The Assembly Committee on Ways and Means was called to order at 7:35 AM, on Tuesday, February 2, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Ms. Jan Evans, Vice-Chairman

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

Mr. Robert Price

COMMITTEE MEMBERS ABSENT:

None

STAFF MEMBERS PRESENT:

Chairman Arberry announced the Ways and Means Committee would meet from 7:30 a.m. until approximately 10:45 a.m. although there may be times when the time of adjournment would be adjusted. Additional meetings would be held on Tuesday and Thursday at 3:30 p.m. as needed.

Chairman Arberry noted most committee members were veteran members and new members were seasoned elected officials so not a great deal of discussion was necessary concerning how to treat individuals providing testimony. He asked members to ask questions with decorum and respect for the speakers.

Chairman Arberry told committee members that because of the time constraints in the 120-day session, their questions needed to be asked when they first came to mind.

He commented the Ways and Means Secretarial staff were hired for the Ways and Means Committee and could not provide filing or general secretarial functions for individual committee members. He noted each member had a basket for filing behind the dais.

Chairman Arberry called attention to the Preliminary Committee Rules and asked for questions or comments (Exhibit C).

Chairman Arberry asked if any of the committee members wanted their own copies of committee minutes. After a brief discussion if was decided to continue with just one set in the committee room available to all.

Gary Crews, Legislative Auditor, introduced Steve Wood, Chief Deputy Legislative Auditor. Mr. Crews stated the mission of the Audit Division was to improve the accountability for public funds and the operations of state government. He explained toward that end, the division produced an audit plan to the Legislative Commission for its approval. The division then conducted the audits approved for inclusion and those findings were reported to the Audit Subcommittee of the Legislative Commission chaired by Speaker Dini. He noted Mr. Arberry was vice chair and Mr. Marvel was a long-standing member of the subcommittee.

Mr. Crews said during the 1987 Legislative Session concern arose that audit recommendations were not being implemented by Executive Branch agencies and the Legislative Commission recommended the "money" committees work with the Audit Division on a regular basis to hold agencies accountable. He noted the support of the legislature had significant benefits. He provided a report titled "Introduction to the Office of Legislative Auditor" (Exhibit D) that indicated over the past biennium cost savings in the amount of $17 million were made as a result of implementing audit recommendations. Mr. Crews noted those were not potential savings, but actual savings that had occurred. He added some of the implementations might not have occurred without the Audit Division and the legislative committees working together.

Mr. Crews provided each member of the committee with a binder containing summaries of audits done over the past two years. He noted a few that should be of special interest over the coming months of the legislative session.

Page 29 identified an audit of the management and collection of the state’s accounts receivable. Mr. Crews stated findings indicated the Executive Branch lacked critical information to effectively manage and collect its accounts receivable resulting in $50 million owed to the state that would never be collected.

The audit of the Department of Information Technology identified a complete lack of management controls. The audit looked at eight systems developed and built during a certain period of time. All of those projects were over budget. He noted one well-known project was Nevada Operations Multi Automated Data System (NOMADS). He stated all of the eight systems reviewed excluding NOMADS were over budget by an average of 64 percent.

The Inmate Medical Services audit found that Nevada allocated more of its prison budget to medical services than any other state. He noted the report provided factors which contributed to medical costs:

• Lack of cost controls within the system; and
• High mental health staff ratio.

Mr. Crews mentioned there were other concerns as well and the high cost of medical care was one reason privatization of medical services was being considered.

The final report Mr. Crews commented on was the audit of the State Employees Group Heath Insurance Program. He noted committee members should already be aware of the significant cost overruns of the program. The audit made recommendations for:

• Changes in organizational structure of the Committee on Benefits;

• Composition and methods for selecting members of the Committee on Benefits; and
• Addressed serious problems in the contracting process.

Mr. Crews stated there were approximately 30 other audit reports in the binder provided to committee members and asked members to use it as a resource throughout the session.

Vice-Chair Evans thanked Mr. Crews for the summaries and for their good work. She asked if there was anything the legislature should be doing to further assist the work of the Audit Division. Mr. Crews replied just having the support of the legislature helped Executive Branch agencies take their work seriously. He added it was sometimes a difficult job to hold "heavy" discussions with agency heads and relationships sometimes became strained.

Assemblyman Beers commented when a business recorded accounts receivable they were simultaneously recording revenue. When the business later decided it must write-off the receivable it recorded an expense or a negative revenue. He asked how the state handled such transactions. Mr. Crews replied the state operated on a cash basis explaining if funds were not collected they would never appear in the revenue figures. Mr. Crews stated there were significant dollars out there and that was an issue the Audit Division was somewhat disappointed in because the report of a year ago had not yet been addressed.

Chairman Arberry explained the operation of the microphone system for committee members and explained the full system should be working within the next few days.

Assemblywoman Chowning referred to the Group Health Insurance Program audit and observed she did not see a date when the audit was performed, no date on the 13 recommendations, and no performance indicators. She noted the report made it appear the agency had done nothing to implement the recommendations although she felt that was probably not an accurate assumption. Mr. Crews responded the Audit Division would be happy to provide dates in the future and that the audits in the report binder were all audits conducted within the last 2 years. He stated the Group Health Insurance Program audit was a recent one, being reported to the Audit Subcommittee in December 1998. Assemblywoman Chowning asked when the committee would receive the results indicating when the recommendations had been acted upon. Mr. Crews replied there was a law dating back to 1987 that required, after completion of an audit, the agency had to submit a plan of corrective action within 60 days. After that, the Department of Administration was supposed to go into the agency and evaluate if, in fact, the agency had implemented the recommendations. A report was prepared which was then presented to the Audit Subcommittee of the Legislative Commission. He noted the procedure he described was used in the interim between legislative sessions and during session the Audit Division looked to the "money" committees to review the reports.

Assemblywoman Giunchigliani stated for future reference, if the Audit Division received any responses from the Department of Prisons either regarding the medical issues or whether they placed the recommended technical staff she would appreciate having that information for the Public Safety, Natural Resources and Transportation Joint Subcommittee.

Assemblyman Price reminded members the first meeting of the Joint Audit Subcommittee was scheduled for 4 p.m. on Thursday, February 4, 1999.

Chairman Arberry stated for the record that Speaker Dini and Assemblyman Perkins were present. He thanked Vice-Chair Evans for her in the Legislative Commission Budget Subcommittee meetings during his illness. He introduced Mr. Larry Spitler, former legislator and Vice-Chair of the Assembly Committee on Ways and Means who was in the audience.

Mark Stevens told members their Interim Finance Committee (IFC) packets were at their seats. That meeting would be on Thursday, February 4, 1999, in

room 1214 at 8 a.m.

Joint subcommittee meetings would begin the week of February 8, 1999 and at least 3 days a week would be dedicated to those subcommittee meetings on Tuesdays, Thursdays, and Fridays. Mondays and Wednesdays would be Ways and Means Committee meetings. Tuesday and Thursday afternoons at

3:30 p.m. would be reserved for meetings as needed.

Mr. Stevens explained each committee member had an area in the bookshelves behind the dais to keep their budget highlights and expanded program narrative binders. He added the expanded program narratives would be available in the next few days and explained they were additional information provided by agencies to further explain their budget requests. The floor desks of each committee member would have a binder for bill explanations. The Chairman typically assigned a committee member to explain certain bills on the Floor of the Assembly and staff provided the explanations for members' use if they wished.

The Fiscal Division prepared "The Fiscal Report" which would be available by Friday. The report outlined what was included in The Executive Budget, the Capital Improvement Program, any one-shot and supplemental requests, provided a brief narrative on each major area of the budget, and numerical data on which programs had increased or decreased and by what amounts.

Mr. Stevens said in the next few days a series of binders would be placed in the committee room containing the full version of the budget for member’s reference.

Mr. Stevens provided members a list concerning joint subcommittee review of specific budgets (Exhibit E). He explained in order to complete the budget process within the 120-day Legislative Session it was recommended that minor budgets traditionally lacking major issues would not be reviewed in joint subcommittee hearings. Every subcommittee and responsibility was listed in Exhibit E. The left column of Exhibit E showed those budgets that were recommended to be a subcommittee responsibility. The right-hand side of Exhibit E listed budgets and responsibilities for which the fiscal staff would develop closing recommendations. No subcommittee hearings would be held and staff would develop a list of budget closings and bring them to the full committee at some point in time. Mr. Stevens needed to know if the concept met with committee approval and also requested members to review the lists to determine if there were any budgets that should be moved from one side of Exhibit E to the other. Chairman Arberry urged committee members to make their recommendations to staff for changes to Exhibit E by Thursday,
February 4, 1999, for finalization.

Assemblywoman Giunchigliani asked if there was a way to asterisk those budgets that might also have bill draft requests on them. Mr. Stevens stated from the fiscal perspective, they needed to get an idea of how to proceed and added at no time, if the subcommittee chairpersons felt a budget listed in the right column needed to be brought before a subcommittee would that be precluded.

Assemblyman Goldwater asked for clarification that fiscal staff would develop the closing recommendation on the right-hand budgets without input of any committee members. Mr. Stevens stated there was no attempt to exclude input from the members of the committee, simply to expedite the process. He added, if any one of the budgets proposed for fiscal review and closing recommendation were a concern they could be made a responsibility of a joint subcommittee.

In the past, those budgets listed on the right-hand side of Exhibit E had not raised any serious questions. Further down the line if concerns arose in a particular budget, the budget could be placed in subcommittee, the members could meet with fiscal staff and request specific reviews, or the members could come before the committee with recommendations themselves. Chairman Arberry added all budgets would still come before the full committee prior to closing.

Assemblywoman de Braga asked whether the budgets listed on the right side of
Exhibit E had any major increases in their budget. Mr. Stevens responded there might be some increases recommended by the Governor but if there were major recommendations they would have to be brought before the committee.

Vice-Chair Evans noted a few sessions previous the legislature studied the entire budget process and as a part of that study had reviewed those procedures followed in other states. One thing that seemed to be uniform in the other states with short legislative sessions such as Nevada now had, was that they operated just as was suggested by Mr. Stevens. The "money committees" only gave the heavy individual scrutiny to the key budgets. Minor budgets were simply relegated to staff analysis. She noted it was a timesaving mechanism employed by many other jurisdictions.

Speaker Dini commented the process proposed was similar to a consent calendar and added his intent to use a consent calendar more frequently on the Floor of the Assembly during the Seventieth Legislative Session and added any member could pull an item from a consent calendar. Speaker Dini commented approximately 90 percent of money spent by the state was contained in approximately 10 percent of the budgets.

Assemblyman Price commended staff for providing Exhibit E. He noted the document contained approximately 175 budgets. The down side of the proposed method was a tendency for policy-makers (the legislators) to get busy and not to be as important a part of setting policy and budget as they should be. He commented it would be a major change in the way Nevada did business. Over long periods of time he felt there were very few budgets in which something controversial was not found.

Assemblywoman Giunchigliani stated staff should not have to meet individually with members. If there was a question on a particular budget it should be pulled and placed in subcommittee. There might also be a concern that one member could be shaping a budget that no one else knew about.
Ms. Giunchigliani commented the proposed procedure would streamline the process and get the committee closer to looking at program budgets. One concern was that with all the changes in procedures to meet the 120-day mandated session requirement, more and more of a legislator’s duties were turned over to staff.

Mr. Stevens commented although the concept might be new to some members, staff had worked with the committee to consult with the director in reviewing recommendations to expedite the legislative process due to the implementation of the 120 day session. The specific proposal being discussed today was reviewed with the majority and minority leadership and the Chair and had received approval from each individual.

Mr. Stevens stated there were a number of boards and commissions which were not brought in for a hearing before the committee and not delegated to subcommittees. He asked the committee to consider if they wanted a few boards and commissions scheduled for a budget hearing, all of them giving presentations, or none as had been done in the past.

Assemblywoman Chowning said committee members should take a good look at the budgets listed on the right side of Exhibit E because during the previous
2 weeks of testimony the members were asked to wait until subcommittee hearings to address certain issues. Yet some of the right-hand column budgets were cut in the Governor’s recommendations yet under the proposal would not receive a hearing. She advised members to take a hard look at the list in the next 2 days. Chairman Arberry stated a time limit was placed on the opportunity to move budgets from one side to the other. He cautioned members to be selective in those budgets they wanted to move because if all the budgets were moved back the legislature could not possibly complete their work in 120 days. Mr. Marvel reiterated the full committee would still view all the budgets prior to their closure.

Assemblywoman Giunchigliani asked if her earlier question concerning marking those budgets which were recommended for cuts could be done. Mr. Stevens responded staff already had a list by budget account that indicated the percentage increase and decrease in General Fund and he would provide it to committee members.

Don Hataway Deputy Budget Administrator, provided the committee a list of
31 revisions to The Executive Budget (Exhibit F) and Chairman Arberry asked Mr. Hataway to be prepared to provide explanations to the committee for all budget revisions. Mr. Hataway pledged the support of the Budget Division to the legislature in closing the budgets as expeditiously as possible.

Mr. Hataway stated budget revisions were currently up to 38 but only affected 1 budget on the agenda. He stated the current group of budget adjustments were more savings to the General Fund than additions to expenditures but the net change to FY 2000 was a negative $476,000 which were considerably lower than the last time he reviewed adjustments with the Legislative Commission Budget Subcommittee. Changes to FY 2001 created a negative $560,000. That percentage from a $2.3 billion General Fund budget was fairly small. Mr. Hataway explained copies of the revisions were sent to the Chairman of the Assembly Committee on Ways and Means and the Chairman of the Senate Finance Committee as well as the fiscal staff for each house. The actual memos contained the list of changes and background information about the changes. Chairman Arberry asked for explanations for changes 15 through 31 as listed on Exhibit F.

Amendment 15 – Nevada Tahoe Regional Planning Agency (TPA), Budget Account 4166, had 1 decision unit which switched from general appropriation for support Pollution Control funds. The M-200 decision unit was overlooked which caused a decrease in appropriation by $506 each year of the biennium and a corresponding increase in the Other Funds by the same amount each year.

Amendment 16 – Forestry, Budget Account 4195, was in error in the original budget. The appropriation should decrease by $50,523 in FY 2000 and by nearly $30,000 in FY 2001. Other Funds would be increased by $48,723 in the first year and $26,051 in the second year of the biennium to correct that budget.

Amendment 17 – Forest Fire Suppression, Budget Account 4196, because other sources of revenue supported that budget, Other Funds would decrease by $1,900 each year of the biennium to correct the funding error.

Amendment 18 - Military, Budget Account 3650, was located in the office of the Adjutant General and reflected the two Engineering Technician positions approved by IFC in December. The Department of Personnel forwarded the approval and classifications after the closing of the budget so the change reflected a 75 percent federal/25 percent General Fund match. That increased the General Fund expenditures by $24,000 in the first year and $25,283 in the second year of the biennium with increases of $73,803 and $75,847 in Other Funds for each year of the biennium respectively.

Amendment 19 - Water Resources, Budget Account 4171, was in error where funding for the new positions that were recommended should have been reimbursements from local governments rather than the General Fund. The General Fund should be decreased $126,343 in FY 2000 and $132,016 in
FY 2001 and Other Funds should be increased accordingly.

Amendments 21 through 24 – related to Motor Pool cost adjustments primarily in Parole and Probation. Mr. Hataway explained when the budget was built all new positions, unless extraordinary, were set to begin October 1 but the motor pool cars were built in beginning July 1. The adjustments delayed those costs until October 1.

Amendment 25 – Department of Motor Vehicles and Public Safety, (DMV) Administrative Services, Division, Budget Account 4704, had overlooked a request which had no General Fund impact but was an increase of $69,668 in Other Funds for paving the Carson City Commercial Driver’s License (CDL) Test Course.

Amendment 26 – Motor Pool, Budget Account 1354, related to amendment 13 where the offender/officer caseloads were reduced from 75:1 to 70:1. Those were adjustments in the administrative motor pool account and the administrative motor pool vehicle purchasing account that reflected the additional rents receivable from Parole and Probation as a result of new vehicle purchases.

Amendment 28 – Consumer Health Protection, Budget Account 3194, was a General Fund decrease of $17,150 in both years of the biennium with a corresponding increase in Other Funds to align the revenue to the proper source of support.

Amendment 29 – DMV, Juvenile Justice Assistance, Budget Account 4708, related to testimony before the Legislative Commission Budget Subcommittee indicating there were additional federal funding sources identified for a specific program, causing a decrease of $121,875 each year of the biennium in the General Fund replaced by federal funding.

Amendment 30 – DMV Highway Patrol, Budget Account 4713, reflected no dollar amount change but replaced Highway Funds with insurance recoveries that were available to support that specific program.

Amendment 31 – a Motor Pool one-shot appropriation for FY 1999 expense relating to the additional Parole and Probation officers was required due to the recommended reduction in the officer/offender ratio. Mr. Hataway stated if the legislature chose not to support the bill for lower officer/offender ratio it would have a domino affect on some of the amendments proposed to The Executive Budget. The one-shot appropriation would have to be increased by $214,000 to purchase 14 vehicles to accommodate the lower ratio.

Mr. Hataway emphasized the Budget Office produced and distributed a memo and supporting backup documentation on all amendments listed in Exhibit F.

Assemblywoman Giunchigliani referred to Budget Amendment 13 and asked for clarification that it was for the Parole and Probation caseload reduction including the related vehicles. Mr. Hataway had explained Amendment 31 was for the
14 vehicles. She asked if Amendment 13 was the actual staffing (personnel) costs and Mr. Hataway agreed. Assemblywoman Giunchigliani asked for confirmation that vehicle costs were actually in Amendment 31 and
Mr. Hataway agreed.

Mr. Hataway stated Amendment 36 that the committee had not yet received affected all budgets and was a recommended adjustment in the personnel assessment rate for the 1999-01 biennium. The rate reflected in The Executive Budget did not consider the salaries of the University System classified employees which substantially reduced the rate that was recommended. The amendment saved $523,000 and $626,000 for each year of the biennium in the General Fund alone.

Mr. Hataway announced he would be presenting the Governor’s budget and introduced Vicky Soberinsky, Deputy Chief of Staff, Office of the Governor.

Mr. Hataway stated the Governor’s budget was similar to many others (fairly lean) based upon the availability of resources. The base budget of the Governor’s Office was adjusted, as were those of other constitutional officers to reflect the salary increases approved by the 1997 Legislature.

Decision unit M-100 included any inflationary adjustments for which the office was eligible. M-300 included fringe benefit adjustments that would be mitigated to a certain degree by the personnel assessment revision. The Governor’s budget did not reflect any other changes but Mr. Hataway encouraged committee members to be aware that M-300 was also where any changes impacted by occupational studies would be placed. He noted the decision unit M-300 in The Executive Budget for the Governor’s office only reflected fringe benefits adjustments.

Mr. Hataway stated the Division of Administrative Services in the Department of Administration, provided accounting and personnel services to the Department of Administration and also to some of the smaller budgets such as the Office of the Governor, Governor’s Mansion, and the Office of the Lieutenant Governor. Thus those budgets included M-800 and E-800 cost allocation adjustments. He noted in some cases the funds reflected costs and in others negative adjustments were recommended.

Mr. Hataway stated the only major change recommended in the Governor’s budget was in unit E-125 Accessible Flexible Responsive Government. The Governor proposed employees of the Governor’s Office be changed from unclassified to non-classified employees. The Governor had not firmed up his staffing complement to-date, however he felt that given the proper flexibility to recruit the staff he needed to provide appropriate service, he could not only decrease the number of employees assigned to the Governor’s Office, but return some of the funds at the end of the fiscal year. Mr. Hataway noted the decision unit totaled $1,364,819 which reflected converting the total salaries and fringe benefits of the budget from unclassified to non-classified employees. Mr. Hataway emphasized the changes in E-125 could not occur if the legislature did not amend the Unclassified Pay Bill and added one bill draft request submitted by the Budget Office for implementation of The Executive Budget, would amend the current Unclassified Pay Bill to eliminate the Governor’s staff from the budget.

Mr. Hataway indicated there was precedent for this throughout the budget. Legislative and Judicial Branch employees are non-classified. The mansion maintenance budget which will be discussed next has three non-classified employees. All of the Occupational Licensing Board employees were non-classified. Printing Division employees who belonged to the union were non-classified so there are precedents for that recommendation.

Mr. Hataway stated the Governor felt the change would give him the flexibility to do the job he feels needs to be done from his office.

Chairman Arberry stated the change requested was a large change from what was normally approved for the Governor’s budget and the committee would take a hard look at that particular change. Mr. Arberry commented the change could not be monitored and there was a "fear factor" of what might transpire if the change was made. Mr. Hataway responded the legislature did control the funds that the Governor would have to work with to address staffing levels, but he understood what the Chair was saying and the Budget Office would be prepared to talk about it more when the BDR became a bill and came before the committee.

Assemblywoman Giunchigliani asked if the term "non-classified" was specifically used as a budget term. Mr. Hataway replied it was specifically used and went on to explain there were technically three groups of employees in state service: 1) The vast majority of employees were in the classified service; 2) Unclassified positions which were specifically delineated in the Unclassified Pay Bill; and 3) Several hundred in the Executive Branch that were technically neither classified or unclassified. Ms. Giunchigliani asked if those employees in the non-classified category were more "at will" employees and Mr. Hataway agreed.

Assemblywoman Giunchigliani asked if, since the non-classified employees could no longer be tracked, the Governor’s office would be willing to stipulate that no salary currently appropriated by the legislature would be increased.
Mr. Hataway responded Governor Guinn wanted the flexibility to hire people at the levels he felt were warranted to meet the needs of the state. He added his belief that the legislature would be apprised of what the remuneration would be but the savings would come from the reduction of authorized staff. Assemblywoman Giunchigliani requested a listing of positions and the salary level recommended for each position.

The budget had a 7.3 percent overall increase and Ms. Giunchigliani asked what areas of the budget were affected. Mr. Hataway replied the primary change was in the adjustment of the salary of the Governor from $90,000 to $117,000. M-300 included fringe benefit adjustments tied to the increase in group insurance costs.

Speaker Dini stated in the past, the non-classified employee category was used on a limited basis only, not for whole departments. He asked if the confidential employees of the Gaming Control Board were non-classified and Mr. Hataway replied those positions were all unclassified employees however, they served at the pleasure of the agency.

Speaker Dini asked for a definition of "non-classified" and Mr. Hataway replied it simply meant they were neither classified nor unclassified. He stated they were unusual positions like three in the Governor’s Mansion budget that included a cook, a head housekeeper, and an administrative assistant. They received payroll checks from Central Payroll like any other employee but they did not fall into either of the other categories. Additionally, all the occupational licensing boards’ employees were unclassified. Mr. Dini commented a definition of non-classified employees might develop and suggested the Budget Office might wish to limit the number of employees in the Governor’s Office to be included in the non-classified category. Mr. Hataway replied the issue was transitional because staff needed to be firmed up and then the information would be available by the time the BDR was heard in committee.

Assemblyman Perkins asked if there would not be some current employees in the Governor’s Office, who by virtue of their tenure, would have a property interest in their positions and might present a problem with regard to what rights they had in their employment if their positions were suddenly changed. Mr. Hataway stated employees in the unclassified service always serve at the pleasure of their employers and the Governor’s Office had always been in the unclassified service. Governor Guinn had retained two employees from the previous administration but that was his choice.

Vice-Chair Evans asked when the pay increase for constitutional officers took effect. Mr. Hataway replied the salary increases approved in Assembly Bill 560 of the 1997 Legislative Session were effective with new terms of office. All new constitutional offices were eligible at the beginning of their terms on January 4, 1999.

Vice-Chair Evans commented the range of increases was quite substantial.

Mr. Hataway stated the largest salary increase was the Lieutenant Governor which went from $20,000 to $50,000. The Governor went from $90,000 to $117,000. He offered to provide specific information for the committee. Assemblywoman Evans asked if the constitutional officers were going to accept their pay raises while state classified employees were not recommended for salary increases. Mr. Hataway replied there were two different issues. 1) The budget must be built with the maximum salary authorized in the event the constitutional officer did take the salary; but 2) The decision was that of the constitutional officers.

Mr. Hataway continued his testimony, indicating the only change in the Mansion Maintenance Budget was in M-200. The Governor’s Mansion reconstruction was currently underway and it would increase the square footage from

8,469 square feet to 15,969 square feet. M-200 merely reflected the anticipated increase in the electricity and natural gas utilities that would be required for operation of the facility. Mr. Hataway noted the projections were made on the actual per-square foot cost of FY 1998 adjusted by the eligible inflationary increases. M-200 increased by $14,400 in FY 2000 and a $14,700 in FY 2001.

Mr. Hataway stated the budget reflected three non-classified employees in the base budget and some inflationary increases for food and utilities. There were also some changes in the Division of Administrative Services cost allocation in M-800 and E-800.

Assemblywoman Giunchigliani noted there was $20,000 rolled over from one year to the next in the equipment category. She asked what plans were to expend those funds. Mr. Hataway replied those were self-standing budgets in each year of the biennium but they did make adjustments in the legislative year for the host fund and food in the operating categories. Assemblywoman Giunchigliani clarified she was referring to the $20,000 allocated in
Senate Bill 174 of the 1997 Legislature that was not used in FY 1997-98 and was rolled over to FY 1998-99. Mr. Hataway asked what the bill contained and Ms. Giunchigliani explained it authorized equipment, replacement furniture, and repair. Mr. Hataway stated those funds were being held to determine if there were any further needs in relation to the renovation. He added it would be a building to be very proud of when the addition and revisions were complete. Assemblywoman Giunchigliani asked when the project was to be completed and Mr. Hataway responded it was due for completion by March 1. She commented by March the legislature would know whether or not the $20,000 could be reverted. Mr. Hataway reminded committee members the expansion and renovation of the Governor’s Mansion was all being done through private donations.

Assemblywoman Chowning stated the legislature approved up to $5 million in donated funds to assist with the mansion expansion and asked how much of those funds had been used. Mr. Hataway responded he would provide a full accounting of those funds at a later time. The last time he had reviewed the fund in late November 1998 approximately $3.5 million was used but there were some additional pledges that were sufficient to cover the projected costs. He added all funds to date had been through private donation and the only public funds possibly anticipated for use was the $20,000 to support improvements. Mrs. Chowning said she would then need to know how much public funding was not needed.

Vice-Chair Evans requested Mr. Hataway to provide a list of the contributors so that the legislature could at least give them the heartfelt thanks of the legislators. Mr. Hataway replied several of the donations were anonymous but he would provide the remainder.

Mr. Hataway testified that Budget Account 1029, for the Commission on Women, was a very lean budget. He stated there were virtually no changes in the budget except some minor inflationary adjustments. The budget itself reflected the actual level of expenditures the commission made in FY 1998. The commission had not met since FY 1998 because the terms of four of the members of the commission expired June 30, 1998. It was recently learned that Governor Miller had decided to allow the new Governor to make the appointments for replacements and currently there was no chairperson.

Mr. Hataway spoke to former Chairperson Paula Quigliani and she suggested Governor Guinn decide if he wished to continue the commission and if he did to make appointments to the vacant seats, the whole commission could meet and develop a plan for the next biennium. The former chair of the commission confirmed if expenses exceeded the budget, the commission would solicit donations in the private sector. Mr. Hataway also spoke to Governor Guinn and he agreed to the suggestion and would make the appointments to the Commission on Women as soon as possible.

Assemblywoman Chowning noted there were no performance indicators in Budget Account 1029 and although there were only $2900 in expenditures, the legislature needed to know how the funds were used. Mr. Hataway responded there had never been performance indicators in that budget, however, once the commission developed their plan of action, that plan in itself would be their performance indicators and thus in the next legislature would be able to measure their plan against their accomplishments. Assemblywoman Chowning stated in the past there had been exemplary documents presented through the Commission on Women and she hoped that would not be a thing of the past. She formally requested an accounting for the $2900 spent in
FY 1998. Mr. Hataway replied the only expenditures in FY 1998 was for two meetings.

Vice-Chair Evans recognized Lee-Ann Keever, Executive Secretary of the Ethics Commission. Ms. Keever introduced Mary Boetsch, Chairwoman, and Tracy Raxter, Chief of Administrative Services.

Chairwoman Boetsch stated she had been advised that the Governor’s Office had apparently been allocated $50,000 for some type of study to perhaps change the make-up and composition of the Ethics Commission. She had also heard the Governor was drafting legislation that would change the composition of the entire staff for the commission.

Ms. Boetsch stated one of the proposals in the Ethics Commission budget that started the changes under consideration was for an unclassified position of executive director who would have a salary and a benefits package somewhere in the neighborhood of $70,000 or $80,000 or perhaps a little more, not yet included in The Executive Budget.. The executive director would be responsible for the office as well as performing a number of tasks currently being done by either the commissioners or the deputy attorney general assigned to the commission. Some of those duties would include:

• Press and Public liaison;
• Attendance at all meetings;
• Help in coordinating the meetings themselves;
• Answer post-meeting questions;
• Tour the state, conducting training and education for various elected officials especially newly elected or appointed officials;

Ms. Boetsch explained it was anticipated the executive director and a half-time secretarial position would process the office paperwork. She added that would free up the deputy attorney general to devote his/her time to their truly assigned duties of acting as legal advisor to the commission and writing legal opinions.

Vice-Chair Evans requested Ms. Boetsch to provide a job description for the executive director and also indicate what responsibilities each current position would retain including the salary and benefits package. Ms. Boetsch replied that information was being drafted. However, she understood there were other plans in the works, including one that proposed the executive director to be an attorney who would act in the capacity of a prosecutor of sorts to more formally hear petitions and discern which ones need not be heard by the commission. The Vice-Chair requested Ms. Boetsch to include all that information in their proposal.

Ms. Boetsch noted if the executive director were an attorney and acted as a prosecutor, the deputy attorney general would then be the legal advisor to the commission and would not present the cases to the Ethics Commission. It would be similar to the procedure used by the Judicial Discipline Commission.

Ms. Boetsch stated another area of the budget where the agency request was more than the Governor’s recommendations was in the investigations area. In 1997 the budget for investigations was increased drastically and the funds were used well. A lot of the work done by the investigators resolved cases far short of conducting a full hearing on the matter. The agency budget had requested a further increase in that category. She noted a large portion of the Investigative Budget in the last biennium was used for the infamous "Terminal D" case but they had done a marvelous job of putting the information together. The same was true of the change to using court reporters from recording the meetings and then having transcriptions done as needed. The court reporter service had been invaluable particularly with the increase in judicial review of some of the decisions made by the commission. The change made transcriptions more readily available for court proceedings and more accessible for checking the record to determine findings of fact.

Ms. Boetsch stated the commission had taken some steps to cut costs where they could. One proposal was to eliminate "just and sufficient cause hearings". The anticipation was those hearings often duplicated "hearings of merit" and could be handled through an initial determination of whether the hearing should go forward, possibly made by the executive director. Ms. Boetsch noted that would eliminate a burden on the people who may have to travel and witnesses who previously needed to come forward twice and made the process less expensive.

Ms. Boetsch reported the commission asked for more travel funds because meetings were lasting longer. There was an increase in travel related to additional hearings scheduled for election campaign complaints. She explained 18 such complaints were received:

• Some were withdrawn; and
• Some were discarded or rejected because the maker of the request was not entitled to do so.

The other significant item in the budget with the make-up of the commission still unknown, was the cost for microfilming. Funding was provided in the previous biennium however, $2,000 was not used and thus was not placed in the current budget. The commission requested microfilm costs be returned to the budget for the next biennium.

Assemblywoman Giunchigliani asked if the Ethics Commission had approved any bill draft requests. Ms. Boetsch replied the commission specifically requested only one bill but she had heard rumors there were up to 20 BDRs that would affect the commission in some way. Ms. Giunchigliani asked if the budget requests and increases reflected whatever costs were associated with the commission’s BDR. Ms. Boetsch indicated their BDR was included in the budget but it did not necessarily address some of the other BDR’s she heard existed. Assemblywoman Giunchigliani asked if the position of executive director was included in the budget and if the position was requested by the commission and Ms. Boetsch replied they had requested the position.
Don Hataway explained the position was requested in the agency budget but due to revenue considerations was not included in The Executive Budget however, the Governor was in the process of drafting his recommendations and Governor Guinn wished to relay that if the result of the draft resulted in a need for additional expenditures including any staffing needs, the Governor would make his recommendations at that time. Hopefully that would occur within the next couple of weeks.

Assemblywoman Giunchigliani stated both an executive director and/or an attorney had been mentioned and asked what exact job description would be the ideal in the viewpoint of the commission. Ms. Boetsch replied, in a perfect world, she suspected the commission business would only be that of hearing cases. The commissioners would not deal with the press nor others except those who made preliminary decisions. Ms. Giunchigliani asked if she was looking for a buffer and Ms. Boetsch responded it was not appropriate for a judicial body to be immediately bombarded with questions about what they did, why did they did it, and what it meant. Thus the ideal candidate would be a prosecutor/executive director. They would not replace the deputy attorney general’s function of advisor to the commission. The person would cull through cases pending before the commission to determine whether to proceed to a hearing or whether a precedent already existed to answer the questions.
Ms. Boetsch stated she understood other commissions in the state did that.

Assemblywoman Giunchigliani asked what staffing was looked at to shorten turnaround times for written recommendations to within 45 to 60 days.
Ms. Boetsch replied if all the duties the deputy attorney general did except writing opinions and decisions was removed it would be easier to meet that time line. Assemblywoman Giunchigliani agreed with the request by the
Vice-Chair for job descriptions of existing positions and how those would be re-defined. She requested a salary range for the executive director position be provided.

Assemblyman Hettrick asked if the performance indicator was correct indicating the number of opinions issued in 1998 was seven. Projected opinions completed were 29 and actual was 7.

Ms. Boetsch stated nine were actually issued and noted two were still pending. Assemblyman Hettrick stated his concern that seven or even nine opinions was a very small accomplishment, even if each one was quite involved.
Ms. Boetsch stated those were official opinions and there was also considerable correspondence to answer issues that did not rise to the need of an official opinion. She added the performance indicator indicated 1998 information and reminded the committee that activity increased in 1999 including election issues which required a far quicker turnaround.

The deputy attorney general was preparing a paper to outline the kind of time spent on various tasks that were to be assumed by the proposed executive director. Assemblyman Hettrick responded he was asking for position justification because it was difficult, off the numbers presented, to justify $90,000 for a new position.

Assemblyman Marvel asked if the commission always used the same deputy attorney general all the time. Ms. Boetsch replied in her 5-year tenure there had been two and a new one would begin with the February meeting. Assemblyman Marvel asked if that would be an impediment to the work through a learning curve and Ms. Boetsch replied she did not believe it would be.

Assemblywoman Giunchigliani noted the performance indicators for the number of financial disclosures had been projected at 6500 in the base budget but actual was 5626 and yet the projection was for 7500 each year of the biennium. She asked if something had occurred that there were that many more people required to file financial disclosures. Ms. Boetsch replied in rural counties an individual might be elected to an office and appointed to several other public positions requiring a financial filing for each. Ms. Giunchigliani stated a part of her own BDR for the Ethics Commission would eliminate the requirement for multiple filings of financial disclosures.

Vice-Chair Evans referred to S.B. 215 of the 1997 Legislative Session and said the Ethics Commission had received an additional $35,000 regarding opinions on campaign issues and also received $14,500 from the Interim Finance Committee’s Contingency Fund and asked how opinions regarding campaign complaints related to number of dollars needed. Ms. Boetsch stated one complaint was still pending and she did not have a sense of how much more the commission might get. More complaints were received than she had anticipated. Jurisdiction was accepted in 17 cases, 9 opinions were issued,
7 complaints were withdrawn at the last minute. The commission had hoped to conduct the hearings by telephone but that had not worked out well.

Vice-Chair Evans asked what was driving the need for increased meeting days and Ms. Boetsch replied it was not the number of opinion requests but the complexity of the requests and the amount of evidence that must be gathered and reviewed. The "Terminal D" case took a tremendous amount of time and resources. The change in the confidentiality statues made people more aware of the Ethics Commission as a resource. Ms. Boetsch stated if the "just and sufficient cause" hearing requirement was changed it might actually decrease the budget need. She added it was not that the members stretched the meetings out. The meetings took longer as there were more witnesses and sometimes more lawyers, more things were at stake for the public official more things at stake for the person making the requests and some cases were brought by people of ill-will but could not be rejected for that reason alone.

Assemblywoman Giunchigliani asked if, in Ms. Boetsch’s mind, the Ethics Commission should be in the business of negative campaign legislation passed in the 1997 Session. Ms. Boetsch replied in some respects, if someone should be in the business, it should be the Ethics Commission. Because of the limitations on what Ethics Commissioners could and could not do, she did not know who else was required to be so removed from the political process by law. Assemblywoman Giunchigliani stated her BDR would repeal the requirement for hearings. She felt the law put the commission in the uncomfortable and untenable position of trying to be an arbiter of what should be the public’s choice at elections based on some foolish statement or campaign brochure.

Assemblyman Beers disclosed that he was currently involved in a court case that involved the Ethics Commission which was on appeal. Thus he would not vote on the issue, but had some questions.

Assemblyman Beers asked if the 17 cases mentioned earlier were all related to the truth in campaign issues and Ms. Boetsch responded the 17 cases were just those related to S.B. 215 of the Sixty-ninth Legislative Session. Assemblyman Beers noted performance indicators showed the commission was accepting jurisdiction for 37 total cases. He was trying to determine what percentage of the commission’s workload was because of the truth in campaigning law and if the law went away, what affect that would have. Ms. Boetsch replied a great deal of staff time was consumed on the issue and she would determine the percentage for the committee.

Assemblyman Beers noted he had read about a case in the newspapers that had take eight or nine months for the opinion to be published. Ms. Boetsch stated the Daiquiri case had actually started in 1997 and had a rather tortured history because it went to the commission as a first-party request and they gave their opinion. It then turned into a public request which became a whole different type of hearing on the merits of the underlying request itself as well as whether or not false statements were made to the commission in rendering the first opinion. She added as that case was closing the Terminal D case was just beginning. The commission’s policy was to deliberate immediately and in public so the decision was known immediately instead of waiting for the written opinion. The opinion in the Daiquiri case took a low priority because the parties already knew the outcome and the commission had been informed the case would not go for judicial review.

Vice-Chair Evans reminded the Committee their function was that of budgets rather than policy.

Assemblyman Goldwater asked for a vision of the requested staff position. He noted possible prosecutorial functions were mentioned and stated his concern the commission should not move away from its judicial functions. Ms. Boetsch stated the commission’s proposal did not request the executive director to be a prosecutor but she had heard other bill requests were pending which requested that type of function. The commission wanted to remove the duties of coordinating witnesses and lawyers, collecting documents and directing the investigators.

Assemblyman Goldwater asked if the executive director would answer only to the Ethics Board members. Ms. Boetsch replied yes, as far as she knew.

Vice-Chair Evans summarized, the requests from the committee were for
Ms. Boetsch and Ms. Keever to provide members with updated information regarding positions and the changes which would impact the budget along with position descriptions already requested.

Mr. Hataway reported he had one procedural change recommended in the budget which was different from past years. Because the commission could not control the timing or number of cases that came before them and the agency was scrambling at the end of FY 1998 to pay their bills, the Budget Office recommended the appropriation be allowed for use in both years of the biennium.

Dean Heller, Secretary of State, presented Budget Account 1050 and introduced Don Reis, Chief Deputy Secretary of State. The Chief Deputy’s position had been transferred to the southern part of the state to handle the increasing volume of that office and Mr. Heller was pleased with the efforts. Mr. Heller introduced Cody Salinas, a freshman at Carson High School who was participating in High School Career Day. Bill Reinhard, Office Administrator, was also introduced.

Secretary of State Heller provided the committee with a pamphlet of information about the Secretary of State’s Office (Exhibit G). He indicated Nevada was in the top ten of incorporating states and of the top ten, Nevada was the fastest growing of incorporating states. Exhibit G, page G-2 (Revenues and Expenditures) depicted the steadily increasing revenue and Mr. Heller stated if the graph was extended another 4 years to the end of his term, he expected revenues to nearly double. The Executive Budget depicted and expected that type of growth.

Exhibit G, page G-3 (Annual New Filings) depicted growth in entities filing for incorporation in Nevada. Mr. Heller noted 41,460 new filings were made in calendar year 1998. He added the months of September and October were down from the previous year probably related to a very volatile stock market during that period.

Exhibit G, pages G-4 through G-6 were concerned web site utilization reports and Mr. Heller noted in November and December 1998 and January 1999 the web site was receiving approximately .5 million hits per month. Mr. Heller commented if his office added nothing to the web page, the number of hits was anticipated to be in the area of 17,000 per day and the site was not yet 1 year old.

Mr. Heller noted some committee members seemed to focus on performance indicators and stated in his opinion it took an act of God to be able to prepare performance indicators that actually measured anything.

Performance indicator 1 reflected the average number of working days for documents to be processed. Four years ago the turn around time was between 4 to 6 weeks or 26 days. Now without payment of an expedite fee a customer could anticipate a turn around time of 2 to 3 days. Mr. Heller stated the "Money Back Guarantee" should be a good performance indicator. The question could be asked, "What kind of funds had to refunded by the state in order to make the guarantee work." In over 1 year of operation there had been no refunds. There were no instances of taking longer than 2 weeks to process an incorporation.

Chairman Arberry stated one of the committee concerns was that the guarantee would become a risk. Mr. Heller responded it was the same risk present 2 years previous when he made the first proposal. Because no refunds had yet been necessary, the budget request for the guarantee program had been reduced as there was no anticipation of risk. Chairman Arberry referred to the performance indicators and asked what would happen if the 5-day turnaround was not accomplished. Mr. Heller replied then there would be no measurement and it was his goal for the committee to have a means of measurement.

Another performance indicator was that of what percentage of phone calls to the Secretary of State’s office actually got answered. Mr. Heller stated when he first took office approximately 1,200 phone calls were received each day and of those staff was able to answer approximately 400. Currently, about 2,000 phone calls were received each day and approximately 800 were actually answered which meant roughly only half the phone calls received by the office were answered. The other half either received a busy signal or they hung up. Mr. Heller emphasized three things his staff had done to address the problem.

1. Instituted a 900 number that allowed the public to receive information on the status of corporations for $3.50. It had been accepted overall because the users would rather pay $3.50 than get a busy signal.
2. Instituted a fax-back system that allowed customers to dial into the office and request copies of certain documents. Currently 32,000 pages were faxed each month.
3. Instituted the web page discussed earlier. Mr. Heller noted without the web page, approximately 1100 sessions per day would have been phone calls that probably could not be answered.

Mr. Heller summarized the office was doing everything it could to provide access and information to the public but were still receiving over 2,000 phone calls daily and answering only about one-half of them.

A request had been made to the Budget Office to out-source the Office of the Secretary of State phone calls by going to a contract to handle the phone traffic at a cost of approximately $4,000. Mr. Heller added there was not enough space or furniture to hire sufficient employees to answer all the phone calls. It was believed a contractor could handle approximately 75 percent of the calls themselves and the remaining 25 percent could actually be transferred to the Secretary of State’s Office, Customer Service Division.

The performance indicator concerning compliance audits was also of significance. Mr. Heller explained the Securities Division went in and outside the state and reviewed major securities firms and the performance indicator indicated how often audits were done. He added currently, a firm could anticipate an audit once every 2 years. Mr. Heller stated his belief that was an acceptable range and noted if a firm received complaints or was having problems they would be audited sooner.

The revenue versus expenditures was another performance indicator. Currently for every $1 spent on the Secretary of State’s Office $6 of revenue was produced. Mr. Heller stated if that ratio could be expanded it would be a positive indicator.

Another performance indicator was how often the office was sued for elections- related issues and during the past election cycle. The office went to court eight times.

Mr. Heller gave two recommendations for future actions: 1) A re-write of Nevada Revised Statutes, Title 24 containing election laws at a cost of approximately $250,000. He explained that title had been amended so many times it was difficult for any election official to interpret some of the laws.

He noted it would be similar to the re-write of corporate laws back in 1990.
He added the out-sourcing of telephone calls and the re-write were taken out of The Executive Budget. 2) A proposal for a statewide voter registration program to link the 17 counties together with one data base housed in the Secretary of State’s office. It would allow more cost effective elections and would reduce multiple voting, a large concern in voter fraud.

Assemblywoman Giunchigliani asked what exactly drove the workload increase that required 10 new positions. Mr. Heller stated the 10 positions were budgeted for commercial recordings, but he felt there was some flexibility in the budget as presented by the Governor, to allow the positions to be used as needed. He deemed them necessary in commercial recordings.

Assemblywoman Giunchigliani asked if, when looking at the expense filings, those filings could just be added to the last disposition report on the unspent contribution form. Mr. Heller agreed and noted the change could possibly be handled in-house.

Assemblywoman Giunchigliani referred to the requested re-write of Title 24 and suggested it might be possible to make that an interim study.

Assemblywoman Giunchigliani asked what the computer cost estimates for statewide voter registration were. Mr. Heller said it was estimated to be approximately $1.5 million and would have to go out to bid. He added the program would assist in a lot of areas. Assemblywoman Giunchigliani asked if anything could be done through the web site. Mr. Heller replied Clark County had tried such a concept when they published everyone who participated in elections on the Review-Journal web site for verification by the public and it had seemed to work well.

Mr. Heller noted California and Utah had gone to statewide voter registrations and in both instances, they reduced their voter rolls by 10 to 15 percent. If Nevada had statewide registration and could tie into California and Utah, then as residents changed their localities the state could track such migration. It had also been mentioned as a good tool to assist with re-districting during the 2001 Legislative Session.

Assemblywoman Evans referred to the Special Services Fund where amounts in excess of $2 million reverted and added Mr. Heller’s office had reverted $903,000 in FY 1998. Currently the account had approximately $1.3 million for use between the present and end of the fiscal year. She asked what was anticipated. Mr. Hataway replied in balancing FY 1999 the Budget Office had looked at previous reversions and the $903,000. He stated the office would not have any problem meeting that figure and exceeding it. Vice-Chair Evans asked what figure was anticipated and Mr. Hataway stated he did not have a definitive answer.

Mr. Heller said his office would have a salary shortfall in the current biennium. The Commercial Recordings Division received upgrades across the board retroactively and those were not figured into their budget. The upgrade was effective July 1, 1998. Mr. Hataway commented the Department of Personnel had not submitted responses until the last week of December, thus a recommended budget change would be submitted for the next biennium.
Mr. Heller noted his office would have the salary shortfall because of the reclassifications and also because there had been very little turnover with the hiring freeze and thus, very little salary savings.

Ms. Evans asked what time frame was anticipated to get the information from State Personnel and provide it to the legislature. Mr. Hataway replied he had no control on how long State Personnel might take. His only knowledge was that they had 14 or 15 classification requests still to be processed. The Budget Office had calculated what had been received year-to-date which was about a $33,000 impact per year and the total would be provided to the committee in form of a budget amendment later. He added the Secretary of State had been asked to provide an expenditure explanation on how they planned to address the FY 1999 shortfall. Mr. Heller stated some of the reclassifications were denied and were on appeal. Vice-Chair Evans emphasized it was important State Personnel realize the legislature was in session and needed the information expeditiously.

Vice-Chair Evans referred to S.B. 155 of the Sixty-Ninth Legislature that concerned expenses related to the Victim’s Assistance Program. She asked
Mr. Heller to report on the uses and expenses to date of approximately $13,000. Mr. Heller replied statute required a .5 full-time equivalent (FTE) position to input the confidential address program. With the Governor’s recommendation of $13,000 the agency could only fund a .25 FTE position. Mr. Heller noted the agency had requested $22,393. There was some confusion of where the position was funded. The confidential address program did not pay its own expenses so the position was paid out of the personnel line item which made it appear the agency did not spend all their funding and therefore, the Governor reduced the agency request. He urged the committee to readdress the issue. Vice-Chair Evans noted that might be a good item to add to the performance indicators. She asked how many requests for confidential addresses were made. Mr. Heller replied the program came on-line in 1998. The program was formulated similar to the State of Washington, the only other state with such a program. The State of Washington in their first year of operation had about six people on the program and now that the program was 3 or 4 years old they had several thousand on the program. During the first year in Nevada there were 14 participants and once the program was widely known it was anticipated it would grow at the same rate as in the State of Washington. The Secretary of State’s office staff was going before different commissions and agencies to explain the program and make it better known.

Assemblyman Marvel asked for an update on the status of the Business Process Re-engineering program (BPR). Mr. Heller responded Phase 1 which looked at all the processes done in the office was completed. It looked at the way funds were handled and how paperwork was processed from one division to the next. Phase 2 was just beginning and would add technology to the processes already in place. Mr. Heller explained there was an assumption from the beginning of the program, that if the processes were wrong there was no reason to add technology. The study was conducted in 1996 and Mr. Heller asked the committee to imagine the changes that had taken place in technology from that time. During the 1997 Legislature the office was commissioned by the legislature to research the use of digital signatures and they were prepared to come before the 1999 Legislature to allow digital signatures which would allow on-line filings for corporations from anywhere in the world. It was hoped
"E-Commerce" would be on-line by the end of the year. If even half the filings were done on line, it would significantly increase the revenues received.
Mr. Heller added the Secretary of State had gone before IFC approximately one month previous and asked for three additional technical positions whose specific duties would be to encourage on-line filings.

Assemblyman Marvel asked if digital signatures were legally recognized and
Mr. Heller replied they would be if the legislation was passed to allow it. Assemblyman Marvel asked if a BDR had been done and Mr. Heller assured him it had.

Assemblyman Marvel asked how many phases there were in the BPR and
Mr. Heller replied there were only Phase 1 and Phase 2. Assemblyman Marvel asked the status of the Western Presidential Primary project. Mr. Heller responded expenditures were at issue but a BDR had been submitted and he thought Assemblyman Hettrick had the bill. The question was whether election was done by caucus or by a vote of the people. Assemblyman Marvel asked why there would be a fiscal impact if there was already a primary election.
Mr. Heller stated the fiscal impact came from the fact the Western Presidential Primary would be a separate primary election. There would be a primary as usual in August or September but the Presidential Primary was proposed for March 10. Assemblyman Marvel asked what the cost estimate was and Assemblyman Hettrick replied the cost was dependent on how the counties were allowed to address the election regarding whether mail-in ballots or ballot booths were used. Mr. Heller stated another issue was whether the political parties decided to hold an election by caucus or through a regular election. Assemblyman Marvel asked if a budget amendment would be needed when the issues were decided and Mr. Heller replied the decision would be in the form of a separate bill and appropriation.

Assemblywoman Chowning stated she had received a number of compliments about the new fax-back service and a lot of complaints about telephone service. She noted some people did not realize they could ask questions through e-mail and she had also received a number of compliments about the e-mail service.

Assemblywoman Chowning referred to decision unit M-200 that requested $200,000 for services of Department of Information Technology (DoIT) and asked what specific business activities were anticipated over the Internet.

Mr. Heller replied the funding request reflected the three additional technical positions requested during the last IFC hearings. The positions would deal directly with "E-Commerce."

Assemblywoman de Braga asked Mr. Heller to address written requests for information. She asked how written requests were prioritized and/or decisions made about what requests would not be answered and would the new positions help ease that load. Mr. Heller asked if she was assuming if someone wrote to the Secretary of State they might not receive a response and Mrs. de Braga agreed. Mr. Heller said he felt that was not accurate, explaining that most written requests went direct to supervisors or the deputies. He added the deputies spent a tremendous amount of their time responding to written requests. Assemblywoman de Braga had made three written requests personally within the last year and had not received any responses. Mr. Heller apologized but added there was no agenda to consciously not answer correspondence. He offered to work with her after the meeting on her questions. Mr. Heller stated the new positions would be used in processing whether it was in the mailroom, the receiving process, or the actual processing. The hope was to have the flexibility with the positions to use them in the areas of greatest need. The purpose was to maintain the growth the office was seeing and the belief was that was possible.

Assemblyman Goldwater disclosed he worked in an industry licensed and regulated by the Secretary of State’s Office. He noted during the interim he served on a committee that examined removal of an exemption and Mr. Heller had assured him removal of the exemption would not materially affect his budget and asked Mr. Heller to state that for the record before the Ways and Means Committee. Mr. Heller responded when the issue was heard in committee he anticipated, regardless of what was stated in the past, that a position or two would be needed in the Securities Division to accommodate the workload. Don Reis, Deputy Secretary of State, added his recollection of the hearing was that the office had said it would probably require no more than two positions in the Securities Division and he would anticipate two positions to be adequate although three was more desirable.

Secretary of State Heller concluded by stating four things that would negatively impact the ratio of 6:1 in income versus expenditures:

1. If the office started producing poor service;
2. If the rates for incorporation were raised and they priced themselves out of the industry;
3. A bad economy such as was seen in September and October; and
4. Bad legislation that impacted the way business was conducted.

Mr. Heller informed the committee of a piece of legislation that could potentially impact his office. Assembly Bill 18 did not specifically mention the office of the Secretary of State but required resident agents to be attorneys to file paperwork with the Secretary of State’s office. Mr. Heller stated his opinion the process was very administrative. The bill did not specifically state a resident agent must be an attorney but the implications were such that agents were already calling his office and talking of moving their filings to a different state such as Wyoming.

Assemblyman Price asked if Mr. Heller’s office contracted with Sprint for additional phone service how it would save time in the office. Would the operators be assigned only to handle Secretary of State calls or if they were generic operators how would they know answers to specific questions.
Mr. Heller stated the contract would go out to bid but he would anticipate the company awarded would provide guarantees as to the type of service to be provided. The intent was that every call for the Secretary of State’s office be answered and the caller receive the information needed. Mr. Heller stated they would expect certain performance guarantees from the contractor.

Assemblywoman Cegavske stated she had a few questions but Mr. Heller could provide the information at a later hearing.

• Performance indicator 10 concerning notary fines projected 45 and 5 were actually done. What funds were generated from those five fines. Mr. Reis replied the maximum fine was $250 so the income was a minor amount.
• What was the turnover rate in the office prior to the hiring freeze. Mr. Heller responded prior turnover was 20 to 25 percent. The last 2 years the workforce had been very steady.
• What length of time was necessary to train a new employee. Mr. Heller replied it varied dependant on the employee. Some picked up things right away and other had to be trained two or three times.

Ron Sparks, Executive Director, Western Interstate Commission for Higher Education (WICHE) introduced Bob Atkinson, Budget Analyst.

Mr. Sparks said WICHE in Nevada had been involved in providing financial assistance to students since 1959. Currently WICHE consisted of four different programs providing aid to citizens of Nevada. He provided an overview of the programs to explain how the budget was developed.

• The Professional Student Exchange Program which required students to return to the State of Nevada to practice and repay 25 percent of the support fee paid on their behalf.

• The new Health Care Access Program (HCAP) required students to return to the state in an under-served community. The first graduating class under that program would be 1999.

• The Western or Graduate Exchange Program was a program that allowed students to attend school outside the state but pay in-state tuition plus
  50 percent. The program was designed as an undergraduate level program.

• The Western Regional Graduate Program was designed to allow students to achieve their graduate level degrees at an in-state cost.

Mr. Sparks stated each of the programs mentioned had two sub-components. The HCAP program had, through a collaborative effort with the University of Nevada Medical School, applied for and been granted a federal grant to fund a program called the Community Scholars. It was funded through federal, state, and community funds. It would fund two nurse practitioner positions and two physician assistant positions who would be required to return to under-served communities as designated by the federal government.

Mr. Sparks said the Loan Offset Pro Bono Program had been revamped to allow students participating in the Professional Student Exchange Program to return to the state and work off a percentage of their loans by doing pro bono work. Currently there were two dentists in Yerington who were seeing patients at the tribal community there and an optometrist who traveled to rural communities, a veterinarian who was going to be working on animals with special heart problems at a hospital in Douglas County. Licensure issues were a problem with the pro bono program. In dentistry it was very difficult to get some students back into the state but that was being addressed with a limited license and would help WICHE bring back students who would be limited to work with an under-served population. The requirements that the student must not have failed board exams made things difficult.

Mr. Sparks stated Budget Account 614-2681 consisted of loan paybacks and the amount of money needed to pay students to attend school. He proposed to fund four slots for in-state physical therapy students and continue with the two already in existence in the out-of-state HCAP. The old thought was, if there was a program in the state there was no need to fund students outside the state and he agreed that was appropriate in the Professional Student Exchange Program. Mr. Sparks said he did not agree in the HCAP Program because it was designed to place people in under-served communities and it did not matter what their source of education was.

WICHE got students into school, thus, if WICHE no longer funded out-of-state programs the in-state program must meet all the needs. Students would otherwise not be able to attend some of the schools with stiff admittance fees. WICHE cut their budget to accommodate in-state physical therapy slots.

Instead of funding a student at $10,000 per year for out-of-state slots, $5,000 per year was recommended to get the same amount of service as in the past.

Chairman Arberry stated he knew WICHE was trying to get physical therapists into deprived areas but the approach was very different. The Chair stated his understanding that when the legislature approved a profession to become an educational in-state program, all out-of-state programs within the WICHE budget would be dropped. The proposal by WICHE would change this principle.
Mr. Sparks said they were not trying to change the rules but were talking about two separate programs. In the past students were simply required to return to the state to practice and the HCAP Program required students to go to under-served communities and work in those communities. In Mr. Sparks mind, it did not matter whether they were using an in-state or out-of-state program. The communities needed people to serve them.

Chairman Arberry asked if such a procedure had ever been used in the past and Mr. Sparks replied it had not but the state had not previously had a HCAP program either. Mr. Sparks said if the program was handled "right" the economic development opportunities in the state would improve because there would be continued care in the under-served communities that could be held up to companies looking to locate in Nevada. Chairman Arberry rebutted the concern was that "once the box was opened, all the other schools such as law or medical schools" would try to get funding. Mr. Sparks was requesting an exemption for the physical therapists but once the door was opened, every other group would have a reason to say they needed the opportunity to do the same thing. Mr. Sparks replied the legislature set the priority so if they chose not to exempt other schools that would be fine. He added the law school issue was completely different than the WICHE proposal. The proposal was to provide a cost-effective enhancement to get help in the under-served communities. The HCAP Program allowed the graduate to serve the rural communities one or two days a week and that was "continuity of care" to those communities.

Assemblywoman Giunchigliani asked if the pharmacy program was considered under HCAP and Mr. Sparks replied it was. Ms. Giunchigliani asked how many pharmacists were lacking in the rural areas. Mr. Sparks said he would have to review an Employment Security Division (ESD) study but pharmacy, in his mind, was one of the areas where there were large issues because of the salary levels, and it was an issue in rural communities. Ms. Giunchigliani requested copies of the studies the proposals were based on. She stated her appreciation for
Mr. Sparks’ commitment. The 1997 Legislature recognized something needed to be done to create incentives for the rural areas, however, the legislation did not say they must fully fund or change a 40-year old policy. Changing the precedent would create an expectation in the future.

Assemblywoman Giunchigliani asked for clarification that 11 law students were continuing in the program and that was done because they were already in the program. Mr. Sparks said that was correct. She asked if when those students went away, that money reverted into the loan fund and again, Mr. Sparks concurred.

Mr. Sparks clarified the loan programs were not just for the rural communities. The need was just as large in urban settings and they did work with community health centers so it would not just benefit the rural communities. He added his understanding that "opening the box" could create problems but made a plea that if a way was not found to get care to the under-served communities, without incentives the likelihood was small that professionals would move into those areas. The programs were designed to teach, not place professionals in certain areas.

Assemblyman Marvel reminded the Chair there were such pockets of need in the Chair’s urban assembly district as well. He stated his impression that
Mr. Sparks was trying to keep the loans within a certain parameter to get professionals to serve in those areas. He stated he was not yet convinced on the instate proposal and suggested the committee reflect on the proposal for a while before a decision was made.

Chairman Arberry stated the committee appreciated Mr. Sparks’ use of some creativity to meet a need, but at the same time he wanted Mr. Sparks to consider what some of the drawbacks might be. Mr. Sparks responded:

Mr. Sparks concluded, WICHE requested funding for minority doctoral scholar students of $18,000 in the first year of the biennium and $36,000 in the second but it was not recommended by the Governor. The program was designed to promote supportive environments for graduate students of color within participating departments by strengthening mentoring, by committed faculty and peers fostering improved teaching skills of doctoral scholars, and mentoring faculty skills. Mr. Sparks explained they were trying to get a population of people into the state to help diversify the teaching staff. The request was for two students per year and WICHE was already using the program for one student at each university campus.

Chairman Arberry asked Mr. Sparks to step back a little and consider Governor Guinn’s plan to use the cigarette lawsuit funds for education. Perhaps, since

Mr. Sparks wanted to give money to schools out-of-state he could use the cigarette funds in-state by funding the universities with a qualification that the students must stay in-state and perform their duties in the rural or inner-city areas. Mr. Sparks said all he cared about was trying to get some care to the under-served areas.

Bob Atkinson stated the Budget Division would be requesting WICHE receive an advance against their authorized revenues from the state controller to allow the program to finance the funding for students early in the fall, should reserves in that budget account not be available due to the timing of loan repayment revenues.

Mr. Sparks reported the administrative budget was really a "base-only" budget. There were no recommended increases. The agency had requested travel funding be brought back up to the 1999 level rather than the base 1998 level. The money was not spent in 1998 because the HCAP program was not yet in place. It currently appeared as an unfunded enhancement.

Chairman Arberry requested a list of WICHE’s anticipated out-of-state meetings and conferences so the committee could make a comparison.

There being no further business, the meeting was adjourned at 11:05 a.m.

RESPECTFULLY SUBMITTED:

Cindy Clampitt,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE: