The Committee on Government Affairs was called to order at 9:05 a.m., on Monday, April 26, 1999. Chairman Douglas Bache presided in Room 3143 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:

Mr. Douglas Bache, Chairman

Mr. John Jay Lee, Vice Chairman

Mrs. Vivian Freeman

Mr. David Humke

Mr. Harry Mortenson

Mr. Roy Neighbors

Ms. Bonnie Parnell

Ms. Gene Segerblom

Mr. Kelly Thomas

Mr. Wendell Williams

COMMITTEE MEMBERS EXCUSED:

Ms. Dawn Gibbons

Ms. Merle Berman

Ms. Sandra Tiffany

Ms. Kathy Von Tobel

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Lieutenant Stan Olsen, Las Vegas Metropolitan Police Department (Metro) said Las Vegas had been faced with a growing problem whereby pager companies had been dealing with a certain criminal element on a cash-only basis. Investigations of a pager number, when traced back to the company issuing the pager number, revealed limited information about the subscriber. The criminal further hid his identity by utilizing the pager as a personal internet system, primarily during narcotics transactions. S.B. 131 would call for counties to enact ordinances requiring those companies to maintain proper and detailed information when issuing pagers to cash-only clientele.

Continuing, Lieutenant Olsen said Metro did not have a problem with those clients who had billing statements sent to their homes or credit cards. The information on criminal investigations could be tracked more easily in that fashion.

With regard to accountability, Mr. Lee asked if companies issuing pagers received falsified information would they be held accountable for bad recordkeeping. Lieutenant Olsen replied if S.B. 131 was enacted, the pager companies would be required to obtain photo-identification for those clients engaging in cash transactions. It was possible for the photos to be falsified; however, Metro would at least have the photograph from which to work.

In response to Mr. Lee’s question, Lieutenant Olsen said it was not the intent of Metro to fine and/or seize the respective pager businesses for receiving false information unless that business continued to operate in a manner which did not adhere to the ordinance.

Mr. Thomas asked if the cities would also be required to enact similar ordinances, to which Lieutenant Olsen replied each individual city would be addressed through the county ordinances.

Mr. Thomas asked if pager companies were already currently required to obtain proper photographic identification and S.B. 131 just provided those companies with an extra incentive. Lieutenant Olsen replied that was currently the case. He added that the verbiage in S.B. 131 had been developed in accordance with meetings with the telephone and pager companies, and representatives from the independent pager companies with which metro had issues.

Directing his question to Eileen O’Grady, committee counsel, Chairman Bache asked if all county ordinances would apply only to the unincorporated portion of each county whether or not it was part of an incorporated city. Ms. O’Grady replied she was unsure, but would provide that information after further review. Lieutenant Olsen added if that became a problem, the city had the ability to enact an ordinance within the city limits in order to address similar issues.

Chairman Bache asked if the bill was directed at the telephone companies that issued pagers in addition to other services, or if it was directed at those companies primarily offering pagers. Lieutenant Olsen replied that was correct. S.B. 131 would be directed primarily at those companies that dealt exclusively in pagers.

Mr. Lee asked what was the length of time the records must be maintained, to which Lieutenant Olsen replied the lifetime of the account plus 6 months after the close of the account.

Margaret McMillan, representing Sprint, testified Sprint was in support of S.B. 131, and commented she had worked with Lieutenant Olsen in drafting the verbiage of the bill.

Stephanie Tyler, representing Nevada Bell Wireless, testified Nevada Bell Wireless was also in support of S.B. 131.

With no further testimony, Chairman Bache closed the hearing on S.B. 131.

Frederick Schmidt, chief deputy attorney general, Bureau of Consumer Protection, stated S.B. 487, drafted by the Office of the Attorney General, would provide benefits for low-income persons throughout Nevada. Two years ago, the office reviewed federal programs wherein low-income families had been provided with "Lifeline" and "Link Up" services by participating phone companies. A survey conducted by the bureau, in cooperation with the Welfare Division, had determined less than 10 percent of those qualified individuals in Nevada were actually participating in the program.

Problems had arisen when representatives from the phone companies did not know how to inform the caller of the program, or had been unknowledgeable of the program altogether. It was then that the idea of a bill draft automatically qualifying those individuals eligible for entitlement programs, for Lifeline or Link Up, was developed. The Lifeline Program would save the qualified individual, or family, an additional $5.25 on their phone bill each month. The Link Up Program was developed with the thought that if an individual did not have telephone service established and could not afford the installation cost, the program would discount the individual 50 percent. The phone companies would be fully reimbursed for the costs. Both Nevada Bell and Sprint supported S.B. 487.

Continuing, Mr. Schmidt informed the committee the development of the two programs were applicable to sections 1 through 10 of S.B. 487. Section 11 proposed enhanced 9-1-1 services throughout Nevada and dealt with liability issues for providers of 9-1-1 services.

Robert Cooper, deputy attorney general and regulatory analyst, Bureau of Consumer Protection, reiterated the purpose of the bill and described the bill’s intent. The committee had been provided with a table indicating the ratios of Lifeline recipients to people in poverty (Exhibit C). A number of states were taking full advantage of the program, roughly 50 percent of low-income households in states like New York and California were participating; however, in Nevada the participation rate was closer to 7 percent.

Mr. Cooper said the proposed legislation would address the problem of participation by establishing a link-up with the database of the Nevada Department of Human Resources, which currently administered the bulk of the programs that made a household automatically eligible for Lifeline. The goal of the legislation was for the department to communicate the information to the phone companies, and in turn, the telephone company would inform each eligible individual of his or her automatic enrollment in the program. Other benefits derived from S.B. 487 included:

• Toll Blocking – A feature allowing customers to control long distance bills by blocking long distance access and/or relying on prepaid phone cards.

• Disconnection – Lifeline customers would not be disconnected for inability to pay long distance bills.

Mr. Cooper concluded by stating he thought S.B. 487 was a win-win situation for Nevada and its low-income residents, and he urged the committee’s support.

In response to Mrs. Freeman’s question, Mr. Schmidt said the cost of $2,800 for estimated computer programming costs in preparation of the data tape would be absorbed by the Welfare Division of the Department of Human Resources because a great deal of benefits were anticipated to be derived from the program. He understood there was no fiscal note attached.

Jeanette Hills, chief of Eligibility and Payments, Department of Human Resources, Welfare Division, testified she supported sections 1 through 10 of S.B. 487 and read from the text of Exhibit D. The bill would provide an efficient method of notification to those who qualified, as well as provide savings for low-income families. Lists of eligible clients would be provided to local telephone companies biannually. Clients would then be notified of the program for which they qualified.

Ms. Hills explained if confidentiality became an issue, the department would work in accordance with the telephone company in developing letters requesting clients contact the company; however, the division would be expected to be reimbursed by the telephone companies because of the costs involved to the division.

Mr. Lee asked if those individuals currently on the eligible list would be removed from subsequent lists as a result of a change in financial status. Ms. Hills replied when the biannual lists were mailed, only those eligible and on the prior list would qualify for the program.

Margaret McMillan, representing Sprint, said Sprint supported the bill and the concept of both Lifeline and Link Up Programs. During a recent rate filing with the Public Utilities Commission (PUC), Sprint had included a provision that broadened the eligibility requirements for the programs. Individuals or families who received basic telephone service would continue to pay low rates. She elucidated the original language submitted in section 10, subsection 4, stated "the eligible provider shall be reimbursed from the fund established…," but because the fund was not actually established, reimbursement could not be mandated through the PUC. Language stating the provider was entitled to the reimbursement was drafted instead. She wanted it known for the record that the company expected to be totally reimbursed.

Ms. McMillan explained the wireless telephone services received no reimbursement when 9-1-1 was utilized, as it was only a courtesy service provided. Under section 11 of S.B. 487, a company who provided wireless services could not be held liable for failure of the equipment while accessing 9-1-1.

Brian Herr, executive director, External Affairs, Nevada Bell, echoed the sentiments of Ms. McMillan, and was in support of S.B. 487; however, Nevada Bell was concerned with the timing outlined in the bill and costs anticipated to be incurred. As indicated in section 9, subsection 1, an eligible provider was required to notify the eligible customer that he would receive either Lifeline or Link Up within 7 days after determining eligibility. He said Nevada Bell would work with the Department of Human Resources and consumer advocates in meeting that timeline. A second concern arose with the administrative cost of the initial mailings, which would total approximately $50,000. There was nothing in the bill indicating Nevada Bell was prohibited from applying through the commission for reimbursement from the Lifeline Program, and it was hoped the Public Service Commission would look favorably upon reimbursement.

Mrs. Freeman asked from where the money for reimbursement would originate, and if the commission currently administered those funds. Mr. Herr replied currently the money for reimbursement came from a federal program administered by the commission.

Mr. Herr added Nevada Bell would work closely with the Bureau of Consumer Protection and the Department of Human Resources in order to develop the proper application form for mailing. It was hoped the department would perform the screening for potential customers before the list was received by Nevada Bell to ensure full understanding of the eligibility requirements.

In response to Ms. Parnell’s question, Mr. Herr explained the phone company would continue to use bill inserts and brochures to inform people of the Lifeline and Link Up Programs, but would provide to the committee brochures used previous years.

Jan Gilbert, representing the Progressive Leadership Alliance of Nevada, remarked many of the coalition groups worked with individuals who came in at under 150 percent of poverty ($20,400 for a woman and two children). She urged the committee’s support of S.B. 487.

Kathy Augustine, state controller, remarked in response to Mr. Lee’s question, the Office of the State Controller had been canceling approximately 500 checks per month issued to welfare recipients due to insufficient addresses or withdrawal from the entitlement programs.

In response to Mrs. Freeman’s question, Mr. Schmidt said the basic rate for Nevada Bell customers was currently $10.75, plus a federal mandatory access charge of $3.50, bringing the total basic rate to $14.25. Ms. McMillan added the basic rate in southern Nevada was currently $7.10, in addition to the $3.50 federal mandatory access charge, bringing the total to $10.60.

With no further testimony, Chairman Bache closed the hearing on S.B. 487.

Anne Cathcart, special assistant attorney general, stated the information contained within the legislative auditor’s report issued in January 1998 had determined that as of June 30, 1996, there was approximately $103.5 million owed to the state. Of that amount, $50 million was uncollectable. In order to address the collection problem, and other issues identified in the report, such as inadequate recordkeeping and tracking and collection efforts, a task force had been formed. A joint Debt Collection Management Task Force was created at the request of the attorney general and the director of the Department of Administration on behalf of the governor to develop a variety of collection remedies, which could be used by the state agencies for different types of revenue. Because of the uniqueness of each individual agency, it was important that each individual agency take responsibility for collecting revenues owed to it. S.B. 500 was the result of the Debt Collection Management Task Force’s efforts.

Ms. Cathcart read from the text of Exhibit E. S.B. 500 would create a new chapter in the Nevada Revised Statutes (NRS) applicable only to those agencies that did not currently have a similar collection remedy. The different remedies had been summarized on page 2 of Exhibit E. Each agency would be able to choose from the six remedies listed in order to facilitate the collection process. In addition, S.B. 500 would allow the controller to offset refunds due a debtor if that debtor had obligations to another state agency and would enable a state agency to request that the State Board of Examiners authorize the write-off of a debt determined to be impossible to recover (subject to the Office of the Controller).

With regard to debts incurred, Chairman Bache asked if lengths of time indicated in section 22, subsection 1, parts (a) and (b), were standard. He thought it was an excessive amount of time for an agency to wait before action was taken. Ms. Cathcart replied she believed the length of time was written into the bill, in part, after review of other state’s statutes, and because other collection remedies could be a lengthy process.

Gary Crews, legislative auditor, introduced Mike Spell, deputy legislative auditor, audit supervisor, who had been in charge of the auditor’s Management Collections of the State’s Accounts Receivables (Exhibit F). He reiterated the audit had been initiated because of the collection problems throughout the state. Six major revenue collection agencies were identified on page 2 of Exhibit F. Those agencies included the Department of Taxation, Gaming Control Board, the Department of Motor Vehicles and Public Safety (DMV & PS), Department of Employment, Training, and Rehabilitation’s Division of Employment Security (DETR), State Industrial Insurance System (SIIS), and the Department of Business and Industry’s Division of Industrial Relations.

Continuing, Mr. Crews called the committee’s attention to page 25 of Exhibit F. As indicated, there were four recommendation needed to improve the state’s debt-collection. The legislative auditing staff supported S.B. 500 as a result of recommendation number 4.

Referring to page 16, Mr. Spell said the table indicated the frequency of collection actions for which those agencies engaged related to the accounts listed. The most prominent collection action utilized by the agencies were billings, letters, faxes, and phone calls. He reviewed with the committee other effective techniques identified and their associated percentage of use.

Mr. Spell explained several factors that contributed to the inconsistent use of techniques indicated included little or no guidance to the agencies, no central oversight by the state, and inadequate statutory authority. Inadequate statutory authority was addressed in S.B. 500.

Turning to page 21 of Exhibit F, Mr. Spell noted the table illustrated the actual statutory authority for collections that had been granted to each agency for the selected revenues previously indicated. State agencies could only use liens for five of the eight revenue sources; offsets and withholds, and judgements were authorized for three of the eight sources; and for payment agreements, only two of the eight revenue sources had authority. The development and use of the effective collection practices through the statutory authority would significantly improve the amount of receivables collected by the state.

Mr. Crews believed S.B. 500, in conjunction with regulations being developed, would provide state agencies with the needed guidance in order to implement more effective collection practices. Support of S.B. 500 was urged.

Mrs. Freeman asked if the ongoing problems with state computers contributed to the problem with inadequate recordkeeping on the part of the agencies. Mr. Crews replied the problems arose due to a lack of guidance, and a lack of statutory authority, to those state agencies. He felt the legislature’s money committees should examine the collection practices of the agencies.

Mrs. Freeman inquired if other states had been experiencing the same problems, to which Mr. Spell replied affirmatively. Other states had addressed the problems of central oversight and accountability in collection practices in a similar manner.

Mr. Humke asked if Mr. Crews had a breakdown in audit findings of the debts owed to the general fund versus debts owed to specialized accounts. Mr. Crews replied he did not think that was specifically addressed. He indicated on page 12 of Exhibit F there was a breakdown of the major categories of receivables.

At the request of Mr. Humke, Mr. Crews reviewed with the committee members those agencies that owed to the general fund and those that owed to other accounts. All taxes collected by the Department of Taxation - with the exception of the motor vehicle fuel tax - and Gaming Control Board were owed to the general fund. All other agency receivables were owed to other specialized accounts.

Responding to Mr. Neighbor’s question, Mr. Spell said the short-term auto lease tax had been subsequently transferred to the Department of Taxation for collection since completing the audit; however, he did believe an undetermined amount had been ear-marked for the general fund.

Kathy Augustine, state controller, read from prepared text (Exhibit G). S.B. 500 would codify the recommendations of the audit report, which included the Department of Administration, and the state offices of the State Controller and Attorney General which provided guidance and oversight to ensure that agencies maintained reliable data on effective revenue collection practices, established procedures for management and collection of state’s receivables, coordinated collection efforts, and obtained statutory authority to utilize effective collection efforts. The bill would provide a vehicle for active debt collection.

Continuing, Ms. Augustine said the following amendments had been requested by the state controller and would allow the controller to act as a collection agent for all state agencies, with the exception of those given authority to collect their own debts:

• Section 3 – as written would give every entity in state government the authority to collect its own debt. The amendment would clarify that the controller shall serve as the collection agent for all state agencies except for those six previously indicated, which were given the authority to collect their own debts.

• Section 12 – Deleted "director of the Department of Administration" and replaced with "state controller" in order for the controller to establish forms and procedures for collection practices. The change would be consistent with section 20, subsection 3, which gave the controller authority to adopt regulations to carry out provisions for the allocation of offsets.

• Section 13 – Deleted "director of the Department of Administration" and replaced with "state controller and attorney general."

• Deleted section 23, subsections 1 and 2, the term "cancellation" needed to be further defined. Suggested language had been provided, and section 25, subsection 2, part (b).

Ms. Augustine said there had originally been a fiscal note attached to the legislation, which had been removed by the Senate Committee on Government Affairs but had been added to various sections enabling the availability of resources for performing debt collection. As an attachment to Exhibit G, an article on collecting delinquent revenue had been provided for the committee’s information. The article reviewed centralized collection programs, a key issue in the collection process. A decentralized collection process often led to a fragmented and less efficient collection operation. In response to that potential problem, revenue collection was centralized and the responsibility of delinquent accounts delegated to one person in the organization, such as the treasurer, tax collector, or finance director. No further discussion ensued.

In response to Mr. Humke’s question, Ms. Augustine reiterated the six state agencies responsible for their own debt collection: Nevada Department of Taxation, Employment Security Department (ESD), Employers Insurance Company of Nevada (formerly SIIS), Nevada Gaming Commission, Division of Industrial Relations, and the Department of Motor Vehicles and Public Safety (DMV & PS). The Office of the State Controller would oversee the remaining state agencies in their quest for debt collection.

Mr. Humke remarked the original language of S.B. 500 relating to section 23, subsection 1, authorizing the State Board of Examiners to approve the cancellation of debt appeared peculiar to him. Ms. Augustine said she desired a more centralized process of debt cancellation whereby the state controller and attorney general would approve the cancellation of debt.

Perry Comeaux, director, Department of Administration, said the department was in vehement support of S.B. 500. No objections had been found with the amendments submitted by the Office of the State Controller. Addressing Mr. Humke’s previous remarks on the Board of Examiners involvement with the approval of the cancellation of debt, he said that was the body wherein refunds were approved resulting in the board’s insertion into the bill. Review of legitimacy of the receivables incurred and the collection effort by the agency needed to be reviewed in order to determine additional steps with which to proceed. He believed the amendment would greatly improve the bill.

Larry Bennett, representing the Nevada Taxpayers Association, testified the association supported S.B. 500 as written.

Ms. Cathcart informed the committee the Office of the Attorney General would consider the amendments of the controller and would review the amendments with the task force. The rationale behind originally having each agency responsible for their own debt collection, was to facilitate accountability for the manner in which revenue was collected and records were kept.

There being no further business, the meeting was adjourned at 10:34 a.m.

RESPECTFULLY SUBMITTED:

Rachel Baker,

Committee Secretary

APPROVED BY:

Assemblyman Douglas Bache, Chairman

DATE: