MINUTES OF THE
SENATE COMMITTEE ON FINANCE
Sixty-seventh Session
June 19, 1993
The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Saturday, June 19, 1993, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Bob Coffin
Senator Diana M. Glomb
Senator William R. O'Donnell
Senator Matthew Q. Callister
STAFF MEMBERS PRESENT:
Daniel G. Miles, Fiscal Analyst
Robert Guernsey, Principal Deputy Fiscal Analyst
Jeanne L. Botts, Program Analyst
Judy Jacobs, Committee Secretary
OTHERS PRESENT:
Samuel P. McMullen, Washoe County
Bjorn P. Selinder, County Manager, Churchill County
Senator Raggio announced the meeting would open with a report on Senate Bill (S.B.) 506, a measure for Churchill County. He recalled the counties had been asked to confer regarding the amount and nature of appropriations and to review information from the Department of Taxation.
SENATE BILL 506:Makes various changes relating to supplemental city-county relief tax.
Samuel P. McMullen, Washoe County, reported a number of meetings had been held with county representatives and with the Department of Taxation to consider the ramifications of the bill. He stated a complete analysis of the methodologies used by the counties involved had been made. The counties cited were Washoe, Churchill and Lander. He declared full agreement had been reached between the Department of Taxation and Churchill and Washoe counties as to the methodology used to estimate revenues and losses.
Mr. McMullen declared there was no longer any contention about overcollection or overestimation of revenues. He said Deputy Executive Director of the Department of Taxation Janice Wright had attended the meetings and she agreed the methodologies and figures were reasonable.
Mr. McMullen said there had been some question that Lander County was going to lose approximately $600,000 through the impact of the legislation. Based upon a projection from the Department of Taxation it had been estimated that their sales tax revenue would go to 8.13 percent. He said there was actually a decline of 17 percent, so it is estimated that Lander County will have a gain of around $220,000 even if S.B. 506 should pass.
Mr. McMullen reiterated there is no longer any contention about any of the figures. He said there will be some additional technical amendments to S.B. 506 which have been discussed with the bill drafter.
Senator Raggio recalled the original bill was designed to make an appropriation to correct an error that occurred after the last legislative session. The result was a loss of revenue to Churchill County. He said:
The agreement had been that there would be no payback in so far as retroactive loss, but that you would come up with something that would apply to any loss prospectively, recognizing, of course, that you had raised some revenue sources to ameliorate some of that situation.
Secondly, there was to be a change in the formula where you have been relying on estimates to make the allocation to all the counties, and I understood that there had been an agreement signed-off by all counties, including NACO [Nevada Association of Counties], that that should...be based upon a previous year where you had actual collection numbers.
Senator Raggio pointed out the bill was also designed to put Churchill County and Lander County under guaranteed county status. He said if they had been aware of the erroneous information they probably would have elected to go into the guaranteed status. He asked how that had been changed.
Mr. McMullen responded:
We...left all of the pieces of that in place except for the appropriation. Speaking specifically to the appropriation, our effort has been...to do as much as we could to try to reduce that amount from the $1,020,000 figure currently in the original draft of S.B. 506. The operative effect...is...that appropriation would be reduced to...$600,000.
Mr. McMullen explained they reached the figure by making a onetime appropriation to cover periodic payments made over a 3-year period. He said an analysis of present-value discounting had been done which made a difference of approximately $120,000. He said that reduced the figure from $1,020,000 to $900,000.
Mr. McMullen said another analysis showed that out of the adjustments from the second part of the bill, going from estimates to the actual prior year performance, there is an expectation that Washoe County would see approximately $300,000 from a onetime adjustment. He stated there is a suggested change to accommodate some of the small counties. He said it was deemed appropriate to give Churchill County a direct credit from Washoe County. He said the combination of those two things dropped the need for the appropriation to $600,000.
Senator Coffin asked if there had been a consensus on the $600,000 appropriation or if that had been Washoe County's proposal. Mr. McMullen replied:
I want to be very careful about making any representation that can be construed as Clark County's representation, or any of the entities there. I don't speak for them....
This bill doesn't...truly affect them and they've been very good about helping us with numbers and analysis....
As far as I understand there is no major disagreement with any of that.... Outside that [Clark County] there is real true consensus about it.
Senator Coffin said he had found one adjustment that would make Churchill County whole without the necessity of a General Fund appropriation. He asked if Mr. McMullen had seen the scenario to which he was referring.
Mr. McMullen replied he had seen many scenarios but he could not support a case in which the funds would come from onetime revenues or out of the Supplemental City-County Relief Tax (SCCRT). Mr. McMullen asserted those would result in a disproportionate share coming from Clark County which would not be appropriate. He acknowledged the error was not caused by any one county but it had been a mistake in clerical forms.
Senator Coffin said there was a possibility some counties could continually be out of balance and there would be a continual request to repair the fund. He declared he could not support the use of General Funds. Mr. McMullen responded he believed the formula was being repaired and there was not much chance that the same type of error would arise again.
Senator Callister acknowledged it took approximately 10 years for the error in distribution of sales taxes to come to light. He disagreed with a statement made by Mr. McMullen that the solution would not penalize any entity, asserting that 65 to 70 percent of General Fund money is generated by the taxpayers of Clark County. He asked Mr. McMullen to explain what he meant by the statement that there was full agreement that the methodologies were correct and appropriate.
Mr. McMullen responded:
What functionally happened...the methodology fundamentally used by the Department of Taxation was one that did not specifically look at the ups and downs of each individual county. Basically it applies a standard percentage across the board statewide and then utilizes that number. When a county doesn't hit that number, goes up above it or below it in terms of what is actual or their projections are, those numbers...would change. If you use a number as a projected increase in sales tax revenue that, let's say...8.13 percent used by the Department of Taxation, but the actual number is 4 percent, say...if that blanket number used across the state doesn't match the number applied to any county. what happens...[is] an overestimation of SCCRT revenues. If that number is high then what you say is, the number for SCCRT revenues coming in is higher than that and can take a loss and adjust it...downward. ...You're talking about the gap between what you're going to raise, which would be estimated as larger than actual.... What we did was we...came down to a more specific figure.
Mr. McMullen stated the Department of Taxation was about 4 percent off while he was about 0.84 percent off in comparable estimations versus the actual figures.
Mr. McMullen explained:
We walked through each one of those numbers, those formulas, both theirs and ours, both theirs and Churchill's, and worked through the assumptions and the features of each one of those methodologies. Janice Wright said at the table that the methodology used by Churchill, the methodology used by Washoe was reasonable, that those numbers were very appropriate because the methodology was reasonable....
The key feature is that they used a standard of percentage across the state and we tried to...tune these things up more correctly.... Our numbers were and our projections, and you almost have to project for all 17 counties, have to be more accurate than just a statewide across-the-board projection.
Senator Callister asked if Mr. McMullen meant that everyone agrees that the correction to the formula language in the bill is acceptable to all counties. Mr. McMullen answered, "Right."
Senator Callister asked if there had been any determination as to the accuracy of information testified to by the Department of Taxation which suggested that Churchill and Washoe counties have already more than offset that. Mr. McMullen replied, "The answer is no...to both the question of whether Churchill overcollected or that Washoe overcollected."
Senator Callister responded, "I don't mean overcollected. Have you collected as much as was necessary to offset Churchill County's participation in the phase-in in the Washoe County adjustment?" Mr. McMullen replied:
Churchill actually had a number set in the original law as to what loss they would have, therefore what makeup revenues they could get. That was $540,000...I think the actual number for them was around $680,000. So even in year one, and we are just finishing year two, they lost money.... I think they collected just a touch under that.... They were allowed $540,000. That's a function of trying to guess what your tax revenues bring in, what taxes you want to put on people.
Senator Callister inquired if that meant Churchill County had already recovered $540,000 by utilizing alternative, additional or supplemental taxing devices.
Bjorn P. Selinder, County Manager, Churchill County, suggested it should first be determined which fiscal year (FY) was the subject. He distributed two charts depicting the deficiency of revenue for FY 1991-92 and FY 1992-93 (Exhibits C and D). He explained Churchill County had been allowed to make up $340,000. He said, "The total amount was closer to $694,000 because of phasing.... There was a portion we were not allowed to collect." He was unsure why that was included since he had not been privy to the methodology that caused it.
Mr. Selinder said:
That applied to all the...counties that were identified as exporters, so Churchill County was not the sole county that was impacted by that provision. A piece of it was allowed for makeup, and a piece of it was outside of that makeup provision.
Mr. Selinder reiterated Churchill County had been allowed to make up $340,000 in the first year. He said the county actually collected, under the makeup revenue formulas, $280,000 which left a $60,000 shortfall in the first year. He said the county was allowed to make up $680,000 in the second fiscal year. He indicated it now appears the county will collect just $423,000 which will leave another shortfall of approximately $256,000.
Mr. Selinder explained much of the cause of the shortfall is due to calculations versus actual collections. He concurred with Mr. McMullen that it appeared to be due to the application of numbers used by the Department of Taxation and each county would have to factor in its own growth. He said the ability to collect in Churchill County is missing because the general growth numbers were used.
Senator Callister asked if it would be a correct statement to say that all of the anticipated shortfall in the second year is really a shortfall that was occasioned by the requirement that Churchill County participate in the Washoe County adjustment. Mr. Selinder responded:
I think that the makeup revenues are all based on the adjustment formulas. So we were allowed to make up those losses...or shortfalls or deductions from our distributions from this makeup formula which we're applying against our local taxpayers.
Senator Callister inquired what the impact would have been had Churchill County not participated in the Washoe County adjustment. Mr. Selinder replied at least a portion of those makeup revenues would have to be levied because of the "deplorable" financial condition of Churchill County.
Senator Callister suggested that had the proper data about Churchill County been available 2 years ago a different decision might have been made. The decision might have been that Churchill County not be required to participate in the Washoe County phase-in. He charged the reduction of the request from $1 million down to $600,000 was not a major compromise as he felt was being implied. He acknowledged the problem was neither Churchill County's nor Washoe County's, but he did not believe the best solution would be to shift the price tag to Clark County taxpayers through a General Fund appropriation.
Mr. McMullen reiterated that the key feature was that there were counties exporting to Washoe County in 1991. He said whether it was Churchill County or not there were export dollars going to Washoe County. He stated:
When the bill came out of the assembly...all of those counties were at 100 percent of whatever the export was being given to Washoe. It was Washoe who...said that that export should not continue, we need to have a phase-out, we need to resolve this problem. The answer to the issue you just posed is that those monies would have probably come from other counties or whatever.... Those monies still would be Washoe's dollars.... It's just a function of a...good formula based on bad data, and that still would have happened.
Senator Callister asked if 65 to 70 percent of it would have come from Clark County under the scenario stated by Mr. McMullen. Mr. McMullen replied, "No." He said it was the fair-share adjustment made between Clark and Washoe counties.
Senator Raggio pointed out it had taken the entire last session to resolve the issue that has been around for over a decade. He noted that every legislator left that session under the belief that the problem had been resolved to everyone's satisfaction and everyone pledged that was the last time the issue would be brought up. He acknowledged S.B. 506 was designed to correct an error that could not be attributed to any specific entity. He admitted Churchill County would probably have been in a guaranteed position if the error had come to light during the last session. He stated it must be dealt with fairly and he opined the only method would be through some sort of General Fund appropriation.
Senator Raggio expressed surprise that one member of the committee would suggest that any appropriation made to any sector of the state should be measured against the receipts into the General Fund from any particular county. He noted that the General Fund is made up from many sources, one of which is sales tax. He pointed out that approximately 35 percent of the sales tax is paid by tourists. He suggested it would be provincial and divisive to measure each and every appropriation made. He pointed out testimony has been given that it is possible 80 percent of the welfare and prison budgets may be attributed to problems in Clark County. He declared measuring such costs is not the way to run a legislature. He asked the committee to consider all issues in the light of what is best for the state as a whole.
Senator Callister differed with Senator Raggio, saying:
It is not every measure that addresses how we collect and distribute the state's second largest source of revenue. What makes this different than Windsor Park, or Doolittle, or Truckee Meadows Community College, or any other issue, is this the device through which we collect and distribute our sales tax....
Mr. McMullen said some of the smaller counties had asked for one amendment to S.B. 506. He said the request had been to phase in the change of going from estimated to actual collections of sales tax. He said they had requested that change be phased in over 2 years because most of their budgets have already been developed on the previous assumption. He agreed to submit a written amendment to the committee on Monday.
Senator Raggio announced he had a bill draft request (BDR) for the committee to consider.
BILL DRAFT REQUEST S-2152: Requires board of trustees for each school district to administer examinations for achievement and proficiency to certain pupils.
Senator Raggio explained the measure was applicable only to ninth-graders during the 1993-94 school year.
SENATOR RAWSON MOVED FOR COMMITTEE INTRODUCTION OF BDR S-2152.
SENATOR JACOBSEN SECONDED THE MOTION.
Senator Rawson explained the measure was necessary because the testing years had been changed which meant one segment of children would not be tested for approximately 5 years.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Senator Raggio announced the Capital Improvements Committee would meet immediately following the floor session in the Senate Conference Room. He asked the committee to consider two amendments.
SENATE BILL 471: Creates office of advocate for missing or exploited children and makes various changes relating to clearinghouse for information concerning missing or exploited children.
Senator Raggio read the proposed Amendment No. 916 to S.B. 471 which had been approved on June 14. The committee approved the changes delineated.
SENATE BILL 86: Requires development of state plan for education technology.
Senator Raggio said the bill had been heard on May 17 but no action had been taken.
Senator Rawson said Amendment No. 883 to S.B. 86 would remove the appropriation. He indicated he had received assurances from the State Board of Education that existing resources could be used to accomplish the plan and they also believe there is an excellent chance they may receive some federal funding. He stated no funding would be necessary for the technology board that would be created by the bill.
Jeanne L. Botts, Program Analyst, indicated to the committee there was one addition in the amendment that had not been discussed earlier. She said the addition was in regard to the list of things the statewide plan must contain. She explained the new requirement that the effectiveness of the state plan will be measured by comparisons of the performance of pupils on standardized tests and their level of skill in the use of computers.
SENATOR RAWSON MOVED TO AMEND AND DO PASS S.B. 86 WITH AMENDMENT NO. 883.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
SENATE BILL 422: Increases license fees for real estate brokers, broker-salesmen and salesmen.
Senator Raggio reminded the committee the bill had been passed on May 24. It had been amended by the assembly to include some fees that had been omitted.
Daniel G. Miles, Fiscal Analyst, said the senate had not provided for the existing requirement that failure to renew fees must be 1 1/2 times the regular fee. An adjustment would be made to page 1, section 1, line 18 to change $65 to $85 and on line 20 to change $50 to $65.
SENATOR COFFIN MOVED TO CONCUR IN THE ASSEMBLY AMENDMENT TO S.B. 422.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR O'DONNELL ABSTAINED FROM THE VOTE.)
* * * * *
SENATE BILL 79: Eliminates requirement that adoptive parents of child with special needs have limited financial resources to receive financial assistance.
Senator Raggio noted the bill had been amended by the assembly to become effective on July 1, 1993, instead of on the normal date in October.
SENATOR O'DONNELL MOVED TO CONCUR IN ASSEMBLY AMENDMENT NO. 968 TO S.B. 79 TO MAKE THE MEASURE EFFECTIVE ON JULY 1, 1993.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
There being no further business before the committee, Senator Raggio adjourned the meeting at 9:15 a.m.
RESPECTFULLY SUBMITTED:
Judy Jacobs,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE:
??
Senate Committee on Finance
June 19, 1993
Page 1