Mr. Morse Arberry Jr., Chairman

Ms. Jan Evans, Vice-Chairman

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph E. Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Bob Price

Mr. Richard Perkins (Excused)

Senator William J. Raggio, Chairman

Senator Joseph Neal

Senator Lawrence E. Jacobsen

Senator Ann O’Connell

Senator Bob Coffin

Senator William R. O’Donnell

Senator Bernice Mathews

Mark Stevens, Fiscal Analyst

Gary Ghiggeri, Principal Deputy Fiscal Analyst

Dan Miles, Fiscal Analyst

Bob Guernsey, Principal Deputy Fiscal Analyst

Jeanne L. Botts, Program Analyst

Cindy Clampitt, Committee Secretary

Janine Toth, Committee Secretary

Debbie Zuspan, Committee Secretary

Don Hataway, Deputy Budget Director, presented the Distributive School Account.

Mr. Hataway stated his intent was to present the methodology and construction of the budget.

Mr. Hataway said, two supplemental appropriations would be needed for the Distributive School Account (DSA) and Class-Size Reduction Program in
Fiscal Year (FY) 1999. He stated the DSA deficit was currently estimated at $28,985,515 primarily because of the lowered receipts of the Local School Support Tax (LSST) and offset in part by lower enrollments than what was legislatively approved. The deficit might be revised downward slightly after the Economic Forum meeting in May 1999. Mr. Hataway added, however, state sales tax collections year-to-date had been dismal.

Mr. Hataway stated he would address two areas of the budget:

1. Normal operating projections; and
2. The Consolidated Budget.

Mr. Hataway explained the methodology was the same as that used in previous sessions which included six elements:

• The audited actual revenues and expenditures from all 17 school districts as listed in the Nevada Revised Statutes (NRS) 387 report;
• Actual average salaries from the major employee classifications such as licensed instructional personnel whose FY 1998 average salary was $38,278 (base) or with fringe benefits $48,988;
• A certified report from the Department of Education for the average starting salary as of FY 1999 for the Distributive School Account of $29,067, for the Class-Size Reduction $28,528; and
• Certified number of employees in each school district from which was constructed a student/employee ratio.

Mr. Hataway explained there was one licensed instructional person for every 19.01 teachers. The current biennium was based on a figure of 19.37 indicating a one-third reduction in the ratio. He stated the fifth factor was enrollment growth which was projected at 4.88 percent for the year 2000 and 4.79 percent for 2001.

Chairman Arberry noted in the Sixty-ninth Legislative Session enrollment growth was projected at approximately 6.43 percent and asked why there was such a difference from current projections. Mr. Hataway said the projections were weighted on Clark and Washoe County enrollments and the Budget Office felt the school district projections were reasonable. He stated the projections were within the 98 to 99 percentile.

Senator Raggio asked Mr. Hataway to explain the actual numbers represented by the percentages. Mr. Hataway responded the additional number of new students (weighted average) based on the projected enrollment increases are:

• FY 1998 -- 16,668 actual;
• FY 1999 -- 14,106 actual;
• FY 2000 -- 14,648 projected; and
• FY 2001 -- 15,088 projected.

The last element used in the methodology was the total square footage of buildings. Mr. Hataway stated for FY 1998, the actual square footage of buildings was 29,542,122 square feet. That was projected to grow to 34,062,477 square feet by FY 2001. Those figures represented a 15.3 percent increase from FY 1998.

Speaker Dini asked how many school districts were currently operating under the "hold harmless" clause and how that clause affects the overall enrollment figures. Mr. Hataway stated it affected the FY 1999 figures. He added there were nine districts under the "hold harmless" clause at present. Those districts must be "made whole" in the current fiscal year because of the clause. That was not considered when projecting the future. Speaker Dini noted it appeared to leave quite a gap and Mr. Hataway explained each district revisited their enrollments and made projections on what was known at the time. If actual enrollments came in lower than the projections, the affected districts would then be eligible for the "hold harmless" clause again.

Mr. Hataway stated the adjusted base budget presented in The Executive Budget

was computed using the base year (FY 1998) average salaries and rolling them through the next biennium. That amount was rolled up by 2 percent to compensate for merit increases and 3 percent for the legislatively approved cost of living allowance (COLA) to arrive at the FY 1999 Adjusted Base Budget. The resultant figure was then rolled up an additional 2 percent each year for merit increases in FY 2000-01. Mr. Hataway stated the resulting average salary figures were:

• $40,215 for licensed instructional staff in FY 1999;
• $41,019 in FY 2000; and
• $41,839 in FY 2001.

All one-time equipment costs were removed from the base budget and included as an enhancement unit.

Mr. Hataway stated the only inflation factors in M-100 of the DSA budget were those that were uniformly applied to The Executive Budget. Those adjustments were for items such as heat, electricity, water, liability insurance, property insurance and postage.

He noted the agency had requested an additional 2 percent across the remaining budget line items but that was not recommended by the Budget Office.

Mr. Hataway noted four areas of the M-200 category he wished to discuss. The employee/student ratio of one employee to19.01 students was then applied to the new enrollment projections and included in M-200 using the starting salary projections.

He noted the second issue was that the average FY 1999 starting salary was used to project the starting salary during the 1999-2001 biennium because employees came from a different labor pool than that of typical school district employees.

Mr. Hataway noted the typical starting date used for each year of the budget was October 1, however the DSA budget built in a starting date of August 15 for all non-instructional staff because districts on average did not hire these positions until just before the beginning of the school year. The change represents a $2.3 million increase each year of the biennium.

Operating and equipment expenses were projected on a per capita basis to arrive at the net increase. Each increase in operating expenses related to either 1) cost per student, 2) cost per building square footage or 3) cost per employee.
Mr. Hataway stated those figures were included in M-200. All equipment expenses were based on cost per student.

Senator Raggio asked if the figures given represented actual figures or whether they were carryovers from amounts plugged into the formulas. Mr. Hataway responded they were actual costs divided by the actual number of students for FY 1998 to arrive at the final figure which was then driven by the projected enrollments of the new biennium.

Mr. Hataway emphasized the revenue developments shown in decision unit M-200 were based on the Department of Taxation estimates of property tax assessments and used in M-200 to adjust the base budget from the FY 1998 actuals.

Mr. Hataway noted in answer to an earlier question raised by Senator Neal on January 19, 1999, the Budget Office used an estimate from the Department of Taxation in the budget preparation process. He explained all county assessors were required to certify what they believed to be the assessments in the second year of the biennium by March 1. That figure would then be combined with the assessor’s work on centrally assessed properties to arrive at a final number.
Mr. Hataway noted that once the final certified assessed valuations were complete in the spring, the Budget Office would work with the legislature to fine tune any adjustments needed on LSST or other revenue sources to develop a final product.

Motor vehicle privilege taxes had been adjusted based upon revenue growth over the past 4 or 5 years. The LSST was based on the Economic Forum projections of state sales tax. The slot tax had been adjusted based upon estimates from the Gaming Control Board. Mr. Hataway stated he would discuss estate tax under the Class-Size Reduction budget.

Mr. Hataway stated the LSST estimate included a .75 percent collection fee by the Department of Taxation and if that bill draft request (BDR) was not passed that would become an issue.

There was a minor modification in investment income from the Permanent School Fund. There was a difference of opinion between the counties and the state regarding what fines levied against NRS violators, the counties should keep. The fines that went to the state went to the Permanent School Fund and the Permanent School Fund received the benefit of the interest on those funds. The outcome of that dispute could cause an increase or decrease in the revenues.

Mr. Hataway state the M-300 decision unit was an adjustment for fringe benefits based on changes identified from the FY 1998 actual figures, generally through a bargaining effort with the various employee unions.

The E-710 decision unit reflected the return to the budget of equipment purchases eliminated in the base budget. In the current budget that figure was $31,893,770.

Senator Raggio asked why unit E-710 had such a distinct difference between what the agencies requested and the Governor’s Recommendation. Mr. Hataway said the difference was because the agencies based their requests on the original legislatively approved amounts and actual expenditures were nearly double that amount.

Senator Raggio asked if the situation developed because of the one-time appropriations the legislature made in the 1997 Legislature. Mr. Hataway stated the districts did not expend the equipment category evenly throughout the budget cycle. Senator Raggio asked if the equipment category of the budget was allocated. Was it based on actual expenditures. Mr. Hataway responded the agencies actual expenditures in the base year were used in decision unit E-710. Senator Raggio asked if control was exercised to ensure expenditures were done proportionately. Mr. Hataway stated once The Executive Budget was approved by the legislature, the school districts were in control of funding. The total expenditure for FY 1998 was $31.6 million. Senator Raggio requested that Douglas Thunder, Deputy Superintendent, Administration, Department of Education to provide an overview of expenditures in the equipment category broken down by each school district. Mr. Hataway stated the NRS 387 report could provide that information and added the Budget Office worked closely with fiscal staff to track what was approved versus actual expenditures. He explained a small school might only purchase textbooks every other year or every third year. He added the figures basically represent a "snap shot in time."

Mr. Hataway explained the second part of his presentation was the consolidation of categorical allocations. He gave an analogy of taking a categorical grant and making it into a block grant for the DSA. Decision unit E-850 represented moving Special Education Unit Funding and the Adult Education Expenses into the DSA. E-900 transferred the Elementary School Counselors allocation of approximately $2 million into DSA. E-901 would consolidate the Class-Size Reduction account into DSA.

Mr. Hataway stated the benefits would be a true reflection of the basic support of students. The Executive Budget page E-82, indicated the basic support allocation would increase from $3812 to $4291 per student in FY 2000 and $4285 per student in FY 2001. The other benefit was if standards were tightened to produce better students, teachers should be provided with the maximum flexibility possible to allocate resources.

Mr. Hataway noted there were two nonfunded decision units presented in the budget. A request was made to add 2 additional days to the "school year" at a cost of $8.9 million and $9.7 million respectively during the 1999/2001 biennium. Another request would provide a cost of living increase to school district personnel of 3 percent per year. Neither of those items was recommended for funding in The Executive Budget.

Assemblyman Goldwater asked what the guaranteed level of support per student would have been if the other programs like Class-Size Reduction had not been rolled into DSA. Mr. Hataway stated he did not have that figure with him but he would provide the information later.

Assemblyman Beers asked Mr. Hataway to expand Mr. Goldwater’s request to include historical figures of what the budget would have looked like had the accounts been rolled into DSA during the 1997 legislature.

Mr. Hataway reviewed the spreadsheet in The Executive Budget on page K12 ED-82. The number of students in FY 2001 was expected to reach 330,059.

Adult Prison Education would remain a separate line-item because only four districts in the state served that need at the present time. He listed those as Carson City, Clark, Pershing and White Pine Counties. Under the "Nevada Plan" total support of $1,357,331,320 in FY 2000 and the $1,420,281,990 in FY 2001 represented the amount recommended in the state guarantee for school districts to provide student education.

The comparison between the 1997/99 biennium with the 1999/2001 biennium was approximately $436 million additional in funds. Mr. Hataway suggested that be compared with the total appropriation for the Department of Prisons which was $312 million.

Chairman Arberry asked if the Prison Adult Education took into consideration the new prison facilities. Mr. Hataway stated he would check that information but he thought the budget requests included growth for new prison facilities. Chairman Arberry asked the information be provided to staff prior to convening the subcommittee and Mr. Hataway assured him he would.

Senator O’Connell asked if the Jean prison was leased out, would funds be provided to educate the inmates housed there. Mr. Hataway replied the lease of the Jean facility was an emerging issue and her suggestion needed to be revisited. He noted Clark County did provide educational services to the other privately-owned prison in their county.

Mr. Hataway stated some of the discussion regarding Class-Size Reduction had already been covered. He noted expenditures in that program were recommended to be rolled to the DSA account. He added there was a BDR which was not yet complete that would be submitted. The BDR would request a name change for the fund from the "Fund for Class-Size Reduction" to the "Fund for School Improvement." To balance the total budget Mr. Hataway’s office recommended $5.8 million each year of the estate tax to be transferred to the Distributive School Account. He hoped that would be a transitional issue and suggested if the ability existed in 2 years there would be a request to return those funds for other types of school improvements.

Assemblyman Goldwater stated his concern over not having a line item for something as important as Class-Size Reduction. He was also concerned with inclusion of Class-Size Reduction in the basic support figures. Mr. Goldwater explained one concern was that it might be viewed as "an unfunded mandate" for the school districts by requiring the task and not specifying funding. Mr. Hataway replied there was no difference in regulations on Class-Size Reduction from any other required federal or state program. He reminded the committee there would be a BDR submitted. All BDR’s to implement the budget should be in within the next 2 weeks.

Mr. Hataway noted current statutes called for a class-size ratio of 15:1 for first, second and third grades. He stated that needed to be changed to at least 16:1for grades 1 and 2 and 19:1 for third grade.

Assemblywoman Giunchigliani disclosed for the record that she was a public school teacher with the Clark County School District but she would be discussing and voting on education issues. She asked what other benefit existed beyond flexibility in rolling the special education funds into the DSA. Mr. Hataway responded it would allow the state, for the first time, to reflect the true basic support for students. He noted that even with the proposed amounts Nevada would still provide less funding than the average provided by other states.

Assemblywoman Giunchigliani asked if there had been any discussions which might indicate better benefits for the children or the actual program itself through consolidation. She said her concern was the issue of accountability. She added the biggest complaints she had heard from the districts were not about Class-Size Reduction, but that the school districts were not given the facilities to deal with it. Mr. Hataway offered to discuss that issue with her. He stated he did not see the statutory requirements for things like reports on average class size going away. If that requirement was not met, the school district would need to request a variance from the State Board of Education. Ms. Giunchigliani said her fear was that Class-Size Reduction might be slowly phased out if it was not clearly accounted for Mr. Hataway stated if would be up to the Department of Education to police those issues regardless of what statutory changes were made.

Assemblywoman Cegavske asked if 16 of the 17 school districts were still on waivers because they were unable to accommodate Class-Size Reduction. Mr. Hataway agreed adding the vast majority of school districts had sought a waiver because the statutory requirement was for a 15:1 ratio. He stated the situation would be somewhat corrected if the ratio as required by statute was changed to 16:1.

Assemblywoman Cegavske asked if there were any reporting requirements for the federal funds received by the state for Class-Size Reduction. Mr. Hataway replied it was his understanding that federal funding for Class-Size Reduction would go directly to the school districts.

Mrs. Cegavske stated when she attended a conference in Washington D.C. last year, attendees were very surprised at how Class-Size Reduction was handled in Nevada and indicated that the Nevada’s method did not seem to meet the intent of federal funding. She asked if Nevada had lost any money or received complaints from the Federal Government because of the methodology used. Mr. Hataway stated he was not aware of any and noted he had not seen the final regulation for the federal class-size requirements.

Jeanne Botts, Program Analyst, Legislative Counsel Bureau, stated the federal money for Class-Size Reduction was a brand-new program and none of the districts were receiving funds yet. Also, it was not yet known what the federal requirements for eligibility would be. She added the federal funding was only authorized for 1 year. She noted the average student/teacher ratio in first and second grade across the state was currently 15.8 and most districts had attained 16.1 or lower. Mrs. Cegavske asked if that was accomplished by placing two teachers in some of the classrooms and Ms. Botts agreed.

Senator Neal stated he understood DSA funds were provided on a per pupil basis. Mr. Hataway stated it was all ratios. Senator Neal asked if CSR and other funds were rolled into DSA would it not indicate a percentage increase in the school distributive account. Mr. Hataway agreed. Senator Neal asked if that action would not lose the "character" of the money and leave it to the school district’s discretion as to use of the money. Mr. Hataway responded unless the statutes totally eliminated or substantially changed the required student/teacher ratios the districts would still have to adhere to state law. Also, FY 1999 was the first year third grade was funded at a student/teacher ratio of 19:1.

Assemblyman Neal asked what was so difficult about keeping the funds in separate accounts. Mr. Hataway replied the Department of Administration wanted to consolidate the funds into one account so that the districts would have maximum flexibility to make decisions on the allocation of funds and to show for the first time the true support provided to districts on a per pupil basis. Mr. Hataway explained with Class-Size Reduction funding provided for third grade, the school districts had the ability to come to the State Board of Education and request use of Class-Size Reduction funds for remediation programs, but whatever the funds were used for, the districts must meet state and federal law.

Senator Neal asked if the administration consulted the superintendent of Clark County as to whether they would approve the proposed methodology. Mr. Hataway responded he was not aware of such a discussion. Senator Neal wondered if someone in the Governor’s Office made the decisions regardless of the affects on the local school districts. Mr. Hataway said he could not concur. He added the Department of Administration met with district representatives in early December 1998 on the issue and most reacted favorably. He noted there had been concerns about the need for a transitional rate structure. Mr. Hataway stated the Department of Administration worked on a global basic support per student adjusted by the wealth factor. He noted not all districts benefited equally from those numbers and noted Eureka received zero while Esmeralda received the largest benefit. Senator Neal said the proposed method in effect would give an increase to DSA which was not actually an increase. Mr. Hataway stated regardless of where the funds were allocated the school districts still must adhere to state law.

Mr. Hataway stated there was $8 million per year in Estate Tax funds recommended for school improvement activities and Governor Guinn had not finalized his list of recommendations for use of those funds. He added at least $12 million was recommended for remediation in the State of the State address. He stated that information would be available by the time the subcommittee began its meetings. The Governor had also indicated the $3 million allocated for remedial education in the current biennium was woefully lacking.

Assemblywoman Giunchigliani asked if the wealth equalization formula would be applied to the combined funds as usual and Mr. Hataway replied if would. She commented the figures would appear to be skewed where larger districts that had a larger impact would actually receive less funding. Mr. Hataway replied that was a challenge that was given to the finance directors of the various districts. Ms. Giunchigliani stated care was needed or there could be a huge inequity in addition to that which already exists. She added the legislature needed to be extremely careful of meeting intent and also meeting the needs of the population being served.

Assemblywoman Giunchigliani asked if remediation included paid intersession, summer schools and the like as providing remediation for children. Mr. Hataway said he did not see a problem with that. He added no students should be precluded under the plan.

Assemblywoman Giunchigliani asked for an explanation of the statement that $5.8 million in estate tax funds recommended in the DSA was a transitional issue. Mr. Hataway responded in order to balance the budget the Budget Division initially kept all the estate tax in the Fund for School Improvement or whatever the final name became, then it was decided to pull out $3.8 million and there was still a budget problem. The budget could not be balanced without using estate tax funds to partially fund the DSA.

Assemblywoman Giunchigliani asked if Class-Size Reduction included growth and Mr. Hataway replied affirmatively. Ms. Giunchigliani asked if there was inflation built into any of the budget. Mr. Hataway responded the only category with inflation was salaries. Ms. Giunchigliani stated there was still a problem with wealth equalization and Mr. Hataway cautioned everyone that Nevada was among a handful of states that had not been through litigation on the issue of basic support.

Assemblyman Giunchigliani expressed the need for uniformity and hoped the issue of flexibility did not become the "death knell" for a variety of beneficial programs in the state.

Assemblyman Goldwater referred to a document that examined the increases recommended by budget amount for the 1999-2001 biennium. He gave an example of the proficiency testing budget which decreased 73.6 percent from $4.4 million to $1.1 million. He asked if the decrease simply reflected cuts in staff. Mr. Hataway replied affirmatively. Assemblyman Goldwater noted the category "Education of Handicapped Persons" cut 72 percent. Mr. Hataway replied the Department of Education budgets were to be presented in the week to follow and he would provide that type of information at that time. He noted the budget referred to was the out-of-district education of the handicapped. His office recommended funds be made available in both years of the biennium and reserve federal funds for that purpose.

Assemblyman Goldwater asked if it was appropriate to say there were no cuts to education in the proposed budget. Mr. Hataway said there were approximately $54 million in one-time expenditures that were not recommended for continuance. He noted the largest was $27 million for the technology program. Mr. Goldwater reiterated the budget in fact did cut education. Mr. Hataway responded that was one way of looking at it. Assemblyman Goldwater confirmed the "Schools to Careers" program was cut as well and Mr. Hataway concurred. Mr. Hataway added the federal funds for the Schools to Careers would run out at the end of the next biennium.

Assemblywoman Cegavske stated she had heard one school district had voted to hire eight more attorneys for lawsuits over the special education program. She added the Federal Government recommended federal mediators be used in lieu of hiring the attorneys. She asked if Nevada, as a state, was trying to be proactive on the issue. She also asked if Mr. Hataway would provide what each school district spent in the past 2 years in litigation of special education issues.
Mr. Hataway replied that was not necessarily a funding issue. Mrs. Cegavske stated she felt the funding should be used for classroom rather than litigation if mediators were available that could assist with the legal issues. Mr. Hataway stated the Budget Office could work with the Department of Education to get the total costs spent on litigation but he was not sure it could be broken out into the special education category.

Mary Peterson, Superintendent of Public Instruction, provided committee members with a packet of information concerning Department of Education issues, stating it contained background information and referred to the demands on the DSA and the challenges the school districts faced. The Department of Education also proposed to discuss various methods for distribution of DSA funds in light of the Governor’s recommendation that certain accounts be rolled into the DSA. She noted there were two distinctive methods of distribution. Representatives from some of the school districts were also present to make presentations. She briefly discussed the contents of the packet of information she provided to the committee. The packet included: 1) a copy of the department’s "Power Point" presentation which provided an overview of public education including some demands on DSA; 2) the annual Research Bulletin Volume 39 which is a good reference tool including gender and ethnic breakdowns, and some private school information among others; and 3) a list of the 452 schools in the 17 public school districts.

She noted Clark County was the largest school district with over 200,000 students and Esmeralda was the smallest with slightly over 100 students.

Other information in the packet included brief summaries of the various programs proposed to be included in DSA: namely Special Education; an evaluation of Class-Size Reduction; a summary of Class-Size Reduction which might answer some of Assemblywoman Cegavske’s questions; a report of the elementary school counselors program that was recommended for inclusion in DSA; and, a table which illustrated the two distinctive approaches for distribution of the funds from DSA.

Because of the evident interest in how DSA funds were to be disbursed, Ms. Peterson called attention to a table detailing two approaches for distributions of DSA (Exhibit C). Since the Governor’s recommended budget included Class-Size Reduction, adult high school diplomas, special education, and elementary school counselors in DSA she expected large discussions on how those funds should be disbursed. She stated, due to the interest in that particular category, Douglas Thunder would discuss Exhibit C. Senator Raggio asked subcommittee members to hold their questions until after the presentation.

Douglas Thunder, Deputy Superintendent, Administrative and Fiscal, Department of Education, stated the most significant change in how DSA was presented was the merging of two programs that at present resided outside DSA, and two other programs that reside within DSA for which funding was tracked separately. He explained the two outside programs were Class-Size Reduction at $82.9 million for FY 2000 and $86.9 million for

FY 2001; and elementary school counselors at $2.3 million in each year of the biennium.

The two programs inside DSA, but not currently included in basic support-per-students figures, were special education at $63 million for FY 2000 and
$68 million for FY 2001; and the regular high school adult diploma program at
$7.2 million in the first year of the biennium and $7.6 million in the second year. Mr. Thunder noted; the amounts for the prison adult education program were not included in the amount used to compute the basic support because they only occurred in four school districts.

He went on to explain the new approach required a new way for calculating the basic support-per-student amount. In the past, when the legislature had determined the total amount of the Nevada Plan allocation and the average statewide basic support per student, the information was entered into a complex formula to determine each school districts’ basic support per student. In addition, each district received an allocation for each of the separate accounts. Mr. Thunder explained special education and the adult high school diploma program were "not run through the formula." He added, to determine what the difference of the change would be, they had calculated the difference if the Sixty-ninth Legislative Session had adopted the plan.

Mr. Thunder referred committee members to Exhibit C, page 2, which showed what would have happened if the programs were completely merged and run through the formula which he called "The Complete Merger Method." He explained columns H through L reflected the amounts allocated to each school district for each of the programs for FY 1998. He explained Column L showed the basic support per student for each school district. Column M reflected what the amount would be when program funding was included in the DSA. Column N reflected the actual funding from the DSA and other programs. The variance reflected the change up or down for each district under that method. He explained under "The Complete Merger Method" all the programs were subject to the wealth factor and the other adjusting factors in the DSA.

Mr. Thunder stated the second method proposed for distribution of the funds was called "The Modular Approach" and looked at each of the programs as separate units or modules within the DSA formula. He added one such modular unit already existed within DSA which was the Transportation Equalization Factor. The funding for transportation was removed before the formula was run and then distributed among the districts based upon their demonstrated need. He proposed to set up four additional modules for:

• Special education;
• Class-Size Reduction;
• Adult high school diploma program; and
• Elementary school counselors.

The modular approach would reduce the funding for each program to an amount per student based on all students, not just those involved in a program. The separate amount would then be added to the previously established basic support- per-student amount. Mr. Thunder stated pages 3 through 7 of Exhibit C indicated how that funding would work out. He pointed out that there was no variance from what happened in the past because each program was separate and put inside DSA, but allowed all the factors to remain the same. Mr. Thunder went on to explain page 7 of Exhibit C was a summary of the preceding pages.

Page 2 of Exhibit C answered part of Assemblyman Beers’ earlier question showing what the basic support would have been for FY 1998 and, he added, the amount could be calculated for FY 1997 as well.

Mr. Thunder explained the administration sought the advice of the Superintendent’s Finance Committee. He stated the preference of the Superintendent’s Finance Committee was to use the modular method, at least on a transitional basis. He explained the modular format would allow programs to be tracked and problems with the method detected more readily.

Mr. Thunder explained the chief concern of the Department of Education was the special education program and the modular method provided a method to demonstrate there was sufficient funding for special education. He added the Department of Education planned to run the numbers again using the Governor recommended amounts as soon as possible.

Mary Peterson summarized the charts in Exhibit C represented two completely different methods for working with the Governor’s recommendation which combined all funds into the DSA. She added the final resolution would likely be somewhere in between.

Mary Peterson provided a context for discussions of expenditures. She outlined the many demands on the DSA and on all funding for public schools and some of the challenges our schools were facing.

Ms. Peterson explained some of the demands on the DSA included:

• Rapid enrollment growth;
• Increasing diversity in the student population;
• High transciency;
• Higher expectations; and
• Need for professional development for teachers and increased technology.

Ms. Peterson stated Nevada was one of the fastest growing states which translated to one of the fastest growing K-12 enrollments in the nation. She noted from 1988 to 1999 Nevada schools experienced a 93 percent growth rate. She added Clark County led that growth and was the ninth largest school district in the nation. Ms. Peterson stated in the fall of 1998, for the first time, Clark County exceeded 200,000 students. On the other end of the spectrum there was Esmeralda School District with 114 students.

Ms. Peterson noted Nevada’s growth rate averaged between 6 and 8 percent which was about 3 to 4 times the national average. Florida and Arizona had similar trends and the three states led the nation in K-12 enrollment.

Ms. Peterson referred to an earlier question about the growth rate in Nevada and noted from the fall of 1997 to the fall of 1998 that rate was approximately
4.9 percent. For the first time in a decade, nine school districts had experienced a decline in enrollment. She noted those would be the same districts that fell under the "hold harmless" clause.

The ethnic minority groups were experiencing an even greater enrollment growth she said. Since 1988 the Hispanic population alone had grown by 421 percent.

Ms. Peterson stated course-taking patterns were a good indication of student achievement. She gave an example of SAT scores which showed there was a direct correlation between the difficulty of the classes students chose and their level of performance. She noted Nevada’s enrollment in regular, as well as upper level math and science courses was below the national average and added educators were concerned.

Ms. Peterson went on to say, when looking at special populations, it must be kept in mind that low socio-economic status was a strong predictor of student performance. She added approximately 33 percent of Nevada students were eligible for free and reduced-fee lunches. Eligibility was based on family size and income. Students were eligible for free lunch if family income levels were at
130 percent of poverty. Students were eligible for reduced-fee lunch if their family was at 185 percent of poverty. Ms. Peterson also noted approximately
10.7 percent of students were identified as eligible for special education services and 9.9 percent were English language learners.

Ms. Peterson noted transciency and dropout rates were a concern. She explained transciency rates accounted for student movement in and out of schools. When a student was expected to achieve under higher standards, a transciency rate of 39 percent presented special challenges to teachers. New strategies needed to be found to help accomplish the higher standards with such a high transciency rate.

Ms. Peterson stated the dropout rate was of great concern in the ethnic minority groups and that the dropout rates for Hispanic and Black students were unacceptable. Consultants for Indian Education and Cultural Diversity had focused on dropout rates over the past 2 years. She stated those positions were funded under Assembly Bill 266 of the 1997 Legislature.

Ms. Peterson pointed out there was some good news in the area of TerraNova results. Students were tested in fourth, eighth and tenth grades. Fourth and eighth grade scores had improved 2 percentage points in math in each grade; science was up 1 percentage point in fourth grade and 3 percentage points in eighth grade; language scores were down and reading scores had stayed the same. She reminded subcommittee members the score results were from the October testing cycle. Tenth grade scores, she said, were down from the previous year. Statistics on high school proficiency exams did not reflect the new test and higher passing score required. It simply reflected the percentage of high school seniors who passed the proficiency exam in 1996-1997. It would be the 1998-1999 seniors who would be held to the higher standard, she noted.

Ms. Peterson said the final measurement of proficiency was the national Assessment of Educational Progress, and in 1996 Nevada fourth graders ranked 31st of 43 participating states. Nevada’s performances on both ACT and SAT college entrance exams were above the national average. She explained those tests were designed to test college readiness.

Ms. Peterson explained in the 1997-1998 school year Nevada employed
18,396 licensed personnel. Of those, 11.7 percent were new to Nevada. She added that 34.5 percent held degrees from institutions of higher education in Nevada. Degrees above a Bachelor’s Degree were held by 31 percent. The average years of experience for licensed personnel was 10.7 years. Far fewer ethnic groups were represented in licensed personnel than in the student population.

Ms. Peterson emphasized the class-size ratio was funded at 16:1 for grades one and two and at 19:1 for third grade. However, the law remained at 15:1 for all grades. She noted she had tried to visit as many under-standard schools as possible in the past year. While Class-Size Reduction was working, other challenges faced teaching staff including the percentage of non English-speaking students in a classroom.

Ms. Peterson went on to explain there were 452 public schools in Nevada and in 1998 every school was designated into one of three categories:

1. High Achieving Schools - 2 schools - (Roy Gomm Elementary School in Reno and Advanced Technologies Academy in Las Vegas);
2. Inadequate Achievement – 23 schools – (those schools were working hard on remediation programs); and
3. Adequately achieving schools.

Ms. Peterson also noted that in a review of school facilities 321 schools had identified repairs which needed to be addressed.

Ms. Peterson concluded the department presentation was intended as a simple overview of budget matters. She thanked Governor Guinn and the Budget Office for their priority on education. She stated "We do have the most rapid enrollment growth in any state in the country; we have to serve diverse populations; we have to deal with and operate effectively in spite of the high mobility and transciency of our students; we want our students to meet the higher expectations we have set out in the higher standards but, we also want to make sure they have remediation if they are having trouble meeting those standards. To do that we’re going to have to make sure we have professional development for our teachers and have to make sure that we have technologies that can support learning to the higher standards."

Assemblyman Price stated he had heard in the past that some of the students who received free lunches might be receiving their only hot meal of the day. He asked if there were figures regarding that. Ms. Peterson stated she would try to get the information but was not sure it would be statistically sound.

Assemblyman Price stated he had gone to 13 schools in 7 states and the District of Columbia before graduation. He asked how the department defined whether a student had moved or dropped out. Ms. Peterson said the dropout rate was figured following the national guidelines of the National Center for Educational
Statistics. If a student left a school and did not request a transcript that student would be counted as a dropout. She noted many students did eventually go into General Education Degree (GED) programs or Adult Education Programs and those were not removed in the dropout rates.

Assemblyman Hettrick asked if there was a publication or a set of publications that legislators could use to pull all the variety of information together. He explained he was looking for a comparison table that would show how Nevada ranked against other states in certain categories such as dropout rates. Ms. Peterson responded the National Center for Educational Statistics releases a publication annually that contains a multitude of tables to answer those questions. She offered to provide a copy to the committee. Douglas Thunder noted all of the information was also available over the Internet and offered to provide the web site address for the committee.

Senator Neal referred to Exhibit C, page 2, Column O, and asked if the parenthesis indicated a loss of funding to that particular school district. Ms. Peterson replied that was true except for the parenthesis around the figure $4,412 at the bottom of the column. Mr. Thunder explained the minus $4,412 was a rounding issue when such large amounts of money went through a formula and the $4,412 really had no meaning at the present.

Senator Neal asked how rolling CSR funds into DSA enhanced the end product of educating children. Ms. Peterson replied it really would not make a difference in the end product. What might change, was the affect the rolling of funds had on the flexibility within the law. If the law remained the same, it must be followed.

Senator Neal asked if Ms. Peterson was suggesting a lack of flexibility was the cause of problems in school funding issues. Ms. Peterson replied she did not know that there were problems in the program. She suggested he ask the school districts what kind of flexibility they would like to see.

Senator Neal referred to dropout rates presented in the Power Point slides and stated Nevada had the highest dropout rate in the nation and between the grades of 9 through 12 there was almost a 10 percent dropout rate. He asked if the Department of Education had any data which indicated why there was such a large dropout rate. Ms. Peterson noted the 10 percent rate was an annual dropout rate in high schools. There was some research that found one of the leading reasons students expressed for leaving school nationwide was they found no relevance or connectivity in school attendance.

Senator Neal asked if there was a difference in the dropout rate in Clark County compared to Washoe County. Ms. Peterson responded there was and that Clark County had the highest dropout rate in the state. She noted it was also the largest school district.

Senator Neal observed that in Clark County it was possible for a high school dropout to work as a parking attendant and make $60,000 per year and wondered if that might have an affect on the rate. Ms. Peterson countered it was a problem throughout the state. She noted she had visited Elko and found a high school-aged student bussing tables in the middle of the day. The student had explained he dropped out because with tips he was earning $18,000 per year and that was very impressive to a 17-year old.

Assemblywoman de Braga stated she had heard a complaint from a number of teachers regarding the length of time it took to get test scores returned and asked what could be done about it. Ms. Peterson replied TerraNova was being turned around as quickly as possible, although there were some problems in the beginning. She added Assembly Bill (A.B.) 523 of the 1997 Session outlined when TerraNova results had to be reported back to districts and to parents. The High School Proficiency Exams were late in the fall of 1998. More students than ever took the tests and there was a problem in turning them around. Subsequently, the department had worked with the school districts to develop a time line everyone could live with.

Senator O’Donnell stated he supported the fact that the Department of Education was trying to make the budgets reflect the reality of what the law required. He noted he was concerned about the dropout rate and asked if those children were added into the DSA "count" even though they had dropped out. Ms. Peterson stated they would be counted if they were there on the designated "Count Day." If they dropped out prior to, or were absent on "Count Day," they would not be counted. She added if they dropped out after "Count Day" they would be included in the count.

Senator O’Donnell concluded the state was spending $12 million on graduation programs in six different counties to graduate students who dropped out and then decided dropping out was not a good idea. At the same time they were still being counted as students for DSA purposes. He expressed frustration that in addition special education children were counted as one-sixth of a child. Ms. Peterson stated kindergarten students were counted as .6 of a child and special education children were counted as units of funding not as one-sixth of a child. She explained special education funding was proposed to be included in DSA; however, exactly how the distribution was handled had yet to be decided.

Senator O’Donnell asked if dropouts could somehow be deducted from the DSA "Count Day" totals. He noted it was almost an incentive to have the child there on "Count Day" and then if they dropped out the district still received funding for them. Ms. Peterson stated as an example, dropouts were counted as dropping if they completed their junior year and did not return in the fall. Also if a request for a transcript was not received by December 1, the student was counted as a dropout. Additionally, the student would not have been there on "Count Day." She stated not all dropouts were present on "Count Day."

Senator Raggio interjected that numerous similar discussions were held in the past and that "Count Day" was the last day of the first week of school. The school districts still had to hire teachers for a given number of students and then new enrollees were added as well. He stated in previous discussions it was determined it would be unfair to reduce funding for a district which had already made commitments based on "Count Day" and noted there was no factoring to include new enrollees for additional funding.

Senator Jacobsen confirmed 321 of the 452 public schools in Nevada had building deficiencies. He stated he wanted to ensure the health and safety of students was protected. He added in rural areas such as he represented, safety services were largely provided by volunteers and as far as he knew the safety services had never been made aware of those schools with safety deficiencies. Ms. Peterson replied A.B.353 of the 1997 Session appropriated $300,000 to look at the condition of school facilities in the state. She noted Assemblywoman Giunchigliani chaired the interim committee. She added the 321 schools with deficiencies were not necessarily all health and safety issues. The consultant report had been received and it did break down what the issues were. She said there were some schools with real safety issues but others might need wiring to accommodate technology or were not totally compliant with the American Disabilities Act (ADA).

Assemblyman Goldwater stated Mr. Hataway had reported the consolidation of funds into the DSA would more accurately reflect what was being spent on each student: However, the Class-Size Reduction funds only related to first through third grades and yet seemed to be included in the basic per-student formula out of DSA and thus would appear to be inaccurate for grades 4 through 12. Mr. Thunder stated Mr. Hataway was referring to revenue and an average per-student amount and how that would compare with other states. He added the primary comparisons used were on the expenditure side. The numbers reported to the Federal Government were expenditures including all the programs.

Assemblywoman Cegavske noted school principals had requested that proficiency testing not be moved to springtime because it was much easier to help students if testing was done in the fall. She asked if statistics were available for eighth grade dropout rates and commented she had seen cases where the transition from middle school to high school caused many students to be lost. She noted eighth grade students did not have the job opportunities as described earlier. She requested statistics on this matter be provided.

Assemblywoman Chowning asked what percentage of the Hispanic high school dropouts were attributed to the student not being English proficient and what recommendations the Department of Education had for state funding to address the problem. She noted in Clark County, there were not nearly enough teachers or funding to address the high population of English as a Second Language (ESL) learners and once the student passed sixth grade there were not even any ESL classes available.

Ms. Peterson replied she was not aware how many of the ESL students were included in the dropout rate but she would try to find an answer to the question.

She added the State Board of Education had proposed a BDR to expand the possible uses of remediation funds. The 1997 Legislature had provided
$3 million in remediation funds but targeted it to inadequate schools. The BDR would address the needs of children who might not have passed the high school proficiency exam the first time whether it was because of ESL or other causes. The Department of Education budget had asked for continuation of the Cultural Diversity consultant position and the Indian Education consultant position.

Assemblywoman Chowning stated expansion of the remediation funds and summer school was absolutely critical but the legislature also needed to look at the issue as a "front-end" problem.

Senator Coffin stated during the 1997 Legislature, disputes had arisen between the State Board of Education about who should appear to testify before committees. He noted there were even some who had to be encouraged to speak because they held a minority viewpoint. The county school districts would be speaking during the current meeting. He asked if any State Board of Education members would be speaking at the meeting. Ms. Peterson responded no State Board members were present but if the committee requested their presence, she would arrange for someone to be present at future meetings. She added, speaking to the disputes on the State Board, it was her belief they were functioning more smoothly and there should not be a problem. Senator Coffin noted disputes were healthy but it was important to head off disputes before they arise. He added it was important the State Board be encouraged to attend hearings. He said while a great deal of that responsibility was delegated to Ms. Peterson and he in no way was being disrespectful, he would like to hear from the State Board of Education because they were elected to their positions, pondered issues, and held hearings. Ms. Peterson stated she would convey the message to the Board.

Senator Raggio stated one of the beneficial results of the Legislative Committee on Education was bringing together all the voices that deal with education, particularly the State Board. Ms. Peterson stated the Board took a great interest in the Standards Council and the Commission on Educational Technology.

Assemblywoman Giunchigliani asked, of the 2,088 special education units, how many were new. Mr. Thunder replied the units were allowed to increase at a rate of 4.6 percent. Ms. Giunchigliani asked if it was known what the actual growth rate was in each of the counties. She noted the information in the packets quoted overall growth rates and wanted to know what specific percentage was for special education. Ms. Peterson responded the special education count was done on December 1 of each year and those numbers should be available soon. Ms. Giunchigliani stated they were normally broken out by "so many units," but her understanding was in The Executive Budget they were simply broken out by percentages. Ms. Peterson replied that was true for the DSA.

Assemblywoman Giunchigliani asked what the budget shortfall was in special education. Don Hataway clarified the special education units were driven the same way they were in the past through the general population increase.
Ms. Giunchigliani stated in her mind special education was not fully funded to begin with and then by merging funds would receive even less funding.

Assemblywoman Giunchigliani noted it seemed full apportionment was received only when a properly licensed teacher was in the classroom, and asked how many schools did not receive their full apportionment. Ms. Peterson stated she did not know but she did know that the Commission on Professional Standards was meeting on January 22, 1999, and looking at some alternative routes for special education licensure. Ms. Giunchigliani stated the legislature needed to look at the number of exceptions in each of the areas. A teacher could graduate in special education but they were assigned outside their area of licensure such as an emotionally disturbed classroom. She noted that might not be counted for apportionment purposes. Ms. Peterson responded the department would provide the exceptions report to answer the questions.

Assemblywoman Giunchigliani asked what the 130 percent and 185 percent poverty levels translated to in terms of wages. Ms. Peterson replied those percentages were factored to include the size of the family. Ms. Giunchigliani asked Ms. Peterson to provide those breakouts at a later time.

Assemblywoman Giunchigliani noted it was important not to cut funds for in-service training, and said she was not necessarily referring to those offered by the University System.

Assemblywoman Giunchigliani asked what could be done about transient students who were enrolled in the fall, left and returned again. She asked how many times that should be allowed to happen and noted the gaps in student learning were tremendous. She asked if there was any program that would allow schools to take a proactive stance on the issue. Ms. Peterson noted the implementation of standards would bring consistency so that if a student did transfer the expectations would remain the same.

Assemblywoman Giunchigliani asked if test scores could be separated to determine whether schools were adequate or not. Ms. Peterson responded the department collected information on how long a child had been in school. She explained when TerraNova tests were given that information was collected. She added, the law clearly required that they computed test scores based on all children in the school.

Assemblywoman Giunchigliani asked, considering all the new requirements and the amount of instructional time lost on testing days, would there be a recommendation for a longer school year with compensation from the State Board of Education. Ms. Peterson responded there had been an enhancement unit in the budget requested by the State Board to add 2 days to the school year, but that was not funded in The Executive Budget and noted it was a very expensive proposition.

Senator O’Connell stated she served on the focus group for teachers in the Academic Standards Committee and they had addressed that issue by asking specifics to be taught during a given quarter as well as a longer school day. She noted a concern had been the time impact to teachers when asking them to spend more time on the core subjects.

Senator Neal asked if Exhibit C indicated why Clark County would lose nearly
$3 million. Ms. Peterson stated Mr. Thunder had addressed the issue but it dealt primarily with how special education and Class-Size Reduction were allocated when contained in the DSA. Mr. Thunder stated the primary reason was a ratio established when looking at estimated cost for the numbers of teachers and operational expenses. Ratios were set in four different groups. In Clark and Washoe Counties the ratio was slightly less than one. Smaller districts with much greater cause for expenses would have a much higher ratio. Compared to the size of the Clark County School District budget, it only represented a .4 percent decline. Senator Neal asked if he heard correctly that when special education and Class-Size Reduction were rolled into the DSA, Clark County lost money they would not have lost if the funds were separate. Mr. Thunder stated Senator Neal’s assumption was correct, although the presentation was hypothetical and Clark County did not actually lose $3 million. He added it would have been an actual loss if the 1997 Legislature had adopted the plan. Senator Neal noted the plan was under consideration for the current session as well. Mr. Thunder stated Clark County stood to lose the $3 million if the "Complete Merger Method" was adopted but be less likely if the more modular approach was used.

Assemblyman Price stated there were still four or five 1-room schools in the state and noted there were at least four schools in the state that did not have fax machines. He hoped they could at least be brought that far into the technology age.

Chairman Arberry announced the committee would take testimony from three of the school districts present.

Walt Rulffes, Assistant Superintendent, Clark County School District, offered thanks to Don Hataway, Jeanne Botts, and Douglas Thunder for helping him understand the full fiscal process. He thanked others for helping him understand the legislative process, and those who helped him understand the DSA and its impact.

He noted the school districts fully understood the economic conditions of Nevada’s budget and against that background stated he would limit his comments to only those major concerns raised by the Nevada School Superintendent’s Finance Committee.

Mr. Rulffes provided a transparency and reported he rearranged his remarks after hearing the State of the State and State of the Union messages.

Mr. Rulffes’ first concern was remediation and higher standards. He provided examples of the changes which had taken place from the school district point of view:

• Because of new graduation standards schools needed to "gear up" and find funding locally to offer supplemental opportunities for those students who came into the new standards late in their academic career;
• Schools needed to be more attentive to up-front concerns such as students dealing daily with poverty issues.
• The most successful progress to date was the Head Start program in helping early age students with catch up programs;

Mr. Rulffes noted part of the reason behind the Governor’s plan for flexibility was to allow school districts to use some discretion. He noted the culture in southern Nevada might be different than that in some of the rural areas.

Dropout rates were a major concern, and Mr. Rulffes noted throughout his years of experience school districts had been trying to arrive at reasons for dropouts and "frankly make excuses." He said school districts wanted to find solutions to reduce the dropout rate regardless of students’ reasons for leaving school.
A 6-point bill was drafted by Clark County and others that might need modification because there was a cost of $5 million for Clark County and $8 million statewide associated with it. He asked for the support of the legislators.

The School to Career program was deleted in the Governor’s budget but business leaders had told educators for years that only about one-third of the employees they want out of public schools must have a baccalaureate degree. Other forms of training were as important in some cases as a college degree. Mr. Rulffes agreed a savings of $4 million was important in tight budget times, but that might not be prudent given the needs of communities.

Mr. Rulffes said at times wrenching decisions must be made over the choice of whether to put money into basic or special education. Because funding was in the form of a lump sum and special education funding had not increased at the same time the population base had increased, it cost school districts $4,000 to $5,000 to educate a basic education student. It cost between $9,000 and $10,000 to educate a special education student, so every time the special needs population grew funds must be diverted from the basic education expenditures to fund the special education student. Mr. Rulffes asked the committee to not lose sight of the crucial funding issue of special education if it was merged with the DSA. He noted Nevada’s current special education enrollment was approximately 10 percent and the national average was approximately 13 percent. He added many states had tried to place caps on special education enrollment because of the increased costs. Other states were concerned too many students were being placed in the special education category. He offered to open up the district’s records to the legislature for an audit to verify the number of special education students that require services if necessary.

Chairman Arberry acknowledged Mr. Rulffes’ complete presentation but noted the committee was nearly out of time and there were other presentations still to be heard. He noted the committee was only looking for highlights at this point in the budget process.

Mr. Rulffes closed with a comment regarding merging the per student formula and the other funds. He stated the mix would create beneficiaries and benefactors and as a group, the school district financial staff were not interested in becoming a beneficiary of someone else’s funds, however none of them wanted to become the benefactor either. He stated school districts would only support some type of a merger if it came with some type of biennial transition plan that assured no district would lose funds because of the formula conversions.

Mr. Rulffes testimony is included as Exhibit D.

Chairman Arberry noted committee members had received budget amendments and asked Perry Comeaux to address those before the close of the hearing. The Chair admonished Mr. Comeaux that every time there were revisions to The Executive Budget he would be expected to provide an explanation at the hearings.

Rick Kester, Director of Business Services, Douglas County School District, testified to the issues at hand. He stated if school districts were to meet higher standards in a fiscally lean budget year that flexibility might be essential to achieving that goal.

Mr. Kester believed the DSA, as presented, was clearly tight in its funding and in addition the employment vacancy factor must be considered. It was the tightest budget in the 20 years he had been involved in this process.

Mr. Kester spoke to the issue of merging four budget accounts into DSA noting special education was already in DSA as a unit of funding rather than per student funding. He noted if laws did not change to create flexibility, then he saw no reason to merge the funds. In the accounting process the exact cost of Class-Size Reduction would be lost. Under that scenario, programs could be administered with ratios rather than exact costs. He concluded there were large policy issues yet to be decided.

Mark Shellinger, Superintendent, White Pine School District, quoted the Governor’s State of the State message,

"When you are in small business, you do everything. You are the shipping department, receiving, sales and production. But as your business grows you either work yourself to death or you hire good people and give them the resources and the authority to do the job."

Mr. Shellinger stated White Pine County was typical of most counties, in that they:

• Hired good people;
• Aggressively recruited good staff across the nation;
• Replaced non-performing staff (teachers, administrators and support staff);
• Transferred authority to parents and staff;
• Raised expectations for students, teachers, and parents;
• Increased the length of the school day;
• Used technology to provide more resources and staff;
• Provided summer school and Saturday tutorials;
• Had a content-based curriculum for K-5 in place for 2 years that exceeded state standards;
• Actively sought outside funding sources such as grants to replace a loss of DSA due to the district’s collapse in 1995; and
• Used test scores that focused on instruction and noted test scores were up.

Mr. Shellinger stated he was preparing a report specifically on test scores for the Legislative Committee on Education. He added people were dedicated to improving schools across the state for at least the last 3 years since he had been in Nevada.

Mr. Shellinger stated the Governor’s proposal did not give the schools the kind of resources the schools needed to continue the kind of improvements necessary. He said money did not make a better school system but it did help.

He noted the budget increase was only 2 percent overall and that would not cover increases for teachers that progressed up the salary scale in his school district.
Mr. Shellinger added the 2 percent roll-up costs did not begin to cover the instructional resources and building maintenance. He said he was 45 years old and most of the buildings in his district were older than he was. Future improvements were also of concern. He referred to the earlier discussion of school lunch programs and stated only 2 of the 12 schools in his district had school lunch programs.

Mr. Shellinger stated he was concerned about combining all the funds into DSA, however the bottom line issue for him was, "How much money will we actually receive." He noted flexibility would be nice but asked if he needed it in terms of the current situation. Additional resources were needed to continue the improvements asked for by the legislature.

Mr. Shellinger concluded by thanking the committee for the new standards set in Nevada and asked the committee to work to find areas in Nevada’s budget to provide the resources Nevada teachers needed to accomplish what had been asked of them.

Assemblywoman Cegavske asked how long Mr. Shellinger had been Superintendent of White Pine County Schools and Mr. Shellinger responded he had been in Nevada 3 years. Mrs. Cegavske asked both Mr. Shellinger and the other school districts representatives how much funding had been provided for building upgrades that was diverted for other uses. Mr. Shellinger stated he could not think of a single instance that fit that situation.

Assemblyman Goldwater asked if Mr. Shellinger would agree with the statement that The Executive Budget essentially cut education from its previous level given the new levels of service required. Mr. Shellinger replied he could not speak for all 17 counties but from his point of view it was clearly a cut. He referred the committee to school audits to see the level of spending per student comparison.

Senator Raggio introduced Dr. James Hager, the new Superintendent for Washoe County Schools.

Don Hataway, Budget Division, provided committee members with revisions to
The Executive Budget (Exhibit E). Senator Neal asked if budget prefix numbers were available because members using laptop computers needed that information. He was informed the fund was "101" and Mr. Hataway offered to provide fund numbers on future adjustment memos.

Mr. Hataway summarized the presentation of the Distributive School Account and Class-Size Reduction and set the stage for the coming week of budget discussions. He emphasized there were always "pluses and minuses" in any budget but the overall K-12 budget contained $130 million in additional funds, the largest block of funds set aside in the total budget.

Mr. Hataway explained Exhibit E, budget revisions, was an open attempt to keep the committee informed of issues identified in The Executive Budget that needed amendment. The Budget Office had adopted a standard memo format that would be forwarded to Chairman Arberry and Chairman Raggio as well as the fiscal analysts to outline the amendment number, budget number, account title, decision unit, page number, and the amount of change recommended including an explanation and any backup information. He explained with the rush to complete the budget under a new administration a number of issues that should have been included in the budget were missed. He added his office was tracking budget revisions to keep a perspective of the overall balance.

Revision 1 was one-shot funds of $405,228 for equipment to furnish the new Cold Creek Prison which was reverted from the FY 1999 budget but was not included in the FY 2000 budget.

Revision 2 was a 5 percent pay incentive increase for employees of the Ely Prison to assist with the vacancy turnover rate.

Revisions 3 through 10 related to a number of budget accounts for the Lovelock Prison allowing a remote area salary differential. He stated his sheet only showed an impact to the General Fund because the other budgets had reserves from which to address the issue. Mr. Hataway reiterated Exhibit E was an open attempt by the Budget Office to keep the committee as informed as possible.

Assemblywoman Evans asked Mr. Hataway to clarify if there would be further budget adjustment memos. Mr. Hataway replied they hoped to minimize the need and noted adjustments could be either positive or negative. He added he viewed the provision of information as a positive step to maintain good communications. Assemblywoman Evans said the adjustments in Exhibit E put the budget $2.2 million "in the red." Mr. Hataway responded the adjustments did not put the budget "in the red" but rather reduced the ending fund balance closer to the statutorily required 5 percent.

Assemblywoman Evans asked how the adjustments affected the claim that the legislature was presented with a balanced budget. Mr. Hataway insisted it was a balanced budget as long as the budget stayed above the statutory 5 percent fund balance. He continued, if the Budget Office identified issues that took the budget below that 5 percent mark then his office would need to provide recommendations of how to maintain a balanced budget. Mrs. Evans stated the committee needed all the changes as quickly as possible rather than having the Budget Office come in on a regular basis to make adjustments which placed the committee at a disadvantage.

Senator Raggio explained to Assemblywoman Evans the Chairmen of the subcommittee had made the request for information. He explained there were dozens of such revisions in the previous legislative session. He noted the Chairs had requested revisions as quickly as possible but expected to receive some throughout the session. Senator Raggio noted the Senate Finance Committee appreciated the communications and added the new administration had a very short time to prepare The Executive Budget while the previous administration had 10 years. Mr. Hataway stated the goal of the Budget Office was for 100 percent accuracy, but the adjustment memos were their recommendations for committee consideration at budget closings. He added the Budget Office would attempt to meet Mrs. Evans’ request and get the adjustment memos to the committee as quickly as possible.

Chairman Arberry stated he appreciated the work of the Budget Office and simply asked their representatives to be prepared to speak on the adjustments as they were received.

Assemblywoman Evans wished to clarify her comments were not meant in any way to reflect on the new administration. She commented preparation of the budget was an extraordinarily difficult task to come into office in November and present an Executive Budget in January. She added, as Senator Raggio stated, it was an ongoing problem and simply expressed an appeal to try to tighten up the changes. She stated it did not reflect on the Chief Executive Officer of the state but it did reflect on the work of the Budget Office, so she appreciated
Mr. Hataway’s willingness to work with the committee.

Chairman Arberry recessed the committee until 1:30 p.m.

The Legislative Commission’s Budget Subcommittee was reconvened at 1:40 p.m., on Tuesday, January 20, 1999. Chairman Morse Arberry Jr. presided in Room 1214 of the Legislative Building, Carson City, Nevada.

Chairman Arberry introduced Charlotte Crawford, Director, Department of Human Resources (DHR), to present the budget overview for DHR and DHR Director’s Office.

Mrs. Crawford referred committee members to the first handout entitled, "Nevada Department of Human Resources, Overview, Budget Presentation to the Joint Money Committees, January 20, 1999," (Exhibit F). She explained the organizational chart on the first page of the handout reflected the constituent divisions, agencies, and programs of the DHR, which provided health and human services to the State of Nevada.

Mrs. Crawford explained the second page of the handout reflected the current legislatively approved budget for the DHR, broken down by constituent divisions, as well as the projections for the upcoming biennium. Mrs. Crawford explained the current budget for the DHR was slightly over $2.3 billion. The recommended budget for the 1999-2001 biennium was slightly over $2.7 billion. She said the substantial increases in DHR’s budget reflected tough decisions, which had been made in the department to deal with growth as well as some expansion in certain areas.

Continuing, Mrs. Crawford explained the third page of Exhibit F reflected a breakdown of the Governor’s recommended budget for DHR by area of revenue, showing the percentage in dollars for state, federal, and other. She pointed out the federal dollars were the largest single revenue source in DHR. Mrs. Crawford said those dollars provided a great deal of the guidance and requirements for how the DHR and its programs performed. She explained that a large portion of the "other" percentage reflected Medicaid dollars being transferred through Medicaid to the Division of Mental Health and Mental Retardation (MH/MR). So while the "other" percentage looked like an increase in fees, it was not. Mrs. Crawford said the fourth page of Exhibit F reflected the current number of full-time equivalent positions in DHR as well as the "Governor Recommends" for the next biennium. Those figures were broken down by constituent divisions and reflected a slight increase from the current total of 3,736 full-time equivalent positions to the recommended 3,798 positions.

Mrs. Crawford explained the last page of Exhibit F reflected a slightly different schedule of organization, displaying the constituent divisions at the bottom of the chart. The right-hand side of the organizational chart reflected the administrative and oversight structure of the DHR Director’s Office and contained four different sections; a director, a deputy director position, a lead fiscal position, and a lead personnel officer. The left-hand side of the organizational chart, the Community Connections section, reflected the various programs run out of the Director’s office, including the IDEA – Part C, which is the early childhood program; the Family to Family Connection; the Family Resource Centers; the Title XX program, which is the Social Services Block Grant, and the Community Services Block Grant. Mrs. Crawford explained the Community Connections portion of the organizational chart reflected a coalition of those five entities. The combined structures could capitalize on the strength that each individual program had in their personnel and form a collaborative group because they commonly worked with pass-through funds and community agencies. She said DHR was attempting to gain greater effectiveness and efficiency by bringing the five areas together in a coordinated group.

Mrs. Crawford referred committee members to The Executive Budget, DHR Administration, Budget Account 101-3150. She explained the significant change to the Director’s Office budget was the addition of a Management Analyst IV position. Due to the small number of staff in the director’s office, this represented a significant increase. The Management Analyst IV position would perform research, writing, coordination and report preparation. Mrs. Crawford explained the Director’s Office functioned to provide oversight coordination for DHR. She said the Director’s Office was currently engaged in a reorientation of the DHR to increase centralized decisionmaking and planning throughout the department. She clarified that in the past, the Director’s Office functioned more as a coordinating department and did not provide a centralized management structure. Mrs. Crawford explained Governor Guinn was encouraging DHR to become more centralized in planning and management. She explained DHR had not accomplished that goal by adding resources, but rather they had reoriented their existing resources within the department and formed a management team comprised of skilled divisional administrators. The management team would process decisions from a department perspective, not just the division perspective. She further explained DHR would form coordinated groups, such as financial officers, to assist in the planning, and to try to achieve an orientation that was more integrated in its approach to planning for health and human services in Nevada.

Mrs. Crawford explained the Social Services Block Grant of slightly over $14 million supported various programs within the DHR and non-state programs which supported community programs and provided social services at the local level. She said during the last four years, Title XX had seen substantial changes. The last Congress reduced the total national allocation of Title XX funds. Mrs. Crawford explained the budget reflected the reduction in the form of adjustments in state programs receiving Title XX funds. Referring the committee members to The Executive Budget, Mrs. Crawford pointed out that Nevada was currently allocated $13.9 million in Title XX funds. The Title XX grant amount was expected to decrease to slightly over $10 million in 2001. She explained the Director’s Office budget, as well as the other division budgets that would be heard, reflected changes in Title XX funds available to them.

Mrs. Crawford explained that during the 1995 Legislative Session, a concern was expressed regarding funding provided to non-state agencies. DHR was provided with a letter of intent advising the legislature wanted DHR to increase the percentage of Title XX funds going to non-state agencies. She explained this budget held the non-state agency portion constant, while the state agency portion was, unfortunately, decreased. The amount of Title XX funds provided to non-state agencies was going up to approximately 7.5 percent of the total Title XX allocation.

The Chair recognized Senator Raggio. Senator Raggio wanted to know if the committee members were looking at the E-130 decision unit. Mrs. Crawford explained E-130 reflected where the Title XX adjustments were reflected in the individual agencies. Senator Raggio asked Mrs. Crawford to name those state agencies that reflected Title XX cuts. Mrs. Crawford responded that Medicaid, Child Welfare* * * and in certain cases, there were a variety of reductions and transfers of Title XX funds. One example was the transfer of Homemaker and Elder Protective Services to the Aging Services Division. Title XX funds were transferred to accommodate that. She explained the Division of Child and Family Services (DCFS), DHR, and the Health Care Financing and Policy Division each received Title XX funds. She pointed out that each of these divisions had received some reduction. Senator Raggio requested an evaluation of the impact of those reductions. Mrs. Crawford explained that, fortunately, because enough advanced warning had been provided, the budget was adjusted to ensure no reduction in service as a result of reduced Title XX funding. She explained DHR had to make cuts over the last couple of years, so the adjustments had been gradual. The cuts were replaced with either other types of federal funding or the state General Fund.

Mrs. Crawford said that in E-256, funds had been transferred from the Temporary Assistance for Needy Families (TANF) grant into Title XX. She explained the law allowed the transfer of up to 10 percent of TANF into Title XX, to be used for social services. She pointed out E-256 reflected a transfer into the Division of Child and Family Services of $155,000 in the first year of the biennium, and $738,000 the second year. The transfer was to support child welfare services. Mrs. Crawford explained this was one of the mechanisms used to offset some of the reductions in Title XX. Additionally, TANF dollars were transferred into E-256 to non-state agencies in order to keep funding at a constant level. She reiterated there were some changes reflected in the budget due to the reduction in Title XX funds and because some of the TANF dollars that were not needed in the welfare program were being transferred to support the decrease in Title XX funds. Mrs. Crawford explained the DHR had been reserving TANF dollars due to the decline in caseloads. Additionally, the budget reflected the transfer of Title XX funds to transfer administration of the Elder Protective Services and Homemaker Services Programs from the Health Financing and Policy Division to Aging Services to allow more coordination in programs provided for the aging population.

Mrs. Crawford explained this budget was a pass-through block grant that went directly to local communities. The distribution was statutorily dictated. Its purpose was to ameliorate poverty. There were no significant changes in this budget.

Mrs. Crawford explained the program was approved during the last Legislative Session, with a sunset provision. The program was being brought before the legislature again, at a reduced level. Mrs. Crawford spoke to the status of the program. She explained the program was crafted as a pass-through block grant to communities. Thirteen infant support districts had been created, as well as 22 new baby centers. Dollars were passed through to community collaborations, to be used to visit and provide services to newborn families. Services included home/hospital visitation, new baby center services, and lending resource libraries. Mrs. Crawford said a premium was placed on community collaborations, with one of the major areas of concern being the duplication of services. Community collaborations were created in the development of contracts with each of the infant support districts and to bring together existing services and deliver the array of available and necessary services. She said in each case the collaborations were very successful, with major community response. Thirteen infant support districts were operating, with a full array of services, by July of 1998, the target date. Twenty five percent of newborns had been seen in the first quarter. She reminded committee members DHR had projected the program to provide services to 50 percent of newborn children. The program saw 28 percent of newborn children in the July/August/September time frame, showing a steeply increasing utilization rate. A status report on the Family to Family program had recently been provided to the Interim Finance Committee. The status report reflected DHR estimated utilization in the first quarter, and followed that trend line forward. She advised second quarter data was available, which reflected the number of unduplicated families that had used the services during the second quarter, and 53 percent of the newborns had been seen. A total of 5,837 families had been seen since the initiation of the program. Mrs. Crawford pointed out the program was still experiencing an increasing trend line. She said it appeared the target had been hit, that families were using the services, and the feedback was very positive. Unfortunately, she continued, DHR faced a very difficult budget next biennium, and the budget had to be streamlined. Due to budget preparation, those decisions had to be made at a time when the utilization rate was unknown. She explained the budget reflected about 45 percent of the original dollars, $2.8 million per year. The structure of Family to Family was being preserved. The 13 infant support districts and the 22 new baby centers would be supported in the budget. Unfortunately, DHR was unable to support those programs at the current level. She said a floor was built in for rural communities of $100,000 to assure that each infant support district at least had a minimal enough amount to be able to operate the program. There were 14 state staff in the program. The budget recommended reducing the number of staff to 7. There had been a data evaluation contract with the University System which had been completed. The operation of the data system would have to be taken over by program staff. This area had been eliminated from the budget. Mrs. Crawford said DHR was pleased to have been able to preserve the basic structure of the program; however, it was a very difficult decision to wrestle with.

Mrs. Crawford then explained that in terms of in-kind donations and private contributions to support the infant support districts, the first two quarters of the current fiscal year reflected $350,000. Those funds came from private and in-kind donations. She said the partnerships had been great and the program could be hopeful that some of what the state was not able to contribute would perhaps be provided through other means.

Mrs. Crawford explained there were 41 Family Resource Centers. DHR had requested the program be continued at the existing level. The centers were based in high-risk neighborhoods. They had local governing boards that received guidance from the neighborhood. The centers had the latitude to provide those services deemed most needed in their community.

Mrs. Crawford advised committee members the Chapter I Special Education Project Budget (Budget Account 3276) would be reflected in the Division of Child & Family Services budget. She explained that this budget represented the early childhood programs that had two parts, a federal grant which provided for special needs children ages zero through two. Chairman Arberry interrupted and questioned the absence of the budget. Mrs. Crawford explained the budget could be found in the DCFS section, not the Director’s Office portion of the budget. Chairman Arberry requested the budget be held until the hearing on the DCFS budget was heard. Mrs. Crawford said she had not wanted to comment on the numbers in the budget, but the administrative oversight staff of that program was being moved to the Director’s Office. The service-providing staff would remain in the DCFS. The DCFS would become part of the Community Connections because they were basically a federal pass-through program with community orientations.

Mrs. Crawford continued, saying the narrative of Budget Account No. 3150 mentioned Community Connections. The Early Childhood Program was the last piece of the Community Connections. She explained when the DCFS budget was heard, the detail of the Early Childhood Program would be heard.

Chairman Arberry called for questions and recognized Mrs. Cegavske. Mrs. Cegavske advised she had not heard any testimony regarding the Baby Your Baby Program and wanted to know if that program was incorporated in any testimony that had been provided. Additionally, Mrs. Cegavske reminded Mrs. Crawford that during the last legislative session she had inquired about the availability of informational pamphlets to outside organizations. She had been told the funding was not available to print the pamphlets at that time and wondered if funding was available now. Mrs. Crawford responded the Baby Your Baby Program was in the Medicaid finds and the Health Division budget. She advised the program was being continued and the federal match came from the Medicaid budget and that a private donation had been made to support the program. Additionally, Mrs. Crawford would check into the availability of pamphlets.

The Chair recognized Mrs. de Braga. Mrs. de Braga explained that she had visited several of the family resource centers and had heard positive discussion of the Family to Family Program. The one criticism was the program was very difficult to implement, very bureaucratic, and costly. She said she had heard the centers had worked very hard to make the program work. She pointed out that this difficulty should have been a red flag in itself. Mrs. de Braga said the bottom line was a suggestion that perhaps family resource centers could, in a less costly way, absorb the functions of the Family to Family Program, especially in light of the budget being cut. Mrs. Crawford responded that many of the Family to Family programs were with the family resource centers. She explained the decision to devise its collaboration had been left to each community. Family resource centers were encouraged to be participants. In many communities, the new baby center is combined with the family resource center. She expressed her opinion that that decision should be left to each community. She pointed out that with the reduced funding, the motivation to partner and use existing resources was beneficial.

Mrs. de Braga asked if the funding for the Baby Your Baby program would go to the family resource center. Mrs. Crawford explained that right now, the family resource centers could be recipients if they became one of the service providers. She further explained that a contract was developed with each of the infant support districts. The district would then bring forward a proposal on a competitive basis. Proposals were submitted to provide the services. DHR worked very hard to promote the community collaborations.

The Chair recognized Mrs. Giunchigliani. Referring to the budget’s performance indicators, the family resource centers, Mrs. Giunchigliani noted there were 229 individuals trained in FY 1998, but 1,650 projected to be trained in each year of the upcoming biennium. She asked if that was because of a consolidation of some sort, and asked how the new numbers were derived. Mrs. Crawford explained the difference was the result of the startup timing of the program during the current biennium.

Mrs. Giunchigliani requested an overview of the Title XX dollars and an explanation of the exact impact. Mrs. Crawford explained the Title XX dollars reflected an actual reduction at the federal level. She said there was a national allocation divided among the states which depended on the percentage of low income families in each state. Reductions had initially been made when welfare reform was approved. The following budget reinstated some of those funds. In the last transportation bill, Title XX funding was reduced. She explained the impact would be seen in the year 2000. Mrs. Giunchigliani asked where the $1.7 million reallocation would be placed. Chairman Arberry interrupted and advised Mark Stevens would respond to that question. Mr. Stevens explained in DCFS, Title XX was reduced and reallocated to other agencies. That allowed DCFS to earn more federal IV-E funds. The end result was DHR was able to leverage an additional $1.7 million in federal funds which, in turn, freed up state dollars. Mr. Stevens explained that by reducing the Title XX funds in DCFS, and replacing that with federal IV-E, it freed up Title XX funds which could be allocated to other agencies. Mrs. Giunchigliani recalled that in either 1993 or 1995, the legislature had directed a certain percentage of Title XX funds be allocated for non-state agencies. She asked what the result had been. Mrs. Crawford explained Mr. Stevens was correct. The IV-E had been increased to replace the Title XX funds. She advised she did not have the exact breakdown available, but would be happy to provide it to committee members. She reiterated her prior testimony regarding the letter of intent provided by the 1995 Legislature that DHR move towards an increasing percentage of Title XX funds going to the non-state entities. Because the allocation to non-state agencies had been kept flat, it had become an increasing percentage as a result of the total Title XX funding being reduced. The budget also reflected a TANF transfer to keep funding to non-state agencies at their current level. Mrs. Giunchigliani asked if non-state agencies increased funding needs. Mrs. Crawford replied there may be an increased need, but DHR had struggled to keep funding for non-state agencies at existing levels. The said 7.5 percent of total title XX funds was going to non-state entities. In response to Mrs. Giunchigliani, Mrs. Crawford replied there were 22 new baby centers. Mrs. Giunchigliani asked if 22 centers would remain and Mrs. Crawford replied affirmatively, and explained there would be no expansion. DHR would continue with 13 infant support districts and the 22 new baby centers. She clarified DHR funded 22 new baby centers, but there were actually 30 centers as a result of satellite offices. Mrs. Giunchigliani recalled that no needs or means test had been applied to the program and asked if those types of figures were available. Mrs. Crawford referred Mrs. Giunchigliani to the report that had been submitted by DHR which provided those breakdowns and indicated an update would be provided.

The Chair recognized Mrs. Evans. Regarding the zeroed-out agency request for Title XIX with the Family to Family budget, Mrs. Evans asked if there was subsequent information regarding the use of Medicaid dollars. Mrs. Crawford explained the activities in the new baby centers were more consistent with the child care services federal money, and it was those federal dollars that had been incorporated. About $2 million in General Fund and approximately $800,000 from federal childcare funds were recommended to finance the Family to Family Program. She further explained DHR zeroed out the Medicaid because it was more appropriate when home and hospital visitations were being performed. Mrs. Evans asked if DHR felt the services they now provided would not qualify for Medicaid, and Mrs. Crawford replied in the affirmative. She added the program was more consistent with child care training and quality activities than with medical services.

The Chair recognized Senator Neal. Senator Neal pointed out DHR’s budget for the 1999-2001 biennium reflected 42.8 percent of federal funding and 36.2 percent of state funding. He asked what the "other" category represented. Mrs. Crawford advised the "other" category included revenues and licensing fees, which the Health Division and Bureau of Licensure and Certification primary collects. The "other" category also included Medicaid federal dollars that came through Medicaid and are transferred to another state agency. Referring to the 1998-99 "approved" portion of the budget, Senator Neil asked if the figure of 3,736 total staff represented the current operating staff. Mrs. Crawford replied that was authorized staff. Senator Neal asked if the 3,736 staff figure represented what DHR was authorized. Mrs. Crawford again replied that was the staffing figure authorized. She clarified that all positions were not currently filled due to the hiring freeze, but the 3,736 figure was the number of authorized budgeted positions. Senator Neal asked if the number of unfilled positions was represented. Mrs. Crawford replied she did not have that breakdown, but that information would be provided to the committee members. Senator Neal referred to the FY 2001 "governor recommends" staffing figure which recommended an increase to 3,798, an additional 62 positions. He pointed out DHR’s funding seemed to suggest there would be $400 million for 62 new positions. Mrs. Crawford explained the largest single area of funding in DHR was Medicaid, which represented over half of the department. The principal expenditures were not for the provision of services by state staff, but for purchase and payment of recipient medical services. Senator Neil asked if that represented the substantial increase in the "governor recommends" portion of the DCFS category, and Mrs. Crawford replied in the affirmative. She pointed out a significant increase in child support enforcement dollars was also reflected in this budget.

The Chair recognized Mrs. Chowning. Referring to performance indicators for the Family Resource Centers budget, Mrs. Chowning asked how many of the 41 individual family resource centers began, closed, and new centers opened, pointing out that several of the centers were just a few months old. Additionally, Mrs. Chowning indicated the committee members had been provided with some numbers of families served, but had not been advised of the specific benefits and accomplishments. She said she was aware of the tremendous partnership in the communities. In some communities, the centers were the only source of information. As a result of the community council, the centers were successful; however, they were struggling. Mrs. Chowning pointed out some of the centers had 486 computers that had been donated. That equipment provided center users with some computer experience which was useful when seeking employment. Continuing, Mrs. Chowning asked that committee members be advised of the following:

• Types of benefits served;
• How many job referrals had there been;
• What types of services and information are provided to center users; and
• What types of services have benefited the hard, at-risk families.

Mrs. Crawford responded the Family Resource Center had provided a report for 1998 to the legislature. She would provide committee members with a copy of the report, as well as any additional information requested.

Chairman Arberry introduced Myla Florence, Administrator, Nevada State Welfare Division, to present the budget overview for the Welfare Division. Mrs. Florence, in turn, introduced Mr. Bob Anderson, Deputy Administrator for Administrative Services within the division, and Mike Willden, Deputy Administrator for Program and Field Operations.

Mrs. Florence referred committee members to the first handout entitled, "Nevada State Welfare Division, FY 1998, Overview of Programs," (Exhibit G). She said there were two major functions within the Welfare Division. The first was to assist families to achieve their highest level of self-sufficiency through employment and, where appropriate, the collection of child support. The second major function was to ensure the accurate and timely administration of benefits to eligible individuals and families. The first page of the handout reflected the major programs administered within the division, which would be discussed in the upcoming budget overview. Pages 2-13 provided state FY 98 statistics, as well as program eligibility information, which could be helpful when returning constituent calls. Page 14 reflected the division’s organizational chart which outlined the various programs and key personnel involved with those programs. Page 15 provided a listing of all welfare offices throughout the state. There were 21 offices in addition to itinerant runs used to show statewide presence with regard to programs administered by the division. The back page of the handout provided the administrative staff listing.

Mrs. Florence advised the division’s proposed legislation was primarily in two areas, the first being child support. During the 1997 session, A.B. 401 was a major piece of legislation which dealt with welfare reform. The bill had significant impact on the child support enforcement program, particularly as it related to federal mandates within that program. She said the division had proposed four bill draft requests related to child support, and indicated the bill drafters would probably look to combine some of the information. The bill drafts dealt with clean-up language within the child support programs relating to references in the 1997 legislation which did not fully comport with how the district attorneys did business, or the business requirements of the child support program. The bill drafts also dealt with the cleanup of declaratory statements on professional and recreational licenses stated in S.B. 356, also from the 1997 Legislative Session. Mrs. Florence said no legislation had been proposed that related specifically to the welfare reform efforts currently in place. The Welfare Division felt this was the time to stabilize many of the initiatives implemented over the last 18 months. She said there was one significant piece of legislation that would come forward in the area of child support related to the creation of a state disbursement unit for the centralization and distribution of all child support collections in the state.

She explained there was a federal mandate which the Interim Finance Committee had approved on December 14, 1998. That legislation would be submitted in conjunction with the controller’s office. Mrs. Florence explained the other area of legislation had to do with a Medicaid estate recovery program. A consultation with District Attorneys revealed minor changes which would be addressed in probate legislation to facilitate the timely and accurate recoveries under the Medicaid estate recovery program. The legislation would clarify the requirements of public assistance recipients to reimburse the state for any incorrectly paid benefits as well as provide the state with the authority to recover such benefits.

Mrs. Florence referred committee members to Exhibit H the Budget Presentation of the Nevada State Welfare Division (Original on file at the Research Library, Legislative Counsel Bureau). Workload and caseload trends within the division were provided under the first tab. The first page under the "Caseloads" tab reflected applications received by the division during the period July 1996 through June 1998. These applications were for cash assistance, which was the TANF program; for child health assurance, which was the Medicaid program; for pregnant women and children; for food stamps and other Medicaid benefits. She said the chart showed the volume of applications coming in remained relatively constant, even though there had been much discussion regarding caseloads declining in some areas. The experience of the frontline worker was that their work had not declined due to the application pool remaining relatively constant.

The second chart under the "Caseloads" tab reflected the dramatic decline of the cash assistance caseload. This area had received a great deal of attention both within Nevada, and nationally. Mrs. Florence pointed out Nevada’s caseload began to decline in 1996 as the result of some of the welfare reform initiatives that had been passed in the 1995 session. She said Nevada did not wait until the federal law was passed in August of 1996 to examine welfare reform efforts. She pointed out the significant decline year-to-year, to the point where since the highest period in March of 1995, the caseload had declined slightly over 46 percent. Fiscal Years 2000 and 2001 reflected two bars. The first, grey-shaded bar showed what the caseload would be if the reform initiatives, some of which would be proposed in this budget, were not in place. Without welfare reform in the year 2000, the caseload was projected at 26,152 recipients. With the initiatives in the year 2000, the caseload was projected at 22,942 recipients. In the year 2001, projected recipients without initiatives were 26,318, and with initiatives, 21,917. These figures reflected the impact of programmatic changes on the caseload.

Mrs. Crawford advised the third chart under the "Caseloads" tab showed the reduction of caseload from November of 1998 as compared to November of 1997. This 1-year period reflected an almost 20 percent reduction in recipients. The fourth chart under the "Caseloads" tab showed the trend line of projected recipients and actual recipients. She pointed out that while the actual numbers were lower than projections, which had been modified with experience, the trend line followed the same path. She noted the significant drop in January 2000 which represented the point in time when Nevada’s 2-year time limit came into effect. The division’s goal was to move people to work.

The fifth chart under the "Caseloads" tab showed that TANF-related Medicaid reflected a significant increase in recipients. The increase was largely due to the fact that as people went off TANF, they became eligible for 1-year’s post-Medicaid if they did not categorically qualify under any other program. The increase in that area was almost proportionate to the decrease in TANF.

Referring committee members to the sixth chart under the "Caseloads" tab, Mrs. Florence noted the dramatic decline in persons participating in the food stamps program. There had been an approximate 41 percent reduction since 1995. She said a portion of the reduction was the result of federal changes, while the majority of the reduction was more reflective of the robust economy. She added the reduction represented the national decline in food stamp need. The seventh chart under the "Caseloads" tab showed the total Medicaid eligibles and reflected the strong relationship between the Welfare Division and the Division of Health Care, Financing, and Policy. The overall Medicaid population, which had declined for some period, had begun to increase. Mrs. Florence expressed her opinion that the increase was largely due to the increase in disabled and elderly population, which represented a large percentage of Medicare beneficiaries who were eligible for payment of premiums or co-pays through the Medicaid program.

Referring committee members to the eighth chart under the "Caseloads" tab, Mrs. Florence pointed out the increased caseload of approximately 45 percent over 1995. The rate of growth had slowed from early years, primarily due to the fact that as one year was added, the age group went up 1 year in eligibles since the program began. She noted those numbers were not as large as they had been in the early years of the program. Continuing with the ninth chart under the "Caseloads" tab, Mrs. Florence said the disabled and blind population had increased approximately 28 percent since 1995. She noted the elderly population reflected an 11 percent rate of growth since 1995. She added the Medicare beneficiaries previously mentioned reflected significant growth of 80 percent, even though they were not the highest Medicaid cost group because they do have Medicare as a dual coverage.

Mrs. Florence concluded her testimony regarding caseload and commented she hoped the numbers would suggest to committee members that current staffing was not ripe for reduction due to volume, particularly in the case of incoming applications, as well as eligibility determinations, which had not decreased in the overall scheme.

Mrs. Florence referred committee members to the "Block Grant" tab of Exhibit H. She explained block grants were major funding streams. Those included TANF funding which was the block grant which replaced the old Aid to Families with Dependent Children, (AFDC) program. She said TANF funding represented approximately $44 million in the year 2001 and when the federal population modifier was added, the amount was about $46.5 million, for which the state was required to maintain its level of effort of spending. In 1994, that level was at 80% was about $27.1 million for the year 2000. She explained the state’s share of the overall TANF funding was approximately 37 percent of the overall funding stream. That percent declined in the year 2001 to about 36.4 percent; again, because Nevada was eligible for a population modifier that increased the federal share in proportion to the level of match required.

The second page under the "Block Grant" tab represented TANF funding and maintenance of effort funding which flowed through five different program budgets within the overall division. Also outlined on the second page were the anticipated population modifiers that Nevada would be entitled to as the fastest growing state in the nation.

The third page under the "Block Grant" tab was a depiction of the Child Care Development Fund block grant which was administered by the division. The chart reflected increased funding acquired through the Child Care Development Fund block grant. Mrs. Florence noted that $14.5 million in childcare payments had been issued in FY 1998, and the program served almost 11,000 children. Mrs. Florence explained, as committee members were well aware, demand for childcare exceeded existing resources. Even with planned increases in the childcare area, it was doubtful the demand for childcare would be fully met. She made the analogy that childcare was very much like transportation and homemaking services, demand would always exceed supply. She said, in her view, other creative solutions needed to be looked at to meet the continuing demand for childcare, not just governmental spending. Mrs. Florence pointed out almost 82 percent of children served were being served in center-based care.

The Chair recognized Senator Neal. Senator Neal requested an explanation of "unduplicated children." Mrs. Florence explained it meant each child was counted only once. She said there were several ways information could have been presented and if it had been represented by number of payments, the chart would look very different.

Continuing, Mrs. Florence explained 82 percent of care was provided in childcare centers which supported the issue that children were hopefully getting more child-developmental type of care, rather than being cared for in front of a television set at the next door neighbor’s house.

The fourth page under the "Block Grant" tab showed the anticipated funding through block grants for childcare of approximately $21.3 million. Referring to the President’s State of the Union address, she noted the President proposed some enhancements to childcare funding. Additionally, over the last session there had been seven or eight different legislative proposals in Congress that had dealt with childcare.

Mrs. Florence referred committee members to the "Welfare Administration" tab. She explained the Welfare Division was responsible for nine budget accounts. Overall, the "governor’s budget" had an approximate 2 ½ to 3 percent increase in General Fund appropriations, dependent upon whether or not the figure was normalized for the Nevada Operations Multi Automated Data Systems (NOMADS).

Going on to the second page under the "Welfare Administration" tab, Mrs. Florence explained Welfare Administration, Budget Account 3228, was the account that funded the administrative component. She reminded committee members that during the 1997 Legislative Session, it was recommended the welfare administrative account delete field operations and a separate budget account be established, She explained functions within the welfare administration budget account included administration, quality control efforts, investigative and recovery units, program policy staff for eligibility and benefits, and support, and the automated systems staffing.

Mrs. Florence advised The Executive Budget recommended five new positions beginning October 1, 1999. First was a Program Specialist to assist with consumer inquiries and customer service. Second was a Quality Control Specialist. She added it was paramount to the division to provide timely and accurate benefits. Specific program reviews, targeted case reviews, and corrective action plans had been initiated to deal with food stamp error rate problems. Third was a Computer Network Technician, critical to the division’s growing dependency on automation. There were currently five technicians to support all equipment, as well as assisting with the setup of the environment in district attorneys’ offices for the NOMADS project. The ratio of units to technician was 257 pieces of equipment per technician. She explained the technicians had been run ragged throughout the state trying to deal with ongoing maintenance issues. The fourth and fifth positions, a Social Welfare Program Specialist and a Program Assistant III, respectively, were needed to meet federally mandated disaggregated data reporting requirements. Mrs. Florence explained compilation and transmission of data was information the federal government used to determine the division’s work participation rates, potential penalties, and potential bonuses. The division felt that function needed to be centralized and fully identified by staff in view of the fact there had been significant problems in dealing with that reporting requirement.

Moving on to the next major topic, which Mrs. Florence commented the committee members had heard a lot about over the years, was the NOMADS program. She said the facts were the NOMADS coding for all of the welfare reform changes and certification requirements for the child support functionality would be completed by March 18, 1999. With regard to eligibility functionality, Mrs. Florence explained the division had entered approximately 1,400 cases in Washoe County. They had just begun entering cases in Las Vegas in the Belrose welfare office. As of January 15, 1999, the Belrose office had entered 200-plus cases. She added entering of cases in Carson City, Elko, and Fallon had just begun. Those statistics were related to case types not impacted by welfare reforms, i.e., Medicaid institutional cases, food stamp cases, and elderly and disabled cases. She said the division was excited about the fact that people actually touched the system and workers had begun to see the benefits of automated eligibility determination, particularly as they related to one of the most complicated areas, Medicaid institutional eligibility determination. Mrs. Florence said the division hoped all institutional cases would be in the system by the end of February 1999.

The Chair recognized Senator O’Donnell who asked why NOMADS had been originally requested. He wanted to know why Nevada was required to put NOMADS in place. Mrs. Florence explained the original system was for combined eligibility determination and child support. She said she had not gotten the chance to finish reporting that in Douglas County 50 cases had been entered into the system on child support enforcement. During the week of January 18, 1999, Washoe County District Attorney’s Office had planned to begin entering cases. Senator O’Donnell asked how much had been spent on the NOMADS project to date. Mrs. Florence responded the Welfare Division was still finalizing costs with regard to the level of federal participation and state share, but said the cost was in the neighborhood of $94 million, projected through the end of 1999. She reminded committee members to keep in mind the $94 million figure represented a fully integrated system that reflected all costs, to include the state welfare staff, Department of Information Technologies staff, and so on. Committee members were well aware, the State of California had abandoned its system, about $256 million of which was for a child support system. She reiterated those systems were expensive. Senator O’Donnell commented he hoped Nevada would not expend $256 million and then abandon the project. In his calculations, there were only 50 cases of child support entered in the system. Senator O’Donnell questioned the March startup date. According to his calculations, the state could have given those 50 welfare recipients $2 million apiece and come out even. Mrs. Florence clarified the 50 cases were child support cases, not welfare recipients. In fact, she said, they were non-welfare recipients. Senator O’Donnell acknowledged her response but commented the program was supposed to be designed to track food stamps eligibility and child support payments. He added those were the only two issues the state was required to deal with. He said the only thing not working, as he understood it, was the portion of the program the state was required to do in the first place. Mrs. Florence stated she had not tried to put a happy face on the project. Senator O’Donnell stated he thought the program was a boondoggle. Mrs. Florence responded it was important to understand the system was not originally designed to deal only with the child support issue. She added she wished that had been the original determination, in which case the deadline would probably have been met. The determination had been made to develop a fully integrated system to take advantage of the federal participation available at that time. She said she thought they had all learned that a phased approach to system development was the better way to go.

Chairman Arberry asked if there were additional questions at that point. The Chair recognized Senator Neal. Senator Neal referred Mrs. Florence to the organizational chart which reflected the major programs within the Welfare Division and asked if the central office staff was part of the Child Development Enforcement Section or her office. Mrs. Florence explained the central office staff represented the staff in the Child Support Enforcement Unit of the division. Senator Neal wanted to know why it was shown separately. Mrs. Florence responded that it reflected that position’s span of responsibility which included state welfare staff assigned to the child support enforcement program, as well as coordination with the district attorneys, and oversight for Nevada State Welfare staff situated in field offices. The chart, she added, made the distinction between field office staff and central office staff. Senator Neal noticed that quite a number of chiefs were reflected under the administrative services. Starting with the deputy administrator, he asked how many positions existed. Mrs. Florence said that 72 positions were included within that area. She added the division’s full organization chart was a very large packet which she would be happy to provide to the committee members. Addressing the Chair, Senator Neal suggested that organizational charts reflect staffing numbers within each block. Senator Raggio asked if the chart could be updated to provide staffing figures, to which Mrs. Florence said she would be happy to provide the committee members with a new chart.

Remaining in the welfare administration budget, Mrs. Florence advised funding had been provided for an electronic benefit transfer system for food stamps. She said there had been some discussion during the last legislative session, that by the year 2002, the division must have established an electronic benefit transfer system for food stamps, or obtain a waiver from the Secretary of Labor.

Mrs. Florence requested committee members move to the next tab, "Field Services." The first colored chart reflected the level of complexity of interviewing for services the front-line eligibility staff faced. She explained when an applicant came into the division for cash assistance, they were screened for other programs, a determination of their employability and, if they had not obtained a job during the applicant job search process, a complete screening and assessment. If the applicant was approved for cash assistance, the division tried, as quickly as possible, to develop a personal responsibility plan to either move them into work or into an appropriate job training experience that was consistent with their capabilities for unsubsidized employment. Mrs. Florence explained the division’s obvious goal was placement in a job. She said this biennial budget placed more focus on job retention and counseling to help individuals move up in a job so they were not left in a job that may not provide adequate long-term earnings.

The second page under the "Field Services" tab outlined the Welfare to Work Program. Mrs. Florence said the important issue was the Department of Labor, through the Balanced Budget Act, had provided funding for the hard-to-employ welfare recipient. She said the most important aspect was that while TANF benefits were time limited, there were no time limitations placed on welfare-to-work services. The division felt that was a good marriage of resources on behalf of clients. Again referring to the President’s State of the Union Address, Mrs. Florence pointed out President Clinton had indicated he would look for continued funding for the Welfare-to-Work Program. The program was only authorized through the year 2000. The Welfare Division hoped that funding stream would continue.

Mrs. Florence advised the fourth page under the "Field Services" tab provided the recent history of the quality control error rates for the food stamp program. She said some of the committee members may have recalled some years in which Nevada had been eligible for enhanced funding, or bonus funding from the Federal Government when the error rate was below the federal tolerance of 6 percent. She pointed out that had not occurred since 1989. Regrettably, the division had seen an increased trend of error rates through 1995, at which time the division was well below the national average. Mrs. Florence said the increase was largely due to increasing caseloads. Additionally, many federal changes in programs had occurred during that period. She explained that as the program became more complicated, the eligibility determinations became more error prone. In 1996, the Welfare Division exceeded the national error rate, and again in 1997, for which a corrective action plan was entered into with the U.S. Department of Agriculture. The U.S. Department of Agriculture had implemented a number of initiatives which improved the accuracy rate. She said the good news was the estimated error rate for 1998 was 8.78 percent which was below the national average estimated to be 10 percent or above. Many of the training and initiatives which had been implemented to improve case integrity were certainly reflected in the decreased error rate. Mrs. Florence said the Welfare Division’s goal was to return the state to below the 6 percent tolerance level and staff had been committed to achieving that goal. She remembered when Nevada was the model for the nation with regard to food stamp accuracy and resources had been committed to bring Nevada back to that level of performance again.

Mrs. Florence mentioned that during the 1997 Legislative Session, field services, or front-line operations of the Welfare Division had been placed into a new budget account. At that time, the Budget Account was 3233. There were 684 full-time positions within the field services account. She added the Governor had recommended two additional social work supervisor positions. During the 1995 Legislative Session, social workers had been reintroduced into the public welfare arena. She explained the division currently had 32 social workers. Adding two supervisors to that pool would improve the ratio to 1 to 8. Additionally, a social welfare manager had been recommended to be the direct link between the district offices and administration insofar as performing district office reviews and policy interpretation. Mrs. Florence indicated that position would provide for field presence not currently possible, because Mike Willden now supervised all district office managers along with central office staff. The Welfare Division felt the social welfare manager would provide a benefit not only to staff, but to people served.

Mrs. Florence referred committee members to the next tab, "Welfare-to-Work." She said committee members were aware the Welfare Division had gone to the Interim Finance Committee for program authority. In 1996, Nevada was one of the first states to implement welfare-to-work funding. The funding was through the Department of Labor in accordance with the TANF program principals; however, those funds were specifically targeted to the hardest-to-employ recipients. She explained that what the Welfare Division was seeing was that as the caseload declined in TANF, the greater number of individuals with employment barriers remained as part of that caseload. She commented she was pleased that President Clinton had indicated he would pursue continuation of the program. The most difficult aspect for the Welfare Division with regard to the Welfare-to-Work Program had to do with the federal limitations on who could be served out of the 70 percent pool and out of the 30 percent pool of the hard-to-employ. The 70 percent provision was targeted to those recipients associated with long-term welfare dependents. Those long-term welfare dependents must have faced two out of three labor market deficiencies which were defined as substance abuse, poor work history, or the absence of a high school diploma or General Education Diploma (GED). The Welfare Division caseload included many people who had a GED, or even a high school diploma; however, they did not function at an eighth grade level. The criteria had been set up in such a way that there were limitations on the number of people who could be served. Mrs. Florence noted comments had been offered to the Federal Government with regard to potentially making changes in the regulations so the Welfare Division could be assured the greatest needs were met within the funding stream. Continuing, Mrs. Florence explained the other targeted group for the Welfare-to-Work Program was non-custodial parents who qualified as welfare recipients or met the characteristics of long-term welfare dependency. She said that, too, had been a bonus to the current non-custodial parent training program that she would describe in the Child Support Enforcement Program. While the program was relatively new and results were premature, the budget did not reflect continuation of the program in the year 2001 due to the uncertainty of ongoing federal funding. Additionally, the Welfare Division had not had enough experience to determine whether a recommendation would be made for TANF funding to support some of those activities. Another alternative might be that the State of Nevada would be eligible for some bonus funding, as the result of being one of the first states to implement the program. Bonus funding would provide for program continuation. Mrs. Florence said the Welfare Division had certified 2,694 individuals to the Welfare-to-Work Program. Those individuals would remain eligible for services from the Welfare-to-Work Program even if their lifetime or 2-year limits had expired under the TANF program.

Mrs. Florence referred committee members back to the tab entitled "TANF" and explained there were a number of issues going on within that budget. When TANF replaced the old AFDC program, automatic eligibility and entitlement was ended under the Welfare Reform Act of 1996. The TANF program supported not only the cash assistance payments made to eligible individuals, but other contracts and activities that supported the notion the Welfare Division was focused on employability rather than eligibility.

Mrs. Florence referred committee members to A.B. 401 (1997) which included a 24-month time limit that began January 1, 2000. The bill stated those individuals capable of work would be discontinued from the TANF program at that point in time. She said the Welfare Division hit its first major milestone in January of 1999. That milestone under federal law provided that individuals, after receiving 24 months of assistance, must be working or in a work activity in order to continue benefits. The distinction being that under the federal law and after 24 months, a recipient could continue to receive benefits if they were in some work activity. The state law specified that in 24 months a recipient would not be eligible for benefits, regardless of whether or not they were in a work activity. It was a true time limit. However, certain exceptions would be made for hardship that were enumerated in the law. She explained that having the federal time limit come a year before the Nevada time limit was very beneficial in that the Welfare Division had some experience for anticipating what might occur in the year 2000.

Continuing, Mrs. Florence explained under federal law, there were 733 clients that could have been in jeopardy of losing benefits were they not in a work activity. The Welfare Division emphasized the need for people to enter into assessment or personal responsibility plans, knowing the time limit was coming up. Of those
733 clients, 488 were already involved in a work activity or actual work experience, leaving 245 being contacted by caseworkers to try to establish a plan to alleviate the loss of benefits. Mrs. Florence commented she was very pleased to see that Welfare Division staff, in anticipation of the federal requirement, were already actively engaged with those people. She presumed the same action would occur as the January 2000 date was reached.

Mrs. Florence advised the first major initiative as recommended in The Executive Budget was increased payments to the non-needy caretaker population. Over the past 4 years, the Welfare Division had implemented a number of programs which supported people who were able to work, and incentives so that cash grants were not increased to that population. She said about half of the caseload represented non-needy caretakers; individuals like grandmothers, aunts, or siblings, who may be caring for dependent children for whom they did not have a responsibility. The average monthly payment for a non-needy caretaker with two children was
$289. The Welfare Division proposed the payment standard to non-needy caretakers be increased 70 percent of need. A non-needy caretaker who received $289 would receive $486. Mrs. Florence explained the rationale that supported that proposal was the individual, if they were a foster care parent, would receive $448 per month per child. The Welfare Division viewed that as an effort to maintain children in family structures that were supportive of the family unit and, hopefully, not have children moved into the foster care system which was certainly more expensive.

Mrs. Florence indicated the next initiative in the TANF program was the job retention incentive. The Welfare Division had been very successful in getting people to work and believed the next area of focus should be job retention. To that end, the Welfare Division had proposed a one-time $350 job retention incentive payment to an individual who had maintained continuous employment for a 6-month period. The incentive payment would accomplish two things for the Welfare Division. First, the individual would be supported in work. Second, the program would provide a method of reporting to the Welfare Division that they had maintained employment which, in turn, would help in federal reporting and allow access to high performance bonus monies. The Welfare Division saw the program as a win/win situation for welfare recipients who entered jobs and, with participation in existing programs, they would hopefully retain those jobs.

The TANF budget based on the Welfare Division’s assumptions with the 2-year Nevada time limit an estimated savings of about $2.5 million in the first year of the biennium, and $3.3 million in the second year of the biennium. Mrs. Florence explained many programs worked in conjunction with each other as far as entering employment, retaining employment, and time limitations, which resulted in savings. If the Welfare Division was doing its job correctly, it would not just be that people had dropped off the rolls, but that they had entered into the work force and a supported work environment.

Mrs. Florence reminded the committee members that in the last Legislative Session, the Welfare Division proposed a self-sufficiency grant payment which was approved by the legislature. That was a one-time payment from TANF funds for individuals who were not placed on the TANF rolls but whose immediate needs could be met. She explained the one-time payment, together with a bonafide offer of employment and other supportive services, would divert individuals from having to enter the program. Unfortunately, due to data processing issues, the Welfare Division had been unable to initiate the program thus far during the biennium. The division remained hopeful that a solution could be found prior to June 1999. Because the program was not operational, it had been identified in a new decision unit.

Continuing, Mrs. Florence explained funding had been provided in the TANF budget for second chance homes for teen parents unable to live with their parents or who were in an abusive situation. The Welfare Record Act required the Welfare Division to provide a supportive and supervised living arrangement if an individual could not be maintained at home. There had not been many instances to date. The program would allow the Welfare Division to enter into contracts as needed.

Finally, in the TANF program, Mrs. Florence reminded committee members of the reserve that had been recommended and approved during the last legislative session. She said the "rainy day" fund had been recommended because the Welfare Division had not opted to provide a 100 percent maintenance of effort which would have enabled the state to access the federal contingency funds in the event of an economic downturn. The fund consisted of a state reserve of unobligated TANF monies. The Executive Budget recommended the continuation of the "TANF rainy day" fund. While the American Public Human Services Association recommended a rainy day fund be established based on the variance between the highest peak caseload and the current caseload, that funding amount would be approximately $21.4 million by the end of the biennium. The Executive Budget recommended about $8.6 million.

Mrs. Florence referred committee members to the "Child Support Enforcement" tab. She said there had been a great deal of discussion regarding child support enforcement during the 1997 Legislative Session, particularly as it related to numerous federal changes made by a bi-partisan panel of Congress. There was, and continues to be, a great deal of interest on the part of Congress to strengthen child support enforcement efforts across the country. A number of changes had been included with regard to tracking and automated interception of wage withholding, Internal Revenue Service (IRS) payments, and so on, to ensure that non-custodial parents fully supported the children for which they were responsible.

Chairman Arberry interrupted and asked that Mrs. Florence go back to the TANF program. He had understood that the TANF reserve was recommended at approximately $8.7 million for the year 2001. He also understood caseloads were going down, but he had not heard if reserves were also going down. He asked if reserves were going down, where were the funds being applied. Mrs. Florence explained reserves had actually increased, primarily to build toward an economic downturn. She reiterated the TANF budget reflected enactments of the 1997 Legislative Session regarding the investment of caseload savings into supportive services. Those actions ensured welfare recipients received support services, particularly in the area of childcare, which enabled them to maintain employment.

Mr. Arberry asked at what level the TANF reserve had been budgeted during the current biennium. Mrs. Florence interjected the TANF reserve had been
$8.2 million. The Welfare Division had transferred TANF funding to Title XX, and recalled Mrs. Crawford’s earlier testimony which indicated due to reduction of Title XX funds, the Welfare Division had wanted to make the community-based providers whole, rather than experience the reduction other state agencies had experienced. She explained there were two parts to the answer. The first part being the division had continued to put TANF cash savings into supportive services while maintaining a meaningful reserve. The division hoped that reserve would increase each biennium in the event there was an economic downturn.

Chairman Arberry asked what caseload level Mrs. Florence was looking at. He said the division projected an average of 21,917 recipients per month. Mrs. Florence responded she was looking at the same figure of 21,917 recipients per month shown under the "Caseloads" tab, third page. The 21,917 figure contemplated all initiatives proposed being in place. Without those initiatives, the caseload figure was estimated to total 26,318 recipients per month.

Continuing, Mrs. Florence advised child support was an essential element of welfare reform. While the division was successful in getting people to work, the beginning average wage of those jobs was only $6.38 per hour. She explained in order to ensure household income was sufficient, it was absolutely critical that unpaid child support also be a means of income into that family in providing for those dependent children.

As a result of the 1997 session, Mrs. Florence explained a number of new initiatives had been implemented. Those were areas the legislature had supported in terms of new positions. She advised she had been asked to provide an update of those issues. The division had up-front child support orientation as part of the TANF application process. That orientation had significantly improved information obtained from the custodial parents so child support enforcement activities could begin expeditiously. She indicated the 1997 legislature had authorized investigative and recovery staff for determination of paternity. That program had been very successful in identifying parents who were in some cases in the home and reported out of the home. That initiative had resulted in reductions in TANF payments to ineligible individuals, as well as establishment of parentage for those cases.

During the last biennium, Mrs. Florence explained, two positions had been hired for the Non-custodial Parent (NCP) Employment and Training Services Program, which had been referenced earlier under the Welfare-to-Work Program. Those positions were filled in FY 1998. As a result of those activities, collections of slightly over $500,000 were made for those parents who would not otherwise have received payments due to unemployment. She added over $300,000 had been collected in FY 1999. In terms of cost benefit, those initiatives were particularly beneficial to individuals who otherwise would be reliant on public assistance payments, and also contributed to the caseload decline.

As the result of the Federal Welfare Reform Law and A.B. 401, Mrs. Florence explained caseworker presentations had begun as part of the court process. The presentations began in March 1998. Staff presented cases one day per week. She explained a deputy attorney general had been recommended to support caseworkers in their presentations and court filings.

Continuing, Mrs. Florence said one initiative that had not proved cost effective was the Medicaid Recovery Project. While three positions had been authorized, two of those had not been filled. She explained the division had proposed staff to pursue non-custodial parents whose custodial parent had given birth at Medicaid expense. Since December of 1997, only $20,000 had been collected. She said the division was examining the cost benefit of the entire proposal.

Mrs. Florence explained the "new hire" directory established as a result of federal law had been extremely effective. The benefit had been rather than waiting
3 months for employment information, there was an automatic transmission of division case files to the Employment Security Division. From October 1997 when the program was required through December 1998, there had been
521,000 transmissions of employee information, and 39,000 transmissions of employer information. She explained the way the directory worked was employers that may have multi-state operations could choose a state in which to transmit their data. For example, Southland Corporation transmitted all its employee information to Nevada. Nevada, in turn, sent that information to the national registry. She said there had been some concern that since the division was pretty early in getting the system running that Nevada would become the magnet for all employers in the nation. Fortunately, that had not occurred. The division had been successful in regard to fulfilling the federal requirement.

Continuing, Mrs. Florence went on to explain the Suspension of Professional and Recreational Licenses Program (effective October 1, 1997) was part of S.B. 356. In FY 1998, there were only two transmissions. In FY 1999, there had been 24 transmissions and approximately $15,000 in collections. Of the 20 referrals in 1999, only five licenses had been suspended. She explained generally what happened with the process was a notice was mailed to an individual who was then anxious to make child support payment arrangements, particularly when a professional license was involved. She reported to committee members there had been one passport denied as the result of nonpayment of child support. It appeared the highly sophisticated automated reporting efforts would be extremely successful in the maintenance of child support compliance from non-custodial parents.

Regarding driver’s licenses, Mrs. Florence explained the numbers were really astounding. In FY 1998, $2.3 million had been collected in child support as the result of 468 initial referrals and 530 suspensions. That represented slightly over 7,000 collection cases. From July through December 1998, approximately
$1.4 million had been collected. The FY 1999 figure-to-date was tracking slightly ahead of FY 1998. She explained district attorneys definitely had the enforcement tools to make child support compliance effective.

Mrs. Florence said with regard to budget recommendations mentioned earlier in the presentation, legislation was being proposed in conjunction with the Controller’s Office for a state disbursement unit. She said under federal law, all states were required to have a centralized single state collection and distribution mechanism for the issuance of child support collections within 2 business days of receipt. As committee members were aware, district attorneys within their respective counties did the bulk of collection and distribution of child support payments. The Welfare Division came to the Interim Finance Committee on December 14, 1998, and requested a position and funding in order to launch the disbursement unit effort. She explained the division was required to have the system in place no later than October 1999.

Continuing, Mrs. Florence said committee members would see some adjustments in the division’s budget regarding the anticipated reduction in federal incentive payments. In the year 2000, based on federal FY 1999 performance, there had been an entire restructuring of how incentive payments would be paid to states. The division had a meeting with district attorneys in June 1998. Based on current performance levels of district attorney and state offices, the division anticipated about a $725,000 reduction in incentive payments. The division was hopeful they could work with district attorneys to improve their performance levels so the reduction did not occur. However, the budget was built based on current experience. There were different performance measures and weighted values in terms of the amounts of funding the state could receive based on establishing paternity, support order establishment, collections on current payment, collections on arrears, and cost effectiveness.

She said one area the division knew needed to be addressed was the fact that Nevada did have a bifurcated program where pieces of the program were administered by the state, and other pieces were administered by offices of district attorneys. As the result of moving toward one automated system, a lot of standardized processes were being worked out. Mrs. Florence said she felt the bifurcation would remain an issue and one that might be considered as an interim study at some point in the future.

Mrs. Florence said she knew the committee members had looked at the juvenile justice and family court issues and advised the entire child support enforcement issue could warrant a study of its own.

The Chair recognized Mr. Hettrick who asked when the incentive payment was made if a portion of the payment went back to the counties that collected the money, and Mrs. Florence replied in the affirmative. She explained the entire payment went back to the county (currently $2.2 million). During the June 1998 meeting, the Welfare Division worked with the counties and established a process which defined how monies would be distributed based on performance measures. Mr. Hettrick said he had not understood, that Mrs. Florence said the budget was built on the fact the division would not get $2.2 million in incentives last time, but rather $725,000 this time. He asked how it worked out that the counties got the money. Mrs. Florence turned to Mike Willden for response. Mr. Willden explained in the base year there were $2.2 million worth of incentives passed through to the counties. The counties had earned those incentives based on a 6 percent factor on collections that were made. He explained the formula had now changed and there was a national fund that states competed for. The national fund was $422 million. Nevada’s share of that amount was prorated down to an eligible amount of $2.5 million. Mr. Willden explained there was a five-step process to decide how Nevada could earn the $2.5 million. Current performance, however, indicated Nevada could only earn about $1,473,000. Thus, the $725,000 difference. Mr. Willden added that all of the $1,473,000 would be passed through to district attorneys that earned it.

The Chair recognized Senator O’Donnell who asked if the NOMADS program would require reprogramming. Mrs. Florence explained the incentives were done manually.

Mrs. Evans asked that more information be provided to the subcommittee regarding the subject of collection and disbursement. She added that another division had experienced a great deal of trouble obtaining cooperation from the counties. The committee members needed to know if that was an issue. As for the Welfare-to-Work Program, Mrs. Evans asked the subcommittee be provided with a continuation plan for 2001 in the event federal monies became available.

In referring to the TANF program, Mrs. Giunchigliani asked if there was a requirement that a parent had to make sure their child was in school.
Mrs. Florence explained that requirement appeared in A.B. 401 which outlined the state requirement that a child between the ages of 7 and 13 maintain satisfactory school attendance. The requirement was not a sanctionable offense, but one that required social work intervention if necessary.

Concluding with the "Child Support Enforcement" tab, Mrs. Florence advised there were a number of charts, the most important of which reflected the line on collections. She explained the Welfare Division had estimated $122 million in total collections by the year end of 2001, just from the Title IV-D program. As stated during the child support discussion, the establishment of the centralized disbursement unit would be a new budget account, 3239. That budget would receive and distribute over $257 million over the biennium.

Moving to the "Aged and Blind" tab, Mrs. Florence explained that budget provided for a supplemental payment to aged and blind individuals who received Supplemental Security Income (SSI). The state had taken that option since the inception of the supplemental payments in 1974. The state had never elected to provide a state supplement to the disabled population, which was permitted under law. The notable changes within the aged and blind budget account dealt with increased cost of Social Security Administration’s administrative fee for processing the state supplement as part of the SSI check. That assessment increased to $7.80 in the year 2000, and $8.10 in the year 2001. Every check processed included an administrative fee for the division.

Mrs. Florence said the Welfare Division anticipated an approximate 4 percent growth in the blind caseload population, 10 percent higher than 1998 actuals. Also anticipated was a 4.3 percent increase in the aged population over 1998 actuals. Funding for the supplement came exclusively from the General Fund. Also included in that budget account was a 6 percent increase in payments to the adult group care operators as initially implemented in the 1997 session.

The Chair recognized Mrs. Giunchigliani. Mrs. Giunchigliani questioned if the 6 percent increase was from the state or the Federal Government. Mrs. Florence replied the increase was from the state. Mrs. Giunchigliani asked what the Federal Government increase amounted to. Mrs. Florence said the COLA cost-of-living increase, based on the supplement security income payment, had been passed to the client. Mrs. Giunchigliani confirmed the payment went directly to the client and Mrs. Florence responded in the affirmative. Mrs. Giunchigliani said there had been discussion otherwise. Mrs. Florence explained when the Welfare Division built its budget, the 6 percent increase was built in. The division had contemplated not passing on the increase authorized by the 1997 legislature, and just passing on the SSI portion. She clarified the division had implemented the increase a couple of months later (March), so that it was passed on in full. The budget would continue this 6 percent increase. Mrs. Giunchigliani asked if the subcommittee would discuss how the program could assist in long-term care needs and that increases and/or expansions should be looked at in order to save money in the future as the aged population grew.

Mrs. Florence referred the committee members to the "Employment and Training" tab. She wanted the committee members to be aware the tracking the Welfare Division had done on all elements of welfare reform since July 1994 indicated a tripling of cases with earnings. The division had approximately 400 individuals per month entering jobs with an average hourly wage of $6.58. She said the group of recipients that required mandatory assessment for work, and who were supported with work activities, had gone down to approximately 3,800 individuals. The primary issues within the employment and training budget had to do with work, support, and childcare. As she had previously mentioned, childcare funding since the original childcare development block grant, had almost tripled over the past 2 years. The budget would support the employment and training activities with an authorized employment and training supervisor and an additional staff person to deal with related childcare issues.

Continuing to the last two tabs, "Low Income Home Energy Assistance (LIHEA)" and "Homeless Grant," Mrs. Florence explained those two budgets were fully federally funded and remained status quo. There were no significant budgetary impacts.

There being no further business, the meeting adjourned at 4:30 P.M.

RESPECTFULLY SUBMITTED:

Cindy Clampitt,

Committee Secretary

Debbie Zuspan,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE:

Senator William J. Raggio, Chairman

DATE: