Seventieth Session

January 22, 1999

The meeting of the Legislative Commission’s Budget Subcommittee was called to order by Chairman Morse Arberry Jr. at 8:41 a.m., on Friday, January 22, 1999, in room 1214 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster.

Mr. Morse Arberry Jr., Chairman

Mrs. Jan Evans, Vice Chairman

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph Dini, Jr.

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

Mr. Bob Price

Senator William J. Raggio, Chairman

Senator Lawrence E. Jacobsen

Senator Bernice Mathews

Senator Joseph Neal

Senator Ann O’Connell

Senator William O’Donnell

Mrs. Chris Giunchigliani (Excused)

Mr. David Goldwater (Excused)

Senator Bob Coffin, (Excused)

Mark W. Stevens, Fiscal Analyst

Gary Ghiggeri, Principal Deputy Fiscal Analyst

Daniel G. Miles, Fiscal Analyst

Robert A. Guernsey, Principal Deputy Fiscal Analyst

Chairman Raggio apprised committee members and the audience of the death of former colleague and committee member, Senator Jack Regan, who had died while in his home the previous evening. Chairman Raggio remarked Senator

Regan was a valuable member of the committee and a dedicated member of the legislature who would be greatly missed by members of the committee and those with whom he came in contact. Chairman Raggio requested a moment of silence in memory of Senator Regan.

Chairman Raggio conveyed the appreciation of Senator Regan’s widow regarding the concern expressed by Mrs. Chowning and others during Senator Regan’s long illness. Chairman Raggio informed the committee a memorial service would be tentatively scheduled for January 30, in Las Vegas and arrangements were pending. Chairman Raggio declared the Legislative Counsel Bureau had ordered the legislative flag to be hung at half-staff until the commencement of the Seventieth Legislative Session.

Chairman Arberry then requested John Drew, Acting Director for the Department of Motor Vehicles and Public Safety, to present an overview of The Executive Budget for the Department of Motor Vehicles and Public Safety (DMV & PS).

Attending with Mr. Drew were Mr. Ray Sparks and Mr. Bruce Glover, deputy directors for DMV & PS.

Reading from a prepared statement (Exhibit C) Mr. Drew outlined his presentation by stating he would begin with remarks covering a broad spectrum of issues which would affect the department and its budgets. After these remarks, Mr. Drew noted both deputy directors would also provide an overview of the budgets for public safety and then motor vehicles. Mr. Drew specified his remarks would be restricted to the overview of the budgets for the directors office.

Mr. Drew described the Department of Motor Vehicles and Public Safety as a large and diverse department responsible for administering complex programs concerning motor vehicle issues while at the same time developing ways to improve customer service to citizens. Mr. Drew contended, on the public safety side, there was an ever-present desire of the department to ensure the safety of the citizens on Nevada’s highways and in Nevada’s communities, in addition to assisting law enforcement throughout the State when necessary. Mr. Drew believed in an environment of unlimited resources, the department would be providing those services in an unfettered fashion. However, because an environment of unlimited resources did not exist, the department had attempted to balance the needs of the public and the communities against the cost of providing the services. Moreover, Mr. Drew articulated agencies like DMV & PS had been constantly looking toward ways to improve service, including improving the conditions of employees, while not unduly burdening the taxpayers.

Mr. Drew mentioned the motor vehicle section initiated one such endeavor a few years ago. He referred to Project Genesis, which was designed to improve the aging technology of motor vehicles and to allow the department to take customer service into the future by allowing simple transactions to take place in a location other than a DMV facility. Mr. Drew remarked Deputy Director Glover would furnish greater detail on that subject during his remarks.

Mr. Drew felt the theme of "providing a service at a reasonable cost " was maintained throughout DMV & PS budgets especially by the establishment of a Training Division in the department. Mr. Drew noted although this had been attempted in the past with varying degrees of success, DMV & PS had over 2200 employees, of which almost 825 were sworn officers. He argued with that number of programs and sworn personnel, the department had tried to ensure employees were properly trained to perform at a maximum effort with the resources available to them.

Subsequently, Mr. Drew stated the current designs for the Training Division had developed out of SCR21, an interim study, which determined the future of POST or Peace Officers Standards and Training. He explained at that time, the training function was attached to the department and had combined with department resources to form the Nevada Law Enforcement Academy, an entity that provided basic law enforcement training to agencies throughout the state. As a result of the final report for SCR21, a recommendation had been made which would disassociate the POST entity from DMV & PS. Although Mr. Drew felt the department was in agreement with the recommendation, he asserted even if the legislature chose not to follow the recommendation of the SCR21 study, the department would still need to establish its own training mechanism. Mr. Drew argued if POST were to stay attached to the department, it would need to concentrate its basic mission on training those officers from departments which had no ability to train their own. He concluded the department simultaneously and separately required the means with which to train its own officers without competing for the same resources as POST.

To highlight the goals of the department’s budgets, Mr. Drew offered an overview of the Director’s Office budget. Like other budgets, Mr. Drew indicated that budget maintained the office’s current operations with two significant exceptions. He stated the first exception was the budgetary transfer of the Internal Affairs Unit to the Director’s Office. This would enhance budgetary integrity as well as clearly establish the cost of the Internal Affairs Unit and the services which it provided. The personnel assigned to the Internal Affairs Unit within the Director’s Office would be paid and operated under the Director’s Office budget, but the personnel themselves would officially belong to their parent division, the Highway Patrol, or Parole and Probation. When those personnel had completed their internal affairs assignment, they would be returned to their normal duties.

Mr. Drew identified the second new concept to the Director’s Office Budget as the request for a Management Analyst III and Management Analyst II. He announced that staff would provide planning and research capabilities for the Director and Deputy Directors. He explained the unit would also oversee the department’s strategic planning and promulgate administrative regulations.

Previously, Mr. Drew noted the department had never had that resource available to them and was forced to rely on temporary personnel from the divisions. This, he argued, lead to sporadic productivity and it removed personnel from their normal duties.

In addition, Mr. Drew mentioned a Bill Draft Request (BDR) that would be presented to the legislature regarding the expansion of the utilization of the pollution control fund, which was created through the certification of vehicles in Washoe and Clark counties for emission control. In the 1997 Legislative Session, legislators had indicated their desire to see the amount of pollution control fund reserves be utilized instead of allowing the reserves to accrue. The proposed legislation, Mr. Drew declared, would fund emission control programs within the department, it would continue to fund grants for both Washoe and Clark counties, and it would fund other functions such as the Tahoe Regional Planning Agency (TRPA).

Mr. Drew then commented on the major one-shot appropriation and supplemental requests, which would affect the department's budget. He called attention to the 1997 Legislative Session, where $2. 9 million was appropriated for the purpose of upgrading the departments radio system. Consequently, within the current budget proposals, the department had requested funds totaling approximately $9 million for that purpose. He stated that at the time of his testimony, the department, alongside Frank Thatcher and Associates, had completed the Request for Proposal and it had been anticipated a vendor would be selected by the end of February. Mr. Drew informed committee members the purchase of equipment would take place shortly. Mr. Drew felt the requested appropriations would allow the department to complete the majority of the conversion from a low band to a high band technology. He also contended the completion of the radio system upgrade was a critical issue for the department due to the existing radio systems obsolete technology and problematic maintenance. Mr. Drew concluded by emphasizing the necessity of a reliable radio system in order to ensure public safety.

Focusing on the one-shot requests within the Registration Division, three one-shot requests totaling approximately $4.8 million were highlighted. The largest of these, Mr. Drew stated would provide funding for the issuance of new license plates beginning in January 2001. The appropriation for that project would total $4.3 million. Mr. Drew then disclosed the second sizeable appropriation would be used for refurbishing, or reissuing the blue license plates, which had been issued prior to January 1982. Finally the third one-shot appropriation which Mr. Drew proposed would be designed to complete phase II of the Genesis Project. He indicated that appropriation would complete the computer hardware lease payments, consultant contracts, and would provide for travel and training of personnel within the Department of Motor Vehicles.

Finally, Mr. Drew addressed two supplemental requests contained within the budget account. The first supplemental request, which dealt with Parole and Probation, would be detailed later in the session. Mr. Drew explained the second supplemental request would fund the parking ticket program within the Registration Division. He stated this request dealt with a revenue shortfall caused by the 1997 Legislative Session’s changes to how parking ticket monies were collected and distributed.

Mr. Drew then introduced. Ray Sparks Deputy Director of Public Safety, who would present the Public Safety position for DMV &PS budget Overview. Mr. Sparks presented his overview by reading a prepared statement (Exhibit D).

However, before Mr. Sparks could begin his presentation Chairman Raggio requested further clarification concerning the total project costs for the radio system upgrade. He reminded the committee members that during the 1997 Legislative Session, committee members had been told the project would cost a total of $5.7 million and that it would be implemented over a period of 4 years. However, assuming information referenced by Mr. Drew and compiled by staff was correct, Chairman Raggio thought the figure for the total costs of the project actually totaled $12.2 million. Chairman Raggio felt the figure was a significant increase over the figure for the total project costs used in the 1997 Legislative Session and he wondered if there was a misunderstanding on the part of committee members or if misinformation had been provided.

In reply, Mr. Sparks said he had presented the information concerning the radio system upgrade to committee members in the past session. At the time, he had provided an estimate of the cost of an internally developed system, which had a projected total cost of $5.7 million. He reminded the committee he had also testified that figure was a preliminary figure and it did not include the cost of the trunking capability. Mr. Sparks further explained it was his intention at the time to contract for an engineering consultant to assist in the design of an upgraded radio system. He revealed the current $12 million dollar estimate was the result of the engineer’s analysis.

Chairman Raggio wondered if the project, if approved, would have to divert
$8.4 million of highway funding and $538,000 from the General Funds in a one-shot appropriation request. Mr. Sparks replied affirmatively. Chairman Raggio felt that was a large amount to be diverted from the Highway Fund and questioned Mr. Sparks regarding the impact of such a diversion. Mr. Sparks, however, could not comment concerning the overall impact of the project upon the Highway Fund. Following Mr. Spark’s response, Chairman Raggio expressed concern that at a future session the projected total cost of project might be increased or revised. He further opined the staffing formula issue begged the question and he requested a definite response at a future date. Mr. Sparks stated he did not anticipate additional costs and the department would have a more detailed report of the cost of the system upgrade to the legislature by the beginning of March. He noted the department would have then had sufficient time to review the alternate vendor proposals and to realize a more accurate project cost, which should not change or be modified after that date.

Chairman Arberry asked Mr. Sparks when he expected to have a final figure for the upgrade project costs. Mr. Sparks explained the proposals for the new system would be due February 2, 1999 and then would be reviewed by an evaluation committee who would make a decision on the reward total; therefore a final figure could be submitted to committee members by mid-March.

Mr. Sparks began his overview of the Public Safety branch of the Department of Motor Vehicles and Public Safety by addressing the purpose and organization of the branch. He explained the Public Safety branch of the department was comprised of the Highway Patrol, Division of Investigation, the Divisions of Parole and Probation, Capitol Police, Training Division (POST), Division of Emergency Management, State Fire Marshal Division, Office of Traffic Safety, Office of Criminal Justice Assistance, Public Safety Information Technology, Office of Internal Audit, and the Office of Internal Affairs. Mr. Sparks noted Acting Director Drew had presented the budget overview for the Training Division and the Internal Audit and Internal Affairs Units, which were contained in the Director’s Office budget account. He said he would address the highlights of the budget accounts for the remaining Public Safety programs, except Parole and Probation. He noted the budget overview for Parole and Probation would be presented to the committee members the following Tuesday. However, he mentioned the chiefs of the public safety divisions were in attendance and would be available to answer any questions the committee might have.

Mr. Sparks called attention to two events he felt were significant in terms of their implications for public safety in Nevada. Mr. Sparks testified the first event occurred in January 1998, when an explosion at the Sierra Chemical Company in Washoe County resulted in four deaths and several injuries. Consequently, Mr. Sparks explained, the "Clark" Commission, on which Mr. Sparks served as a member, was founded by then-Governor Miller and recommendations were subsequently made which enhanced emergency preparedness and response for similar incidents.

The second notable occurrence according to Mr. Sparks was a statistic disclosing the number of persons who had died in traffic crashes on Nevada’s highways in 1998 totaled 362, an all-time record high for traffic deaths in the State of Nevada. Comparatively, he noted the previous high was 358 deaths recorded in 1979.

Mr. Sparks described the Public Safety Information Technology (PSIT) budget account first by explaining how the account provided funds for computer support for the public safety divisions. He also noted the account was funded from court assessments and charges to divisions utilizing these services.

Mr. Sparks explained that unit maintained the mainframe computer and servers, provided programming services, and maintained the internal public safety computer network. The dramatic increase in the number of personal computers used in the department resulted in a budget recommendation for four new computer network specialist positions (M-200). Additionally, the module also recommended additional server software to support applications being developed on the system.

Mr. Sparks then called attention to Module E-710, which recommended a network management system that would be used to automate monitoring and management of the data lines.

Mr. Sparks reminded the committee members that during the 1997 Legislative Session, the legislature transferred the Drug Commission, (formerly known as the Commission of Substance Abuse Education, Prevention, Enforcement, and Treatment), to the Department of Public Safety. Mr. Sparks explained the Drug Commission was responsible for advocating and coordinating programs designed to reduce substance abuse. The account was funded through both a General Fund appropriation and a federal grant. Concluding the budget account, Mr. Sparks communicated the budget proposal recommended the elimination of funding for the biennial report produced by the commission.

Mr. Sparks explained the budget account was a pass-through account for federal grants for the Byrne law enforcement memorial grants, violent offender incarceration grants, residential substance abuse treatment grants, local law enforcement block grants, national criminal history improvement grants, national sex offender registry grants, state identification systems grants, and the police corps scholarship programs. Within the budget account, Module E-375 specifically recommended General Funds for a grant match for a residential substance abuse treatment program. However, Mr. Sparks felt that was unnecessary and the department would be able to provide those funds through an alternate grant with different matching requirements. Thus, Mr. Sparks recommended the elimination of funding for the program.

Chairman Raggio questioned whether or not the department would be able to obtain the needed $121,875 stated in The Executive Budget, without obtaining General Fund revenues.

Mr. Sparks repeated he believed General Fund appropriations for the proposed half-way house would be unnecessary as the department would be able to obtain the funds through the Violent Offender Incarceration Grant, which only required a 10 percent match. He felt the matching requirement would be easily achieved by the agency administering the halfway house program.

Chairman Raggio wondered if at some point in the budget, there would be at least 10 percent or $12,000 each year coming from an alternate state source. He informed Mr. Sparks there would have to be a modification in the budget for that allocation and he expected Mr. Sparks to present the modification in the future.

Mr. Sparks responded he was uncertain as to which agency would be providing those funds, nevertheless, he felt these funds at a 10 percent match should be included in that agency’s budget.

Mr. Sparks stated the Justice Grant budget account funded the administrative costs of the Office of Criminal Justice Assistance. The budget account he noted was funded from federal grants and a General Fund appropriation for matching requirements. Mr. Sparks conceded the sole augmentation to the account was found in Module M-200, which recommended the addition of a half-time position, thus rendering a current half-time position to full-time status.

Mr. Sparks testified the Division of Emergency Management operated through four separate budget accounts, however The Executive Budget recommended the consolidation of two of those budget accounts.

Recommended for consolidation in Budget Account 3601, Mr. Sparks explained the account was funded through Federal Emergency Management Agency (FEMA) grants and a General Fund appropriation. He said the account recommended continued General Fund support for state and local assistance programs and for the State Disaster Identification Team while only one half-time position would be eliminated.

Mr. Sparks apprised committee members Budget Account 3673 was the new budget account created through the consolidation of Budget Account’s 3601 and 3659.

Recommended for consolidation into Budget Account 3673, Mr. Sparks explained both grants from FEMA and a grant from the Department of Energy (DOE) funded Budget Account 3601. He revealed funds from the account supported three programs: state and local assistance, disaster preparedness improvement, and planning and mitigation activities in response to off-site incidents, which could occur at the Nevada Test Site.

Although the state and local assistance program had been 100 percent federally funded, Mr. Sparks projected in FY 2000 that funding would decrease to 50 percent. Altogether the budget recommended a General Fund appropriation for the required state match to continue support for 6.5 positions.

Senator Mathews quizzed Mr. Sparks concerning the recommendations for reorganization made by the Governor during his "State of the State" address. Further, she asked if the department had included the recommendation to transfer the Public Safety functions to the Department of Prisons within the budget accounts.

In response, Mr. Drew referred to his discussions with the Governor’s office, stating the Governor and his staff were still attempting to develop a role for the Department of Public Safety in Nevada and research was being conducted concerning which areas might be reorganized or consolidated. Even so, the Governor’s office had yet to formalize any plan concerning the consolidation of these accounts. Thus, Mr. Drew conceded any plan for consolidation was still considered a work in progress and may not be completed before the end of session.

Chairman Raggio declared the Chairs had discussed the issue earlier with Perry Comeaux, Director of the Department of Administration. He requested that if the Governor’s Office solidified a recommendation for consolidation, it should provide amended budgets to reflect the changes made.

Chairman Arberry concurred with Chairman Raggio’s statement, yet he pressed Mr. Comeaux for a specific date when the reorganization proposals would be solidified.

Mr. Comeaux responded by stating the proposal was a work in progress on the part of the Governor’s Office. He asserted the Governor’s Office was addressing a number of proposals simultaneously and at that point in time, Mr. Comeaux was not certain when a proposal would be complete.

Chairman Arberry opined he did not feel proposals should be discussed in committee and subcommittee, especially if changes to the proposals might be made mid-way through the process. He requested Mr. Comeaux to identify a timeframe for the completion of the reorganization plans and to notify committee members as soon as possible.

Before continuing his presentation Mr. Sparks offered information concerning Senator Raggio’s previous question regarding the matching requirement for the halfway house program. He said any funds directed toward the halfway house would have to come from local, nonprofit, sources and that the matching requirement would not be directed at any state agency.

Following Mr. Spark’s response, Mr. Beers expressed confusion over performance indicator five in Budget Account 3601 which read, "significant emergency incidents per year are fifty. " He asked if Mr. Sparks had budgeted the number of emergency incidents per year and if he had reached the goal of that budget.

Mr. Sparks deferred to Frank Siracusa, Chief of the Division of Emergency Management. Mr. Siracusa responded by explaining the department had attempted to obtain a fair estimate of the kinds of incidents to which the department responded in a given year. On average, Mr. Siracusa felt those incidents averaged between 40 and 60 incidents a year, figures obviously subject to change. He claimed performance indicator five served as a benchmark for the kinds of emergency incidents for which the department had responsibility over previous years.

Mr. Sparks described Budget Account 3674 as a pass through account where sub-grants from FEMA grants were passed to local governments for disaster preparedness.

Mr. Sparks explained Budget Account 4728 funded 12 NHP commercial enforcement troopers. He noted the amount of support was the proportion of NHP commercial enforcement activity related to hazardous materials. Subsequently, he cited three civilian positions that were also funded to administer the hazardous material transportation permit program. Although supported by the Highway Fund, the permitting process had generated revenue for both the Highway Fund as well as for the State Emergency Response Commission.

Following his description of the account, Mr. Sparks moved towards the discussion of The Executive Budget recommendations for that biennium. Module E-375 recommended the appropriation of funds to allow the NHP to conduct investigations of motor carriers of radioactive waste who applied for permits. He also identified a BDR that would give the NHP the ability to recover those costs from the applicant carrier.

Finally, Module E-710, requested funds for the replacement of equipment, including chairs, fax machines, emergency lights and sirens, computers, and two vehicles.

Mr. Sparks described the Criminal History Repository as a unit, within NHP, which maintained a system of criminal history records, including a protective order registry and a sex offender registry. He maintained the unit had served as the state’s control terminal agency for other criminal justice information systems while it also had performed background checks related to firearm purchases pursuant to the Brady Act.

The repository was funded from court assessments as well as from user fees, including fees for criminal history checks for employment and regulatory purposes, in addition to fees from firearm purchase checks.

Mr. Sparks called attention to The Executive Budget recommendation for the elimination of three positions in the Civil Name Check program. Additionally it recommended funding for Module M-200, the addition of one new program specialist position. That module would include funding for the cost of increased fees paid to the Las Vegas Metropolitan Police Department (LVMPD) and the Federal Bureau of Investigation, though Mr. Sparks felt the increase in fees paid would be recovered through fees assessed upon the repository users.

Mr. Price interjected to ask if the department had created a new definition for hazardous materials. He elaborated that in the previous year, former Senator Regan and he had attended a meeting in Washington DC, where the federal definition of radioactive hazardous materials had been altered. Mr. Price indicated at that time the movement of the newly defined materials into a radioactive waste dump in Beatty had commenced and he wondered if it was tied into the budget account that Mr. Sparks was addressing.

Mr. Sparks replied the issue was related, however, he was unfamiliar with the change to which Mr. Price had referred. He went on to explain the department utilized a number of definitions varying from hazardous materials, to hazardous substances, to hazardous waste. He replied the department had adopted the federal definition of hazardous materials.

Senator Neal next questioned Mr. Sparks in reference to the Criminal History Repository. He cited the performance indicator, which stated 90 percent of all civil fingerprints were processed within 10 working days, and asked Mr. Sparks if he would explain how fingerprints were retrieved. Mr. Sparks responded a number of sources provided fingerprint submission records. For example, an employer with a prospective employee could obtain a criminal history record check through a release signed by that prospective employee. In that case, he stated the employer could submit the fingerprint results to the repository to be searched against department records for a record of criminal history. Senator Neal continued his query, asking Mr. Sparks if the department received many of those types of requests for criminal history checks. Mr. Sparks, cited the new Civil Name Check Program, which still in its pilot phase, had allowed employers to inquire about criminal history by utilizing names and physical descriptors other than fingerprints. Mr. Sparks believed if this program was operated on a permanent basis, the number of inquiries would increase. He also divulged many of the large hotels, particularly in Las Vegas, had submitted fingerprint cards and had requested criminal history checks for prospective employees.

Mrs. Cegavske asked Mr. Sparks if the department was closer to consolidating a system of work-cards so that when work permits could be developed, the department could reference its criminal history checks against a national system of criminal records. Mr. Sparks reminded Mrs. Cegavske the department was not involved directly with the design and implementation of work permits as they existed under local government authority. However, he noted efficiencies had been attained through the Civil Name Check Program. He cited an agreement with the LVMPD where the department had been able to utilize the LVMPD’s database, which was roughly similar to the record check they would have performed had someone requested a work permit from the department. Furthermore, Mr. Sparks felt that although the agreement had not eliminated county requirements for a work permit, the department had expedited the process.

Mr. Sparks stated the Dignitary Protection Program, funded through a General Fund appropriation, supported eight highway patrol officers who were assigned to the dignitary protection detail. He noted there were no recommended changes to this budget’s current program level request.

Mr. Sparks stated this account was funded primarily from the Highway Fund. The Executive Budget had recommended funding in the amount of $45.7 million for FY 2000, which was a 19 percent increase over FY 1999 funding.

Mr. Sparks also mentioned a supplemental appropriation request, for an amount slightly exceeding $10,000 from the Highway Fund, in order to pay stale claims from FY 1997.

Mr. Sparks indicated the most significant change in the Nevada Highway Patrol (NHP) account was the request for additional staffing. For the current fiscal year, 522 new positions were authorized, while for the next biennium The Executive Budget recommended 37 new positions. Furthermore, an additional effect of this budget account he disclosed, was the transfer in of two existing positions and the transfer out of six positions for a net increase of 33 positions.

Mr. Sparks next referred to Module M-200, demographics and caseload changes, which recommended funding for 11 new trooper positions and associated costs for Las Vegas over the next biennium. That figure was the result of a staffing formula used by NHP to determine staffing needs in urban areas. He explained the formula was used to maintain trooper strength at a level that permits, on average, a trooper to have 34 percent of his or her work time available for patrolling the highways. Even though the formula predicted a large number of additional trooper positions, NHP had considerably scaled back their request and proposed a four-year plan that would build to the requisite staffing levels. Accordingly, Mr. Sparks divulged the recommended new positions were half of this request and the 11 new troopers over the biennium represented an increase of 11 percent over the current number of Las Vegas urban area trooper positions.

Chairman Arberry interrupted to inquire if DMV & PS had discussed the trooper staffing formula used in this budget account with committee members in the previous session. Chairman Arberry believed the formula had been changed from that which was developed in the 1997 Legislative Session to a new formula used in the present hearing. He felt that the previous formula was working efficiently, yet the adoption of the new formula would allocate a greater share of funds.

Mr. Sparks corroborated Chairman Arberry’s understanding of the staffing formula. He stated NHP had presented the formula to the 1997 Legislative Session and since that time had made minor modifications to it. To elucidate the issue, Mr. Sparks deferred to Colonel Michael Hood, Chief of NHP.

Mr. Hood explained the formula was based upon several factors, including a performance factor, minutes of obligated time, and a shift relief factor.

Chairman Arberry asked Colonel Hood if the formula to which he had referred was the formula used in the last session or the formula used to calculate the present budget account. To clarify, Colonel Hood stated the formula he had used was the formula used in the last session, albeit with minor modifications.

Colonel Hood continued that the modifications made to the formula were based on alternate relief factors. In the previous session, NHP had used the national average relief factor of 1.6, which was based upon Northwestern, California Highway Patrol, and Arizona Highway Patrol figures. Consequently, Colonel Hood stated NHP compromised and used the figure 1.6, which fell in between the limits set by the national average.

However, Colonel Hood disclosed the new modified formula, used a relief factor of 1.82 instead of 1.6, which was where the point of confusion existed. The relief factor 1.82 was based upon actual figures from NHP, not the national average. Colonel Hood reiterated although the national average of 1.6 was calculated through the compilation of accumulated time, leave time, and break time, the new NHP relief factor of 1.82 was calculated by pulling bi-weekly time sheets and evaluating the actual time officers were off-duty. Obviously, he conceded that method had increased NHP’s calculation of officer need. He also noted the NHP had begun a process of negotiation over the formula with the Legislative Counsel Bureau and with the Director’s Office. As a result, NHP had gone back to utilizing the 1. 6 relief factor in its calculations.

Chairman Arberry recommended that the NHP negotiate with the appropriate subcommittee, rather than the LCB staff, and to have the subcommittee submit a proper recommendation for the staffing formula. Chairman Arberry noted that this issue could be discussed with LCB staff, however, it must be negotiated in the subcommittee process.

Mr. Sparks continued his presentation of Budget Account 4713. He remarked the staffing formula had also been applied to several other Enhancement Modules in the budget requests. For instance, also based on the relief factor of 1.82, Module E-375, recommended funding 12 new trooper positions and associated costs for the Reno-Carson City-Lake Tahoe urban area. The 12 new positions over the biennium represented an increase of 21 percent over the existing Reno urban area trooper strength.

Before Mr. Sparks could address Module E-376, Chairman Arberry emphasized the discrepancies between past and present formulas created a problem for committee members. He requested that Mr. Sparks, through the subcommittee process, finalize a formula to eliminate future confusion and backsliding. Chairman Arberry said committee members desired NHP to have the resources which it required to provide for public safety, yet he felt it was unfair for Mr. Sparks to constantly change this formula. In response, Mr. Sparks relayed his hope that NHP and the legislators could arrive at a mutually agreed upon methodology, similar to the parole and probation staffing formula, which had been accepted by both the legislature and the Executive Branch.

Moving on to another issue, Senator Neal noticed the statewide trooper response time was 14 minutes, 21 seconds and he wondered how that figure compared with other states. Mr. Sparks did not have that information at the time, however, he stated he would be able to provide that information at a future time.

Budget Account 4713 also requested for funds to lease 7,100 square feet of office space for an additional NHP office in the Las Vegas area. In addition to that request, Mr. Sparks stated the budget also recommended leasing a modular office building to replace the decrepit facility in Fernley.

The next budget request addressed by Mr. Sparks, Module E-710, recommended funding for replacement equipment. The largest item in the account was the replacement of NHP vehicles, 133 of which would be replaced in the first year of the biennium followed by the replacement of 102 vehicles in the second year. Mr. Sparks explained the replacement was based upon the replacement criteria of 80,000 miles or three years of age.

Colonel Hood interjected NHP was sizing down its pursuit vehicle fleet, in fact, only 14 had been authorized for replacement at that time and NHP planned to eliminate the pursuit vehicle in the following two to three years, depending upon the mileage of the vehicles. NHP would utilize those vehicles until they had expended their life.

Senator O’Donnell brought up the issue of light bars on the top of the vehicles. He was under the impression the light bar had been removed from the roof of a vehicle because it incurred greater wind resistance, subsequently increasing gas mileage. Colonel Hood responded 14 percent of the fleet utilized the "slick-top" lights to which Senator O’Donnell had referred. Furthermore current technology had designed for purchase a much more efficient, smaller light bar. In actuality, the light bars used by NHP reduced gas mileage in some instances by two miles per gallon, if the vehicle was being operated at high speeds. Senator O’Donnell wondered if the light bars would be kept on the inside or the outside of the vehicles. Colonel Hood responded NHP planned to keep less than 20 percent of their fleet in operation with the type of "slick-top" light bar, while the remaining 80 percent would continue to operate with full light bars on the tops of the vehicles.

Also addressing the issue of light bars, Senator Neal inquired of Mr. Hood if any study had been completed regarding amount of drag caused by light bars operating on the roof of a vehicle. Colonel Hood replied NHP fleet mechanics had unofficially completed their own comparative study concerning the effects of light bar induced drag upon gas mileage, by using vehicles with light bars on the inside as well as on the outside of the vehicles. The study was inconclusive.

The last budget request for the account called for the transfer of two storekeeper positions from the Administrative Services Division, to the NHP budget. It also recommended the transfer of a sergeant and trooper position to the Director’s Office for the Internal Affairs unit, explained by Acting Director Drew in his testimony, (see Exhibit C), as well as the transfer of three trooper positions and a training officer to the recommended Training Division budget account.

Mr. Beers called attention to the geographic disparity in time used to accomplish writing tasks. He cited information given to him by staff, which indicated southern urban traffic troopers averaged 76 hours a year in report writing, while northern urban traffic troopers averaged 205 hours per year for the same task. Mr. Sparks replied he did not have an immediate answer, however he would clarify the disparity at a later date.

Chairman Arberry requested Mr. Sparks to next address the issue of the new training division that would be placed in the department.

Mr. Sparks indicated as the result of Senate Concurrent Resolution 21 (SCR 21), from the previous session, the department had evaluated the feasibility of separating the Peace Officer Standards and Training Committee from the department. Resulting from careful analysis of the effect of separate training units upon the department, Mr. Sparks stated the department recommendation was to re-establish a training unit within the department.

Initially the training unit would be limited to training peace officers. Mr. Sparks reminded committee members the department housed over 800 peace officers, whose turnover required training 80 to 100 new officers each year. Yet, even though each officer was required to complete a minimum of 24 hours of annual retraining under POST regulations, Mr. Sparks felt that the department did not fulfill the POST regulations. NHP recruits were to be assigned to the Nevada Law Enforcement Academy, which was a component of POST, the Parole and Probation Officer recruits would be sent to POST, the High Sierra Academy in Reno, and would be trained in the various community college programs in Reno.

Because the department would like to provide consistent and quality training for their law enforcement employees it requested funding to re-establish a training division within the department. He noted the recommendation was cost neutral to the Highway Fund as well as to the General Fund. In order to create the new training division, the department proposed to transfer existing training positions in the NHP, Parole and Probation, and the Division of Investigation into the new unit. Essentially, Mr. Sparks felt the department would be consolidating the training units by absorbing resources already devoted to training.

Chairman Raggio felt the issue should be further discussed in subcommittee. If staff information was correct Chairman Raggio noted the POST training would reduce by half, the number of cadets than it formerly trained. He felt both the consolidation of training in POST and the staffing formula were contentious issues and he forewarned Mr. Sparks to be prepared to answer questions in subcommittee regarding those issues.

Mrs. Chowning quickly inquired if Genesis funds were available to fund training activities. She wanted to ensure that the subcommittee was aware the Training Division was a new proposal and funding might be available through Project Genesis. Mr. Sparks responded that within the Genesis proposal for the upcoming biennium, funds would only be provided for one training-coordinator position; after which funding for Genesis resources would be dramatically reduced. The new Training Division, he explained, was related only to law enforcement training in order to ensure cost effectiveness.

Mr. Sparks stated The Executive Budget recommended the elimination of the auto theft program that had been approved in the 1997 Legislative Session. The recommendation included the elimination of four criminal investigator positions from the base budget.

Chairman Raggio asked how those positions were funded and why they were eliminated from the budget. Mr. Sparks replied they were General Fund positions and due to the limited General Funds available, the positions had been eliminated. After, Chairman Raggio expressed concern over the effectiveness of the program, Mr. Sparks deferred to Acting Director Drew.

Initiated in October 1997, Mr. Drew explained the auto theft program had only been in operation for 14 months. The major concentration of the program was in Las Vegas where approximately 1,100 automobiles per month had been stolen. He claimed the department had addressed the program through a multi-agency task force that included Las Vegas Metro, North Las Vegas, Henderson Police Departments and NHP. The program had completed significant investigations, which had been completed in that 14-month period of time, had recovered stolen property and made significant arrests. Regardless, Mr. Drew concluded the actual impact to the 1,100 automobile per month could not be calculated at that time.

The last item within the budget account recommended three investigator positions that had been transferred into the Division of Investigation from the Registration Division’s Bureau of Enforcement, to be transferred back to the Bureau of Enforcement. Mr. Sparks explained those positions were funded by the Highway Fund and were dedicated to performing investigations related to the automobile industry.

Mr. Sparks mentioned recommended realignments to expenses in the Division of Investigation account with and the Narcotics Control account were also made.

CAPITOL POLICE – THE EXECUTIVE BUDGET 4727, PAGE DMV-194

Mr. Sparks the two new positions were recommended with the approval of the Interim Finance Committee (IFC), to staff the Supreme Court’s office in Las Vegas. There were no other additions to the Capitol Police Budget Account.

Briefly returning to the issue of the elimination of the auto theft program, Mr. Price wondered if the program’s duration was sufficient to determine it’s effectiveness and he asked how the problem would be addressed in its absence.

Mr. Drew explained the local agencies would address the auto theft problem in the same manner in which they had addressed the problem before the program had been implemented.

Mrs. Chowning identified, for the purpose of subcommittee, specific issues she would like to see addressed. First, Mrs. Chowning requested figures denoting the number of vehicles recovered through the auto theft program and the total costs recovered. She thought the program had had significant results, especially one recovery worth over $300,000. Second, Mrs. Chowning requested an alternate proposal that would thoroughly deal with the problem should the program be eliminated.

Mr. Drew responded that he would be able to provide Mrs. Chowning with such information in subcommittee.

Mr. Sparks then briefly noted that the Office of Traffic Safety had four budget accounts whose only significant change existed in the Motorcycle Safety Program, Budget 4691. He recalled an on-going proposal that would fund a mobile classroom which motorcycle rider trainers could use at various training locations. The program recommended the purchase of a pick-up truck and a fifth wheel trailer for their use.

Senator Neal, moving back to the Capitol Police budget account, wondered why the performance indicators implied that Capitol Police members were installing alarms in the buildings. Mr. Sparks clarified the performance indicator described alarm response time.

Mr. Sparks concluded his presentation by stating the State Fire Marshal Division had two budget accounts whose recommendations continued current program levels. Regardless, he claimed the state Board of Fire Services had taken the position that the State Fire Marshal should be more active and should provide more services. He believed the subcommittees would receive future testimony in regard to that issue.

Deputy Director, Bruce Glover, presented the budget overview for the Motor Vehicles branch of DMV & PS by reading from a prepared statement. (see Exhibit E). Mr. Glover stated he would first address pertinent changes made to the budget accounts for the current biennium and concluded by highlighting the important component’s of the department’s budget requests.

Mr. Glover began by describing Project Genesis, which completely revamped the way DMV completed its objectives. Using a customer perspective, new work processes were developed that should dramatically improve service to the citizens of this state. However, in order to make the new process a reality, Mr. Glover stated a new computer system and organizational structure were required. He noted in the 1997 Legislative Session, the department was given permission to proceed with these plans.

Since the end of the last legislative session, Mr. Glover explained the department had been working with the Subcommittee of the IFC, which had provided DMV with guidance and support for Project Genesis. Mr. Glover took a moment to recognize Senator Jacobsen, Senator O’Donnell, and Assemblywoman Vonne Chowning whose assistance, tough questions, encouragement, humor, and continued support for the project Mr. Glover felt would bring DMV into the 21^st century. He also recognized former Subcommittee Chairman Assemblyman Close, a person whom Mr. Glover believed provided the department with the guidance and leadership that a project like Genesis required.

With the assistance of the Subcommittee of the IFC, Mr. Glover felt the department had been able to overcome significant milestones on the path to what he called "Big Bang. " Big Bang was the day DMV offices across the state would convert to the new system, officially set to occur August 2, 1999. Mr. Glover claimed site preparation in the branch offices, including cabling and electrical changes for new computer systems was underway. Development of the computer program was being completed by Deloitte and Touche Consulting and was reported on schedule; the new organizational charts had been finalized and state personnel had approved new job descriptions and had established appropriate pay classifications.

Mr. Glover stated that with the approval of the IFC Subcommittee, DMV had been able to move forward on both the technology and the organizational plans. However, a number of significant issues still remain. For instance, he stated the approval to submit a bill, which would change the organizational structure of DMV, represented a significant milestone to ensure that the department would be able to benefit from the new technology tools.

Mr. Glover commented the new organizational structure would be divided by types of service into four divisions instead of being organized into Registration and Driver’s License. He noted the employees in each division would share a common goal. Budget Account 4735, Division of Field Services, was established by the 1997 Legislative Session as the first step in that realignment process. This step would be completed during the forthcoming biennium and was expected to provide excellent face-to-face customer service regardless of the type of transaction. That would allow for one DMV employee to serve a customer with both driver’s license and registration transactions.

Mr. Glover reminded committee members that during the previous IFC Subcommittee meeting, the department had given a demonstration of its one-stop customer service concept to subcommittee members. He noted a similar demonstration would be held as part of an Open House for Legislators on February 2, 1999 from 3:00 p. m. to 5:00 p. m.

Mr. Glover said the goal of the department’s budget was to increase turnaround time on transactions sent by mail and to quickly answer telephone inquiries. Furthermore, in the long term the department’s goal was to provide as many cost-effective alternatives as were practical so that customers would be able to conduct business with DMV without physically entering a branch office. He remarked the state would realize a return on its investment in Genesis should the Committee decide to provide funds for these alternative services. Mr. Glover then indicated in the forthcoming session, the department would attempt to gain approval for services such as Internet, Interactive Voice Technology, Fax on Demand, and Registration Renewal at emissions control stations. He noted these services would be managed in the Central Services division.

Additionally, Mr. Glover explained the Compliance Enforcement Division was comprised of three budgets. Budget Account 4740, which represented the Bureau of Enforcement component of the Registration Division; Budget Account 4722, which was comprised of Pollution Control; and Budget Account 4717, which was comprised of Motor Carrier. He relayed the goal of this combined group was to regulate the vehicle industry, including dealer’s, automobile wreckers, manufacturers, emission control stations, field suppliers and occupational licensees associated with those businesses. Within these three accounts DUI, traffic safety schools, and third party driving schools would be regulated. Lastly, Mr. Glover remarked the group would contain a new function entitled operational review, whose purpose would be to ensure that all the offices were utilizing the new work processes properly. Mr. Glover felt that by bringing all of these activities into one unit, DMV would bring consistency and efficiency to the regulatory process.

Mr. Glover identified a fourth division that he felt represented a new concept for DMV. Previously when new programs had been implemented, tasks were distributed to a variety of people in the field to complete, in addition to their job of serving customers. This resulted in an inadequate performance on the part of both tasks. Additionally, new programs had implementation problems, causing customer service to suffer. Therefore, Mr. Glover stated the goal of the Budget Account 4742, the Management Services budget, was project oriented rather than transaction oriented.

Management Services itself contained two distinct groups: the Fiscal Group, which prepared budgets and cost justifications for new programs, and tracked expenditures. The Program Group planned, developed, and implemented new programs. Together, Mr. Glover felt these two groups would provide DMV with the focus and the expertise necessary to develop policies, procedures, tracking systems, training programs, and documentation which in turn would support the ability of the other three divisions to absorb new programs with minimal impact to customer service.

Mr. Glover noted in the 1997 Legislative session, Budget Account 4739 was established to fund Project Genesis. He stated the department had utilized this account to isolate the costs of the re-engineering project. Mr. Glover believed the information was valuable not only to DMV but to other agencies that might take on similar projects in the future.

Next, Mr. Glover claimed the process under which those budgets were formulated had been challenging because the budget requests where based upon the original Registration and Drivers License Divisions. He noted that once these budgets were completed, the department then requested the assistance of the Administrative Services division to help accomplish the task of moving monies into new accounts. The department transferred Position Control Number’s (PCN) and other costs based on a match between the purpose for the expenditure and the tasks associated with those new divisions.

In the second portion of Mr. Glover’s presentation, he highlighted the most significant points in the department’s budget.

In the Field Services Division, Mr. Glover stated, with the support of committee members, the department had been able to expand their staff in southern Nevada in order to serve the growing population of the state. In the forthcoming session, Mr. Glover requested that committee members turn their attention towards the northern half of the state where the department had experienced increased volumes of transactions. He recalled the Genesis cost justifications were based upon stabilizing the number of buildings and staff needed to cope with the population of Nevada. However, he felt that these benefits would only be fully realized if DMV were to implement the enabling technologies that could provide alternate ways for customers to do business with DMV. With the aid of the legislature, DMV would commence the implementation of this program in the beginning of the biennium and would begin seeing results by the FY 2002 and FY 2003 timeframe. Meanwhile, DMV had made modest requests for additional staff to handle the significant increases in volume that DMV has already been experiencing.

Mr. Glover stated the Field Services Budget included requests for three new positions in Fallon, three new positions in Minden, seven new positions in Carson City, and 13 new positions in Reno during FY 2000. The account also requested three new positions in Elko and two in Winnemucca in FY 2001. Mr. Glover felt these new positions would allow for additional windows to be open, improved supervisory backup, more availability for drive and CDL testing, and better supervision of office activities. He relayed in many of the rural offices, supervisors’s were working supervisors, giving driving tests on an on-going basis and were having trouble in multiple areas.

In this budget, Mr. Glover also identified the request for funding of a program that would verify social security numbers with the Social Security Administration, an online project that could allow for immediate verification.

Mr. Glover explained this account reflected the new division that would provide DMV’s production capabilities. Along with the renewal by mail programs, this account also included titles, license review, data entry, and the license plate factory. Mr. Glover declared all of those areas had experienced increased workloads. He also noted the budget requested one position in Titles, due to sunset at the end of FY 2000; three new DMV technicians, two of which were existing positions due to sunset. Those additions would handle the significant increase in telephone calls, correspondence, medical files, accident reports, and withdrawal actions and would free team leaders to have time to better monitor the activities of this section.

The budget account also called for the addition of three new data-entry operators who would handle the significant increase in transaction volumes of convictions, police records, phone calls, and microfilming. Furthermore, the budget requested one driver/warehouse worker for the License Plate Factory who would reduce overtime, assist with deliveries, and oversee the inmate staff using the two-man safety rule. Finally, Mr. Glover stated the department had requested funds for the purchase of software, which would update the OCR microfilming system in order to be FY 2000 compliant.

Next, Mr. Glover described DMV’s budget requests for Compliance Enforcement, which contained requests for 11 new positions. Six of these positions were designated for the Bureau of Enforcement Activities. A request for a compliance enforcement investigator in order to supply Elko with a full-time position was also relayed.

Additionally, the budget account requested two program officers who would expand the number of licensee workshops, educational programs, and informational seminars provided on a quarterly basis for FY 2001. Mr. Glover felt that by focussing the bureau’s training efforts in that area, the bureau would be able to make more effective use of investigators.

The account also requested funding for three existing NDI positions, which were to be transferred into the Compliance Enforcement Division.

Mr. Glover explained this account requested one new position for Emission Control to expand the Smoking Vehicle Program in Clark County where the number of contacts had grown from 490 to 6,835 in FY 1998. Additionally this account requested four new emissions technicians for the Visible Smoke Enforcement Program (VSEP) program which was being absorbed into DMV from NHP.

Mr. Glover cited the request for four new positions in the Motor Carrier area including one revenue officer to be located in Las Vegas in order to provide better customer access, as approximately 50 percent of the bureau’s collection activity was in the southern region.

A management analyst position was also requested to increase efficiency and to reduce errors. This program would focus on the development operation of data base programs used by all of Motor Carrier. Mr. Glover noted that at the time, those activities had been spread across various staff and outside vendors. He believed this position would allow for the consolidation of these efforts.

Finally, the account requested the extension of two program assistant positions, due to sunset June 30, 1999. Noting their efforts to review transactions submitted by special fuel suppliers, transporters, importers and exporters, Mr. Glover stated the department had uncovered many errors, resulting in significant lost revenues to the state. Mr. Glover felt maintaining these positions would allow DMV to continue its current review program.

Mr. Price interjected to inquire if DMV furnished any of their offices with supplies from the prison industry system. Mr. Glover responded that much of the department’s furnishing and supplies were obtained through the prison industries.

Mr. Hettrick believed the performance indicators for Budget Account 4717 and Budget Account 4740 were virtually identical performance indicators that described basic "counting" activities. Instead, Mr. Hettrick indicated that he and other members of the committee would like to review indicators that show how proficient the department had been in completing its objectives, rather than how often they completed a task. He felt this was essential for multiple accounts that utilized identical indicators.

Mr. Glover responded that the issue had already been addressed in an inter-departmental meeting and he assured Mr. Hettrick the problem would be corrected in time for subcommittee.

Referring to Budget Account 4731, Mrs. Chowning asked Mr. Glover how much money was returned to taxpayers as a result of the 1997 Legislative Session’s decision to revoke the fine for not having returned a registration form. Mr. Glover replied a total of 1,072 refunds had been requested, 870 requests were approved, resulting in approximately $54,400 in refunds.

Next Mrs. Cegavske took a moment to recognize DMV and public safety personnel for their efforts on AB 404, the driver’s education bill. She expressed her pleasure in working with staff from both departments and stated a pamphlet would be available in the near future.

Continuing his presentation Mr. Glover addressed one-shot appropriations requests. Mr. Glover expressed DMV’s extensive commitment to Project Genesis, which ensured the project would meet department requirements and would be supported by department resources. He explained the implementation of the new technologies and the service concepts would progress throughout the next biennium. Therefore, the department’s requests for funds were limited to funding for the completion of Phase II of Project Genesis, which facilitated one-stop service, and the first year of Phase III, which provided enabling technologies. Mr. Glover indicated these requests would be delivered to committee members in a one-shot bill.

Actual implementation of the new computer system would commence by the beginning of FY 2000. Mr. Glover stated, once implementation began, the old offices would be converted to adhere to the new service oriented concepts and employees would be trained to use their new tools.

Mr. Glover also described how the department initiated the implementation of Q-Matic, the queuing system in the Sahara and Henderson offices. The new system proved popular with customer’s who preferred being seated while waiting for service. In addition, Q-Matic had been able to provide supervisors with an accurate count of demand for various transactions.

In FY 2000, Mr. Glover explained the department would begin the detailed planning and procurement process to implement digitized licensing by FY 2001. The new license technology would improve license security and would provide more accurate verification for license duplication requests, allowing the department to provide photo verification of identification to assist law enforcement officials.

To provide a cost-effective way of giving customer’s 24-hour access to DMV from their homes, the budget also requested funds for electronic commerce services. In the next biennium, Mr. Glover stated DMV would develop and implement applications using Internet, Interactive Voice Response technology, and Fax-on–Demand. Renewal, replacement, and record inquiries would all eventually be handled by these services.

Finally, Mr. Glover explained the department designed a system where pass/fail information would be transmitted from emissions stations directly to DMV. Eliminating the need for customers to present a certificate in order to register their vehicle, in the forthcoming biennium DMV would expand the benefits of their technology investments by allowing the customer to pay for their vehicle renewal at the emission station itself. The decal and registration would be processed in Central Services overnight and mailed directly to the customer.

Chairman Arberry returned to the "Big Bang" concept and asked Mr. Glover what back-up technology the department would adopt, should the new system fail. Mr. Glover replied the Legacy system would still be in place if the new system failed to come on-line.

Chairman Arberry also asked why the department chose to implement the new computer program immediately, rather than using the phased in approach previously espoused. Mr. Glover answered Deloitte and Touche was the only firm that met the bid requirements; the firm had proposed the "Big Bang" concept as a means of meeting those budget requirements. Mr. Glover disclosed no other vendors met the allowable budgetary constraints and he felt the state would benefit most by using "Big Bang. "

Chairman Arberry remarked the department had failed to provide accurate performance indicators, which evaluated the overall impact of Project Genesis. Admonishing the department for its lack of baseline or projective performance measures, which would be needed to provide support for the on-going cost of the project, he asked why it would cost an additional $200,000 for employee upgrades.

Mr. Glover explained the $200,000 cost figure was associated with the realignment of the existing organization into the new organizational structure. Chairman Arberry requested Mr. Glover to provide information concerning the performance indicators for Project Genesis to the appropriate subcommittee.

Chairman Arberry next inquired if the department had addressed the transition of funding to TRPA. John Drew responded to Chairman Arberry explaining a BDR submitted by the Department of Administration (DOA) called for a portion of the Pollution Control Fund reserves to be utilized to fund TRPA. Regardless of his affinity for Lake Tahoe, Chairman Arberry expressed concern that such a transfer of funds would be unfair because it would require both Washoe and Clark counties to pay for the lack of funding within TRPA.

Mr. Drew felt that he could not elaborate entirely on this issue as the department was not involved in the discussion of TRPA’s budget or the discussion of the BDR, which would subsequently make those changes. He deferred his response to Mr. Comeaux.

Mr. Comeaux responded to Chairman Arberry by re-addressing a BDR, which called for the expansion of allowable uses of the Pollution Fund. In the development of this BDR, Mr. Comeaux said the administration had taken into consideration the fact that the funds had been collected in the two counties and that the benefit of funding TRPA would not be realized in either Washoe or Clark county. Nevertheless, Mr. Comeaux noted there were new activities and positions in a number of other budgets, which were supposed to receive support from the gas/pollution funds as well. He noted these accounts were all tied to the Environmental Improvement Plan for Lake Tahoe. The Department of Administration felt Lake Tahoe’s importance to the state as a whole merited the diversion of these funds and that such a diversion was an appropriate use of the funds.

Chairman Arberry expressed concern that this would deplete the amount of funding Clark and Washoe counties might request for pollution control. He inquired if the DOA had an alternate plan, should the one under discussion fail to gain approval.

Mr. Comeaux replied that an alternate plan was not in existence. If, however, the transfers were allowed, a balance in the reserve of $3.5 million, would still exist. He emphasized it was not the intention of the Administration to utilize these funds in order to deprive Clark and Washoe counties of desired funding.

Chairman Arberry forewarned Mr. Comeaux to be prepared to answer questions related to this issue in subcommittee.

Chairman Raggio wondered if the transfer of funds was somehow tied to the commitment made by the federal government and President Clinton at the Tahoe Summit or to the state’s commitment also made at the time by then-Governor Bob Miller.

Mr. Comeaux responded part of the fund transfer was related to the commitments made during the Tahoe Summit. In fact, new positions and activities in the Division of Parks and Forestry were directly tied to that commitment. Legislation was submitted that would authorize the issuance of $3.2 million in bonds related to the Tahoe Summit decisions. Mr. Comeaux said Governor Guinn had not yet had the opportunity to review any of the programs resulting from those commitments.

Chairman Raggio expressed concern that neither the federal government nor then-Governor Miller had consulted the legislature in regard to those commitments. Although Nevada’s commitments to those proposals would total over $80 million in 10 years, Mr. Comeaux explained the commitments would not be confirmed unless they received the approval of the legislature.

Accordingly, Chairman Raggio believed The Executive Budget would lower the amount of funds the two counties would receive by $1 million. Mr. Comeaux said the amount of funds available to Washoe and Clark counties would decrease yet he had calculated the proposed transfers in conjunction with the grant requests would still leave a $3.5 million reserve for Washoe and Clark counties.

Senator Neal questioned if a fee was charged for insurance verification as well as for the fingerprint process, which was sent to the repository. In reply, Mr. Sparks said fees were collected for the fingerprint check if the prints had been forwarded to the FBI for a record check. An additional fee was also collected for remittance to the FBI. Next, Senator Neal asked when fees were last raised. Mr. Sparks did not have that information, but he suspected it had not been recently. Although a fee was not charged for the Insurance Verification Program, Mr. Glover added that if a driver had been suspended as a result of the program, a $50 reinstatement fee was collected.

Senator O’Donnell cited the department’s proposal for four additional personnel for Information Services and requested to know the specific account number and the level at which the new positions would be hired in dollar terms. Mr. Sparks replied he would provide information concerning salary grades in Budget Account 4733, the Public Safety Information Technology budget, in subcommittee.

Following Senator O’Donnell, Mr. Parks expressed concern over revenue lost from the lack of enforcement of diesel fuel regulation and he inquired if the budget aggressively addressed that loss of revenue.

Mr. Sparks replied the budget did not include an item to correct the problem, yet the department had been working internally with NHP and Motor Carrier Bureau to develop an enforcement program for dyed fuel regulation. Previously, non-taxed diesel fuel had been dyed so law enforcement officials could easily determine which carriers had not complied with the regulations. He felt the program could be carried out without any impact on the budget due to grants available for fuel tax evasion enforcement.

Adjutant Major General Drennan A. (Tony) Clark presented the budget overview for the Office of the Military. Attending with General Clark were John Orr, Administrative Services Officer; Chuck Abbott, Director of Veterans Affairs; and Major Terry Sullivan, Facilities Management Officer.

Beginning his budget overview, Major General Clark first addressed the new National Guard Readiness Center in Carson City. The military’s number one project, the new Readiness Center, had already received federal funding for its construction. The Executive Budget requested the state to provide its share,
$3 million, through the Capital Improvement Project (CIP).

At 35 percent design, Major General Clark stated the Office of the Military had been working diligently with Public Works Board (PWB) to complete the design within 30 days. If funded through the legislative process, the department planned to go to contract by September 1999. Major General Clark anticipated construction of the project would be complete by late 2000 and the facility would be operational by early 2001. The facility would be constructed on a 28-acre parcel of property located on the corner of Evans and Fairview in Carson City. He noted once the building’s construction was completed, the department would vacate its current facilities on South Carson Street. Subsequently that facility would be transferred to the state.

Major General Clark relayed the department had contracted for an outside appraisal of its current property on South Carson Street whose preliminary value was set at $6.5 million. When available, Major General Clark indicated he would deliver copies of the final appraisal report to Chairmen Arberry and Raggio, to Perry Comeaux of the Department of Administration, and to Eric Raecke of the Public Works Board (PWB).

Major General Clark felt the new facility would consolidate the currently fragmented operation into one building with sufficient space for all activities. With the help of advanced technology the department should be able to save substantial amounts of money in heating, utilities, air conditioning, and other environmental processes while enhancing the department’s ability to exchange and transfer information.

Major General Clark introduced Major Terry Sullivan, Construction and Facilities Management Officer, who described the basic design of the new facility.

Major Sullivan reminded committee members the department had requested and received advance planning funds in the 1997 Legislative Session. He stated the department had achieved its prior goal to acquire the necessary funds to complete the design of the Readiness Center and to award the building contract by the end of the fiscal year. In fact the $477,000, which the state had given for advanced planning strengthened the department’s leverage against the National Guard Bureau, which was subsequently able to match the design money.

By January, Ganther-Milby Architects, the firm designing the building facility, had already completed 35 percent of the design. The design still had to be reviewed by the National Guard Bureau in February. After a PWB review, type B construction documents would be developed and completed by July. The bid process was scheduled to begin by August, while the actual contract was to be awarded by mid-September. Major Sullivan reiterated as a result of 1997 Legislative Session, General Clark had gained the federal construction funds that were added into the current fiscal year.

Chairman Arberry asked when the new Readiness Center would be completed. Major Sullivan stated that if conditions remained status quo and the contract was awarded in mid-September, the Readiness Center building would be completed by the end of 2000 and fully operational by 2001. Adding onto his previous question, Chairman Arberry inquired when construction on the new veteran’s home would be completed. As he did not have that information, Major Sullivan replied the veteran’s home would be addressed later in Major General Clark’s presentation.

Referring to an easel chart, Major Sullivan described the physical location of the new facility as well as components of the proposed design. Located at the intersection of Edmonds and Fairview, Major Sullivan identified the existing building, a consolidated maintenance building, as well as proposed sites for the parking area and the warehouse facility. Next, Major Sullivan referred to a visual graphic of the 35 percent level floor plan, which was a two-story building with parking and formal entrances. Major Sullivan remarked the comprehensive design included the Air National Guard headquarters section and it incorporated all of the staffing sections for the Army. Finally, he noted the public use potential of the building; auditoriums, classrooms, services for the blind, and cafeteria were all included in the building design.

Major General Clark stated the department had also requested four new positions in The Executive Budget. The first position was a Management Assistant II to provide secretarial support for the Adjutant General and the Command Group, including the Army Guard Chief-of-Staff, the Air Guard Executive, and the full-time Judge Advocate. Currently, the department had one secretary, a federal civil service employee, who was severely over-worked and needed additional assistance. Notably, as required by new federal regulations, all civil servant employees who were not dual status technicians were earmarked for elimination over a seven year period. Dual status technicians were persons employed in the National Guard militarily on the weekends while maintaining full-time status as military technicians for the National Guard during the week. Subsequently, eighteen or nineteen of those employees were not classified as dual status technicians, including two secretaries who were employed in the command suite. Major General Clark explained because the department could neither hire any additional employees who did not have dual technician status nor transfer employees from another department into the secretarial positions, requested support for this area was vital to their operations.

Chairman Arberry queried whether or not certain engineering positions, approved by the Interim Finance Committee (IFC) had been included in The Executive Budget.

Major General Clark replied those position had not been added to The Executive Budget. Administrative Services Officer, John Orr, relayed the two engineering positions had not been approved by IFC in time to be added to the agency requests in The Executive Budget. The department had been negotiating with both LCB Fiscal Division and the Budget Office and those positions would be added to the budget requests as committee members recommended. Chairman Arberry followed by asking if those positions would be phased in. Mr. Orr replied negatively; supported by a 75 percent federal to 25 percent state ratio, the positions had been approved for the current fiscal year and were hired immediately. He further explained when the IFC approved funding for those positions, the IFC had also approved a transfer of funds from Budget Account 3652 to 3650 so that there would be no additional state impact in the current fiscal year. However, when the department last testified before the IFC, the department pointed out continuing state support for those engineering positions would require a 25 percent state share commencing July 1, 1999.

Also requested in The Executive Budget Major General Clark mentioned request for three additional positions, a Maintenance Worker II, a Building Custodian II, and a Groundsworker II who would not begin until the new Readiness Center was operational.

Major General Clark said the third component to the department budget request was Project Challenge, a 5 month in-residence program run by the National Guard to address the problem of high school dropouts. The program assisted at-risk youth with life skills, introduced them to community service, and provided them with the means to achieve a secondary educational degree through the General Education Diploma (GED), or a high school diploma. He explained the federal government had been funding the program at a 100 percent level, however a year and a half ago, a state matching requirement was introduced. By the end of three years, the state matching requirement for the program would be 60 percent federally funded, 40 percent state funded. Major General Clark reminded committee members the IFC in March had approved the department request for the state’s portion of funds for the summer course and the current course amounting to a total of $65,000.

Currently, there were seven students participating in the program which was being conducted at the former Williams Airforce Base in Phoenix, Arizona. Major General Clark indicated the Arizona partnership provided the physical facilities, including barracks, dining facilities, and classrooms that the Nevada National Guard would not have been able to replicate at a reasonable cost. He recalled the program was operated like a boot camp aimed at developing the educational and social needs of at-risk teens. After graduating from Project Challenge students would be paired with an adult mentor in their home community who would meet with them on a regular basis over the period of one year. The mentor would assist them with any educational, life-skills, or job related questions. To date, 117 students had participated in the program; 52 students had received GED, four students received high school diploma’s, nine students joined the military, and 12 were in trade school, while eight students were completing post-secondary education and twelve were in the mentoring system. Additionally, five students counted as graduates but who did not graduate from the program, had received their GED by testing before the completion of the program date, consequently choosing to leave the program at that time.

The fourth component to the department’s budget request was the move of the National Guard Base in Reno. Major General Clark provided committee members with a copy of the full master plan, the executive report of the master plan, as well as with a large schematic of the proposed National Guard Air base at the Reno- Tahoe International Airport. Currently, Major General Clark explained, the master plan was completed and the contractor for the airport authority was completing environmental assessments the project books required for each facility and each building. Once completed, the books would be sent to the National Guard Bureau and to the airport authority for approval and review. Afterwards, the books would be forwarded to the architect who would then begin to design the actual facility. The department anticipated a 35 percent design completion by April 2000. Major General Clark predicted the 5 year construction process could begin as early as 2001.

Finally, Major General Clark addressed significant future military construction projects. Over the biennium, he noted there were no major construction projects that required state involvement. In April, the department intended to commence construction of the third hangar at the Army Aviation facility in Stead, however, that project was completely federally funded. Furthermore, in 2000, the department would begin a $1.5 million repair to the parking facility at the Army Aviation Facility at Stead.

Next, presenting the budget overview for the Department of Veterans Affairs (VA) Major General Clark introduced Chuck Abbott, the Executive Director of the Nevada Commission for Veterans Affairs.

The Nevada Commission for Veteran’s Affairs was established in 1966 in order to provide assistance to veterans, family members of veterans, and residents of Nevada who were serving on active duty. Beginning his presentation Mr. Abbott highlighted several agency responsibilities, which included a service officer program through which the agency assisted veterans in filing claims with the federal government for benefits. Additionally, the agency had a guardianship program for incompetent veterans and managed two state cemeteries. Finally, the agency served as a clearinghouse for information concerning veteran’s benefits.

In the last year, the agency began to provide technical support and training to those counties which indicated a desire to establish county veteran service coordinators. Moreover, in the 1997 Legislative Session, the agency was asked to establish, operate, and manage a state veteran’s home in Nevada.

Mr. Abbott said the major goal of the agency over the next biennium was to complete the construction of the veteran’s home in Boulder City. The second agency goal was to meet the demands of the two state cemeteries. Third, the agency hoped to better develop the county veteran coordinator program.

Mr. Abbott felt the increasing number of veterans in the state in conjunction with the increasing average age of Nevada’s veterans posed the most significant problem for the agency in the future. World War II veterans comprised a quarter of the total number of veterans in Nevada and were approaching their mid-70’s to early 80’s. As a result, the medical needs of those veterans were increasing at an alarming rate, including the demand for burial services.

There were no funding changes recommended by the Office of the Governor with which the agency did not concur. Mr. Abbott believed the agency budget itself was reasonable as there were no additional positions requested. However, there were three CIP’s that had been approved by the 1997 Legislative Session that were currently in progress. First, CIP 97-C20, which constructed a chapel at the Boulder City Cemetery, was scheduled for completion in FY 1999 and would be managed by the Public Works Board (PWB). Notably, veterans had raised
$425,000 in private donations toward this project. Second, CIP 97-C20L, an expansion of the burial grounds at the Boulder City Cemetery was also scheduled for completion by FY 1999. Third, CIP 97-C16 had been approved to provide funds for the Southern Nevada Veterans Home.

The only CIP to be presented in the current session, Mr. Abbott stated was
CIP 99-C9. That project requested funding to expand the burial grounds at the Fernley Cemetery in addition to enclosing the ceremonial pavilion and constructing an outdoor public restroom. The estimated costs for this project were $746,000 and 50 percent of the required funds could be obtained through federal grant.

Senator Mathews believed legislators had approved an agency request for funds to complete the construction of the pavilion in Fernley during the last session. Mr. Abbott corrected Senator Mathews by referring to a request in 1995 to enclose only portions of the pavilion at the Fernley Cemetery. That project had only enclosed three sides of the pavilion and since then it had become apparent that a fourth wall would need to be added to fully enclose the area.

Mr. Beers asked Mr. Abbott to elaborate upon the information services line item which illustrated an increase from $7,700 to $20,000. Mr. Abbott responded, with some uncertainty, that the figures indicated the costs of replacement equipment only, but he would provide a definite answer at a future meeting.

Mr. Abbott continued his presentation by highlighting the State Veterans Home Budget Account 2561. In the 1997 Legislative Session, funding had been approved for CIP 97C-16 which provided for the construction of the Southern Nevada Veterans Home. The Nevada State Veterans Home would be a skilled nursing facility established specifically for veterans disabled by age, disease, or other disabilities that were incapable of earning a living. Located in Boulder City, the veterans home would be a single story, 180-bed facility built to skilled nursing home specifications. Providing essentially the same services as community based nursing facilities, the facility would also assign 24 beds for those afflicted with Alzheimer’s or dementia.

Mr. Abbott related plans for a veteran’s home in southern Nevada had been under design since July 1997 and all of the major requirements including environmental assessments, soil testing, plan reviews and land transfers had already been completed. The project was put out to bid on December 22, 1998, opening was scheduled for February 4, 1999. Upon acceptance of the bid, the contract would then be forwarded to the U. S. Department of Veterans Affairs for final grant approval. Once approval by the federal government was provided, the contract could be awarded and construction could begin.

PWB predicted the official groundbreaking in the 12-month construction process to begin in March 1999. Mr. Abbott explained construction plans designated an April to May 2000 time frame for start-up and licensing. Patients would be admitted by July 2000.

In order to develop the agency’s budget requests for the current biennium, Mr. Abbott stated detailed financial reports from five private homes in the Las Vegas area were extensively reviewed. After averaging the cost of each expense listed on those reports and equating the total to a 180-bed facility, the agency was able to design a competitive facility with a more accurate understanding of budgetary expenses. Personnel requirements were developed based upon personnel requirements from other nursing facilities throughout the state, and from requirements established by the state licensing board. Moreover, these requirements were adjusted to ensure a 24-hour day, 7-day week coverage.

Mr. Abbott noted the agency’s start-up plan called for hiring several key personnel prior to the opening of the facility. Those employees would be responsible for ensuring that all procedures were in place and that the facility was properly licensed before patients could be admitted. Because numerous licenses and inspections had to be obtained before federal funds could be received for the home, that period would be critical to the opening of the veteran’s home. The start-up plan also called for a gradual phase-in process for the opening of the three 60 bed wings, which would occur as the patient population increased. Likewise, a similar phase-in process for employee hiring would also occur over a 1-year period.

Mr. Abbott explained the median range of estimated costs for running a state veterans home was between $115 to $145 per patient per day. He indicated some states funded well above that level while others funded well below it. The variation in costs depended upon the level of care, the extent of care, the quality of care, the nature of services of provided, the efficiency of operations, and the admissions requirements of the veterans. Mr. Abbott explained in the state veterans home program, the VA would pay the state a specified amount for the daily care for each veteran; that amount was currently $45 a day per veteran.

One of the major features of the veterans home program was the fact that most veterans eligible to receive care from the new veterans home would also be eligible for additional VA benefits, pensions, aid and attendant care allowances. Therefore, Mr. Abbott believed the residents themselves could be considered a major source of income for the home. The remaining funds would come from Medicaid, the General Fund, and from third party sources.

Mr. Abbott felt the first key to managing the home would be the ability to attain and maintain occupancy, which was anticipated to occur within 12 months of the home’s opening. Secondly, efficient administrators could provide a valuable return by helping maintain low operating costs. Thirdly, administrators could cut costs by emphasizing cost recovery for Medicaid costs, VA per diem costs, or self-payment.

The possibility of contracting the management of the home out to the private sector also had been evaluated by the agency. Privatization was effectively analyzed by contacting personnel from those states with privatized management as well as by discussing privatization with administrators from facilities run by the public sector. The department found, nationally, 16 out of 90 veteran’s homes were subject to privatization. Mr. Abbott noted the agency would be happy to share its opinions concerning privatization.

Senator O’Connell asked Mr. Abbott to describe the average expenses for a veteran receiving care from the home. Mr. Abbott reiterated the estimated costs for running a veterans home averaged between $114 to $145 per patient per day; that average was used by the agency as a standard representation for future costs. Mr. Abbott then indicated the federal Department of Veterans Affairs would pay a certain amount, set annually, to the amount of $45 a day in the current fiscal year. That amount would increase annually, in order to maintain a one third cost sharing ratio. Because some veterans would receive as a minimum, pensions, additional allowances from aid and attendance, and disability payments, the clientele could assume one-third of the costs. Senator O’Connell wondered if veterans were required to relinquish all benefits to the Commission or if they would be required to commit only one third. Mr. Abbott anticipated that each person living in the home would be assessed their share of the costs and if they had the means with which to cover those costs they would be responsible for a monthly payment to the home.

Michael Pitlock, Executive Director for the Department of Taxation, presented the budget overview for the Department of Taxation.

Mr. Pitlock stated in the last fiscal year, the Department of Taxation collected
$2.5 billion resulting from the administration of over 20 different tax programs. Those funds were subsequently re-distributed to over 130 government entities.

In the last biennium the goal of the department of Taxation’s budget was to improve taxpayer service; this goal had been achieved explicitly due to the appropriations derived from the 1997 Legislative Session. Approaching compliance with the Taxpayer’s Bill of Rights, the department had achieved a 100 percent response rate to taxpayer telephone inquiries compared to a 97 percent rate for written correspondence. With additional staff and training, Mr. Pitlock felt the department would soon reach 100 percent compliance.

However, in the current biennium, Mr. Pitlock said the goal of budget was an emphasis on improving taxpayer compliance through education and enforcement within the audit division. In the budget request, he pointed out that all new positions included in The Executive Budget were located within the Audit Division.

Expressing the significance of improving taxpayer compliance, Mr. Pitlock referred to two charts. The first, (Exhibit F) illustrated the levels of taxpayer compliance and the current level of effort the department had undertaken to deal effectively with that problem. The second chart, (Exhibit G), was an historical analysis depicting the department’s audit recovery rate and its changes over time.

Referring to Exhibit F, Mr. Pitlock explained that currently, state and local governments had lost an estimated 4.4 percent of the sales and use taxes through non-compliance. That amount represented $80 million annually, 30 percent of which was state revenue, while 70 percent was revenue generated by local governments. He stated that based on their current compliance efforts at current staffing levels, the department had historically recovered 37 percent of that initial noncompliance amount. In the last two fiscal years that amount had averaged $20 million per year leaving, $60 million unaccounted for. Mr. Pitlock repeated the goal of this budget was to reduce that level of noncompliance thereby providing additional revenue to the state and the local governments without raising the tax rate. On an equitable basis, Mr. Pitlock felt the taxpayers should pay what they had been asked to pay.

Examining Exhibit G Mr. Pitlock illustrated how the combined audit program impacted audit recoveries. After the initial catch-up period ended, the department was able to settle into a mode where its audit staff was able to recover $17 million annually. Nevertheless, Mr. Pitlock expressed concern over the fact that as the number of sales and use tax accounts grew, the audit staff remained constant, causing the level of audit penetration to fall. Mr. Pitlock felt if the level of audit penetration continued to deteriorate the level of non-compliance would be higher than what the department was currently experiencing. Therefore, the number one priority for the department’s budget request was to increase the audit staff.

Referring to Exhibit G, Chairman Raggio asked Mr. Pitlock how many years the net recovery rate of $20 million per year was reached. Mr. Pitlock responded the highest single year of audit recovery reached a level slightly above $23 million. Averaging amounts recovered over the last two fiscal years, the department recovered $20 million. Because the audit penetration rate had dropped since that time, the recovery rate leveled off at a $17 million annual audit. For this reason Mr. Pitlock felt additional audit staff were crucial to returning the penetration level to its previous amount.

Chairman Raggio believed the issue needed further clarification because in his interpretation of the chart, the net audit recovery per auditor had declined significantly, mitigating the impact additional staff might have on the recovery rate. Mr. Pitlock explained the net recovery per auditor declined because large audits had not been completed during the combined audit program. Immediately following that program, the auditors began to concentrate on large accounts, causing a peak in the recovery rate above what the department would expect on an on-going basis. Once the catch-up period ended and the department returned to a normalized rate of operating times, the department had fallen behind in audit penetration because the number of accounts had grown. Thus Mr. Pitlock felt that in order to get the penetration rate necessary to achieve those recoveries, more auditors were needed on staff.

Chairman Raggio asked if the average rate--$355,000 per year per auditor—was the current rate of audit recovery. Mr. Pitlock replied this figure was the result of a 10-year average. The audit recovery rate for FY 1997 was $438,000 per auditor, while the rate for FY 1998 dropped to $329,000. Chairman Raggio asked what expectations the department could make with additional auditors. Chairman Raggio was concerned that audits would be spread out amongst a greater number of staff without actually increasing the audit penetration rate. In response, Mr. Pitlock said because the current amount of accounts had been increasing while the number of staff was constant, the department had audited a lower percentage of the total accounts.

Chairman Raggio felt it was unreasonable to provide funding for additional auditors, especially if a larger amount of staff would only continue to reproduce the current recovery rate.

Mr. Pitlock reiterated the department needed to complete more audits. He felt they were not auditing a high enough percentage of the total accounts to have an impact on overall compliance.

Next, Mrs. Evans questioned the methodology for determining the audit recovery and taxpayer noncompliance rates. Mr. Pitlock replied the figure was calculated by using all of the audits performed as a sample. He had developed an error rate by comparing the audit efficiencies determined for the audited accounts, and compared that figure to the total taxable sales for those audited accounts. Applying the error rate to the total amount of taxable sales, determined the total uncollected or noncompliance amount, or the current $80 million figure.

Mr. Marvel asked Mr. Pitlock how much of the uncollected revenue in the accounts receivable could reasonably be collected by the state. Mr. Pitlock repeated, from a historical perspective, the department had recovered 37 percent of the total level of noncompliance revenues. Yet, this percentage was declining due to the combination of a growing number of accounts and a constant level of personnel. Again, Mr. Pitlock stated the request for additional funds was essential to maintaining that level of recovery and he believed it would be realized should new auditor positions be funded.

Mr. Marvel asked when the department turned the noncompliance cases over to the Attorney General’s Office. Mr. Pitlock stated the determination was made on a case by case basis. Depending upon the success of internal procedures, cases could be sent to the Attorney General. He noted revenue officers had collected $560,000 per year per revenue officer. As collection tools became better developed, the department hoped it would improve that level of revenue collection. Yet before the revenue officer could even begin collection, Mr. Pitlock stated the audit staff had to have found a source of revenue. In other words, the audit staff directed collections toward the revenue officer, who would in turn, make the ultimate collection of funds should the taxpayer refuse to voluntarily pay them. Mr. Pitlock felt the audit division was responsible for the declining value of collected revenue because the growth in auditors had failed to keep up with the growth in accounts.

Mr. Hettrick felt that if the department was evaluating a greater number of firms under the same percentage of noncompliance, it would appear a more efficient method of choosing which firms to audit needed to be developed. He felt the problem existed not in terms of a penetration percentage but in choosing whom to audit. If more auditors were funded while the choice of which firms or taxpayers to audit was poor, the amount of revenue collected per auditor would decline rather than increase.

Mr. Pitlock admitted the problem required more than simply adding to the current level of audit staff. He explained the solution should be a combination of having an appropriate number of trained individuals in place so audits could be completed, and taxpayers needed to be educated in order to alleviate repetitive mistakes and continual audits. He believed a combined effort of both education and enforcement would drive down the noncompliance rate. Mr. Pitlock felt the penetration rate was also important. He stressed there must be a reasonable rate of enforcement or there would be less incentive for compliance. For instance, Mr. Pitlock stated if he had been driving down a road and saw a speed limit sign immediately followed by a sign, indicating the police never patrolled the area, he would be more inclined to risk breaking the law. Enforcement and education were thus essential to decrease noncompliance. Although Mr. Hettrick agreed in part with Mr. Pitlock’s emphasis on education and enforcement, he expressed a desire to study those who had been audited in the past and then audited a second time to analyze how compliance had been affected.

Mr. Pitlock stated he understood Mr. Hettrick’s concern over saturating the market with too many auditors. For that reason, Mr. Pitlock had not wanted to request funds for additional auditor positions without providing committee members with an estimate of the amount of uncollected funds in the system. He further noted the noncompliance rate was determined prior to the formation of the budget requests.

Senator O’Donnell recalled the problem the department had with the Automated Tax Collection System (ACES). In the 1997 Legislative Session, individuals who had been assigned to the Department of Information, were permanently transferred to the Department of Taxation. Senator O’Donnell inquired if the transfer had been effectual.

Mr. Pitlock explained because of a combination of problems with ACES, the department had not had an adequate opportunity to evaluate the success of that plan. One of the main problems afflicting the Department of Information Technology was a difficulty in hiring programmers who could be assigned to the Department of Taxation. Thus, since the decision to transfer those positions to the Department of Taxation had been made, Mr. Pitlock said the department had not been able to hire a full staff of programmers to work with ACES. Additionally, an effective evaluation of ACES had been put on hold because ACES was not year 2000 compliant. Thus the efforts of the existing staff were focused completely on ensuring ACES was year 2000 compliant.

Mr. Pitlock said the department had conducted two parallel tests of the revised code to ensure the changes made to ACES were year 2000 compliant. For instance, the last tax roll completed for the November taxable sales was run parallel to the existing code and to the new code. To date, that initial review did not identify any significant problems. A second parallel test would be run in February 1999, however that test would utilize a year end roll or the maximum loading amount the system would potentially see. If that test proved effective, Mr. Pitlock stated the revised code would be installed as quickly as possible.

Senator O’Donnell reflected upon the fact that valuable employees, especially programmers, could not be attracted given current salary level. He felt the problem of the Department of Taxation was exemplary of the current hiring problems faced by state government. Furthermore, Senator O’Donnell felt, as state agencies became more dependent upon technology, they were falling further behind. The problem was a serious disservice to state agencies.

Mr. Pitlock concurred with Senator O’Donnell and explained as a result of the Department of Information Technology’s recruiting difficulties, the Department of Taxation fell victim to the lack of these services as well.

Next, Senator Neal asked Mr. Pitlock if he had information concerning the result of the lawsuit involving Mirage Inc. and the Nevada Tax Commission. Mr. Pitlock explained the lawsuit alleged the tax commission had exceeded its statutory authority with respect to certain provisions within the fine art regulation. The Attorney General’s Office was in the process of preparing the Commission’s response. Mr. Pitlock stated he would have the Attorney General’s Office forward a copy of its response to Senator Neal.

Next Mr. Beers concurred with Senator O’Donnell’s remark concerning the underfunding of the state’s information technology staff salaries. Mr. Beers then inquired if Mr. Pitlock had implemented a mock year 2000 test upon the new code. Mr. Pitlock stated tests had been run into the year 2000, including leap years, and to date, the department had not run into any problems. Mr. Pitlock felt the two parallel test runs scheduled for February 1999 would confirm that finding.

Also, in response to Mr. Beers confusion concerning the noncompliance factor, Mr. Pitlock clarified the department had historically recovered 37 percent of noncompliance revenues. The net noncompliance was the difference between the total noncompliance figure, $80 million, and the amount the department had been able to recover, roughly $20 million, resulting in a total $60 million in unrecovered revenue. Mr. Beers then asked what percentage of the $20 million recovered was bad debt and uncollectable. Mr. Pitlock replied 98% of that figure had been collected with only a 2 percent non-collection rate.

Senator O’Connell asked Mr. Pitlock if the computation of total noncompliance revenue had been further divided into source areas such as noncompliance from business tax revenues. Mr. Pitlock explained that number represented only sales and use taxes; it did not represent noncompliance with any other administered taxes.

Senator O’Connell further inquired if all counties required business licenses. Mr. Pitlock replied negatively. Senator O’Connell felt this issue needed to be further addressed due to the significance of Internet sales and the fact that sales tax was not collected on those sales. Mr. Pitlock answered the problem would continue to grow over time. Unfortunately, he noted Nevada could be impacted severely due to its heavy reliance on sales and uses taxes to fund local and state government. Mr. Pitlock said compared to lost revenues from catalogue ordering, the amount of Internet transactions escaping taxation would continue to grow. Furthermore this posed problems because use taxes were impossible to enforce. The department could not gather the information on individuals to calculate what level of tangible personal property was purchased over the Internet or through catalog purchase. He mentioned Congress had addressed this issue as part of the Internet Freedom act and a commission was formed to study remote commerce in total in order to develop a system which would force retailers to report and remit sales tax to the states to which they ship orders. Finally, Mr. Pitlock felt Nevada’s businesses were less competitive because Internet sales had the advantage of escaping tax requirements.

Moving on to another topic, Chairman Arberry recalled in December, IFC had provided funds in the amount of $345,000 for the purpose of bringing the Business Process Re-engineering study (BPR) study to $595,000. However there was not a provision within The Executive Budget for the continuation of the re-engineering effort. Mr. Pitlock said the BPR study, which had been authorized in the 1997 Legislative Session and funded with the approval of the IFC in September, was continuing forward. The initial BPR report would be due March 15, 1999.

He stated the BPR was the first step in a three-step process to eventually reinvent job performance in the Department of Taxation as well as to prepare for the replacement of ACES. The second step of the process would utilize the requirement definition and high level design to implement the findings of the BPR study. Based on current estimates, the requirement definition would cost $600,000 whereas the high-level design for the implementation of a new system would cost $200,000. Mr. Pitlock predicted if both projects remained online, funding would be required for both of those projects in the upcoming biennium. In addition to those funds, there would be an equal amount for the Independent Verification and Validation contract, or the quality assurance component of the system. This component would essentially serve as insurance to prevent similar problems that had occurred with ACES. Finally, Mr. Pitlock estimated the ultimate replacement of ACES would require a request from $6 million to $8 million. Those funds could be derived from a 10 percent improvement in audit recovery through the implementation of the BPR recommendations.

Chairman Arberry said the total cost of the BPR should be multiplied by two, revealing the total cost of the project to be $1.2 million. Mr. Pitlock clarified the
$1.2 million figure was comprised of the requirement definition only; the cost of the BPR would actually total $1.6 million with the inclusion of the high-level design costs. Chairman Arberry requested that this information be presented in subcommittee as it was not presented in The Executive Budget.

Mr. Pitlock stated that because approval for BPR funding was not received until September, the department was unable to include the BPR cost recommendations within the budget. He repeated the information would be submitted in subcommittee.

The meeting was adjourned at 11:50 a. m.

RESPECTFULLY SUBMITTED:

Janine Marie Toth,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry, Jr., Chairman

DATE:

______________________________________________

Senator William J. Raggio, Chairman

DATE:________________________________________