The Committee on Commerce and Labor was called to order at 2:15 p.m., on Wednesday, May 12, 1999. Chairman Barbara Buckley presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Chairman Buckley, Chairman

Mr. Richard Perkins, Vice Chairman

Mr. Morse Arberry, Jr.

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Ms. Ms. Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

COMMITTEE MEMBERS EXCUSED:

Mrs. Jan Evans

GUEST LEGISLATORS PRESENT:

Senator Randolph Townsend, Senatorial District 4

Senator Schneider, Senatorial District 8

Assemblyman Bernie Anderson, Assembly District 31

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

After roll was called, the Chairman opened the hearing on S.B. 437.

Chairman Buckley explained there were twenty measures to be discussed in work session and time was of the essence. She requested proponents of the measure begin by discussing what was in the measure that was not contained in S.B. 475.

Mr. Holloway, Executive Vice President of Associated General Contractors, was the first to testify in support of S.B. 437. He said the proposed legislation was duplicated in section 13 of S.B. 475, which was currently in the Assembly Committee on Government Affairs. He provided the committee with a handout, which was a section by section analysis of the proposed legislation (Exhibit C).

Chairman Buckley asked why there were two similar measures. She pointed out the shortened session demanded more organization and no duplication of legislation. Mr. Holloway explained because the Senate Committee on Government Affairs voted S.B. 475 out of committee, it was suggested to indefinitely postpone S.B. 437; however, they chose not to postpone the measure for fear additional controversy would be generated. All concerned entities were in complete accord regarding suggested changes to S.B. 437. Chairman Buckley said she would consult with chairman Bache to find out where the measure was in the legislative process. She was not aware that duplicate provisions had been placed in a separate measure.

Mr. Holloway explained the proposed legislation had been in the development process for 4-years and was the result of the combined efforts of various affected public agencies, the construction industry, and contractor unions in Clark County, all of whom supported the measure. He provided the committee with a section-by-section analysis of the proposed legislation, which summarized proposed changes and amendments, which were designed to streamline the process contractors encountered when applying for bidders’ preference. The proposed amendment was designed to rectify problems that had occurred since the policy of bidders’ preference was instituted approximately 10-years ago. Nearly all changes to the proposed legislation were included in A.B. 106, which was discussed in committee earlier in the session. One change in the proposed legislation was the residency requirement, which would have made bidders’ preference unconstitutional. Also changed in the proposed legislation was the requirement that the person applying for bidders’ preference had to match the lowest bid, which was bid shopping.

Ms. Giunchigliani asked if Nevada Revised Statute (NRS) 341 was amended last session to define the term "more responsible bidder." Mr. Holloway said the measure the Assemblywoman was referring to did not pass last session. Ms. Giunchigliani said the Interim Committee on School Construction reviewed the recommendation to include additional projects.

Ms. Giunchigliani asked if the provisions in S.B. 475 were exactly the same as those in S.B. 437 or was there additional information. Mr. Holloway explained there were additional provisions, but they did not pertain to bidders’ preference except for specific provisions pertaining to bidders’ preference regarding design-built projects. Ms. Giunchigliani asked if the Nevada Board of Public Works participated in the development of the proposed language, to which Mr. Holloway responded in the affirmative. Ms. Giunchigliani asked if a definition had been provided to clarify the term "design professional." Mr. Holloway explained an amendment would be presented that would clarify the term.

Renny Ashleman, representing the Nevada Government Relations from Clark County, was the next speaker to testify in support of the proposed legislation and amendments. He said the organization he represented concurred with the proposed new language and he urged the committee to pass the proposed legislation.

Fred Hillerby, representing the Nevada Contractors Board, spoke in support of the measure. He pointed out the organization he represented understood the importance of the proposed legislation because the intent of the measure was to ensure contractors did not have to qualify each time they submitted a bid on public works projects.

Dan Musgrove, representing the city of Las Vegas, asked to go on record to state the city of Las Vegas supported the measure as it was written.

The Chairman asked if there were additional questions or comments and there were none. She closed the hearing on S.B. 437 and opened the hearing to a work session, which began with S.B. 13.

Mr. Hughey, Legislative Counsel Bureau senior analyst, said the intent of S.B. 13 was to change various provisions relating to the practice of cosmetology. No amendments were proposed. He provided the committee with a work session document, which summarized the proposed legislation (Exhibit D).

Chairman Buckley asked if Mr. Humke had concerns regarding the proposed legislation. She said was concerned whenever legislation was presented to license apprentices. She said the State of Nevada would be guilty of over-regulating if every apprentice or professional assistant in the state was to receive a license. Mr. Humke did not respond.

Ms. Giunchigliani concurred with the Chairman, adding the same issue was considered regarding speech pathology. She pointed out in the past there had been a debate over a similar issue because the Board of Cosmetology was proposing to require all beauty salon employees who applied make-up to have a license to do so. She did not see any reference to estheticians in the measure and expressed her disapproval if there was an attempt to attach a similar provision to S.B. 13.

Chairman Buckley pointed out a good portion of the measure dealt with apprenticeship licensing and reciprocity issues. The measure had been held for a short time at Senator Townsend’s request because he had a constituent who was trying to obtain licensure and had questions regarding the proposed legislation. She asked Mr. Hughey why a new licensed cosmetology apprentice program was needed. Mr. Hughey explained the floor statement stated the measure established an apprentice program for rural counties that would replace attendance at a school of cosmetology. It was only applicable if a person lived in a county with a population of less than 35,000 and more than 60 miles from a licensed school of cosmetology. Currently, people in rural areas desiring to become cosmetologists had to spend several months away from home in order to attend school. Section 3 of the measure pertained to the population and mileage provision.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

She closed the hearing on S.B. 13 and opened the hearing to a work session on S.B. 39.

Mr. Hughey explained S.B. 39 allowed credit unions to hold public funds as well as offer financial services to the State of Nevada and other public entities. Currently, credit unions were prohibited from doing so. There were no amendments to the proposed legislation. There was a conflict notice attached to the measure, which was a technical conflict with another measure that had already been passed out of committee. He provided the committee with a work session document that described and summarized the proposed legislation (Exhibit D).

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 39 and opened the hearing on S.B. 97.

Assemblyman Dini was the first to testify as a proponent of the proposed legislation. He explained S.B. 97 increased the number of members on the Commission on Mental Health and Retardation from seven to eight by adding a marriage and family therapist to the commission. Testimony on the measure demonstrated the commission acted as an advisory agent to the Department of Human Resources. There was no opposition regarding the number members on the commission and there were no amendments proposed; however, there was a conflict notice attached to the measure.

Chairman Buckley said there might be another measure that previously passed, which might have changed a different subsection of the statute. Legally, the Chairman pointed out, the conflict notice automatically prepared the technical conflict amendment, which could be adopted. The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 97 and opened the hearing on S.B. 103.

Mr. Hughey explained S.B. 103 revised provisions relating to professional engineers and land surveyors. Bruce Robb, representing the Nevada State Board of Professional Engineers (NBPE) had proposed amending section 18 of the measure to clarify provisions of section 7 pertaining to educational requirements for land surveyors effective July 1, 2010. The language of the proposed amendment specified a land surveying curriculum of four years or more, which was approved by the NBPE, was to be offered by an institution of higher education that was located in the State of Nevada. There was another proposal from a former board member, George Brisendene, requesting omission of the term "engineer." There was a letter from the board, which indicated they did not agree with the proposed amendment. They preferred to leave that provision in the measure. There were no other proposed amendments.

Ms. Giunchigliani asked Mr. Hughey if the measure was intending to get rid of alternative ways of becoming a licensed engineer. Mr. Hughey asked if the Assemblywoman was referring to Section 5, to which she replied in the affirmative. Mr. Hughey did not know if that was the case. Chairman Buckley said she would look into the matter.

Bob Beers said he was not present when the proposed legislation was initially heard in committee. He asked if lines 4 through 9 on page 10 did away with use of the letter "e." Mr. Beers said if you are not allowed to use any abbreviations for the word "engineer," without disclosing that you are not licensed to be a practicing professional engineer, that would imply the letter "e" was outlawed, which would be too restrictive. On page 9, lines 41,42,43, and through the first three lines of section 10 appeared to put the same restriction on using the term professional engineer, licensed engineer, or registered engineer.

Chairman Buckley explained the previous law stated it was unlawful for a person to employ, use, or cause to be used any of the following terms or combinations, variations, or abbreviations thereof. The law pertained to professional, operating, or commercial engineers, specifically their identification, representation, or certification. The new language did not differ to any great extent. The language was restated because a new term of registered engineer was being added. That could create a new type of classification, which needed to be clarified to avoid future confusion in the event a disagreement might occur regarding the definition of the new classification. The sponsors of the measure, NBPE, had been approached for comment on the proposed new language. The Chairman received a letter from the board identifying individuals licensed by the board. They had the authority to register firms, partnerships, and corporations, which affiliated together. The amendment was an attempt at clarifying the point "license" referred to individuals and "registered" referred to firms.

The Chairman asked if section 7 of the proposed legislation provided for the legislation to become law effective in the year 2010 if a land-surveying curriculum of four years or more was approved. There were two options: 1) Wait until the year 2010 to clarify that point; or 2) Put the provision into statute in S.B. 103.

Mr. Nolan said he understood the engineering profession wanted to define their title, and provide themselves with some sort of title protection. However, the effort might become absurd, as was indicated, and there was a question as to where the line might be drawn. Someone could go into a large property such as a hotel asking the name of the engineering department be changed, or if a thermostat needed to be fixed an engineer could no longer be requested. Would one have to ask for a "domestic technician?" If situations such as those described were to occur, the changes made in the laws could cause problems in the future legislation.

Mr. Beers said Mr. Nolan seemed to agree the language was silly and the provision needed to be removed to avoid future complications. The provision literally would prohibit the use of the letter "e." Chairman Buckley asked Mr. Beer to suggest language for an amendment. Mr. Beers suggested taking out section 10 entirely, which included lines 4 through 9. That would provide the same language to be used and would keep the same title distinctions of licensed engineer, registered engineer, and professional engineer. He explained "P.E."was a recognized abbreviation, but "e" was not.

Ms. Giunchigliani asked for clarification regarding the proposed amendment. Chairman Buckley confirmed the amendment proposed by Mr. Nolan originated in the letter from Mr. Robb, which would amend section 18, subsection 3. She asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 103 and opened the hearing on S.B. 37.

The Chairman explained the committee had heard descriptions of the measure in an overview presented in a previous hearing and suggested the proposed legislation be reviewed in a section-by-section analysis.

Leonard Ormsby, General Counsel for Employer’s Insurance Company of Nevada (EICN) presented the committee with an index of sections for a proposed amendment to the measure (Exhibit E). He said it was important to recognize the majority of the sections aligned what used to be the State Industrial Insurance System with private carriers. Upon passage of the proposed legislation and providing all conditions were satisfactory, Mr. Ormsby pointed out, EICN would be a private insurance carrier just as the other 240 private carriers seeking business in the State of Nevada would be. Section 1 aligned the system with a private carrier for unemployment consideration. He provided the committee with a detailed explanation of the measure (Exhibit F).

Chairman Buckley stated that six sections of the measure reflected the system would no longer be a state agency. Mr. Ormsby said the current language stated the insurance carrier would be from the private sector. Section 3 stated NRS Chapter 616 would control any conflict with Title 57 that might arise. Section 5 was significant because that language stated the successor organization must honor and perform the contractual duties, which currently existed in the system. Section 12 removed the responsibility for licensing employer’s leasing companies and transferred it to the administrator of the Department of Industrial Relations. A lengthy discussion was expected to occur on the constitutionality of various provisions in section 17 as contained in article 9, section 2, of the constitution, because section 17 dealt with monies already paid into the state fund. Also, section 17 required the Chief Executive Officer of the successor organization to use those monies to pay for providing compensation for industrial insurance claims and occupational diseases, as well as administrative costs. Therefore, the constitutional obligation for the use of those funds would continue to the successor. If the successor organization ceased to provide workers compensation insurance, those monies would be taken over by the insurance commissioner who would be the receiver of the action. The insurance commissioner would take possession of the monies, would deposit them in the state treasury, and would be responsible for their administration for the purpose as provided for in the constitution. Section 18 created the state insurance fund and required the state treasury to fulfill the requirements of section 17.

Mr. Ormsby pointed out section 19 was a provision that caused some confusion. It authorized the successor organization to discount reserves for those monies associated with claims prior to July 1, 1995, which could only be discounted 6 percent; however, that issue had nothing to do with claims going forward. Section 20 removed employees of the system from the Personnel Act and expanded the re-employment rates of employees currently under existing rules. All state employees had 12-months tenure on the re-employment list, which, under the provision, would be expanded to 24 months and require a 60-day minimum notice to any employee laid off either by the system or the successor organization. Sections 24, 25, & 26 dealt with removing the requirement, and all reference to, classified service for employees. Sections 27 and 28, as stated in A.B. 609, were the provisions that transferred $650 million for claims that pre-dated July 1, 1995. The measure removed the accounting separation and put all funds together. Section 32 provided for the removal of the penalty charge for non-payment of premiums. Section 44 through 49 transferred those specific statutory requirements that were associated with employer leasing companies.

Sections 61 thorough 69, Mr. Ormsby continued, provided for the authorization of the manager of the system to hold hearings, issue subpoenas, and pay witness fees that arose out of the manager’s hearings. Section 70 provided that private carriers to be treated the same as public insurance carriers. Section 80 transferred responsibility because it removed the mandate that the system be the administrator of the uninsured fund. It also authorized Division of Industrial Relations (DIR) to bid on the selection of an administrator who would administer the uninsured claims fund. Section 82 removed the mandate that the system was required to provide workers compensation for prison industries. Section 89 changed the rules for DIR assessment by basing it upon annual expenditures on claims for injuries that occurred on or after July 1, 1999. After that time, rather than employers being self-insured, there would be private carriers as well as self-insured families. Therefore, the assessment mechanism established by DIR would be changed. The system would provide home office credit, which benefits all insurance companies as long as they qualified and provided they benefited from the system until January 1, 2000. At that time, provided all conditions were satisfied, the new company would qualify as a carrier. Section 122 was a provision for employees who were working at front desk jobs, or who were working at jobs they held for many years, that would provide a three-year window to allow them to fit into the new organization while down sizing occurred. The provision would amount to a three-year grandfather provision and would exempt them from the licensing requirement. Upon the expiration of the three-year window, licensure would be required.

Continuing on, Mr. Ormsby explained section 128 was the most important part of the measure. It provided the transitory language and would not be codified. It would, instead, be reflected in statute as either a reviser note or an insert that followed related chapters. Under the provision stated within section 128, the manager must take the necessary steps to create a Domestic Mutual Insurance Company (DMIC). Necessary papers must be filed with the insurance commissioner in order to receive a certificate of authority. The Governor would appoint an advisory committee based upon geographic locations of employers and the size of the company, which would assist in the preparation and adoption of the first bylaws of the DMIC. Prior to January 1, 2000, the insurance commissioner must conduct a financial solvency examination of the proposed DMIC, which would be similar to any routine examination conducted on new insurance companies that might file for a certificate of authority. Upon the satisfaction of all conditions, the commissioner would issue a certificate of authority to be effective January 1, 2000. Section 129 identified the precedent described above. All outstanding issues must be resolved prior to the new company coming into effect on January 1, 2000. The conditions that must be satisfied before the insurance carrier could be installed were as follows:

• The contracts must be in place and in effect;

• It must be established that the DMIC was formed properly under the laws of the State of Nevada.;

• All conditions must be satisfied before the Governor proclaimed the DMIC was in existence on January 1, 2000. That would amount to a favorable ruling from the Internal Revenue Service, which had been requested and whose decision was currently pending; and

• The certificate of authority must be issued by the insurance commissioner.

After all conditions were satisfied, the Governor could issue a proclamation in December of 1999 stating that on January 1, 2000, the following events would occur:

• The system would transfer all system assets to the newly formed DMIC;

• The new mutual insurance company would assume all debts and liabilities of the system;

• Division of State Lands would transfer title to the real property, which was currently held in the name of the state, pursuant to state law, and the titles would be transferred to the new DMIC; and

• State Archives would release all business records for the system that were currently being held in archives. The certificate of authority from the insurance commissioner would be effective on January 1, 2000.

Mr. Ormsby continued by pointing out sections 130, 131, and 132 addressed the reemployment rights of classified personnel. All employees would go on the re-employment list for a maximum of 24 months. The provision would apply not only to permanent state employees, but probationary employees as well. Section 133 provided for the establishment of a fund in an amount not to exceed $2 million to be used for retraining of employees who had been laid off. Section 134 was a provision to provide for the purchase of five years of service credit for any employee who would be eligible to retire at an unreduced rate with the purchase of 5-years. Currently, law provided for an employer to contribute toward retirement payments for the purchase of five years service credit for an employee who was laid off. The legislation proposed providing 5-years of service credit and payment of the entire amount for those people that qualified. Section 135 dealt with contracts that were entered into within the last year or two, specifically if they dealt with retrospective rating agreements. Those were contracts that were entered into in the early part of 1999 and which were 2-year agreements based upon the current rating schedules.

Section 135 stated contracts were enforceable without modification until they were either renewed, reissued, or amended. It honored those contracts that were entered into with policyholders effective June 30, 1999. Section 136 was a clean-up provision that stated a certified employee-leasing company would survive the July 1, 1999 date even though the responsibility had been transferred to DIR. Section 138 provided that all employees still in the system on December 31, 1999 would automatically transfer as an employee of the new company effective January 1, 2000.

Mr. Hettrick asked Mr. Ormsby if the agency were privatized and property casualty policies were being written, would there be any questions in the future that these were going to be commingled assets, or would they be accounted for separately. Douglas Dirks, representing EICN explained the proposed legislation by stating the measure was structured in a manner to maximize its ability to write other lines of insurance in the future that required another source of surplus other than the surplus derived from assets transferred and held in trust.

Assemblyman Goldwater stated privatization amounted to an employee buyout. Regarding policy holders purchasing the assets that were held in title of the state, he asked Mr. Ormsby if the assets were actually owned by policyholders. He said he had seen similar employee buyouts. It was more a question of establishing the value of the assets and what people were willing to pay for them. Through the benefit of the state, those employees received a substantial discount for the purchase of those assets. If they had received the discount, the taxpayers should get the benefit of it on the back end.

Leonard Ormsby said Pamela Wilcox, Administrator of Division of State Lands was prepared to answer the question. He added she was prepared to testify before the committee later in the hearing.

Ann Nelson, representing Employers Insurance Company of Nevada, was called upon to testify. She said the Musser Street buildings were purchased by the Nevada Industrial Commission (NIC). NIC purchased the land, built the buildings, and pursuant to the legislation passed in 1983, the title to the land and the buildings was transferred from the NIC to the State of Nevada, Division of State Lands (Exhibit G).

Chairman Buckley called upon Legislative Counsel Bureau Counsel, Brenda Erdoes. She asked for a legal opinion to review the constitutionality of S.B. 37. Ms. Erdoes provided the committee with a document explaining the main issues she discovered through her research while drafting S.B. 37 (Exhibit H). She explained the handout was the needed for an IRS opinion and gave a good idea of what was looked at and why an opinion was not issued stating the proposed legislation was unconstitutional. She said in legislature if a measure was drafted and it was possibly unconstitutional, a letter of unconstitutionality would be sent. Exhibit H was that letter, in which six major issues were identified. The first one was the issue that had been raised whether subsection 2 of section 2 of Article 9 of the Constitution of Nevada, which regulated money paid for purpose of providing workers compensation, was violated by S.B. 37. To understand the issue, a brief analysis of how the section came about was provided. One of the major things courts looked at was what happened at that time and what the statute was trying to accomplish. In regards to the proposed legislation, the stage was set for section 2 of Article 9. The money for worker compensation payments was already held in the state treasury. The money needed to be segregated into proper accounts in the state treasury and it could not be used by the state. The question needed to be asked if the money had to remain in the state treasury or must it be segregated into proper accounts and not be used for anything other than its intended purpose. Historically, since 1989, it was apparent that it was intended for the money to be segregated and held in trust for the benefit of injured workers. The proposed legislation shifted the trustee from State Industrial Insurance System (SIIS) to the new company. That was the theory, she explained, and it should be upheld.

Ms. Erdoes pointed out there were other issues related to holding that money and cases that might appear to go the other way; however, Legislative Counsel Bureau found no case that actually lead the agency to believe the measure would be considered unconstitutional. Another issue Legislative Counsel Bureau reviewed was if state and federal constitutions forbade the passing of laws that might impair obligations of contracts. There were two cases, one in Oregon and one in Oklahoma, where the issue was raised and the court overturned the actions of the legislature. The cases were clearly distinguishable because both cases occurred because the legislature used funds being held in trust for injured workers for another use. The money was put into their General Fund and used for things other than providing benefits to injured workers. Ms. Erdoes said there was an impairment of contracts, which was a good thing, because the impairment of contracts would have been an issue concerning policyholders, particularly the people who paid money into the fund. Nevada’s constitution required that money be held in trust for injured workers, which concerned a different group of people.

The third issue Legislative Counsel Bureau reviewed was whether the state and federal constitutional provisions forbade the taking of private property for public purposes without due process. The payment of just compensation was violated by S.B. 37. There was a case in the State of Utah in which the legislature put workers compensation funds in its General Fund and used the money for something other than that purpose. She did not believe that would be considered taking property because the Nevada Constitution said the state could hold that money in trust for injured workers. Another issue Legislative Counsel Bureau researched was section 1 of Article 8 of the Nevada Constitution, which, under certain circumstance, prohibited the state from creating a corporation by special act. The reason that law came into play was because of an old case, called the Toll Road Case from 1875, in which legislation similar to S.B. 37 allowed a manager to take whatever action he considered to be necessary to create a corporation. The legislation was struck down under section 1 of Article 8. The case hung on the point that the legislature allowed the company to incorporate for the purpose of providing toll roads and that was not something that could be incorporated in the state at that time. That was not the case here, she continued, because there were many other mutual insurance companies and authority granted under S.B. 37 was intended to incorporate under the general law of the state, therefore there were no special benefits provided in terms of incorporation.

The fifth issue Legislative Counsel Bureau reviewed was section 9 of Article 8 of the Nevada Constitution, which stated under certain circumstances the state was prohibited from donating money to a company, association, or corporation. There were differences of opinion regarding the transfer of assets and liabilities in the current system to the new company relative to its worth, if anything. Legislative Counsel Bureau, she pointed out, was concerned as to whether there would be a violation of section 9 of Article 8 regarding the proposed legislation. It was determined the section did not apply to money that was not state money. The money in the fund was treated as if it belonged to policyholders, from the beginning. The money was placed in investments that were not intended for state money, such as corporation stocks.

The last issue Ms. Erdoes said she reviewed was the constitutionality of the doctrine that prohibited a legislative body from unlawfully delegating pledge authority, which was called into play by what was referred to as the trigger mechanism in S.B. 37. That provision required the Governor to make a proclamation to make many sections of the measure effective if a series of circumstances were met. Legislative Counsel Bureau wanted to ensure there was nothing there that would cause an unlawful delegation. The Governor had very little discretion regarding that provision. She said the reason Legislative Counsel Bureau believed it was constitutional was that those funds remained in trust. The trustee was what was changing, the money would come out of trust, which remained in place, and only the trustee was moving.

Chairman Buckley asked how the Attorney General’s opinion applied to the current issue because it was issued in 1980. Ms. Erdoes said the Attorney General’s Office made a determination regarding NIC, particularly if funds from the state treasury could be used to pay workers compensation benefits to self-insurers. The issue was reviewed to determine if existing or additional authority was allowed to do what S.B. 37 was intended to do. Ms. Erdoes explained changes were made in 1989 to stipulate money could not be held in that trust fund nor in the state treasury.

Blackie Evans, Executive Secretary and Treasurer of the Nevada State AFL-CIO, was called as the next witness to testify on the proposed legislation. He explained he had been the commissioner of NIC from 1971 to 1978, after which time he became the executive secretary and treasurer of the Nevada AFL-CIO and chairman of the advisory board to the old insurance commission. Legislation was passed, which allowed self-insurers to self-insure rather than permit a monopoly of the state fund. Mr. Evans pointed out there was concern money was not being placed into the trust fund. A letter was drafted requesting an opinion from Richard Bryan, the Attorney General of Nevada in 1980. The Attorney General’s opinion stated self-insurance monies did not have to be put into the trust fund. Throughout the years he served as a commissioner and as a member of the advisory board, Mr. Evans explained, he was told the workers’ compensation system was provided for in the state constitution, and money intended for that purpose could not be taken out of the fund for any function other than its intended purpose unless the issue went to a vote of the people and the constitution was changed, which agreed with the Attorney General’s opinion of 1980. Mr. Evans said that by enacting the constitutional trust in 1955, the voters of Nevada ensured NIC monies would not be subject to any variations for any other purpose except by subsequent vote of the people. By stating NIC monies were to be segregated into proper accounts in the state treasury, the legislature intended for those monies to be considered part of the state treasury in a restricted capacity for a particular use or purpose.

Mr. Evans explained that legislation established that the state treasurer was not empowered to disperse NIC monies. The same discussions were routinely held whenever NIC buildings were considered for sale. Regarding Jean Hannah Clark Rehabilitation Center, he said, those monies were not employers’ money, the funds belonged to injured workers. Governor O’Callahan, in 1973 felt strongly that there was no rehabilitation offered for workers’ compensation. An arrangement was made to provide injured workers with approximately 20 percent of a person’s partial disability. A significant amount of money went to injured workers, which was forfeited for full rehabilitation. Rehabilitation funds were used to build the Jean Hannah Clark Rehabilitation Center. It was not entirely accurate to say that money belonged to employers. It was employers’

money that had been paid for the benefit of injured workers. Part of that money was used to build the rehabilitation center. He said that since the workers’ compensation system was reformed in 1990 the system had declined. He said one more reform of the system and injured workers would be in a great deal of trouble. He suggested putting the issue to the voters by placing it on the ballot.

Chairman Buckley asked Attorney General Frankie Sue Del Papa to share her opinion on the matter.

Attorney General Frankie Sue Del Papa introduced Tom Patton, Special First Assistant Attorney General and John Hanson, Claims Administrator for the Office of the Attorney General. She explained the Nevada Constitution, Article 9, section 2, required that any money paid for the purpose of compensating industrial accidents and occupational diseases, as well as for associated administrative expenses, must be segregated in proper accounts in the state treasury, and must not be used for any other purpose. The money was to be declared held in trust for such purposes. Also, the Nevada Constitution Article 8, section 9, prohibited donations, loans, or the issuance of credit by the state to any company, association, or corporation, except corporations formed for educational and charitable purposes. Furthermore, the purposed transfer of assets, cash, stocks, bonds, and property to a private for-profit corporation would raise serious constitutional concerns in light of provisions previously mentioned. The Attorney General stated her research into the matter had not resulted in a conclusion that the transfer of assets as proposed in S.B. 37 would pass constitutional scrutiny. Ultimately, the constitutionality of the proposed legislation would be a matter for the judicial system to decide.

The passage of S.B. 37 would result in immediate litigation that would challenge the legality of the legislation, Attorney General Del Papa continued. Most notable was the fact the Office of the Attorney General was not the official legal representative of the Employers Insurance Corporation of Nevada (EICN) and no provision had been made in S.B. 37 to address potential litigation, which would most certainly result upon passage of the measure. Rather than see such litigation arise, it would be advantageous to fully examine the proposed legislation and thoroughly analyze both the legal and financial ramifications of the measure. She recommended a more careful and exhaustive study be done, which should be undertaken by the legislature in cooperation with the Governor’s Office as well as her office. The Attorney General said the matter was of enormous financial importance to all Nevadans, particularly because there were approximately $1.5 billion at stake. It was an issue of great magnitude that deserved to be approached with the utmost caution, planning,

and expertise. Unfortunately, she continued, the current climate was one of urgency and the perceived need to act with urgency was not conducive to careful, thoughtful, and accurate analysis of the complex problem.

Chairman Buckley asked if it was the opinion of the Attorney General that thorough research was needed to avoid unnecessary litigation stemming from concern regarding Article 9, section 2 of the Nevada Constitution, particularly the issue relating to money that had been accepted toward premiums. There was also the issue regarding the constitutionality of transferring funds outside the state treasury system. The Attorney General said there was a question regarding Article 9, section 2, which required funds in the trust account to be maintained in state accounts. By enacting the constitutional trust, the voters of Nevada ensured that NIC money would not be subject to diversion for any other purpose except by subsequent vote of the people. Up until the present time, there had not been any vehicle available to the Office of the Attorney General to consider many important issues. The most important question was should the constitution be amended to allow transfer of money to a private insurer from the trust fund established through SIIS accounts. The other question was if trust funds were established for the benefit of employers and employees, what safeguards were in place to protect claimants if funds became insolvent. The old claims vested the rights of claimants. Attorney General Del Papa asked if the transfer of the trust fund would affect those rights.

Mr. Hettrick said he was not an attorney and would not presume to tell the Attorney General whether she was right or wrong. He pointed out the argument he heard a moment ago was that money was not being diverted for other uses. It was being diverted to continue a trust fund for the benefit of injured workers. He said the question was what would happen if there was insolvency in the fund. Insolvency would be handled for a private insurer the same way it would be handled for any company operating within the state, which would be through the establishment of a state reserve set up by other insurance companies who would pay benefits in order to minimize loss to injured workers. He explained he wanted to find answers to questions that remained unanswered. He said the State of Nevada needed to move quickly, and input from those who had been working on the issue was needed to try to come to some quick resolutions in order to move forward.

Attorney General Del Papa said her office stood ready and committed to that end and she had communicated that to the Governor’s office, and to Legislative Counsel Bureau. She said there were very real concerns still remaining along with unknowns that no one could predict. If there was anything her office could do to assist the process she would be willing to accommodate. Until the Supreme Court ruled on an issue of this magnitude, real concerns were looming at every turn.

Chairman Buckley asked the Attorney General if she would comment on Mr. Hettrick’s first point, which was also made by Ms. Erdoes regarding the fact the money was still going to be held in trust for the same purpose with only the trustee changing. Attorney General Del Papa pointed out she was hampered by the fact her office was not acting as counsel. It might take a constitutional amendment to effect the desired changes, she added.

Tom Patton, First Assistant Attorney General, was called upon to address the issue. He explained there were many difficult issues involved in the matter. It was important to understand the argument revolved around the issue that the trust concepts of Article 9, Section 2 of the Nevada Constitution would not be violated, which concerned the use to which those funds would continue to be applied. There was the added question of how the funds would be managed if they were no longer in the custody of the state treasurer, which was a protection placed into Article 9, section 2. The funds would come under the administration of the private company. The question remained if that action would require a constitutional amendment to implement. He said no one knew the answer to that question for certain. Article 9, section 2 had been interpreted as meaning that so long as the state remained in the business of industrial insurance, all funds collected must remain in segregated accounts in the state treasury. However, the Office of the Attorney General had not had a chance to determine if it agreed with that interpretation. Also, there was a myriad of other issues involved, such as the $ 2 million dedicated in one section to be used for retraining SIIS employees. The fact was, Mr. Patton concluded, was the responsibility for defending against all possible issues as well as the constitutionality of the measure would fall on the Attorney General’s Office.

Chairman Buckley asked Mr. Patton if that was because he expected the state to be sued as opposed to the new company being sued. He said he predicted there would be an action to enjoin application of the law and the constitutionality of the law would be called into question. It would be his job then to step in on behalf of the legislative body because that was the entity that enacted the law.

Mr. Scott Scherer, General Counsel for the Office of the Governor, pointed out the Governor’s intention was to privatize the old state industrial insurance system as he announced in January at the State of the State speech over four months ago. The major amendment to the measure that constituted that action was the proposed legislation as introduced approximately two months ago. Mr. Hansen from the Attorney General’s Office had sat through virtually every hearing on the measure, including all the hearings on the Senate side. Jim Smith from the Attorney General’s Office had been in contact with Ann Nelson two months ago to discuss the measure. Obviously, the measure had been reviewed. Ms. Nelson and Legislative Counsel Bureau researched all of related issues when the measure was being drafted and there were extensive discussions regarding all controversial issues.

Regarding the constitutionality of the proposed legislation and related legal issues, Mr. Scherer continued, the language stated that any money paid for the purpose of providing compensation and for the purpose of funding the public employees retirement system must be segregated in proper accounts in the state treasury. That money must never be used for any other purposes. The entire focus of the section was to determine the purpose for which the money was to be used. Ms. Erdoes pointed out the fund was to be placed in the state treasury. There were no private insurers in the State of Nevada offering workers compensation insurance. There were no self-insured employers. Regarding the 1980 opinion issued by then Attorney General, Richard Bryan, Mr. Scherer said, he agreed with Mr. Evans that the money was to be held in trust for the benefit of injured workers. that was money paid by employers, but held for the benefit of injured workers; therefore, it was essentially the employees’ money, intended for their use only.

Mr. Scherer agreed with the observation of Mr. Hettrick who pointed out the language stated money could not be diverted for any other purpose except by subsequent vote of the people. On page 126, Attorney General Bryan referred to the only legislative history available on the provision, which was in 1953 and 1955, before it was put to a vote of the people in 1956. In a publication issued by the state printing office referring to the amendments, the amendment would prevent any monies collected by the Nevada Industrial Commission from being used in any other manner or for any other purpose then those specified. Again, the focus was on the purpose for which the monies were being used. Turning to page 127 of that opinion, a discussion ensued regarding self-insured employers and the fact money needed to continue to be held in trust even with self-insured employers. While this scheme allowed self-insurance, there were a number of regulatory controls that required self-insured employers to meet certain minimum financial thresholds to deposit money into an account and to insure that the claims would be paid. Through the regulation imposed by the State of Nevada, those self-insured employers were creating a form of trust.

Mr. Scherer pointed out another important aspect of the proposed legislation was the issue of the re-training dollars that had been raised. He said his office did not want the measure to go forward without that provision. He said the issue was an administrative expense incidental to the measure. Just as the payment of salaries and benefits to employees of the system had to be considered in order to process claims, there was an incidental expense, or administrative expense, attached. Payment of severance benefits to employees who were laid off was also a proper administrative expense. The question had been raised in regard to Public Employees Retirement System (PERS). An amendment was passed in 1956 by the voters, which was the beginning of the program and by 1974, PERS was added. In 1996 a resolution was passed that included additional provisions for PERS. Provisions in subsections 3 and 4 specifically prohibited PERS from loaning money to the state. It was already clear from the 1974 amendment the state could not just take money, but in 1996 a provision was added that said PERS could not lend money either, nor could it buy state bonds. PERS, in subsection 4 of the constitutional provision, mandated the system must be governed by a public employees’ retirement board and there must be an executive officer to administer the board. There were additional provisions in place for PERS that were specifically added in 1996.

Mr. Scherer concluded by explaining if the constitutionality of an act passed by the legislature was called into question, the Attorney General would be involved in defending the lawsuit. It would not be any different in the present situation.

Chairman Buckley asked if Mr. Scherer thought anyone requested the Attorney General do an opinion, to which he responded in the negative. He added the Attorney General’s Office was working with the Legislative Counsel Bureau, which was the counsel for legislature, to ensure the measure was constitutional. Chairman Buckley said she intended take a committee vote for a waiver of the deadline to provide an additional week for further hearings, discussions, and to allow the committee enough time to review the proposed legislation. Mr. Scherer stated his office was concerned about the gamble mentioned previously by Mr. Ernaunt regarding July 1, which was when the three-way system was scheduled to begin. He said it was not an issue that could be studied in the interim for consideration next session.

Ms. Nelson, of EICN, stated she wanted to reiterate several points Mr. Scherer made. She said she understand the committee’s concern regarding the constitutionality of the issue as well as the legality of the measure. She explained she wanted to assure the committee that as the agency proceeded to review the proposed legislation the same legal questions were being asked from the beginning. She said the Attorney General’s Office did not represent EICN, which was why a legal opinion from Steve Wather and Rick Shoe of the law firm of Wather Key had been presented to the committee. Discussions with that office had been ongoing since late January 1999 regarding various legal aspects of the measure. She said she also worked very closely with Brenda Erdoes, and the Legislative Counsel Bureau staff to ensure all legal and constitutional issues had been addressed. The only other point she made was a correction regarding the custodian of the trust fund currently, which had been stated earlier to be the state treasurer. That was not correct. The custodian of the trust fund currently, pursuant to Nevada Revised Statute (NRS) 616, was Doug Dirks, the manager of the system.

Chairman Buckley said time was limited and there was less time to dismantle a system that had been in existence for a longer time than the committee had to study the issue involved. She said she had received various correspondences, e-mails, and phone calls regarding the issue. Some were concerned NRS 284.636 stated individuals who would become unemployed from dismantling the state workers compensation system would be placed in a different class or department and would have to serve a new probationary period. She asked Mr. Ormsby to address the issue.

Mr. Ormsby said the measure did not address that issue. He considered it to be a state personnel matter that would apply to employees who were laid off within the system. Currently, if an employee were laid off through downsizing, that employee would receive no re-employment rights under the state personnel rules. Under the proposed legislation, those re-employment rights would be provided and extended to probationary employees as well as permanent employees. A probationary employee of the system, laid off on July 1, 1999 would not become permanent until July 14, under the measure, at which time they would be given the same re-employment rights as a permanent employee.

Chairman Buckley said her next question pertained to buyouts and retirements. NRS 286.3007 did not require state workers to be 60 years old to retire. Some individuals had retirement eligibility papers from PERS, but they were not 60 years old yet though eligible to retire. S.B. 37 would only allow those state employees who were 60 years old or who had 25-years of service with the state to receive the benefit. She called upon Ms. Nelson for comments.

Ms. Nelson said S.B. 37 stated individuals could purchase up to 5-years of retirement if they were eligible to retire through that purchase even if they were not yet 60 years of age because they would qualify under PERS.

Mrs. Segerblom stated a state worker had to have 20-years of service with the state and be 60 years of age to retire. She said she quit at an earlier age and had to wait until she was 60, but she had worked for the state for 20-years.

Chairman Buckley said part of the proposed legislation dealt with a benefits’ package for the long-time, loyal state employees. She wanted to see what could be done for them. There were estimates that hundreds of employees would be laid off if the system was privatized. The question from her constituent had been that she had been in the agency a long time and under current law she was protected. If the program was mutualized, that worker would have no protection under the law. The Chairman said a balance had to be struck.

The Chairman asked what type of re-training was to be expected under the new system. Ms. Nelson said she had numerous discussions on that issue. Re-training would be individualized for each individual employee. Needs, skills, and interests would all be personally assessed.

Ms. Nelson said downsizing would be done by need and merit under personnel rules according to seniority. Five-years of retirement credit could be acquired by a purchase of retirement credits, but it was only 5 percent plus 5 percent per year the employee had worked. Under S.B. 37 employees would be removed from the hiring freeze for priority re-hiring. Under the Personnel Act the hiring freeze would remain in tact. Under S.B. 37, employees were eligible to place their names on the re-hire list upon passage and approval. Under the Personnel Act they were not eligible to be placed on the priority rehire list until they had been laid off.

Mr. Ormsby said re-employment rights would be effective July 1, 1999 because of the budget.

Pamela Wilcox, Administrator of the Division of State Lands, was the next witness to testify on the proposed legislation. She said she had been asked to present the committee with an amendment to the legislation, which was a technical amendment that had received the concurrence of all concerned parties (Exhibit I). Since some questions had been raised about the land assets the measure affected, Ms. Wilcox explained, it would be appropriate to discuss land assets. The land assets of the Industrial Insurance System were all acquired by the system in the distant past. The earliest was acquired in 1949 and the most recent in 1986. Prior to 1977, state agencies all did their own land work. In 1977, the legislature amended state law to provide that title to all state land would be held in the Division of State Lands. Clearly they did this both in order to provide both professional quality services to state agencies as well as to avoid the possibility of abuse. SIIS at that time was the Nevada Industrial Commission and that agency resisted transferring title to the Division of State Lands. A measure was passed by the legislature in 1983, which was codified as NRS 616B.176, providing real property acquired by the system would be held by the Division of State Lands. The system would retain sole power to sell or exchange those properties, the proceeds from which had to be deposited in the state insurance fund. Although title was held in the Division of State Lands it was clear those lands remained assets of SIIS and, should they be sold, the funds would have to be put back into the state industrial insurance fund.

Ms. Wilcox said the amendment requested was simple language. The agency noted some of the land was contained in the capital complex, which needed to remain in tact. If the system had not been mutualized it would have been decided in the future to sell those lands. Division of State Lands wanted the opportunity to buy them back for fair-market value. The amendment would simply provide that could occur. All parties were in agreement that would be appropriate. Many questions were asked regarding those lands, most of which were acquired by the NIC prior to 1977. No files were available in Division of State Lands regarding those lands, which related to the acquisition of those properties; therefore, there was no first-hand knowledge of how much money was used to acquire the properties. She said she had reviewed all of the deeds and could confirm all of the acquisitions were from private parties and that the deeds were consistent with fair-market value deeds. The amount of $10 was used stylistically to protect the confidentially of the parties so there was no record in the county recorder’s office of the actual amount paid for the land. It was Ms. Wilcox’s professional judgment that in all likelihood they were all paid for at fair-market value and she was not aware of any General Fund dollars applied to any of those lands. She said the interpretation of her office was that although her agency held the titles, the assets were wholly acquired by the system and the equitable value of those lands remained with the system. If the system was mutualized she believed it was appropriate for those land assets to go with other assets held by the fund. The amendment would allow the state the opportunity to reacquire for fair-market value the capital complex land should the system decide to sell that property in the future.

David Howard, representing the Greater Reno and Sparks Chamber of Commerce, asked to address the committee because he was a seasoned observer of workers compensation legislation. He said his organization wanted to go on record in support of S.B. 37. He pointed out Ms. Giunchigliani had made reference to rebates last year. Mr. Howard said he went back through the records and from 1982 to 1993 and there were some rebates that were politically applied. There were also seven premium increases in ten years for a total of 70 percent increase to people paying those premiums. Regarding the discussion of state property, he said he did not know why the problem could not be corrected.

Bob Gagnier, representing the State of Nevada Employees Association, presented a statement to the committee on the proposed legislation for the record (Exhibit J).

Chairman Buckley asked if there were additional questions or comments and there were none. She called for a motion to waive the deadline for S.B. 37 and extend it for 1-week.

The Chairman closed the hearing on S.B. 37, and opened the hearing on S.B. 128.

Assemblyman Hettrick said he was concerned regarding certain provisions in section 2 of the legislation because pagers could be used as a loophole. He proposed an amendment be added to section 2 to clarify that loophole and close it. If the committee adopted the proposed amendment, he said it might also want to consider a similar amendment to section 4 of the measure to provide that the Public Utilities Commission must issue an order to a provider of a telephone service to disconnect the telephone number under certain circumstances and, if applicable, the pager service as well. The second amendment pertained to the hearing with Judy Shelder from the Public Utilities Commission (PUC), who proposed section 4 be amended to provide that PUC hold a hearing before issuing an order to a provider of telephone service to disconnect the telephone number. Robert Barango, representing the State Contractors Board to propose similar language that might address that issue.

The Chairman called for discussion. Mr. Beers asked if the amendment proposed included the requirement hearings must first be held. Mr. Humke replied in the affirmative.

Fred Hillerby, State Contractors Board, said regarding Mr. Beers’ question, both he and Mr. Barango had discussed the question with Judy Sheldrew and she said it was important to hold hearings. Chairman Buckley said the primary concern was due process. Mr. Humke said he was not a fan of PUC; however, due process was an important issue.

Chairman Buckley asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 128 and opened the hearing on S.B. 133.

Crystal Lesbo, Legislative Counsel Bureau senior policy analyst, said the proposed legislation established provisions for governing consolidated insurance programs, commonly referred to as Owner Controlled Insurance Programs (OCIPs) or Contractor Controlled Insurance Programs (CCIPs). The first amendment was proposed by David Lee of the American Society of Safety Engineers (ASSE), a world-leading safety organization. His proposal received a considerable amount of information from ASSE. The second amendment was proposed by Mr. Scott Craigie. Both amendments were included in the work session document (Exhibit D). The sections of the bill, including Section 9, dealt clarification, definitions, and information on how the contractors established their own insurance programs that provided them with insurance at lower rates. The amendment also proposed deleting subsection 2 of section 15, which referred back to subsection 9. Sections 13 and 14 on pages 4 through 6 of the proposed legislation dealt with safety coordinators and claims administration. Currently, the measure stated OCIPs and CCIPs performed certain duties related to safety, coordination, and claims administration. The amendment defined how the contractor or the owner of the construction project could perform those duties. The amendment also changed subsection 3(b) of section 13, deleting the term commissioner and replaced it with administrator. Also, the amendment allowed administrators to determine what constituted adequate experience in order to prepare to function as a safety coordinator.

Ms. Lesbo continued discussion on the work session document explaining amends 4(b) of section 13 page 5 deleted lines 1 through 19 as well as removing the provision requiring safety coordinators on construction projects be full-time employees of the personal entity, or company, that appointed them. The amendment also amended section 14 of the measure by deleting the term appointed and replacing it with the word hired or contracted. Item 2(h) amended section 14 to allow the construction project’s claims administrator to hire an assistant administrator. The amendment also requested section 15 of the measure be deleted. The section required contractors or subcontractors engaged in the project to post a bond for the project. The amendment continued by requesting in section 19 the term approved be inserted before the word claim. The section required insurers to follow through on all approved claims and was purely a clarification note for that section. Item 2(k) added a new provision to the measure that would include an OCIP or a CCIP in the definition of "employer" under the industrial insurance act.

Scott Craigie, representing Liberty Mutual Insurance Group, explained there were several proposed amendments to consider, all of which involved issues that had been presented by various agencies and companies. Many of the proposed amendments differed greatly in opinion. Mr. Craigie stated his position was to ask the committee to amend and do pass the proposed legislation and remove section 9 from the proposed amendments.

Daryl Capurro, representing Nevada Motor Transport Association and Nevada Transportation Network Self-Insured Group, said his organizations were opposed to the portion of the proposed amendment referred to by Mr. Craigie that would strike section 9. It was an extremely important provision, Mr. Capurro pointed out, which affected the financial health of at least three or four construction and transportation related self-insured groups. The proposal was modeled after Nebraska’s law, which proved successful. He said the legislature would establish self-insured groups in business that would be a good alternative to employers throughout the state, which would provide essential coverage as required by law. He said it was a better, safer, quicker, and more cost effective way of doing business than the currant system was providing. Mr. Capurro said Berlen Miller and Howard Wells of the Nevada Contractors Association asked him to express to the committee their disapproval of the proposal to remove section 9 from the proposed legislation.

Jack Jeffrey, representing Southern Nevada Building and Construction Trades Counsel, explained he did not want to go into a great deal of detail regarding the proposed legislation and the proposed amendments because he did not like OCIPs or CCIPs. He said they caused a lot of confusion in the construction industry. He said he was also opposed to removing the provision to allow contractors to leave the program because that could leave injured workers without proper coverage and appropriate care. The idea was to reduce cost, and maintain benefit levels while continuing to take care of injured workers. An association of contractors must be able to provide coverage for their members at reduced rates as well as provide the full extent of benefits as guaranteed in statute.

Speaker Dini asked if section 9 was left in tact, what other changes would be made in the amendments. Chairman Buckley explained that every time the term accept as otherwise provided in section 9 was used the language would need to be made consistent throughout the measure.

Glenda Lisle, representing Construction Trust Corporation, said her organization was an association of self-insured employers. She suggested retaining section 9 in the proposed amendment. Her organization would appreciate the support of the committee to maintain self-insurance for the employers who have opted for that arrangement. Ms. Lisle said her organization had experienced 3-years of success and it wanted to continue its work.

Chairman Buckley pointed out the work session document contained another suggestion, which would delete reference to the American Society of Safety Engineers, because they did not issue certification credentials. Senator O’Connell considered section 9 as a vehicle for further cost reductions. If contractors obtained better cost savings, millions of dollars could be saved on public works projects. The Chairman said the Senator wanted to ensure that occurred and that was why the Senate made those policy choices.

Mr. Goldwater said he did not agree. He considered the issue of segregation questionable. If the intent was to clarify the provisions that would make OCIPS and CCIPS uniform entities as well as create economies of scale, then the law must allow someone to opt out of the program if they preferred to do so.

Mr. Hettrick said he had heard discussions concerning OCIPS and CCIPS during the interim and he wanted to clarify the point that the interim committee did not take a position on section 9 allowing the right to opt out of the program. The position was the one Senator O’Connell took, he explained. The issue was if OCIPs and CCIPs would be able to negotiate rates equal to or lower than the bids were that were being received. The second part of the issue was trying to establish a program that bundled everything together. Money for workers compensation costs might be lower, no one was certain.

Mr. Beers pointed out employers were liable though EICN to pay premiums on the first $36,000 of wages paid to workers per year. He asked the committee to consider a possible scenario in which he employed a worker on a non-OCIP job in January and that same worker was employed on a OCIP job from February through June. If the worker’s total salary was $36,000 in June, what would happen in July when he went off the OCIP plan and back onto either self-employment or to EICN. He asked if the wages paid under OCIP would count toward the $36,000 limit.

Mr. Craigie explained if the employee was working under the insurance arrangement of his association and he reached the total $36,000 limit, he could stop paying his premium. At his next place of employment he would be covered by an insurance contract there as well. There were two issues to consider, Mr. Craigie said. First, the employer would no pay the premium. In fact, in that case, the association was paid in full for a whole year and had no liability for the other half. An employee who left one place of employment for another lost whatever share they paid into the program because it did not follow the employee. Because those shares were not paid by the same employer, the employer would not be hurt. In fact, he concluded, the position of the association would be somewhat enhanced by the arrangement.

Cliff King, supervisor for the Division of Insurance, said the law stated that until June 30, 1999, the first $36,000 was used to pay the premium. That would change on July 1, 1999 when it would become per year. The commissioner’s order, dated December 11, 1998, interpreted that to mean "per policy year." Each time a person changed carriers he would start achieving a new $36,000 limit. When a person changed employers, the replacement employee started a new $36,000 limit. Under the OCIP, an individual would have only one carrier. If the employee was covered under a different insurance carrier, he would have a $36,000 limit under each one. An OCIP did not only cover workers compensation, it also rolled a number of other coverages into it, including property insurance and inland marine coverage for example. Typically, on a large project, it would include virtually all-insurable aspects of that project, not just workers’ compensation.

Mr. Beers asked if there was any benefit to someone to work on someone else’s job under an OCIP. Mr. King agreed, adding the reason was that when a contractor bid on a job, whether it was an OCIP or not, he needed to take into account all costs related to the job for that bid. One such cost was workers’ compensation coverage. Under the terms of an OCIP, a contractor must remove all insurance costs from that bid because the OCIP would be providing the service as well as paying for it. What was extracted under an OCIP or under a consolidated insurance program, was the cost of the insurance.

Mr. Ormsby said the employer did benefit from the arrangement. It was not an issue of who paid the premium. The employer was responsible for the first $36,000 of wages. The premium was paid only on the first $36,000. Mr. Ormsby said that Mr. King was correct. Effective July 1, 1999, it would apply to one policy year.

Mr. Beers said it was possible that insurance carriers would have to raise their rates. If that was the case and there was no credit for wages paid under an OCIP toward an insurance limit, when rates went up that could cost the construction industry a good deal of money. Mr. Ormsby said that would not happen.

Mr. Capurro attempted to clarify the point. He said a worker on an OCIP for the first six months of coverage was paid the statutory limit and came back as a worker under another insurance program, premiums would be extracted only on the first $32,000. The employer would save money.

Mr. King concluded the entire purpose of a CCIP or an OCIP was to improve safety and consolidate claim payments. When a person was injured he was referred to a CCIP that was on site operating every minute construction was going on. Once they went to see that person they accessed their medical provider immediately. It provided a safer environment. In terms of overall cost, the impact of having CCIPs or OCIPs, the safety advantage was what drove the program throughout the country.

Mr. Parks said he would prefer to see the measure amended using amendments 2 (a) through 2(k) with the deletion of section 9, as outlined in the work session document.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

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Speaker Dini said he wanted to amend the motion that did not delete section 9, or Item (b).

The Chairman asked for a show of hands on the motion as the verbal vote was not conclusive. The measure lost in the vote. She said the motion would be considered in a later hearing. She closed the hearing on S.B. 133 and opened the hearing on S.B. 132.

Ms. Lesbo explained the proposed legislation revised provisions that governed industrial insurance benefits for police officers and firemen, including preventative treatment for contagious disease. During a previous hearing, the committee questioned whether the provisions of the measure applied to volunteer firemen. According to the Legislative Counsel Bureau Legal Division, the wording of the legislation was not clear and could result in litigation to determine whether the provisions of the measure applied to volunteer firemen. Two option were possible. One included inserting the term salaried or volunteer before all reference to firemen. The other option would clarify the measure so that it would not apply to volunteer firemen. That could be accomplished by inserting the term salaried before all references to firemen.

Speaker Dini said he believed the measure should apply to volunteer firemen as well because they provided a great service throughout the State of Nevada.

The Chairman closed the hearing on S.B. 132 and opened the hearing on S.B. 145.

Mr. Hughey began the discussion. He said S.B. 145 made changes regarding health insurers and administrators, specifically, it limited the amount a health insurer could charge health-care providers in order to be included on a list of providers, which was given to insured members of an insurance provider. It also made changes to provisions regarding payment of claims by health insurers. Mr. Hughey reminded the committee there had been a question in a previous hearing by Mr. Hettrick regarding the wording in section 1, subsection 4, lines 13 and 14. He questioned whether the wording would allow for payment of an undisputed portion of a claim prior to resolution of the issues associated with the balance of the claim. He called upon Mr. Hillerby to answer the question.

Mr. Hillerby explained he had served on the Commissioner Advisory Committee, and before the measure was introduced, the commission had recommended that the undisputed part of a claim could be paid. The original bill would not allow partial payments. It was the only contested part of the measure because the other nine items were uncontested. To clarify, he said, a company could pay the undisputed part of a claim and place a hold payment on the disputed portion of the claim until the disputed part had been resolved.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 145 and opened the hearing on S.B. 357.

Mr. Hughey explained the measure required the State Board of Physical Therapy Examiners (SBPTE) to appoint an advisory committee to recommend legislation concerning regulation of athletic trainers. He said there were no amendments proposed.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 357 and opened the hearing on S.B. 375.

Mr. Hughey explained S.B. 375 made changes to statutes that governed trade secrets. There were three amendments proposed. The first amendment was proposed by Terry Ready, a corporate attorney who proposed lowering the fine suggested in section 1 from $100,000 to $10,000. Mr. Hughey reminded the committee that Mr. Hettrick proposed amending section 2 on page 3, lines 4 through 7 in order to clarify that the word code referred to computer code. The final proposed amendment was from Chairman Buckley who proposed the committee amend section 2 on page 2 to clarify that criminal penalties did not apply in a case in which a person did not will fully breach a responsibility. She proposed the following changes that were included on the work-session document (Exhibit D). Inserting the word willful in front of the work breach in subsection (d) and including the word willful in front of the word inducements to make certain willful acts apply to both a breach and an inducement to breach a duty to maintain secrecy. Also, is subsection (e) inclusion of the word willful to require willful breach or willful inducement of a breach of a duty imposed by common law, statute, contract, license, protective order, or other court-administrative order.

Mr. Beers stated if the committee was inserting the word code to clarify the term computer code, it might be clearer if the language was changed to computer programming instruction. The word code, he explained, was a slang term, which might not be clear to a non-layman.

Chairman Buckley agreed and added that paragraph 3 was a concern to her. She said it needed to be clarified the intent was criminal and not civil intent.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 375 and opened the hearing on S.B. 452.

Mr. Hughey explained S.B. 452 provided for claims of real estate brokers against certain proceeds received from distributions of commercial real estate. He said the testimony on the proposed measure was exclusively real estate brokers because they wanted to ensure they received payment. The legislation made many technical changes, but the essence was that in some commercial real estate transactions, the seller refused to pay the broker for services rendered in connection with the sale of the property. Sometimes the broker received no compensation for services performed. The proponents of the legislation explained the measure only applied to commercial real estate transactions, and did not result in the placement of liens against real property. There were no amendments proposed.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 452 and opened the hearing on S.B. 451.

The Chairman asked Speaker Dini for because there was a concern regarding S.B.451. The measure dealt with homeowners’ associations, which was heard in a previous hearing. At that time it was discovered there was a proposed increase in the assessment to be charged to all homeowners’ associations. If that fee was spread out to include more homeowners’ associations, it would essentially revise the budget for the office of the homeowners’ ombudsman. Mr. Arberry indicated since that would revise their budget, he would want to review proposed legislation in the Assembly Committee on Ways and Means because the measure had a concurrent referral to the Assembly Committee on Commerce and Judiciary. When it first came up, the chairman continued, she informed Mr. Anderson that since the proposed legislation would have a fiscal note attached to it the measure would be exempt from the upcoming scheduling deadline. Because the proposed amendments were lengthy and complicated it might be advantageous for the Committee on Ways and Means to review everything before an exemption was requested.

Mr. Dini explained that when the measure went out of committee, it automatically went to the next committee mentioned in the concurrent referral.

Chairman Buckley told Mr. Anderson she wanted to make sure the measure had enough time it would be able to make it out the Assembly Committee on Judiciary by the scheduled deadline even though it was exempt, because the Committee on Ways and Means would take possession of it in order to make that exemption. She asked Mr. Arberry if that was correct, to which Mr. Arberry responded in the affirmative.

Assemblyman Bernie Anderson, Assembly District 31, said the measure needed to be on the desk in order to receive the exemption. He suggested the committee refer the legislation to the floor of the Assembly and in that transition place it on the desk. The measure would then be re-referred back to the Committee on Commerce and Labor, after which time it would go on to Judiciary. While it was sitting on the desk, Speaker Dini could approve the exemption.

Speaker Dini suggested the best course of action would be to get the measure out of the Committee on Commerce and Labor, amend and do pass it, and then when it hit the desk rescind the action where and why it was concurrently referred to both committees and take it out of the Committee on Judiciary. It could then be put on the desk.

Mr. Anderson said, with all due respect, he did not agree with the suggestion. He said the initial agreement was for it to be sent to the Committee on Judiciary and as a courtesy to the Committee on Commerce and Labor allow the measure to go to the Committee on Ways and Means as well.

Speaker Dini said a measure could not be lost because it was assigned to too many committees as that would not be proper.

Chairman Buckley stated that part of the problem was that when the measure was initially referred she was unaware of any fiscal note attached to it. It did not go to the Senate Committee on Finance, which is what caused the confusion, and neither she nor Mr. Anderson were aware of that. Mr. Arberry suggested asking Mark Stevens to look at the measure as soon as possible in order to cut down on the confusion.

Chairman Buckley said the proposal was not for General Fund money, it was money from the associations, which would affect their budget.

Mr. Anderson pointed out the issue was still a problem for the committee because the measure had to have a fair hearing in the Committee on Judiciary.

Speaker Dini asked why the Committee on Ways and Means wanted the measure.

Chairman Buckley said that was because it expanded the amount of fees the association could charge; therefore more fees would be collected by the real estate division, which would impact their budget. It would not affect the General Fund, but authorization needed to be granted in order to spend the money.

Mr. Ashlman said the measure did not increase fees. More money might be collected in the coming biennium; however, it did not suggest more expenditure of the monies collected from those fees. The concern was how the money received from the collected of fees was used, specifically what the money was used for, was the issue (Exhibit K).

Mr. Hughey explained S.B. 451 made various changes to provisions governing common interest communities. There were a number of amendments proposed, that were complicated and were being reviewed by Legislative Counsel Bureau legal council. The first proposed amendment was from Renny Ashleman. He proposed amending the provisions in section 21 regarding the payment of deficiencies in the declarents’ share of the amount of reserves due. He proposed at the time of the effective date of the act, a declarant who delivered control over the reserve account must deliver an account that contained the declarant’s share of the amount owed. The provision allowed for installment payments to be made, which would only apply in cases involving declarations filed prior to October 1, 1999. Mr. Ashlemen proposed lines 6 through 10 on page 13 be amended to read as indicated on the work session document.

Chairman Buckley called upon Senator Michael Schneider, Senatorial District 8, for comment on the proposed amendments. The Senator explained he had not yet reviewed them. The Chairman suggested the committee continue to review each amendment together.

Mr. Hughey continued by describing the second amendment, which was suggested by Assemblyman Goldwater. Mr. Hughey said it was confusing and asked for Mr. Goldwater’s assistance in explaining the proposed amendment. Mr. Goldwater said the amendment came as a proxy issue previously discussed, which occurred in other Senate measures. He said that rather than require a proxy to meet a quorum requirement it would only require a secret ballot or an absentee ballot instead of proxies for the association to meet the quorum requirements for the executive board of directors.

Pamela Scott, property manager for the Howard Hughes Corporation, said there were no absentee ballots. The Chairman explained secret ballots would be used in mail-in voting for secret ballots when voting members were absent.

Mr. Hughey said the third amendment had been proposed by the Chairman and suggested amending section 22 page 14 lines 14 and 15 by removing the language that had been struck out. The change would reinstate the provision that any rule not uniformly enforced by an association could not be enforced against any unit’s owner. The Chairman said that would eliminate arbitrary conduct in association policies.

The next proposed amendment was suggested by Ms. Scott, Mr. Hughey continued. He said it would affect subsection (h) in section 26 and would replace language regarding the exemption of association managers. It would allow the Real Estate Association to determine if the manager of a small agency could be exempted from various association policies. Mr. Ashleman’s amendment was the next to be considered. It replaced the language of subsections relative to clarification of terms used to define association regulations pertaining to civil actions that might be taken. The next amendment related to clarification of election requirements, followed by an amendment pertaining to the exemption of public buildings, churches, and other similar properties.

Further amendments referred to clarifying terms that defined the difference between commercial and residential properties. An additional amendment was proposed by Mr. Ashleman, which was related to subdivisions, particularly commercial subdivisions. Additional amendments were reviewed pertaining to supplementing operating cost reserve funds to, changing the notification requirements for conducting meetings, and a proposal to change provisions regarding the database constructed by the association ombudsman.

Mike Trudell, representing Caughlin Ranch Homeowners’ Association, reviewed an amendment pertaining to assessments. New language would be added that would affect common interest communities by not assessing vacant lots.

Stephen Hartman provided the committee with a handout of proposed language for an amendment pertaining to time-share projects. The proposed amendment was placed into record in its entirety as Exhibit L.

Scott Canepa, representing the Nevada Trial Lawyers Association, suggested an amendment that would provide reserve funds that would cover the cost of repair work on structures covered by association policies. Mr. Goldwater asked for clarification of how the proposed amendment would affect individual homeowners’ responsibility versus common area repairs.

Senator Schneider said reserve funds were very important because much of common area repairs were extremely expensive, which included repairs to streets and common structures, such as shared condominium roofs and landscaping.

Bud Hicks, representing Glenbrook Homeowners Association, said his organization particularly disfavored legislation that excluded absentee homeowners who lived only part-time in the communities affected by homeowner association boards from sitting on those boards. He said such provisions were unconstitutional and the provision should be excluded. Timeshare units were not included in the arrangement.

Stephen Hartman, representing Allison, MacKenzie, Hartman, Soumbeniotis, and Russell Law Offices was the next to testify on proposed amendment to the legislation. His organization submitted a proposed amendment that would condense and clarify language suggested for the proposed legislation (contained within Exhibit D). He suggested retaining section 16, line 3 and section 30, lines 24 through 36. Proposed amendment A would remove timeshares from NRS Chapter 116.

The Chairman said she did not want any of the provisions of the new legislation to apply to timeshare units and suggested Legislative Counsel Bureau legal division scrutinize the measure and proposed amendments section by section to determine how the legislation applied to timeshares. It was also possible additional legislation might be recommended for next session that would deal with timeshares, as suggested by Mr. Hartman. All involved entities were in agreement with the Chairman.

Mr. Ashleman said section 16, line 3 and with lines 24 through 36, regarding small exemptions, should be reinstated. Senator Schneider disagreed with the exemption provision because he considered 12 units to be a small association. There were many small associations that appeared to be landscape associations that ruled all aspects of life in the complex, yet they charged very low association fees. Therefore, the monetary threshold for association fees should be removed rather than set it at $500 per year. The Chairman asked the committee for its consideration on establishing exemption policies on an industry that needed legislative regulation as much as home associations did. It was agreed landscape and flood control associations should be included in the legislation.

Mr. Humke suggested leaving in the 12-unit limit, establishment of a list describing association purposes, exclude timeshares, and delete the $500 limit. The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 451 and opened the hearing on S.B. 210.

Mr. Hughey said many amendments had been suggested for the proposed legislation. The Bureau of Alcohol and Drug Abuse would continue to certify detoxification technicians after July 1, 2001. Definitions and references were placed in a proposed amendment in order to clarify provisions and descriptions referred to in the measure.

The Chairman asked if there were additional questions or comments and there were none. She called for a motion.

The Chairman closed the hearing on S.B. 210 and opened the hearing on S.B. 439.

Mr. Hughey explained the measure pertained to accountants and had no proposed amendment attached. The Chairman called for a motion.

Mr. Parks said the repealed section on page 20 regarding acceptance of commissions should not be repealed. Mr. Hillerby stated the section was an important aspect of the measure. Mr. Hettrick said there should not be a problem with the provision because full disclosure was a stipulation of the proposed legislation. Mr. Beers, as a certified public accountant, said he supported the repeal of the provision relating to commissions. Mr. Humke said if the provision was repealed, the measure would need to be rewritten.

Mr. Goldwater said the repeal of the provision was a national effort because of abuses that had occurred. He asked Mr. Hillerby if a certified public accountant referred a client to an insurance broker, at what point would a disclosure be needed if the fee to the accountant was contingent upon the purchase of an insurance policy. The scenario he described, Mr. Goldwater explained, was the kind of issue the proposed legislation was intended to address. The fee was not up-front, but rather, a kickback. Mr. Hillerby said he was not sure how to answer the question and that he needed more time to review the suggested scenario. The Chairman said she wanted to postpone the vote on the issue as well as the remainder of the work session issues until a later date.

Jan Needum, principle counsel for Legislative Counsel Bureau, requested the issue of timeshares for S.B. 451 be revisited. She explained the provision regarding timeshare units could either be exempted from the mandatory provisions of the measure or from Chapter 116 of the NRS. However, she explained, it was a far more complex problem that required specific information to develop appropriate language to change the mandatory provisions of the measure. The Chairman asked the committee if she could make an executive decision on the major technical areas of the provisions, to which the committee responded in the affirmative.

The Chairman asked if there were additional questions or comments, and there were none.

The Chairman adjourned the hearing at 7:00 p.m.

RESPECTFULLY SUBMITTED:

Sharon Spencer,

Transcribing Secretary

______________________________

Meagan Colard,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Chairman Buckley, Chairman

DATE: