concern of all branches of this government, whether it's the judicial, executive or legislative branch, has to be public safety. I have been privileged to serve on this committee almost continuously since I came to this legislature in l972. I'm astounded that the administration comes before us, the same people who have come here every other session and have told us the need for prison construction, the need to provide more beds, the need to have better programs in prison and the same individuals now come here under some duress or persuasion or directive and tell us that is no longer the case. The issue clearly, then, is has the administration been lying to us for l8 years? Have they been telling us they need to add beds?
We built the prison in Lovelock, we have created honor camps over the years because they have been the program designed to put some type of rehabilitative effort into the prison system. Forget serving the communities or the rural areas, which some deem unimportant. I happen to think it is important. We have been told that is in effect and it is the only real rehabilitation program we have in our prison system in this state. Now we are told that we must discard that system. Apparently rehabilitation is no longer an issue, and we are only concerned with warehousing for a short period of time and now a shorter period of time, those who offend society's laws. I guess I am more incensed about this because of my personal background as a prosecutor. Having served l8 years in the system in the administration of criminal justice, I believe that this approach is completely irresponsible.
I am not impressed at all with so-called Plan B. I do commend the administration and the prison system for responding to the cries of outrage when this program was initially provided to us, and that was to include all prisoners. Now I don't think it was by design, I think it was by compulsion that Plan B eliminates those who are the violent-type offenders. That may ease some concerns of some of the legislators, but I think anyone with experience in the system knows better. Those inmates, or those persons who are sent to prison in this state, other than those who are serving mandatory sentences for the first offense, are usually repeat offenders. Initial violators go through a probation system. In the Nevada State Prison, most of the offenders are multiple offenders. They are not there for the first time. This proposal under Plan B, I suggest, is more cosmetic than real. The proposal differs only from the original bill in this regard. The administration would have us combine the function of [the Department of] Parole and Probation with that of the prison system and place those programs and agencies under the control of the director of the prison system. The concept being, in essence, that under such control, the probation officers and parole officers will not come before the court, or the parole board, as frequently as they are and request violations. I can tell you, I was singularly unimpressed with that philosophy.
I'm amazed that the persons who have built integrity into their service in this state are asked to come before us and to speak against their will. The chief of the parole and probation department spoke to many of us not a week before this hearing and pleaded that this philosophy was insane...that this violated every concept under which they operated. I care not that other states have sought to do this. As a prosecutor, I firmly agree with them. Not only with the chief, but with every parole and probation officer who has seen fit to contact me since this proposal came to light. They know the problem and they understand it. As a practical matter, Plan B is cosmetic because it is based upon the theory that some 700 less beds will be required if probation officers and parole officers are instructed not to come as frequently to seek violation of offenders. We are told this will only affect those who have technical violations. That's garbage! Today, and in my own experience, and if you talk privately with the officers, they will tell you that they come to the court with probation violators only as a last resort. When they have reached the point of frustration, they don't come there because somebody didn't report for work, or because somebody didn't pass some kind of test. They come there at a point of frustration, and that is equally true with the parole officers who bring people before the parole board.
Now under the proposal of Plan B, a mockery is made of parole in this state. Illusion was already made to the fact that sentences are not served for anywhere near the length of time that either the courts or the public believe to be the fact. With all of the credits that are available to inmates and, again, remind yourselves these are multiple offenders in almost all cases, persons who have failed society not once, but many times. These persons are going to be told now that if you violate parole, there's going to be a real penalty. You are going to have to go back, but not for more than 90 days! Now any con who has been through the system and gone out on parole, and failed parole, will laugh at you when you tell him, or her, that the penalty is 90 days and no more and that is part of Plan B. I don't want to extend this, but I need to say that the goal of this legislation, and I understand the reasoning, however you term this...we need to free up l,000 beds to cut costs at the prison to balance the budget. That means l,000 inmates are not going to be incarcerated as of any particular day whether they're in an honor camp, or intermediate facility, or a maximum facility. The goal is to free up l,000 beds to save money. I cannot, in good conscience, do that to the public, and I wasn't sent here to do that to the public. I wasn't sent here to forsake public safety to help a Governor or a legislature to balance a budget. I realize that we will have to balance our budget ourselves, that we will probably have to make some hard decisions down the road on other budgets, but we didn't create this situation. This situation was presented to us at the outset of this session. For that reason, I cannot support either the original version, or Plan B, which is designed...to cosmetically dissuade argument against this bill. But, in fact, has and will have, very little, if any, practical effect. The chair will entertain a motion.
SENATOR COFFIN MOVED TO AMEND AND DO PASS S.B. 338 WITH THE PROPOSED AMENDMENT AS OUTLINED IN EXHIBIT H.
Senator Raggio queried Senator Coffin whether it was his intent to include in the motion to place the Department of Parole and Probation under the Department of Corrections.
Senator Coffin stated, "No. It is the language, as proposed exactly, in this amendment (Plan B)."
Senator Raggio asked Senator Coffin where he suggested to place the Department of Parole and Probation.
Senator Coffin suggested to vote on his motion first before deciding the issue where to place the Department of Parole and Probation.
SENATOR GLOMB SECONDED THE MOTION.
Senator Raggio invited the committee to speak on the motion.
Senator Coffin testified:
I understand we have a problem balancing our budget here, but the question is, with what do we balance the budget? I think Senator Callister eloquently stated the argument that if you kill the bill, you leave a $20 million hole in your budget. Other bills have been killed, or are in jeopardy here, that could balance the budget, too. So, I suppose one could say you could either balance it with taxes or cut the spending. In this case, all I've heard throughout this entire session is save the honor camps, kill this bill and plug it in with money from United States (U.S.) Ecology, which would then solve all our problems, $25 million. It seemed always in the discussions that I heard in private, and then they became public, that the amount of money to save this plan should come from U.S. Ecology. It sounded good in the beginning and I was about ready to go for it, and then I recognized there is a downside to that argument. Therefore, that's why I felt like if some other method of taxation isn't proposed, it's irresponsible to cut the Governor's efforts at balancing the budget. I think it does leave us in a bit of a hole. This amendment...if that is adopted, then I think we can live with this. We've been telling the prison and parole people for years, all of us here, let them out any time you can. I know we did it in l985 and l987, we had meetings, both houses together. I was on the Assembly Committee on Ways and Means and key members of these committees were telling them let them out, we've got a real prison-overcrowding problem....So, I think we've lived with this practice for a long time. I think it's a question of recognizing that publicly we have to be responsible.
Senator Glomb addressed the public safety issue:
I have spoken with a lot of people and done some reading and looking into it, and I feel comfortable with the bill amended with the language ensuring that violent criminals will not be let out before their sentence is through....I also need to address the fact that there are some public safety issues currently going unaddressed right now in our budget process. When we don't offer teenage young people options for future employment, this puts them at risk for a life of crime. When we don't fund our health department's budget so that we have people with active TB [tuberculosis] walking the streets. We know there are several children in the Las Vegas area who went without the needed diagnostic tests they needed who may be active TB cases walking the street. When we've let out very sick, psychotic people from our mental institutions who irrationally lash out and are violent, not because they're mean, terrible, criminal people, but because they are sick and irrational. Those all present public safety issues that we are not addressing in this budget. We can be frightened and scare ourselves about the fact that maybe we are going to be releasing violent criminals, and I certainly don't want that to happen and I would not support a plan that I knew was going to do that. At the same time, we also need to look at the other public safety issues that are going unaddressed.
Senator Callister interjected:
....Initially, I want to express that I share the chair's concern and sense of betrayal. I think, irrespective of where you stand on this particular issue, I have to acknowledge publicly that I have that same concern over many of the components of this budget. Having said that, I don't think this alone is the item upon which this budget shall or shall not be balanced. There is a number of other measures of significant dollar import pending in this house, or the other, that could have the same kind of catastrophic implications for this budget. So I'm going to address my remarks first to the prison and then to the budget as a whole. I think, clearly, there is only two ways you can address now, what I think today the true battle of the budget that has been opened. That is either through increased reductions or through new revenue and that's the decision we're really making. That's what all of us are kind of dancing around and hedging, and I understand that from all of our point of view.
I want to start off by reading...the initial headline from a newspaper...the Las Vegas Review Journal. It's an editorial from about a month and a half ago in which it starts off, titled:
Prison Reform Vital. Talking prison reform in lock-them-up-Nevada can be a serious liability for any politician. I advocate the comprehensive release regime for the state prisons. Governor Bob Miller has taken significant political risk. We applaud him for his leadership....Under the present system in Nevada...we are...incarcerating twice as many people per capita....
They go on to say this cannot be justified on moral or fiscal grounds and that's the issue, I would suggest to you, 500 new beds every year. One new prison every year. The $25 million cost of construction of those beds and the lifetime operation of those beds. I think we did a calculation last year in Assembly Committee on Ways and Means that points out that is about $90,000 per bed over the life of the bed. Fabulous expenditures are involved in our continuing schizophrenic attitude over incarceration in this state. It has to be addressed...and on a continuing basis. So, I support this reform measure as what it is, an incarceration-reform measure, an effort to target the least violent component based on expert analysis and then try to help those folks change their lives, instead of keeping them in jail at a catastrophic cost to the state. I have to disagree with the chairman on some of the facts that he represented as facts. Again, I will defer to the comments of Dr. Austin in which he indicates that an audit of those l,05l technical violators in prison, a total of l7 percent sample of the total population conducted by the Nevada Department of Prison staff, found the vast majority were for nuisance-type behaviors, e.g., not reporting to their parole officer, failure to maintain gainful employment....These are the items, these are the issues for which we are returning these violators, both parole and probation violators, back to prison. Not because they committed some new crime, but because in a tough budget they couldn't find a job in a tough fiscal climate, they couldn't keep themselves employed, or because they didn't phone in. That's the facts about the character of these people. Secondly, it's been suggested that somehow we're going to enhance public safety. That is profoundly not the argument. Other studies have shown in many states that shortening the length of stay has no impact on recidivism. That's the issue. These people get out of jail. We're not releasing them in lieu of prison, we're releasing them up to 90 days early. They're going to be released sooner or later in any event. If we want to protect public safety, we should be here talking about jobs programs both within and upon parole. If we wanted to enhance public safety, we would be sitting here talking about increasing the allotment, the cash stipend, they get when they walk out, so they walk out with more than $20 in their pocket. We'd be talking about keeping them incarcerated closer to families and not scattered all over rural Nevada because those are in every study, the likelihood of success upon parole or probation, not length of stay. Those are the facts.
I suggest today the battle for the budget really begins. The competition is not just between cons or kids, but is between all of these programs. It's between aging services who were reduced by $l30,000. The Capital Improvements Program for the university, which was reduced by $l0 million. Child, youth and family division, which has been reduced in the last biennium by $2.4 million the first time, by a commensurate amount the second time of budget cuts. It's not just between cons and kids, it's between cons and economic development, which was reduced by $l50,000 in the first round. By education, which was reduced by $l54,000 in the first round. By the state health division, which was reduced by $l.8 million in the first round of cuts. By mental health and mental retardation, which was reduced by something in the neighborhood of $5 million in the first round of cuts. The DMV [Department of Motor Vehicles and Public Safety] reduced by $350,000 in the first round of cuts. The rehabilitation division reduced by $800,000 the first round of cuts. The university, which was reduced by $6,600,000 in the first round of cuts. Welfare, which was reduced by $2.3 million in the first round of cuts. Aging services reduced by $263,000 in the second round of cuts. Child, youth and family division reduced by $2.3 [million] in the second round of cuts. Parks reduced by half a million. Economic development takes another $328,000. Education takes another $473,000 shot. Health division takes $2.5 million in the second round of cuts. DMV takes another half a million. Rehabilitation cuts, another $600,000. University another $6 million in the second round of cuts. Welfare another $ll.9 million. That's the competition. Before we get pompous today, before we engage in a vote that is clearly styled to protect our careers as politicians and not devote our energies towards the people of the state who have had $l72 million cut from their budget, their budget, their dollars, not yours or mine, in the last 2 years. We should make the decision based on what it means we look at going forward.
We can continue to polarize our society. We continue to say those who can afford it, live in a gated community with your own police force, go to your own schools, pay for your own health care. Those who cannot participate in a secondary system and that will only have one net effect, I would suggest, and that is to guarantee that the 500 new beds we will need each year will increase to 600 per year and then 700 and then l,000 per year because the two are absolutely related. We have a 75 percent illiteracy rate in our prison system and yet we act surprised that when we reduce welfare spending for kids, when we send kids to school hungry, when we cut their school budgets, when we increase their class sizes, we don't make college and community college available to them, we act surprised that we are confronted with sky-rocketing incarceration costs. That's the decision. When someone cares to tell me where the money's going to come from, other than more reductions, then I'm interested in that.
Senator Jacobsen stated, "...The motion...doesn't solve the problem. It commends the inmates, and if that's what you want to do, that's fine. But that's not good enough for me."
Senator Raggio stated:
The chair would say that I cannot disagree with a lot of what Senator Callister is saying. But I think it proves the point I'm making, that we should not be in a position of being asked to jeopardize public safety to vote on an issue of this nature for the early release of inmates who have gone through a prison system and use that to address all of the issues in the budget that Senator Callister has referred to. This should not be the decision we are making here today and I resent it again.
With reference to the amendment, certainly uncoupled with what was included in the proposed Plan B, it serves no purpose, other than to exacerbate the situation. The goal is clearly to reduce the need for l,000 beds that now exist in the prison system. Beds that we have been told for two decades are necessary and essential to the proper administration of criminal justice. There are l,000 inmates that need to be let free under some proposal, whatever the nature of their offense. Under this motion, under this amendment, what is required is, when it reaches that point, that there are people standing at the front door, you're going to have to open the back door. I'm not impressed with the 90 days limited in this amendment, because from a practical standpoint, excluding those who they are excluding, it just isn't feasible that it will work for long. Beyond that, the plan in the administration's own words and presentation, does not function, unless they can utilize the directives they want to impose upon the parole and probation system. So standing alone, it serves no purpose and just exacerbates the problem.
I want to add one point that should be made, and I think Senator Callister used the language, that we are shortening the length of stay and that's the only effect to this. We are shortening the length of stay by 90 days for l,000 prisoners, and I don't think we think about what can happen in 90 days with l,000 prisoners. That's 90,000 inmate days. I know this, that as long as they are in prison, nothing is going to happen to an individual or a family.
THE MOTION FAILED. (SENATORS RAGGIO, O'DONNELL, JACOBSEN AND RAWSON VOTED NO.)
* * * * *
Senator Raggio stated he would entertain another motion.
SENATOR O'DONNELL MOVED TO INDEFINITELY POSTPONE S.B. 338.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Senator Raggio closed the hearing on S.B. 338. He re-invited the actuary, Ron Dewsnup, to respond to issues previously raised by Senator Coffin regarding the state health insurance plan.
Senator Coffin asked if funding could be found to add back benefits to the state health insurance plan:
...If we ask for an incremental display of figures that would show us how much it would cost to put it back in, we got a figure from you, David (Thomas)...of 28 percent to add back. But then I asked some people in the industry if they could look at that and see if that was, in fact, something that was accurate....I felt it was a little high, instinctively. I'd have to defer to your expertise, but I know people in the business, so I asked them. They came back with considerably different numbers. I then discovered that actually the committee may have heard different numbers than what you had given us. So I needed to have some reconciliation on that.
Mr. Dewsnup responded:
The incremental numbers provided by Mr. Thomas were correct from our situation in terms of the medical plan and the dental plan. Unfortunately, they were added together before being weighed by their values as part of the total self-funded plan. As a result, when you take the incremental figures, weigh them by the value of the medical plan, which is roughly 80 percent of the plan, and the dental plan, which is about l2 percent of the plan, the figures come out to be approximately l3.3 percent decrease in the total overall self-funded plan from the original costs. However, when we calculate the amount necessary to reinstate those benefits, you have to recalculate that based on the new premium base and, essentially, you just need to divide through by the remaining number, which gives you approximately a l5.3 percent required increase over the current plan. That equates to roughly $9 million. In addition to that...the idea behind the benefit changes made by the committee, they were done in order to strengthen the PPO [Preferred Provider Organization] to help develop additional savings across the course of years and to moderate the inflationary trend.
Senator Coffin thanked Mr. Dewsnup for responding for the accuracy of the record and added:
I think that's a closer figure....It has...tax advantages and since no pay raises are going to be forthcoming from this legislature, if anything can be done for our state employees, certainly the health insurance increase might be considered, or a replacement of benefits....If you find out the last day of the session there is money to add to the benefits, you know that you have a price that you can rely on to do it so that you are not misled into thinking it's almost 30 percent, it's more likely to be closer to l5 percent. I think that's very important for us to know.
Senator Raggio requested that Mr. Dewsnup present the committee with written documentation regarding his response to Senator Coffin's question regarding the cost of health insurance benefit restoration.
Senator Raggio offered the opportunity for testimony regarding actuarial information concerning the health insurance plan.
Mr. Gagnier testified:
I think when I testified on the bill the first time, I gave you a handout based on the actuary's figures on what it would cost to restore certain benefits. You still have that and we still stand by that as a method of picking and choosing how we could improve the plan without getting into those designed to strengthen the PPO network.
All along, we have been using the actuarial information provided by W.F. Caroon (Corporation) and we have no argument with it.
Mr. Thomas interjected:
Just to echo Mr. Dewsnup's final statement, with respect to the PPO network, I would encourage you very strongly not to do anything to dilute that, because the long-term cost impact to the plan would be very drastic.
Senator Raggio invited response by Judy Matteucci.
Ms. Matteucci stated:
The only thing...that I would advise the committee, and particularly Senator Coffin, is if you decide to restore some of the benefits, and you therefore want to increase whatever the state's contributions are, you're going to have to understand that there is going to be an accompanying increase in dependent premiums, because they also have to pay for whatever enhanced benefits. So keep that in mind when you look at the particulars, but it isn't just a matter of increasing the state and not having some of those costs go through to the dependent premiums, too.
There being no further business to come before the committee, Senator Raggio adjourned the meeting at ll:00 a.m.
RESPECTFULLY SUBMITTED:
Dee Crawford,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE:
??
Senate Committee on Finance
June 2, 1993
Page 1