MINUTES OF THE
SENATE COMMITTEE ON FINANCE
Sixty-seventh Session
June 9, 1993
The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:20 a.m., on Wednesday, June 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:
Dan Miles, Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Jeanne Botts, Program Analyst
Steve Abba, Program Analyst
Dee Crawford, Committee Secretary
OTHERS PRESENT:
Rudy Moreno, Assistant Director, Department of Transportation
John Adkins, Deputy Treasurer of Operations, Office of the State Treasurer
John Madole, Associated General Contractors
Brian Hutchins, Deputy Attorney General, Office of the Attorney General
Jack Tedford, General Contractor, Fallon, Nevada
John (Perry) Comeaux, Executive Director, Department of Taxation
Verne Rosse, Chief, Bureau of Waste Management, Division of Environmental Protection, State Department of Conservation and Natural Resources
Paula Berkley, Washoe Tribe of Nevada and California
Myla Florence, Administrator, Welfare Division, Department of Human Resources
Karen Kavanau, Director, Department of Data Processing
Judy Matteucci, Director, Department of Administration
Senator Raggio opened the hearing on Senate Bill 5l7.
SENATE BILL (S.B.) 517:Revises provisions governing state highway revolving account.
Rudy Moreno, Assistant Director, Department of Transportation, explained this bill creates a payroll clearing account to process the payroll of the Department of Transportation (DOT).
Jeanne Botts, Program Analyst, explained currently the DOT disburses its payroll, as well as travel advances and subsistence allowances, out of the Highway Revolving Account. On a biweekly basis, the DOT requests the state controller to issue a check from the Highway Fund in the state treasurer's bank account. That check is deposited into the Highway Revolving Account from which the payroll checks are written. Although statutes permit the DOT to process its payroll and other charges requiring prompt payment through the Highway Revolving Account, there are strict statutory limits on the amount of money that may be in the account at any one time. The $500,000 statutory limit is considerably lower than the $2 million amount required to meet each payroll period. Therefore, the DOT is in violation of the existing statute each time funds to cover a payroll period are transferred to the Highway Revolving Account.
To avoid raising the limits on the revolving account and further audit exceptions, the DOT requests its payroll be processed through a clearing account, beginning October l, l993. Travel advances and subsistence allowances will still be processed through the Highway Revolving Account, which will retain its $500,000 limit.
Senator Raggio asked if the new account has been approved by the legislative auditor.
Ms. Botts disclosed the procedure is acceptable to Gary Crews, legislative auditor, and Carol Ceccarelli, accountant, DOT.
Senator Raggio asked for verification the process will be acceptable to the state treasurer.
John Adkins, Deputy Treasurer of Operations, Office of the State Treasurer, testified S.B. 517 is acceptable to the state treasurer.
In summary, Mr. Moreno announced the state controller also agrees with the measure.
John Madole, Associated General Contractors, distributed Exhibit C, proposed amendment to S.B. 517. He explained the amendment adds a new section 4, which increases the threshold on informal bids from $50,000 to $250,000.
Brian Hutchins, Deputy Attorney General, Office of the Attorney General, came forward to testify there is no opposition to the proposed amendment.
Jack Tedford, General Contractor, Fallon, Nevada, testified in support of the proposed amendment.
SENATOR COFFIN MOVED TO AMEND AND DO PASS S.B. 517.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CALLISTER WAS ABSENT FOR THE VOTE.)
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Senator Raggio closed the hearing on S.B. 517 and opened the hearing on Assembly Bill 386.
ASSEMBLY BILL (A.B.) 386: Revises provisions of Senate Bill No. 97 of this session concerning management of solid waste.
John (Perry) Comeaux, Executive Director, Department of Taxation, testified A.B. 386 revises several provisions of Senate Bill 97.
SENATE BILL (S.B.) 97: Makes various changes regarding regulation of and funding for management of solid waste.
Mr. Comeaux stated S.B. 97 transferred the responsibility for collection of a $l tire fee to the Department of Taxation. Section l, subsection l of A.B. 386 simply clarifies the fact the tire fee applies to the sale of a new tire to a customer for any purpose other than resale.
Continuing, Mr. Comeaux explained subsection 2 of A.B. 386 specifies that the money collected by the retailer will be held in trust for the state. Thereafter, that money will be transferred to the Department of Taxation, he described.
Subsection 3 of A.B. 386 specifies the Department of Taxation will adopt regulations establishing acceptable methods of accounting for and transmitting to the department regarding the money required to be collected, he stated.
Senator Raggio asked what type of regulations does Mr. Comeaux propose will be promulgated under this authority.
Mr. Comeaux stated specification of the payment due dates will be necessary. He disclosed it is his intention to integrate this fee with the sales tax system so the retailer will be able to report and remit the tire fee along with the sales tax payments.
Senator Rawson joined the meeting at 8:35 a.m.
Mr. Comeaux pointed out subsection 4 of section l, page 2, specifies the administrative and legal powers held by the Department of Taxation in connection with Nevada Revised Statutes would apply to this fee.
Mr. Comeaux explained when the tire fee is integrated into the sales tax system, it is his intention to distribute the extra work load among existing staff. He proclaimed that distribution will not be possible for at least l2 to l8 months while the sales tax system is being rewritten. Until that time, most of the activity associated with the tire fee must be centered in one tax examiner position, he insisted. Those activities will involve preparing deposits, processing returns, distributing delinquency and accounts receivable information to the revenue offices. There is currently no position available to oversee this project, he asserted.
Senator Raggio asked what entity has previously been overseeing the project.
Mr. Comeaux answered the function has been provided by the Division of Environmental Protection. Continuing, he explained an additional tax examiner position will be needed during the interim. Referring to section 5 of A.B. 386, Mr. Comeaux pointed out, it provides for a transfer from the solid waste management account of $32,081 in the first year of the biennium to pay for the tax examiner and $l6,l76 in the second year which would fund that position through December 3l, l994. He stressed the funding for the temporary position would not impact the General Fund.
Senator Raggio requested verification the position would be temporary.
Mr. Comeaux responded in the affirmative.
Senator Callister joined the meeting at 8:40 a.m.
Senator O'Donnell asked, "What specifically caused this tire tax? What kind of business would not be paying this tax?"
Mr. Comeaux cited his understanding although the Division of Environmental Protection was given the responsibility for collecting this fee, they did not receive any staff to carry out the task.
Verne Rosse, Chief, Bureau of Waste Management, Division of Environmental Protection, State Department of Conservation and Natural Resources, came forward to testify. He stated when the fee was established during the last legislative session, the agency started collecting the fee, but did not have personnel to devote to conduct audits to ensure the fees were being paid. The operators of the solid waste industry stated they purchased their tires wholesale and were therefore not subject to the retail sales tax and therefore not subject to the $l fee.
Senator O'Donnell asked if new tires placed on a car by a dealership were subject to the $l fee.
Mr. Rosse responded in the affirmative.
Senator O'Donnell asked Mr. Comeaux what administrative powers does the Department of Taxation possess to deal with people who do not pay their sales tax. He asked if a business licensed could be revoked from such action.
Mr. Comeaux responded in the affirmative. He stated the agency has the authority to apply penalty and interest when the payments are not made in full and on time. The agency possesses the authority to file liens, to place a hold on bank accounts for collection purposes, as well as authority to revoke either the seller's permit or the business license which "could put a business out of business," he declared. Mr. Comeaux explained the agency currently has the statute authority but does not specifically possess such authority in connection with the tire fee.
Senator Raggio closed the hearing on A.B. 386.
Closing List #26 was distributed to the committee.
SENATOR RAWSON MOVED TO REOPEN THE BUILDINGS AND GROUNDS BUDGET.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS CALLISTER AND O'DONNELL WERE ABSENT FOR THE VOTE.)
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Buildings and Grounds - Page 234
Senator Jacobsen announced the director of this department has been targeted for Vacancy Savings. He stressed it is imperative the position be maintained, and he urged reconsideration.
Senator Raggio requested input from the Budget Division but there was no representative present.
SENATOR RAWSON MOVED TO ADJUST THE BUDGET BY REMOVING THE VACANCY SAVINGS; ADJUST THE RESERVE BALANCE ACCORDINGLY TO MAINTAIN THE DIRECTOR POSITION. THE ACTION CONSTITUTES NO IMPACT TO THE GENERAL FUND.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.)
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Gaming Control Board - Page 320
Exhibit D, Budget Closing Action dated June 3, l993, (Exhibit D - Original on File in the Research Library) was distributed to the committee.
Bob Guernsey, Principal Deputy Fiscal Analyst, testified the Assembly Committee on Ways and Means removed holiday overtime pay, valued at $60,064 in Fiscal Year (FY) l994 and $60,094 in FY l995.
Mr. Guernsey distributed Exhibit E, memorandum dated June 4, l993, from Harlan Elges, State Gaming Control Board, to the committee. It was explained the holiday overtime pay and standard overtime pay have not historically been budgeted in this account. The agency will be appealing to the Senate Committee on Finance to maintain the holiday overtime pay, he stated.
Senator Glomb reminded the committee if the exempt- and nonexempt- merit system does not materialize, agencies will need additional funding to allow for overtime payment.
Mr. Guernsey pointed out the majority of the positions at this agency are in the unclassified service. Those positions are budgeted at the maximum level, he advised. The agency has hired personnel at a lower level and allowed promotional opportunities. He explained:
Historically, the budget office has put in an item of Vacancy Savings in this budget valued at $35l,000 in FY l994 and $404,000 in FY l995. The effect of removing the payment for overtime would simply...[mean] the amount of Vacancy Savings...generated would be greater.
Mr. Guernsey summarized his recommendation is to remove the overtime pay from the budget. Referencing page 9, Exhibit D, Mr. Guernsey provided an overview of the response by this agency concerning questions raised regarding currency transaction changes by the United States Treasury Department relative to Regulation 6A and the potential effect of those changes on this agency from a budget perspective.
He declared:
The repercussions of any rule changes by the feds are hard to gauge....Bill [Bible] or Harlan [Elges] don't come out directly in an endorsement that we really need additional positions at this point in time. What Bill [Bible] told me over the telephone is he would like a letter of intent that if there is an impact due to rule changes that he be allowed to return to the Interim Finance Committee and request additional positions at that point in time.
Senator Raggio asked for verification that action will only occur if the requirements of Regulation 6A are increased.
Mr. Guernsey agreed.
Continuing, Mr. Guernsey summarized the recommendations as indicated on Exhibit D, page 5, regarding the Gaming Policy Committee. The agency indicated they require additional funding of $7,500 to activate the Gaming Policy Committee and "that is not requested by the agency," he pointed out.
Senator Raggio pointed out the Gaming Policy Committee was active during the administration of Governor O'Callaghan; however it has been inactive for some time. He asked if the recommendation to reactivate this committee was suggested by the interim committee studying the State Gaming Control Board.
Paula Berkley, Washoe Tribe of Nevada and California, came forward to offer the information:
There was a recommendation by the interim committee to expand the change, the function of the policy committee to involve itself with Indian compacts. There was a hearing early in the session....The tribes really didn't go against it; they just made suggestions on how to make it more effective....It hasn't been discussed to my knowledge....
In summary, Mr. Guernsey referenced page 323 of the Executive Budget and said assuming legislation passes concerning the slot route operators, five additional positions will be requested by the agency at a cost of $253,070 the first year of the biennium and $243,974 in the second year.
Referencing Exhibit D, pages 1 and 2, Senator Raggio requested committee input regarding items 1, 6 and 8 outlined in that document.
SENATOR O'DONNELL MOVED TO AMEND THE BUDGET TO INCLUDE ITEMS OUTLINED IN EXHIBIT D, BUDGET CLOSING ACTION DATED JUNE 3, 1993, WITH THE EXCEPTION OF THE AGENCY REQUEST, ITEM NUMBER 8, TO ACTIVATE THE GAMING POLICY COMMITTEE; TO CONCUR WITH THE ACTION TAKEN BY THE ASSEMBLY COMMITTEE ON WAYS AND MEANS NOT TO AUTHORIZE THE OVERTIME PAY REQUEST; AND TO AUTHORIZE A LETTER OF INTENT TO ALLOW THE AGENCY TO RETURN TO THE INTERIM FINANCE COMMITTEE TO ADDRESS ITEM NUMBERS 6 AND 7.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Gaming Investigative Fund - Page 329
Mr. Guernsey stated he had no recommendation for this budget.
SENATOR RAWSON MOVED TO APPROVE THE BUDGET AS RECOMMENDED BY THE GOVERNOR.
SENATOR O'DONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Fire Marshal - Page 1409
Mr. Guernsey distributed Exhibit F, Budget Closing Action, to the committee and said following previous actions taken by the Senate Committee on Finance regarding reorganization savings, it is recommended the position of deputy chief be restored to the budget and Vacancy Savings be increased by a like amount. He pointed out to the committee the agency is authorized by regulation to increase fees and it is anticipated they may exercise that privilege to bring in additional funds to ensure adequate funding is available for the position.
SENATOR RAWSON MOVED TO APPROVE THE BUDGET AS RECOMMENDED BY STAFF AND OUTLINED IN EXHIBIT F.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CALLISTER VOTED NO.)
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Capitol Police - Page l4l3
Dan Miles, Fiscal Analyst, testified this budget relates to the Buildings and Grounds Division budget which has been closed. Minor adjustments were suggested in the form of six new positions which are related to the new Las Vegas Office building budgeted in the second year of the biennium. Funding was submitted for l2 months of group health insurance, he explained. However, since the building will not be completed until January, l994, it was suggested to remove the value of 6 months of group insurance premiums for those new positions. Additionally, he reported, paid compensation has not historically been budgeted but this account has included calculations for paid compensation time.
SENATOR RAWSON MOVED TO APPROVE THE BUDGET AS RECOMMENDED BY STAFF.
SENATOR JACOBSEN SECONDED THE MOTION.
Senator Callister asked if the capitol police will remain under the direction of the Buildings and Grounds Division. He stated:
I think it is confusing to have this unique device in which our capitol police are the only police in the state system that are outside...the state system, so I am going to be voting no on this budget for those reasons.
Senator Glomb declared she would be voting against the motion and opined she did not feel "the agencies should be separate."
Senator Callister expressed his opinion the capitol police should be more appropriately associated with the Department of Public Safety, as proposed in the Governor's reorganization.
Senator Raggio supported the concept the capitol police remain under the auspices of the Buildings and Grounds Division.
Senator Jacobsen explained:
Years ago we had that kind of proposal and the only problem that is apparent with it is a lot of times it goes wherever it has the highest priority. That's one of the reasons we have security here today. Years ago, we used highway patrol and it was mixed with capitol police. But when we needed them, they were busy at the mansion or some other place and that's one of the reasons we kind of segregated each group to make sure they get the attention they need. Admittedly down south when we build the new office building down there, maybe that imposes another requirement. Currently, it operates pretty effectively because they are tied together....We back them up, they back us up....
Senator Callister declared the time has come to address why the state has "three separate subsets of what should be one public safety division."
Senator Raggio requested a show of hands to indicate those who favored retaining the capitol police under the auspices of Buildings and Grounds Division. Senators O'Donnell, Jacobsen, Raggio and Rawson approved the concept. Senators Coffin, Glomb and Callister opposed the issue.
Senator Raggio entertained a new motion on this budget.
SENATOR O'DONNELL MOVED TO ADJUST THE BUDGET BY REMOVING THE COST OF INSURANCE FOR A 6-MONTH PERIOD OF TIME, TO REMOVE THE LINE ITEM FOR PAID COMPENSATION, AND TO ALLOW THE CAPITOL POLICE TO REMAIN UNDER THE AUSPICES OF THE BUILDINGS AND GROUNDS DIVISION.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS CALLISTER, GLOMB AND COFFIN VOTED NO.)
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Hazardous Materials Training Center - Page l440
Exhibit G, Budget Closing Action, was distributed to the committee. Mr. Guernsey recommended:
The transfer from [the] Environmental Protection [Division of Environmental Protection] be reduced down to a level of $260,000 and $265,000, rather than the $459,000. These are fees generated through charges for storage of hazardous material at the Beatty dump site, which will continue for a number of years. The budget was built at $459,000. When we checked with [the] Environmental Protection Agency, [Division of Environmental Protection], the $459,000 is not expected to materialize. The revenues are coming in significantly less and $260,000 may wind up even being optimistic....
Senator Raggio asked if this budget had a reserve.
Mr. Guernsey responded in the affirmative. He recommended to reduce the transfer each year, make a minor adjustment to the balance forward based upon anticipated revenues this year, make the adjustments of balancing to reserve, restore the two training officer positions in reference to reorganization savings and offset that action with vacancy savings, and address the purchasing assessment. He noted the State of California has lowered fees for internal storage within the state for hazardous materials and that action has had a dramatic effect on the Beatty site.
Senator Raggio asked if that action would accommodate all of the agency's programs.
Mr. Guernsey responded in the affirmative.
SENATOR JACOBSEN MOVED TO APPROVE THE BUDGET AS RECOMMENDED BY STAFF AND OUTLINED IN EXHIBIT G.
SENATOR O'DONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Equal Rights Commission - Page ll03
Ms. Botts distributed Exhibit H, memorandum dated June l, l993, from David Miller, Department of Data Processing, to the committee and testified with respect to the automation recommendations for that department. She reminded the committee during the last testimony heard before the Senate Committee on Finance by the Nevada Equal Rights Commission, the agency requested $45,000 for a new computer system to assist them in processing cases. In the interim, a representative from the Department of Data Processing conducted an on-site visit to ascertain whether the agency system could be upgraded rather than replaced at a cost less than $45,000.
She explained Mr. Miller discovered during his on-site visit, the agency had a considerable amount of equipment purchased for them by the federal Equal Employment Opportunity Commission (EEOC). It was discovered the agency was simply not using the equipment. In some cases, new equipment was found still in the original box. Mr. Miller recommended, rather than start over with an entirely new system, to upgrade, where possible, using the existing equipment. She stated the Department of Data Processing has made a commitment to assist the agency with equipment training. The federal EEOC has offered to provide training on the equipment it previously provided the agency if the travel expenses were paid by the State of Nevada. The cost to accomplish these tasks is approximately $2l,450, as outlined in Exhibit H.
Continuing, Ms. Botts pointed out the charge of $7,000 for services provided by the Department of Data Processing could possibly be reduced by $2,000. The Assembly Committee on Ways and Means has reduced the service charge from $7,000 to $5,000 and split the cost of the system 50-50 between the agency state-funded budget account and their federally-funded account, Ms. Botts disclosed. Continuing, she explained the reduced amount would be $l9,450, divided in half, which would result in $9,725 in each of the state-funded and federally-funded respective accounts. Ms. Botts reminded the committee the agency declared it could process approximately 200 additional cases each year with the upgraded equipment. She explained the agency was asked "where it expects to be in terms of processing their cases" but a response has not been received. Ms. Botts suggested to consider a letter of intent to require the agency to report to the Interim Finance Committee on a quarterly basis to provide an update on its case activities as well as earning and collecting federal reimbursements.
Ms. Botts explained the Assembly Committee on Ways and Means treated this account in the following manner:
They did take this data processing request, take $2,000 from the DDP portion and split the $l9,450 between the two accounts. They also added two compliance investigators to try and reduce the backlog of work....at approximately $70,000 a year.
Mr. Miles offered the response the cost for the two compliance investigators is $64,000 in the first year of the biennium and $76,000 in the second year.
Senator Raggio opined the agency presented a very compelling case of its backlog and that it needs to be addressed.
SENATOR COFFIN MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH ACTION TAKEN BY THE ASSEMBLY COMMITTEE ON WAYS AND MEANS WITH REGARD TO THE AUTOMATION REQUEST; TO INCLUDE TWO COMPLIANCE INVESTIGATOR POSITIONS; AND A LETTER OF INTENT TO REPORT ON A QUARTERLY BASIS TO THE INTERIM FINANCE COMMITTEE REGARDING THE AGENCY'S PROGRESS, AS OUTLINED BY STAFF.
SENATOR O'DONNELL SECONDED THE MOTION.
Senator Callister requested a recap of the total amount of the addition to the budget.
Senator Raggio responded the total impact on the General Fund would be $64,628 in the first year of the biennium, and $76,646 in the second year.
Ms. Botts pointed out the two compliance investigator positions would start on October l, l993.
Senator Callister expressed his support of the needs of this agency but opposed the action on the basis he "wondered where the dollars are going to come from."
THE MOTION CARRIED. (SENATOR CALLISTER ABSTAINED FROM THE VOTE. SENATORS RAWSON AND GLOMB WERE ABSENT FOR THE VOTE.)
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Senator Raggio recessed the meeting at 9:50 a.m. and reconvened the meeting at l0:00 a.m.
ASSEMBLY BILL (A.B.) 430: Makes various changes regarding fees of state land registrar and authorization to use state land.
Mr. Miles distributed Amendment No. 783 to A.B. 430 and explained the amendment defines "a navigable body of water."
SENATOR RAWSON MOVED TO ADOPT AMENDMENT NO. 783 TO A.B. 430.
SENATOR O'DONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CALLISTER WAS ABSENT FOR THE VOTE.)
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Welfare Division - Page 865
Senator Rawson testified:
We'll start with the ADC [Aid to Dependent Children]. We've got some disappointments as we deal with these budget closings....We've spent l00 hours coming up with some welfare reform. The welfare reform we're talking about would require a waiver that requires running two systems. We have to have a test group and we're involved in the development of the NOMADS [Nevada Operations of Multi-Automated Data System]. There was testimony before Assembly Committee on Ways and Means that the contractor that is doing that has missed the first deadline and in no way can accept any more...change to that system and be held accountable for finishing what they've been contracted to do. In other words, there is no way to develop the computer capability to go along with the waiver for us to be able to accomplish our reform.
The tragic thing about this is there were some significant savings, and I don't see any way to put those together. We have those things that can probably still be held, and we'll have staff talk to those as we go through. My tendency is to forget about the NOMADS work that is going on and just go with our own system, but that's not responsible to do that. We have to come out of this with a system that is compatible and does the job we need....I suspect we face this in many areas of our state government right now. Our computer faculties are simply not up to doing what we need to have done.
...It's not just the reform we talked about here in the legislature. The Governor suggested a program, and we're told now that this system can't even adapt to the Governor's changes.
Senator Raggio asked Ms. Matteucci if she had any comments regarding Senator Rawson's statement.
Judy Matteucci, Director, Department of Administration, deferred testimony to Ms. Florence.
Myla Florence, Administrator, Welfare Division, Department of Human Resources, testified:
The state made a commitment to totally upgrade the Welfare Division's computer capability. That began actually two sessions ago and further committed during the last session. All together we have about a $22 million investment in completely upgrading every eligibility function within the division. Nevada will be the only state in the union trying to bring a total conversion of food stamps, ADC, the child support enforcement program, the employment and training programs, every program we have contact with an individual is essentially affected by these system changes. It involves some 2.5 to 3 million lines of code. Integrated Systems Solutions Corporations (ISSC)...began this process in August. They are well into the general systems design phase. Their target date for completion and testing and user acceptance phase is August l994. This would just totally compound the major undertaking the contractor is engaged in. I think we're all genuinely interested in welfare reform, however, the timing with respect to a $22 million project has just not come together. We've attempted to work through some of those issues as the session has progressed, but I'm convinced, and feel that I can only advise you in good conscience, that it can't be done.
Any welfare proposal, as Senator Rawson indicated, involves obtaining a waiver from the federal government that we must have a testing control group. So essentially we're running two eligibility processes, which would be very different from the current way we do business. If we were to initiate anything before we convert to the new system, that will require investing in the existing system to make whatever changes would be required, as well as preparing for those changes with the contractor, which would also be additional costs. Pam Case and Karen Kavanau from the Department of Data Processing are here. I think they can provide more specific information regarding the technical difficulties. However, the problem I see with the contractor right now is that if we were to overlay a new eligibility process, which in our plans involve employment and training as well as a changing way in which grants are administered, that strikes at the very core of the development work they are doing right now....
Senator Raggio asked, "If you do all this at this very large cost, is there the capability in the future to do this new overlay?"
Ms. Florence responded there would be the capability in the future to perform system changes.
Senator Raggio asked how this setback impacts the Governor's proposal for welfare reform.
Ms. Florence responded:
As I indicated, we would have the same problem with the Governor's reform proposal. The Governor didn't want us to go forward unless we had consensus on all of those issues anyway. But the system problems would affect any reform proposal and there are others out there.
Senator O'Donnell asked why the Governor did not want her to move forward on the project.
Ms. Florence replied:
He would want us to have consensus with the advocacy groups as well as the legislators, that's why both Senator Rawson and Senator Glomb were involved in some of those discussions to try and craft a package in which everyone could agree to. That included many of the Governor's proposals within that package. Again, the system problem is the one that's frustrating....
Senator O'Donnell asked if the contractor's completion date has fallen behind schedule.
Ms. Florence responded the target date is not behind schedule. She declared, the final date of October l995, "we must have a certified system in place in order to ensure the federal enhanced funding."
Senator O'Donnell asked if Ms. Florence could foresee any changes from the federal government in terms of welfare reform and "would this have any impact on the data processing" issue.
Ms. Florence stated the President has indicated an interest in welfare reform. Her understanding is he has advised Congress that probably won't occur for about 2 years. She did not feel that would present a problem.
Senator Raggio asked for comments from Ms. Kavanau.
Karen Kavanau, Director, Department of Data Processing, testified:
Senator O'Donnell hit the nail on the head. The issue is timing. The Welfare Division is required by law to have the NOMADS up and running by October l995. The changes proposed in the welfare reform are so inherent to the basic design of the NOMADS, that to incorporate those changes would drastically change the design and would severely impact the timing of the NOMADS project. It could be done later.
Senator Rawson concluded a system is being designed that doesn't have the reform the agency wants. "That means we're designing an outmoded system, but the system at least is more adaptable once it is designed than it is during the process," he declared.
Senator Rawson informed the committee:
The Assembly Committee on Ways and Means approached this from a standpoint of having a date certain there would be the plans, all of the details worked out for serious welfare reform that could be presented in the next session of the legislature. It looks like that is the best that we're going to get out of this....
Distributing Exhibit I, Summary of Budget Closing Recommendations, Welfare Division, Steve Abba, Program Analyst, provided the following recommendations:
In reviewing the Welfare Administration budget, we requested the Welfare Division to reevaluate the cost of the NOMADS project, which Myla [Florence] and Karen [Kavanau] just discussed. Based on evaluation and information we received from the division, the NOMADS core staff and other Welfare Division staff who work with the NOMADS project who are entitled to receive federal reimbursement at higher match rates were not done so in the development of the Executive Budget. So under item number 1, it is simply the reductions that you see in regular appropriation and the increase in federal funds. You simply cost allocate those salaries of those positions, accessing the higher federal match that is allowable. The federal match is approximately 90-10 for most of those positions.
Going to item 4, because it's related, in that same process of reevaluating the NOMADS project cost, where we also asked the division to reevaluate the development cost for that system, with the information we received back from the division, it was indicated that several components of the NOMADS project could be charged to federal programs that will provide a higher federal match. There are different milestones and different estimates for the project costs. Adding those all together, the reduction you see in FY l994 and the addition in General Funds for FY l995 were the adjustments that could be made through that reevaluation.
Under item number 2, with the proposed...and approved unbundling of the Department of Data Processing consolidation, there were four positions that were centralized out of the Welfare Administration budget into that consolidated Information and Technology contracting services division. This simply brings back those positions that were transfers and transferred over to that centralized division and fully funds the positions back within the Welfare Administration account.
Item number 3, under the base Welfare Administration budget, there was a recommendation for equipment in the amount of $l86,802 over the biennium. We've asked the Welfare Division to evaluate their equipment needs and provide justification for the equipment funding recommended. The division was able to justify $l43,802 which left a balance of $43,000 in equipment funding they were not able to justify. The reductions you see there take that $43,000 and reduces it out of the budget. Half are federal funds. This in no way penalizes the division, there is still the administrative support and equipment cost for the new positions that are recommended in this budget.
Item number 5...is a reduction in the current data processing system that the Welfare Division must maintain until the NOMADS is completed. The data processing cost that was recommended in the budget included an escalation for caseload which is an appropriate adjustment because of caseloads that are dealt with in the Welfare Administration budget. However, the caseload increases that were recommended had subsequently been reduced in the overall, and various other, budgets of welfare. However, the higher caseload for the data processing costs recommendation was not reduced. The technical correction simply adjusts the ongoing data processing category for the caseload that has actually been budgeted.
Senator Raggio asked if that action applied equally to both federal and General Funds.
Mr. Abba responded in the affirmative. Continuing, he reported:
Item number 6 is a one-time General Fund recommendation of $55,000 for developing a data processing tracking and monitoring program for the school medical screening program. This was a program that is funded in not only Welfare Administration but in the Medicaid budget. A program whereby the school districts can access federal Title XIX dollars to help pay for some of the health and medical costs for school children who go through the...screening process and are found to have medical problems and are Medicaid-eligible. The appropriation was a state appropriation for the computer system. The state does not benefit from this program, so what we're proposing is that the computer system be developed, but the state match...requirement be provided by the school districts who will benefit from that program. The savings would be $50,000. It's a one-time savings in FY l994....
In summary, Mr. Abba explained the six actions would provide a regular appropriation savings of $837,l88 for FY l994 and $237,223 for FY l995.
Mr. Abba distributed Exhibit J, Welfare Administrative Issues, to the committee and explained the exhibit material depicts actions taken by the Assembly Committee on Ways and Means. There has been substantial discussion regarding the division's need for the Medicaid Management Information System (MMIS) which was originally part of the NOMADS project, but due to cost overruns with NOMADS, has not been initiated. The MMIS project is not recommended in the Executive Budget, he reported. The exhibit material represents the estimated MMIS cost if the project was initiated in January l995.
Mr. Abba explained there is no waiver required. He stated:
What the division would have to do is apply with the federal government with an advance planning document process to get approval of the project, for enhanced federal dollars at an approximate 75-25 rate.
Senator Raggio asked for clarification from Mr. Abba's regarding the NOMADS predicament.
Mr. Abba explained:
The contractor right now is strictly working on what is called the NOMADS which is the eligibility payment system for Welfare [Division]. The MMIS is an ancillary component that would access information from NOMADS. It provides Medicaid information that the executive branch, as well as the money committees, have asked for many times to get an idea what is happening with our Medicaid costs, tracking system and federal reporting. This would not require a waiver. What would require a waiver, and was testified to, was a welfare reform issue that had been recommended by the Governor and was being looked at by Senators Rawson and Glomb.
Senator Glomb stated:
We have known forever that this [Medicaid] Management Information System is crucial to the ongoing workings of this division, for us to be able to do projections, be able to do any planning. Why was no money included in the Executive Budget for this?
Ms. Matteucci responded:
We can get Myla [Florence] up here to discuss the issues. It's a matter of priorities and a matter of federal mandate. The NOMADS is higher on the federal list. I think we are the only state that does not have an MMIS....It's just a matter of no money, Senator Glomb. It's simply a matter of what the priorities are....It was decided some time ago that the NOMADS had a higher priority because there is a federal requirement for the NOMADS. That having been said, the proposal for managed care addressed some of the issues of the need for MMIS. The extent to which we get any kind of a managed care system up and going, I suspect is going to certainly reflect on the need for the MMIS. In our presentation, that was mitigating against the cost factors that you could see in the MMIS....
Senator Glomb declared for the record, "this is another budget that is underfunded...."
Ms. Florence interjected, "...The [President] Clinton administration is proposing changes in the federal participation rates."
Senator Glomb pointed out that previously the federal match was 90-l0 and pointed out, "we're the only state that isn't on-line. So for every $l, we would get $9 in federal funds to put in a system that we all have known has been needed for years. We are missing this opportunity."
Ms. Matteucci replied:
We have missed it....The point I think Myla [Florence] is trying to make. I think you all need to be aware...that [President] Clinton has it in their budget, and we have no reason to think it's going to be overturned by Congress, a proposal to reduce many of these enhanced matching rates that you are now building into your budget, here....I think the die is somewhat cast on these matching rates; and if you build the budget on the enhanced matching rates that we know are not in the President's budget, then we are going to have to ask for some accommodation if what looks like what will come to pass, does come to pass....But we do need to get that on the record.
Senator Rawson asked:
When we look at the savings out of the first packet here [Exhibit I] we have a regular appropriation the first year, $837,000 less in General Fund appropriation. Is that already built into the budget?
Ms. Matteucci responded:
The money he just indicated to you that was General Fund savings is in the budget now. But the enhanced matching rates are not because that is something that was presented in March, when the President's budget was presented....So you have about $l million over the course of the biennium in this one budget that is in the budget now that is being proposed for reduction....So you have some options here, is what we're trying to present to you.
Senator Rawson stated:
What I'm trying to see clearly is how much additional General Fund money this will cost us if we pick this option, or any other options. Or whether or not we are developing more savings through these proposals than what was demonstrated in the Governor's budget. In light of today's changing of this, I'm not sure where we are.
Mr. Abba said:
The six proposals I just went through, there would be a $l,074,4ll reduction in the Welfare Administration budget in General Fund dollars. Actually less than the Governor has recommended. The MMIS cost, if it was recommended to come on-line effective January l, l995, to allow the division a leg up to get started on that project, would run, in General Fund dollars, approximately $9l,400. The issue of the [President] Clinton budget, and the potential lowering of the federally matched rates in not only [the] Welfare [Division] but probably various other agency accounts, would have a significant impact on the Welfare Division budgets in an approximate amount of $275,000 in l994, and $2.l million in l995. That would be federal dollars that would not be able to be accessed because the matched rate has been reduced to a 50-50 level.
Senator Rawson said, "But you are indicating we may be able to lock this in if we budget it now?"
Ms. Matteucci responded, "No, I don't believe so." She elaborated:
I'm suggesting to you that everything I have seen...is that reduced matching rate is going to become a reality. The issue comes down to whether or not you're going to remove the caps on this budget. If you're not going to remove the caps on this budget, then we would strongly urge you to anticipate the lower matching rates and put the higher General Fund dollars in here because you're going to handicap the Welfare Division if you don't do that.
Mr. Abba suggested:
Because this is not cast in concrete, but does look like a definite possibility, the appropriations act language may be modified to allow the division to approach the Interim Finance Committee if the federal match rates are reduced, so as not to have to reduce programs....
Senator Rawson responded:
I think that is reasonable to allow them to approach the Interim Finance [Committee], but we're also sending a strong message that we are on a biennial cycle and we have to deal with what is budgeted. If they cannot accommodate us on that, then there will be negative changes in the program.
Ms. Matteucci stated:
We have tried that before. There are very few states that are biennial. I just don't believe they are going to make an accommodation for the minority of states that are biennial, particularly, since we've gotten notice during the legislative session that it is likely that is going to happen....
Senator Rawson opined:
One of the things it does do is make the people of the state aware of the number of mandates we have upon us that we can't do anything about....
Senator Raggio said:
We're looking at the $8 million you recommended [contingency fund] in the budget and last time we did put some in for federal mandates. But I don't think we can take that action now until we see what our final closing action is. If it is appropriate, we can increase the contingency fund...."
Ms. Matteucci insisted:
I truly believe it is going to happen. I think they are going to reduce those rates. I don't think the states have a real good voice to argue against it. Since it is in the President's budget, I cannot see Congress changing that particular option.
Senator Coffin expressed concern over increasing the size of the contingency fund.
Senator Rawson summarized, "I'm not prepared to make a recommendation that we put more General Fund money in today...."
SENATOR RAWSON MOVED TO CLOSE THE BUDGET OF THE WELFARE ADMINISTRATION IN ACCORDANCE WITH STAFF RECOMMENDATIONS AS OUTLINED IN EXHIBIT I.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CALLISTER WAS ABSENT FOR THE VOTE. SENATOR COFFIN ABSTAINED FROM THE VOTE.)
* * * * *
There being no further business to come before the committee, Senator Raggio adjourned the meeting at l0:45 a.m.
RESPECTFULLY SUBMITTED:
Dee Crawford,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE:
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Senate Committee on Finance
June 9, 1993
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