The Committee on Ways and Means was called to order at 7:50 a.m., on Monday, February 22, 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

Mrs. Jan Evans, Vice Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Parks

Mr. Richard Perkins

Mr. Robert Price

COMMITTEE MEMBERS ABSENT:

Mrs. Marcia de Braga (Excused)

Mr. John Marvel (Excused)

STAFF MEMBERS PRESENT:

Chairman Arberry directed Don Hataway to present explanations for the recent revisions to The Executive Budget and asked when the revisions would be completed. Mr. Hataway introduced himself as the Deputy Director of the Budget Division. He assured the committee the Budget Division presented budget revisions as soon as they were identified. The last major revisions to The Executive Budget would be related to cost allocation plans, the Attorney General’s Office, and statewide plans. The Budget Office hoped to have those revisions, as well as the changes in the Department of Information Technology (DoIT) fees and charges, completed by March 1, 1999. Hopefully budget revisions would be minimized thereafter, but he was not certain.

Mr. Hataway said he would present The Executive Budget revisions (Exhibit C) starting with Amendment 44 in Budget Account 4150, The Conservation and Natural Resources Director’s Office. The revision was an addition of $200,000 in the first year of the biennium, which related to the Truckee River and other rivers’ funding for litigation costs. He reminded the committee of two one-shot appropriation bills, one submitted by Mr. Dini and the other submitted by the administration. However, Governor Guinn believed it was best to place the legislation funding into The Executive Budget. The revision was an alternate financing method for the committee to consider. He said the committee could close the budget with that revision incorporated, or they could pass either of the two previously mentioned bills, which were worded identically.

Mr. Hataway explained Amendments 45 and 46 also concerned Budget Account 4150. The revision was a deduction of $23,345 due to duplicate funding for computer replacement equipment. Amendment 46 was a change the Budget Division recommended in Budget Account 1338, Risk Management. That amendment incorporated a $25,998,000 special assessment for the Benefit Services fund. He reminded the committee it had recently passed the initial $10 million supplemental appropriation to the health insurance plan, which would soon be going to the Governor’s Office for signature. He said he would be coming back before the committee later in the session as the reorganization evolved with that program.

Mr. Hataway explained Amendment 47 was a change to Budget Account 3243, Nevada Medicaid. The change reconciled funding requirements in the Medicaid budget with those reflected in the Mental Hygiene and Mental
Retardation (MH/MR) budgets. It would require adding $1.6 million in federal funds in the first year of the biennium and $316,000 in the second year of the biennium.

Amendment 48 was a revision to Budget Account 1050, the Office of the Secretary of State, concerning position reclassifications. Mr. Hataway informed the committee the Secretary of State requested a lump-sum figure for anticipated reclassifications. The Budget Office did not incorporate that into the budget, but recommended the Secretary of State proceed with reclassifications as soon as possible. After The Executive Budget closed in late December 1998, the Budget Office received the initial batch of recommendations on those changes from the Department of Personnel, and over the next few weeks, received the final batch. To incorporate those changes into the budget would require $44,000 in the first year of the biennium, and $44,000 in the second year of the biennium, from the General Fund. From the Secretary of State’s special expedite fund, the change would require $21,000 in the first year of the biennium and $22,000 in the second year of the biennium. Mr. Hataway noted the Secretary of State had informed him there were several reclassifications on which the Department of Personnel recommended no change, which were under appeal. Therefore, the figures might change a bit from time to time, but the revision covered the vast majority of what the reclassifications would cost.

Mr. Hataway explained Amendment 49 was a revision to Budget Account 3222, Maternal Child Health. The revision was apparently an agreement between legislative and executive staff for a one-time allocation in the base budget for the dental screening clinic program. The revision reduced the budget by $220,000 in each year of the biennium.

Amendments 50, 51, and 52 regarded Budget Account 4195, Division of Forestry. There were some changes in funding activities to reconcile certain accounts. Amendment 50 was a deduction of $4,800 in FY 2000 and $4,500 in FY 2001 from the General Fund and an addition of $4,800 in FY 2000 and $4,500 in FY 2001 in M-300 to reflect the proper source of funding. Amendment 51 modified air operations changes, from General Funds to other funds, which was a saving to the General Fund of $1,872 in FY 2000 and $3,000 in FY 2001. Other funds were added at $2,500 and $1,700, respectively. Amendment 52 reconciled revenues in E-900 to those reflected in the base budget, and would require a reduction in the General Fund of $6,800 in each year of the biennium.

Mr. Hataway introduced background information for Amendments 53 and 54. He explained the Budget Office had recommended information technology improvements in the Insurance Division’s budget. However, several weeks ago the division’s system crashed and the Budget Office accelerated improvements that needed to be made. Consequently, Amendment 53 for Budget Account 3813, Division of Insurance, was a reduction in the General Fund of $98,829 in
FY 2000. Amendment 54 concerned Budget Account 3833, Insurance Cost Stabilization, and was an increase in other funds of $2,644 in FY 2000 and a decrease of $2,785 in FY 2001.

Mr. Hataway explained Amendments 55 through 58 were changes in various budget decision units for the Department of Prisons (DOP) Director’s Office, Budget Account 3710. Amendment 55 was an adjustment in payroll calculations—a deduction of $1,586. Amendment 56 was an adjustment in employee physical cost—a General Fund deduction of $36,661 and $22,287 in FY 2000 and FY 2001, respectively. Amendment 57 was also an adjustment in employee physical cost—a General Fund deduction of $8,813 and $3,232 in FY 2000 and FY 2001, respectively. Amendment 58 was an adjustment in state-owned building rent. Apparently when The Executive Budget was closed, the new rent structure was not taken into account. The amendment would be a deduction in the General Fund of almost $19,000 in each year of the biennium.

Amendment 59 concerned Prison Medical, Budget Account 3706. There was an adjustment in the funding source for medical co-payments and other modifications. The amendment required an increase in the General Fund of $14,750 in each year of the biennium, and a deduction of other funds in the same amount.

Mr. Hataway explained Amendment 60 concerned the Division of Forestry, Budget Account 4195. It was a reduction in the number of vehicles, a saving to the General Fund of $14,800 in FY 2000.

Mr. Hataway presented Amendments 61 through 64, which concerned the Division of Wildlife, Budget Account 4452. Amendment 61 was an adjustment in federal revenue in the base to align the reserve to more adequately reflect what the reserve would be for the biennium. It required an addition of $573,000 in FY 2000 and $1,147,000 in FY 2001. Amendment 62 was the result of a realignment of revenue sources in M-300, which involved non-General Fund sources, so the net change was $0. It merely reflected the revenue sources, as did Amendment 63, which realigned revenue sources in decision unit E-710. Again, there was no net change. Amendment 64 decreased the amount transferred to Budget Account 4458 by $1,000. That amendment corresponded with Amendment 68.

Mr. Hataway introduced Amendment 65, which concerned the Criminal History Repository, Budget Account 4709. The amendment reflected an increase of $34,800 in FY 2001 for a correction in the amount of court assessments available. That amount was placed in reserve.

Amendment 66 pertained to Department of Motor Vehicles (DMV) Forfeitures, Budget Account 4703. There was a net change of $0 in other funds, but it replaced the source of funding from reserve to another reserve category that was overlooked.

Mr. Hataway explained Amendment 67 concerned DMV Investigations, Budget Account 3743, and increased other funds in FY 2000 of $33,507 to purchase required copy and computer equipment left out of The Executive Budget.

Amendment 68 concerned Wildlife Obligated Reserve, Budget Account 4458. It was a reduction of $1,000 in FY 2001 of other funds. The amendment decreased the amount required to transfer from Budget Account 4452, which corresponded to Amendment 64.

Amendment 69 pertained to Wildlife Boating Account, Budget Account 4456. From other funds, it increased $37,000 in FY 2000 and $64,000 in FY 2001 to create M-300, which was left out of The Executive Budget.

Mr. Hataway explained Amendments 70 through 72 concerned State Parks, Budget Account 4162. Amendment 70 replaced the source of funding from fees to appropriation in decision unit M-207, which would increase the General Fund in each year of the biennium by $5,000 and decrease other funds by $5,000. Amendment 71 decreased the General Fund by $375, for a reduction in the cost of equipment in E-710. Amendment 72 decreased the General Fund by $16 in FY 2000 due to a recalculation of appropriation share of Parks Maintenance improvement projects.

Amendment 77 was a change in the Office of the Secretary of State, Budget Account 1050. Recalling the testimony given by the Secretary of State, Mr. Hataway explained the Victim’s Assistance Program for Confidentiality was established in the 1997 Legislative Session. One of the positions in that account, number 52, increased from 0.50 to 1.0 and everyone involved in building The Executive Budget failed to catch that change. Consequently, the cost needed to be added to provide a continuation of services for that program. The amendment was an increase in General Fund appropriation of $15,222 in FY 2000 and $15,753 in FY 2001.

Amendment 79 pertained to the Purchasing Division, Budget Account 1358. There was a reduction in reserve required through June 30, 2001 of $182,000 and $411,000 in FY 2000 and FY 2001, respectively. That would bring their unit charges for cost of services in line with the federal cost allocation requirements. The Federal Government normally allowed the internal service funds to maintain roughly a 60-day working-capital reserve, which the amendment would do.

Mr. Hataway concluded his explanation of amendments to The Executive Budget and informed the committee he would be happy to answer any questions. Vice Chair Evans asked Mr. Hataway to explain Amendment 47 again. Mr. Hataway reiterated Amendment 47 balanced the Nevada Medicaid Budget to the funding requirements reflected in the MH/MR budgets for Medicaid. It was strictly a reconciliation process that the two analysts did not do as part of the finalization of The Executive Budget.

Vice Chair Evans said Amendment 47 referred to Benefit Services, as shown in Exhibit C. Mr. Hataway said he needed to get together with the legislative staff, because his information was not the same as the committee’s (Exhibit C). Vice Chair Evans said her list of budget revisions showed no amendment regarding Medicaid. Mr. Hataway said he would make sure his amendments were numbered the same as the committee’s by the next time he met with the committee.

Chairman Arberry updated the committee members on the status of the budgets. There was a total of 474 budgets, and as of February 19, 1999, the committee had reviewed 447 (94.3 percent) of those budgets. The joint subcommittees had reviewed 268 budgets (53.4 percent), so the committee was moving quickly through the budgets.

Chairman Arberry said the committee had a several bills that needed to be introduced.

• BDR S-1381 – Makes appropriation to Nevada Supreme Court for operational costs of Commission on Racial and Economic Bias within the Judicial System. (A.B. 290)

• BDR S-1490 – Makes appropriation to Division of Agriculture of Department of Business and Industry for development of statewide data base and economic analysis of grazing trends on public lands. (A.B. 291)

• BDR R-1492 – Urges Congress to prohibit federal recoupment of money recovered by states from tobacco settlement. (AJR 9)

• BDR 32-1467 – Revises provisions governing compensation paid to State of Nevada for cost of collecting certain taxes. (A.B. 288)

• BDR 16-859 – Enacts provisions governing operation of vending machines located in institutions and facilities of department of prisons.

Kathy Augustine identified herself as the Nevada State Controller and said Deputy Controller Ken West was also present. She said there were two main items requested in the controller’s budget.

Ms. Augustine explained the first item related to the new Integrated Finance System (IFS), which became operational on January 4, 1999. With the first phase of the IFS, the Controller’s Office had a minimal general ledger, which only allowed for present business functions. That was done to mitigate the Y2K problems. The next project phase would develop increased functionality in all agencies. By so doing, the Controller’s Office would have the responsibility to train agencies in processing and reporting of their financial transactions. In addition, there would be an implementation analysis that would assist agencies in evaluating their business processes to ensure they operated efficiently and practically.

Ms. Augustine said the second item requested in the Controller’s budget, which was not recommended by the Governor, was a Las Vegas office. The State Controller was the only constitutional officer without a presence in Las Vegas. Implementation of the new IFS would result in an increase in accounting transactions originating from the Las Vegas area. That decision unit requested the initial staff and office space for the Controller in Las Vegas. She requested one unclassified management assistant in the Las Vegas office.

Ms. Augustine explained the Governor approved, and enhanced, the Controller’s budget. She directed attention to the State Controller’s Office organizational chart on page 4 of Exhibit D ("State Controller’s Budget Request"). There were two positions, an Accountant III, under federal reporting, and an Auditor II, under payroll assurance, which were not included in the budget.

Chairman Arberry asked Ms. Augustine to address the IFS and its accomplishments in dealing with existing staff and resources. Ms. Augustine reiterated the first phase was implemented on January 4,1999, and accomplished basic business functions. The Controller’s Office was understaffed and its vendor services were overwhelmed. There were 400 sites throughout the state that would be affected by the IFS. A temporary person had to be hired to assist vendor services.

Ken West introduced himself as Chief Deputy Controller and said the first phase of the IFS was to bring up a general ledger that did not affect the manner in which business was conducted. There was a collection system that processed documents the same way it had been done for the last 20+ years. The Controller’s Office moved those documents into the new IFS. Currently agencies were suffering because the Controller’s Office had shut down the online query system called "Scooter" that allowed agencies to check for documents, vendors, and transactions. Mr. West said he planned to have a data warehouse up in the near future, and agencies would again be able to access information, as a better means to query information.

Mr. West explained there were two functions the Controller’s Office would accomplish in 1999. The first was to produce an annual financial report, which they were trying to plan. The second function was the end-of-year closing, which would be completed by June 30, 1999. Next year there would be an implementation phase of increased functionality for the agencies. The main reason for the new IFS was related to Y2K issues, but some agencies did not have the functionality needed to keep track of receivables. Those agencies did not include taxation and gaming, but were mostly smaller agencies. The agencies also lacked a good cost-accounting system to keep track of projects and grants that could automatically be allocated costs, based upon labor distributions. The increased functionality had to be explored and developed in the IFS. The Controller’s Office was planning to do that beginning July 1, 1999. The program would be implemented in a few agencies at a time, and would then be implemented in each agency throughout the state. No "big bang" implementation was planned for the project, because it was unfeasible given the short amount of time before its initial implementation. The money in the IFS decision unit was needed for maintenance, additional personnel, training, equipment, and software for the next biennium.

Chairman Arberry said he had a question regarding E-850. The Controller’s Office requested approximately $8,000 for Information Services, but was recommended to receive $222,000 in FY 2000 and $218,000 in FY 2001. The difference needed to be addressed by the Controller’s Office.

Mr. West said when the Controller’s Office’s budget was submitted in August 1998, the planning for the IFS was in its early stages. Another budget was submitted to the Budget Office later in the year, with the addition of the project’s total cost. E-850 reflected the cost of the IFS software contracts, hardware maintenance contracts, and payment to the Department of Information Technology for maintaining the wide-area network.

Mr. Hataway said that agency request included phase II of the IFS project. The Budget Division closed all the original agency requests on October 9, 1998, so the Budget Division could get the reports required by state statute to the Fiscal Analysis Division by October 15, 1998. The large difference was merely a refinement as they got further into the IFS, and the consultant working on the IFS had verified it. E-850 was only an upgrade from what the agency had originally requested.

Vice Chair Evans said the Controller’s Office’s performance indicators were not outcome measures, but were just a measure of volume of activity, so some additional work was needed. She asked Mr. West to address the variability of performance indicator number three, cost per keyed document, which ranged from 0.52 down to 0.48, then up to 0.96.

Mr. West said the IFS would hopefully eliminate the use of paper, but keypunch operators would be retained until they could be absorbed into another function. The cost per keyed document would increase until it could be absorbed into another function. The IFS would transfer the entry of information from the Controller’s Office to the various agencies. Forms the agencies sent to the Controller’s Office would be transmitted electronically, once the agencies were brought online. The core agencies (Purchasing, Controller, Treasurer, Personnel, and General Services) did not send or upload documents as was done in the past, because IFS was an online system. Documents were entered by the agency, edited, and processed in the system. There were some changes in the way documents were processed. The keypunch operators’ salaries would still be there, even though there would be fewer documents coming in, so the cost per document would increase. He added the numbers were only projections.

Vice Chair Evans asked if the Controller’s Office had a document showing an overall plan with a timetable of anticipated phases and completion dates. Mr. West said the next phase planning would start in July 1999. That document was an implementation analysis plan and would be produced in July 1999. The Controller’s Office was concerned with getting IFS and payroll operational and getting bugs out of the minimal system. Vice Chair Evans said she understood, and asked if everything happened as planned, what would be the project’s completion date. Mr. West replied the project would be completed in 4 years.

Chairman Arberry said E-850 showed a substantially higher amount requested for additional training costs, and asked Mr. West to explain that. Mr. West replied there was a training facility in Carson City implemented with the IFS that would be used for many projects. That training cost covered the cost of bringing people to the training facility, or the Controller’s Office staff going elsewhere to complete the necessary training. It was dependent on the timing of phase two. All the requested training money might not be able to be used in the first year, but he did not know how much should be shifted to the second year.

Chairman Arberry asked Mr. West what he meant by the Controller’s Office staff "going elsewhere" for training. Mr. West said he meant in-state travel for training purposes to places outside of Carson City, such as Elko and Las Vegas. The funds might also be used to bring people from agencies to Carson City for training.

Chairman Arberry asked for a justification of the requested salary increases and reclassifications of the positions in E-805. He also asked if the position reclassifications had been submitted to the Department of Personnel. Mr. Hataway said for new positions, or positions reflected in E-850, the agency submitted the NPD 19 (the reclassification request) to the Budget Office. It was reviewed for reasonableness by the Budget Office, and subject to that review was put into The Executive Budget. Ultimately, after The Executive Budget was closed, the reclassifications were submitted to the Department of Personnel, which decided whether the request was correct. That was standard practice.

Mrs. Chowning said there was an increase in contracts to cover the cost of a graphic artist in the base budget. She asked how much the graphic artist was paid and whether or not a graphic artist was needed. She said the cover of the annual report looked very nice, but questioned whether a graphic artist was necessary. She also wanted to know what was included in the unfunded decision units. Mr. West replied controllers were generally penurious. Each year the Controller’s Office featured one department in its annual financial report, and the department was asked to share some of the cost for the advertising of their agency. The Controller’s Office had not needed to be paid for the last 2 years, and therefore, no cost was associated with that in the base budget. Prior to that, they paid $1,500 to $2,500 for a graphic artist when an agency was featured that did not have funding to help pay for the advertising, such as the Division of Minerals. Last year, costs for a graphic artist for the cover, divider pages, and special section, totaled approximately $5,000. Mr. Hataway added that was paid by the Division of Tourism. He had merely picked up the actual cost to the agency and put it in their base budget.

Mr. West deferred to Mr. Hataway to explain unfunded units, but added they were not significant. Mr. Hataway said Ms. Augustine already addressed unfunded units, which covered the auditor position and the Las Vegas office.

Ms. Augustine referred the committee to the proposed amendment to A.B. 150 (Exhibit E). The former Controller requested A.B. 150 and the draft was sent to the Controller’s Office before she officially took office. She apologized for the amendment, and said Mr. West would address the issue.

Mr. West said the proposed amendment would delete section 2 of A.B. 150, which concerned the transfer of funds when the payroll clearing account would be transferred to the main account. The state highway clearing account was a zero-balance account, meaning it was a sub-account of the main account. As checks were cashed at the bank, there was a transfer of money. There was never a balance in that account and section 2 had the balances transferring to the General Fund, rather than the State Highway Department. Since there were no balances, section 2 was unnecessary. Therefore, section 3 should be renamed section 2.

Mr. West explained A.B. 150 did not come about because of the Governor’s wish to consolidate payroll centers, although it would make it a lot easier. During the development of the IFS, the existence of the clearing account caused interface modifications, which cost money. With the IFS, a separate clearing account was not necessary for the purpose of the director to sign checks and report separately. Deleting that account would allow the same check reconciliation procedures and programs and payroll clearing account to be used. It should also simplify account postings and bank reconciliation procedures. The clearing account came about the previous year as a surprise to the Controller’s Office. The Controller’s Office did not want the account to be a separate fund as it had been in the past, thus losing interest earnings. Prior to establishing the clearing account in the 1997 Legislative Session, the only way money could be drawn from the main account was through a Controller’s warrant. That legislation allowed another method of drawing money from the main account and avoiding the checks and balances of the Controller and the Treasurer. Those were the primary reasons for the bill, which was supported by the Department of Administration.

Mr. Parks asked if the bill had the support of the Nevada Department of Transportation (NDOT). Mr. West replied he did not believe NDOT would oppose the bill, but he was not sure if they supported it, although they should because it made less work for NDOT.

Chairman Arberry asked if anyone was present to represent NDOT. Roger Grable introduced himself as the Assistant Director for Administrative Services for NDOT. He said NDOT presently supported the amendment to A.B. 150. Chairman Arberry noted he said "presently," and asked if he planned on changing his position. Mr. Grable said no, he would not be changing his position. When NDOT recently discussed A.B. 150, they were not aware section 2 would be deleted. NDOT was concerned more with the portion of the bill that recommended revision of funds to the General Fund, because it was a zero-balance account and would have been involved entirely with highway funds.

Mr. Beers said testimony indicated IFS had to be modified to accommodate the clearing account. He asked if it would have to be modified again to accommodate taking away the clearing account. Mr. Grable replied they would be looking at the interchange between NDOT and the general ledger in the next IFS phase. The Controller’s Office was not satisfied, and yes, there would probably be a deletion of those modifications. Mr. Beers asked if that cost could presently be quantified, and Mr. Grable replied no, to his knowledge, that had not been done. A planning phase was needed before cost quantification could be done.

Mr. Beers asked if the Controller’s Office was comparing the cost of modifying the IFS to accommodate that change to the cost of additional work in the reconciliation process. Mr. Grable said he did not know what the cost was to modify, or if there were any modifications to the IFS. Currently, NDOT payroll had a separate bank account, tax identification number, and bank reconciliations, and that would cease. The Controller’s Office still had to analyze what programming procedures would be needed. The Controller’s Office was having difficulties with bank reconciliations in the zero-balance account. Outstanding check information was not available to the Controller’s Office, but had to come through NDOT. The Controller’s Office had to reconcile with the bank if there was a further modification of the IFS. They would have to pick up the checks that NDOT issued and put them in bank reconciliation files, which was another modification in programming. With that modification, that no longer had to be done. NDOT could write checks on the main account and would be charged to their funds, like every other payroll account in the state. It was more of an integrated system than was being done with the interfaces to NDOT, which was the original design of that system, but the clearing account caused the Controller’s Office to depart from that. Mr. Grable reiterated he did not know what, if any, modifications would need to be made to IFS.

Mr. Beers asked Mr. Grable if it would be possible to get that information within the next few weeks. Mr. Grable replied probably not, because they were very anxious to bring up a payroll system by the end of March 1999. NDOT would not want to spend the time estimating what had to be done, but he would try.

Chairman Arberry asked Mr. Hataway what the Budget Office thought about A.B. 150 and the amendment to it. Mr. Hataway replied the Budget Office was not opposed to the bill, as it was a logical sequence of merging the two payroll systems. He added, based upon the questions asked by the committee, he did not know whether or not the committee had received a briefing on the total picture of IFS. He thought that would be a good idea because the Controller was just one aspect of IFS, which included payroll, purchasing, et cetera. Mr. Hataway said if the committee was interested, he would be happy to bring the necessary people together provide a briefing, starting with Perry Comeaux, Director of the Budget Division. Chairman Arberry said he would like that, time permitting. Ms. Augustine added there was a prepared pamphlet detailing the first phase of IFS, and she would provide that to the committee. As Mr. West stated, the Controller’s Office was trying to get the payroll system operational. The target date was originally March 1, 1999, but was now April 1, 1999.

With no further questions or comments, Chairman Arberry declared the hearing on A.B. 150 closed.

Ms. Giunchigliani said there was a piece of legislation in the Senate where the Controller’s Office would be transferred to the Governor’s Office. She asked what impact that would have on the Controller’s budget. Ms. Augustine replied it would have no effect because the effective date was January 1, 2007. Ms. Giunchigliani asked if the intent of that legislation was to consolidate the Controller’s Office with the Treasurer’s Office. Ms. Augustine replied no, it was to allow the Governor to appoint the Controller. Ms. Giunchigliani said there had been legislation in the past to consolidate those two offices to eliminate possible redundancies.

Brian Krolicki introduced himself as the State Treasurer of Nevada and said he had been before the committee on many occasions in past years, but this was the first time as State Treasurer. He introduced his staff: John Adkins, Chief Deputy Treasurer; David Clapsaddle, Director of the Prepaid College Tuition Program; Robin Reedy, Deputy Treasurer of Debt Management; Diana Vasey, Deputy Treasurer of Investments; Darrel Rexwinkle, Deputy Treasurer of Cash Management; and Scott Sherwood, Management Analyst. Mr. Krolicki said on Thursday, February 25, 1999 the Nevada Taxpayer’s Association would take away something that had been very proudly sitting in the Treasurer’s Office for the last year: the Cashman Good Government Award. The award was established the previous year, and went to the Treasurer’s Office. The Treasurer’s staff really earned the award, and he hoped he had something to do with that.

Mr. Krolicki explained the Treasurer’s Office invested money on a daily basis. Under Ms. Vasey’s jurisdiction in Las Vegas, the Treasurer’s Office managed a portfolio of approximately $2 billion. The previous year, earnings on the General Fund were approximately $68 million. The local government investment pool, also managed by the Treasurer’s Office, generated approximately $21 million. In FY 1998 $25 billion flowed through the State Treasury. In addition, the Treasurer’s Office managed the state’s debt, which was currently just over
$2 billion. The Treasurer’s Office had the duties of issuing new debt, servicing existing debt, and taking advantage of refunding opportunities. In FY 1998 the State Treasurer’s Office was directly responsible for $378 million in new debt securities on behalf of Nevada and many of its local governments. The Treasurer also administered the State Board of Finance. Everything from Employer’s Insurance Company of Nevada (EICN) to Business and Industry came through the Treasurer’s Office, either directly or indirectly as a recommendation to the State Board of Finance.

Mr. Krolicki said he felt the State Treasurer’s budget was reflective of the austere period that Nevada currently faced. The one item that jumped out in the budget was the ADS system, but it had been approved by the Department of Information Technology and the Governor’s Office. The Treasurer’s Office was asking for approximately $80,000 over the next biennium. The ADS system tracked the investment portfolios of the state. The Treasurer’s Office had very little choice in the current ADS system because it was not compatible with the new Integrated Financial System (IFS). The current system was an MS-DOS-based software program and the upgrade would transfer it to a Windows 95 system. It would also allow the Treasurer’s Office to interface with other banks in Nevada and would allow flexibility in putting different interest rate environments into the portfolio to see how they performed. That would give them the best capability and forecasting to manage the $2 billion portfolio. A cash flow module could be purchased for the upgraded ADS system, and cash forecasting was crucial to Nevada. Data was always a problem in that type of environment, but the upgraded system would give the Treasurer’s Office a large leap forward in its ability to forecast. Mr. Krolicki concluded if there were any discrepancies in the budget, he would accept the Governor’s recommendations.

Mrs. Chowning said the committee was concerned because interest income was projected to decrease from $28 million to $17 million in 2001. She asked
Mr. Krolicki to explain the state’s investment earnings over the next few years. Mr. Krolicki said he was not able to give her a solid answer, and if he could, he would probably be investing his own portfolio and making a fortune. The interest rate environment was at a 30-year historic low. The yield curves in which the Treasurer’s Office invested were flat, and sometimes overnight markets were higher than rates would be for 12 or 24 months. It was extremely difficult to predict what interest rates would be in the future. In addition, they had to predict not only the interest rate, but the base amount to be invested as well. That meant they had to predict the size of the portfolio that would be receiving those interest rates, which was more in the area of the Budget Office and the Legislative Counsel Bureau. In answer to Mrs. Chowning’s question, he noted the lower interest rates made the state’s debt cheaper.

Ms. Evans asked Mr. Krolicki if the Treasurer’s Office was prohibited from making many kinds of investments that might provide the state with more income. Mr. Krolicki replied the state had a constitutional clause that stated the state shall not lend its money or credit to private enterprises. That had been interpreted to mean investment in the stock market. Therefore, the Treasurer’s Office did not have any equity position in the general portfolio of their local government investment pool. The Treasurer’s Office invested in things that were explicitly stated in statute. The office utilized a "prudent person" principal, as did the Public Employees Retirement System (PERS) and the Employers Insurance Company of Nevada (EICN), but the Treasurer’s Office only invested in things that were explicitly stated. The Treasurer’s Office was further confined on the side of conservatism in how they invested, which was approved by the Board of Finance. That was done so there would be a doctrine imposed on whomever was elected to the State Treasurer’s Office. For the general portfolio, the average maturity of that fund was about 400 days. If the general portfolio had any exposure to the stock market, over a 10 to 20 year time frame, the stock positions would appreciate substantially. But if they had a stock market exposure of 10 to 20 percent of the general portfolio, it was likely they could invest a few hundred million today, but a year from now, the amount invested could be down 10 percent.

Ms. Evans agreed there could be either a profit or loss, but the history over
50 years for the Standard and Poor’s (S&P) 500 was quite good. In the past there had been a few unsuccessful attempts to modify the constitutional prohibition. She asked if there was presently any discussion regarding the prohibition. Mr. Krolicki said he had heard some whispers about it, but not like past sessions, when the Commission on Economic Development and the Department of Business and Industry supported expanding the areas in which the state could invest available funds. He thought the ability for the state to incubate or invite appropriate businesses to Nevada was a worthy thing. Most states, and certainly the states around Nevada, did that, which made it very difficult for Nevada to compete for business. While the language was admittedly complex and difficult for voters to accept, the voters defeated that issue twice. He would absolutely support, within conservative constraints, the ability for the state to provide certain incentives for private industries to come to Nevada.

Mr. Dini asked if there was a regular plan for refinancing state bonds. Mr. Krolicki said one of the nice things about managing a multi-billion-dollar portfolio was that individuals on Wall Street called him almost every day. For the first time the State of Nevada adopted, through the Board of Finance, a debt policy from issuance to refundings. Normally, if there was a normal outstanding bond (not close to maturation or a call date), the state wanted savings of 4 to 5 percent of present value before it would be cost efficient to refinance. The Treasurer’s Office had managed to refinance much of the balance sheet, and continued to look at that every day. For example, there was an item that the Colorado River Commission had: one of their Hoover Dam upgrade bonds from 1992, that with some tools given by the 1997 legislature, the Treasurer’s Office may be able to synthetically refinance for over a 10 percent present value savings.

Chairman Arberry asked Mr. Krolicki to explain E-710. It showed the Treasurer’s Office was asking for computer equipment and replacement upgrades. He understood 30 percent of that funding would come from the General Fund, but wanted to know if that cost could be shared from other sources. John Adkins, Chief Deputy Treasurer, explained the replacement equipment in E-710 was primarily for the cost associated with the ADS system. However, the computer hardware associated with the ADS system was approximately $80,000.

Chairman Arberry asked if part of the E-710 cost could be shared, since all the items would be part of the IFS. Mr. Adkins replied the ADS would not be shared with the IFS, but was shared somewhat in that the Local Government Investment Pool (LGIP) for which it would be used, would share a portion of the ADS. Revenues earned from managing the LGIP went into the Treasurer’s budget as revenues, offsetting part of those expenses. The sharing of revenues associated with those various activities, particularly LGIP and Municipal Bond bank, were hidden in respect that revenues were brought into the account, then the Treasurer’s Office expensed those items. There was no separate accounting for that difference, so any excess automatically went into the General Fund. The Treasurer’s Office had returned to the General Fund in excess of $200,000, each year for the last 3 years.

Chairman Arberry said E-720 showed the Treasurer’s Office needed a fax machine and a new file server for the Las Vegas office, but they requested $3,000 for FY 2000 and $12,000 in FY 2001. As he understood, the total of $15,000 was recommended to be funded in FY 2000. He said that was confusing and asked for an explanation. Mr. Adkins said the Budget Office recommended the total amount for the first year, instead of splitting the cost over the biennium.

Mr. Hataway said the Budget Office recommended in the suggested appropriations bill, that the one-time expenses for equipment and computer hardware and software could be used in both years of the biennium. In most of the budgets, the equipment was moved into the first year of the biennium, instead of spreading it over both years. The Budget Office was asking for the flexibility to use those funds in a timely fashion.

Mr. Krolicki said he would like to make a statement regarding the classification of positions in the Treasurer’s Office. He said the Governor’s Office asked the committee for some flexibility in their budgets, and he thought they suggested a nonclassified employee classification. While he was not necessarily lobbying for that, he had a problem he did not know how to fix. The Treasurer’s Office had certain classified employees at the management analyst level who, under the traditional personnel classification programs, were very difficult, if not impossible, to upgrade. Personnel was biased against people who managed a small staff. He had stand-alone people who managed billions of dollars, but did not supervise others.

Mr. Krolicki explained there were three possible outcomes to the situation. First, he could lose those people because he could not give them the upgrades they deserved. Second, he could unclassify those positions, which he would be happy to do if that was appropriate. Third, he could use the nonclassified position the Governor recommended, which would help him in terms of flexibility.

Mr. Hataway added if the positions were moved from classified to unclassified, incorporating them into the unclassified paybill, two things would be required. First, because agencies were currently limited, by statute, in the number of people they could have in unclassified positions, the statute would have to be amended. Second, they would have to be added to the unclassified paybill.

Mr. Goldwater told Mr. Krolicki he thought a bill was recently passed allowing him to hire outside consultants and similar positions. He asked if that allowed appropriate flexibility in hiring. Mr. Krolicki replied he could outsource positions, and did a lot of that due to the nature of their business. However, he needed a core staff to oversee the positions he contracted out. Those were mostly cash management positions that earned the state a significant amount of money. He could not outsource those positions, but if he could, he would.

Mr. Krolicki said David Clapsaddle, Director of Nevada Prepaid College Tuition Program was also present to answer questions about Budget Account 1081. He presented the report (Exhibit F) that the Nevada Prepaid Tuition Program was submitting to the legislature, as required by statute. It was part of the creation legislation that was needed in order for the legislature to keep close tabs on the program, as it should. He urged the committee to look through the book at their leisure.

Mr. Krolicki said the Nevada Prepaid College Tuition Program was an unqualified success. There were almost 2,800 children enrolled in the program. The Board of Trustees did a stunning job, as did Mr. Clapsaddle. The program was Treasurer Seale’s proudest legacy to the State of Nevada. To date, there was $2.5 million in the trust fund, and he anticipated by June 30, 1999, it would increase to $5.8 million. The Nevada Prepaid College Tuition Program was established by the legislature 2 years ago with a $1.2 million loan. Over $200,000 was reverted in FY 1998, and he anticipated another $156,000 would be reverted on June 30, 1999. The $1.2 million loan was really only an $850,000 liability to the General Fund. In 2001 a $25,000 payment would be made. About $40 million in assets needed to be in the trust fund to allow for the program’s self-sufficiency. It should not be difficult, given the early success of the program. For the 1998 enrollment and the payments for the next several years, he anticipated $23 million. There were two more enrollment periods before 2001.

Chairman Arberry asked Mr. Krolicki when repayment of the seed money was scheduled. Mr. Krolicki replied as soon as possible, but not in the current biennium. Mr. Hataway added once the program had a few years experience to see what the portfolio would be, he would get together with the committee’s staff to work out a payment schedule. He thought it would be a 5-year payback, but the program needed "a few more draws under their belt" before that conclusion could be reached. He reminded the committee there was a sunset of June 30, 2001 on the program. Based on the program’s initial experience he expected to come to the committee with a bill to repeal the sunset. Beyond that, the program would need sufficient cash flow out of the return on investments to pay for the operation and maintenance, as well as the loan. The payback probably would not come in a lump sum, but probably would not be over a 10-year period either. Mr. Krolicki added the loan would be paid back as quickly as possible, but there were some actuarial concerns. The trust fund could not be reduced to hurt the actuarial projections to make sure tuitions were covered.

Mrs. Chowning asked Mr. Krolicki why the Nevada Prepaid College Tuition Program needed funding for out-of-state travel. Mr. Krolicki replied Nevada did not invent the program and there were states, such as Michigan and Florida, that had been through the "learning pains" of the program. Within the National Association of State Treasurer’s, a network was dedicated specifically to college savings and prepaid tuition programs. Nevada was a member of College Savings Plan Network (CSPN), and he or Mr. Clapsaddle would go to those meetings to find information on successful advertising routes, actuarials, investments, legal issues, et cetera. It was beneficial to have access to information from around the country.

Mrs. Chowning said it seemed that the cost for in- and out-of-state travel was quite high for the Nevada Prepaid College Tuition Program budget. She requested Mr. Krolicki’s staff provide more information on the programs travel expenses.

Mr. Beers noted funds were set aside for legal and court expenses to cover potential patent infringement and asked who patented the idea of saving money for college. Mr. Krolicki said a man from New Jersey, who was associated with a college savings plan established in that state, thought the plan was so unique and intellectually special that he suggested he had a patent on those types of programs. Other states had dealt with that issue, as would Nevada. The case was currently in court and accused other states of infringing on the patent. He believed the issue would be easily decided in the state’s favor, but the problem existed. Therefore, the program needed legal counsel.

Mr. Krolicki explained Budget Account 1082 was a bond interest and redemption budget. The budget covered the outstanding debt obligation that went against the 2 percent assessed valuation of the state.

Mr. Hataway added, in addition to the ongoing principal and interest for existing bonds, there was decision unit M-200 that would fund the Capital Improvement Program (CIP) and other issues such as cultural resource and Tahoe bonds. The CIP subcommittee would be studying the issue in-depth. A very detailed report had been provided to the committee by the Treasurer’s Office. The report projected principal and interest payments over the life of all existing bonds, as well as those proposed in the current legislative session.

Mr. Krolicki explained Budget Accounts 1086 and 1087 "went hand in hand." The revenues were needed for debt service. The Municipal Bond Bank was established in the early 1980s to provide relief on the interest rates assessed local governments in Nevada that had projects that were natural resource related. Essentially the local government sold the state a local bond and the state kept that internally and sold the local government a state bond that afforded them a lower interest rate. Mr. Krolicki said the program had been very successful. He pointed out there was an outdated fact in the program description on the revenue page. The State Treasurer was now able to sell up to $1.8 billion in municipal bond securities, not the $600 million shown. That was changed in the 1995 Legislative Session, primarily to accommodate the Southern Nevada Water Authority.

Chairman Arberry asked for the current unobligated balance. Mr. Krolicki replied there was just over $1.1 billion outstanding in the municipal bond bank, so there was approximately $700 million in "cap" left in the bond bank for other governments.

Mr. Krolicki reiterated Budget Account 1087 was the flip side of Budget Account 1086. Local governments paid the state 15 days early and interest was earned for those 15 days, which reimbursed the state for administrative costs.

Andrea Reitan introduced herself as the Deputy Chief of Staff for the Lieutenant Governor. She said Budget Account 1020 was relatively simple and they took a lean approach with only slight increases for inflation. Similarly to the Treasurer’s Office, the Lieutenant Governor’s budget requested computer equipment. The equipment in their offices was very antiquated and, as Mr. Hataway said in the Senate Finance hearing, the Lieutenant Governor’s office was simply asking to be brought into the 20^th century before they entered the 21^st century. Existing computers did not communicate with one another. If a disk was taken from one office to another, the other computer could not read it. Ms. Reitan explained the Lieutenant Governor’s office did not make a "wish list." They contacted the Department of Information Technology and told them what was needed and how they wanted to communicate. She introduced the Department of Information Technology’s recommendation (Exhibit G).

Mr. Hataway said the key decision unit that drove Budget Account 1020 was
E-125. He stated the computer information had been outlined by Ms. Reitan. The other main issue in E-125 was a staff person for the Carson City Office that would allow the Lieutenant Governor to keep that office open full-time. In addition, there were in-state and out-of-state travel and operating expenses requested by the Lieutenant Governor, which she felt were necessary to accomplish her mission. Beyond that, the budget was routine.

Chairman Arberry said E-125 requested an additional support person and asked for an explanation. Mr. Hataway restated that person would be used to keep the Carson City office open full-time. The Las Vegas office was open full-time, but the Carson City office was primarily open only during the legislative process.

Ms. Reitan added the Lieutenant Governor wanted, based on economic development and tourism obligations, to have a person in the Carson City office 5 days per week to answer phones and greet people as they came into the office. The Lieutenant Governor’s office found the Carson City office was getting a lot of visitors. The Deputy Chief of Staff and the administrative person in the Carson City office would be traveling a lot with the Commission on Economic Development and Tourism.

Chairman Arberry said, based on the information the Lieutenant Governor’s office just presented, normally the committee asked for some type of performance indicator to show that position was needed. He asked if the Lieutenant Governor’s office could provide an outline for the justification of that position and document the visitation volume, showing why that position was necessary. Ms. Reitan said the Lieutenant Governor’s Office would be happy to provide the committee with job descriptions and performance indicators.

Mr. Beers noted it appeared from the workstation request shown in Exhibit G, that the Lieutenant Governor’s Office was gearing up for multimedia, which made sense, given the Lieutenant Governor’s mission statement. He said he was concerned that the 100 MHz workstations might be a little slow. It might make more sense to spend $150 more per workstation to get the MHz doubled. Ms. Reitan expressed her appreciation for his comment, as she was not a computer expert. Mr. Beers added it may also be an error, and he was currently trying to find that out.

Chairman Arberry noticed the workstations planned to have Harmon Kardon speakers. He said those were very nice speakers and questioned their necessity. Ms. Reitan said apparently the speakers were standard for their needs, as recommended by the Department of Information Technology.
Mr. Beers said he thought those speakers were bundled in the $1400 workstation, and that decision was made by Dell (the manufacturer of the computer).

Ms. Giunchigliani asked how much of the equipment request was to hear the meetings during the legislative sessions, as they only met for 120 days every 2 years. Ms. Reitan replied not very much of the equipment would be used for that purpose, and most of the money would be used for communication with the Commission on Economic Development and Tourism. The Lieutenant Governor’s office currently had nothing compatible with the commission’s computers.

Ms. Giunchigliani asked if the Lieutenant Governor’s office had e-mail.
Ms. Reitan replied they did, but were not able to communicate on an international level for economic development and could not e-mail large documents. Ms. Giunchigliani asked what requests the Lieutenant Governor’s office had in the past for e-mailing large documents. Ms. Reitan said based on her personal experience, she tried to e-mail Microsoft Excel documents on taxation and their computers in Carson City could not communicate with their computers in Las Vegas. The Lieutenant Governor’s office in Carson City had a 386 computer with Microsoft Office from 1994.

Ms. Giunchigliani said she appreciated the need to upgrade computers, but her concern was duplication. If the Commission on Tourism was also working on computer upgrades, just because the Lieutenant Governor’s Office interacted with the Commission on Tourism, it did not need all the same equipment. There was no question the budget had always been underfunded, dating back prior to Sue Wagner, but she did not want to see people traveling around the state for purposes that did not translate into economic development for the state.

Ms. Giunchigliani asked if there had been any new remodeling in any of the offices of the Lieutenant Governor. Ms. Reitan replied they would be adding a door, because the existing door went directly into the Lieutenant Governor’s office. That was not reflected in the Lieutenant Governor’s budget and would come out of the Buildings and Grounds budget.

With no further questions or comments, Chairman Arberry declared Budget Account 1020 closed.

Chuck Abbott introduced himself as the Executive Director of the Nevada Commission for Veteran Affairs. The commission was a state agency that operated under Budget Account 2560. Part of the commission’s mission was to manage two state veterans’ cemeteries, one in Fernley and one in Boulder City. Both cemeteries received and dispersed funds. When the cemeteries were established and given the authority to receive and disperse money, the wording in the statute stated "monies received by the executive director or the deputy director for fees, allowances, appropriations, and donations shall be deposited with the State Treasurer for credit to the veterans’ cemetery in the north or the account of the veterans’ cemetery in south." Since the veterans’ cemeteries had been in operation since 1990, the cemeteries had deposited and separately accounted for the funds for each cemetery in separate categories within their own operating budget. Everything was fine until a recent internal control review indicated NRS required the use of separate budget accounts for each cemetery. The expenditures had been segregated by category, however, the revenues were recorded in the same general ledger account.

Mr. Abbott said the commission should either submit a bill draft request to amend the law or establish separate budget accounts, as required by statute. The commission’s preference was to continue working as they had been, and amend the wording in NRS, as in A.B. 94. If the bill was to be approved, there would be very few changes in the way the commission accounted for the funds belonging to the cemetery. The funds given to, and expended for, each cemetery would remain autonomous. If the bill was not approved, the commission would be required to request a separate budget account for each cemetery.

Mr. Abbott explained there were, however, some wording problems in A.B. 94 that needed to be addressed. Section 1, subparagraph 6, stated any money left in the budget accounts at the end of the year would not revert to the state General Fund, but must be carried over to the next fiscal year. He thought the intent would be that only restricted donations would not be reverted to the General Fund, but all other money would. In addition, the bill concerned retired license plates. Since that measure was approved two sessions ago, there had been 89 requests, but 250 requests were required so that license plate had not been struck.

With no questions or comments, Chairman Arberry declared the hearing on
A.B. 94 closed.

Chairman Arberry said the committee would be closing budgets after staff presented each budget. Mark Stevens, Assembly Fiscal Analyst, said he would give the committee members a brief overview of each budget account scheduled to be closed. He noted a program analyst was also present to answer questions regarding the budgets. All budgets scheduled to be closed were the responsibility of staff to bring forward to the committee for closure.

Mr. Stevens said the staff recommendation for Budget Account 2699 would increase revenues by $12,000 in each year of the biennium for training workshops. As school districts implemented the more rigorous academic standards and new programs for school improvement, requests to the Department of Education for training should increase. The increased authority would allow the department to respond quickly to those requests. Instead of having the department go to the Interim Finance Committee (IFC), more authority was recommended to provide training workshops, when requested by the districts or when the Department of Education felt they were appropriate. Staff recommendation would be to increase revenues for workshops by $12,000 in each year of the biennium.

Chairman Arberry asked the committee if they would prefer Mr. Stevens to go through each budget, then vote on closing, or would they prefer to hear a group of budgets and vote on the closings as a group. The committee decided to hear several budgets and vote to close them with one motion.

Mr. Stevens said staff did not have any recommendations regarding Budget Account 2701, other than what was included in The Executive Budget. With no questions from the committee, staff recommended the Governor’s recommendation for closure.

Mr. Stevens said the Trust for Education Technology was established in the 1995 Legislative Session and enabled the Department of Education to receive grants and gifts for educational technology. Staff had no recommendations in Budget Account 2702, and recommended the Governor’s recommendation for closure.

Mr. Stevens said staff recommended increasing revenue in Budget Account 2602 by $780. There were estate tax funds that flowed from the university into the account, which provided grants to eligible students with a financial need to attend higher education at post-secondary institutions. In the past, the estate tax revenues did not match the cost of the program and other revenues had to be utilized to pay for a small portion of that cost. The recommendation would "true up" the revenues and expenditures that were needed for the program. In addition, it would increase the transfer from the university by $780 in each year of the biennium.

Mrs. Chowning and Mr. Dini expressed concern for the lack of funding for the Classroom on Wheels (COW) program. Jeanne Botts, Senior Program Analyst, explained the Department of Education received, through Budget Account 2699, a $20,000 one-time grant for COW. In the 1997 Legislative Session there was a one-shot appropriation through the School Improvement budget of $177,000 to buy seven busses. In either case there was no funding recommended for continuation of COW.

Chairman Arberry asked Mr. Stevens to present the next group of budgets, which pertained to the Department of Administration.

Mr. Stevens explained Budget Account 3244 provided reimbursement to counties for unpaid hospital charges for medical treatment of indigent persons, excluding injuries sustained in motor vehicle accidents. The fund was funded by a one-cent property tax. Staff recommended closing the budget at Governor’s recommendation.

Mr. Dini asked how much Clark and Washoe Counties got stuck funding the Indigent Supplemental Fund. Mr. Stevens replied he was not sure how much of the bills the counties incurred were not paid through the fund, but would get that information. Mr. Dini requested the committee hold the account until he reviewed that information.

Mr. Stevens said since Budget Account 3245 was similar to Budget Account 3244, and funded by a one-and-a-half-cent property tax, the committee may want to hold that budget as well. It reimbursed hospitals for care of indigent persons who were injured in a motor vehicle accident.

Ms. Giunchigliani said in the 1997 Legislative Session legislation was passed regarding the Indigent Fund passed. The bill was approximately $600,000 that Chris Thompson was to have allocated, based on certain percentages that kicked in. It was her understanding that never came about. Mr. Stevens said that was a different program that involved the long-term care county program. The 1997 Legislative Session set aside $300,000 to assist those counties that had a financial need and could not contribute to the county match program. That funding was in a different budget account. There was currently no funding in The Executive Budget for that purpose.

Chairman Arberry stated budgets for the Indigent Supplemental Fund and the Indigent Accident Fund would be held until the requested information was provided to Mr. Dini and the rest of the committee.

Mr. Stevens explained the Deferred Compensation Committee was a board that oversaw the administration of the State of Nevada’s Deferred Compensation Plan. The staff recommended the committee close Budget Account 1017 at Governor’s recommendation.

Chairman Arberry asked Mr. Stevens to present the budgets to be closed for the Department of Business and Industry.

Mr. Stevens said staff recommended closing Budget Account 3821 at Governor’s recommendation.

Mr. Stevens said staff recommended closing Budget Account 3804 at Governor’s recommendation.

Mr. Stevens explained Budget Account 3828 was funded by a $15 assessment against authorized insurers in the state. It allowed the insurance division to participate in the national organization and to be involved in various task forces that made recommendations on insurance problems. Staff recommended closing Budget Account 3828 at Governor’s recommendation.

Mr. Stevens said staff had some recommendations in Budget Account 3833 that would modify the Governor’s budget. The first was an adjustment to the base of $2,224. In the 1997 Legislative Session, appropriation was provided to assist the division in providing additional technical expertise, due to the retirement of the Chief Actuary. Staff felt that was not an ongoing cost, but a one-time occurrence. Therefore, staff recommended deleting that amount of money from the base.

Mr. Stevens explained the second staff recommendation concerned the replacement equipment area. Money was built in to the second year of the biennium to replace the network equipment within the division’s network. The division’s system crashed and had to be replaced in the current fiscal year. The adjustments reflected in the closing sheets under E-710 would realign the equipment that was needed, reducing the funding in the second year of the biennium.

Ms. Giunchigliani said in the presentation on DoIT costs in a previous subcommittee meeting, there was a plan put together to make some changes in cost allocations that did not appear to be very well thought out. She asked if Budget Account 3833 would be impacted by that plan. If the plan went forward, almost every budget would have to be revised.

Mr. Stevens said Ms. Giunchigliani raised a very good point. He said he should have begun his comments by explaining to the committee some caveats that staff would need regarding closing those budgets. There were a number of things that would impact almost every budget in The Executive Budget. Staff normally had the authority to change those budgets, even after they were closed. Those budgets included statewide cost allocations, the Attorney General’s cost allocation, individual cost allocations within certain departments (like Business and Industry), and personnel assessments. Statewide rent and worker compensation may change.

Mr. Stevens explained the funding scheme mentioned by Ms. Giunchigliani had been recommended for the Department of Information Technology, but staff did not yet have details on it. It would impact a number of budgets, and may or may not impact the budgets scheduled for closing that day. Staff needed guidance from the committee as to whether or not they wanted staff to bring back all the changes. The changes would be numerous and if the committee waited until the changes were finalized, it would bog down the committee. Obviously, staff would bring to the committee the overall impact to the General Fund and other budgets. Normally the detail in each particular budget was assigned to staff who made those adjustments, even after the budgets were closed.

Ms. Giunchigliani said she did not have a problem closing budgets, but some policy decisions needed to be made. She thought it would be wasteful for staff to have to bring back every change, but she would like a running tally on General Fund impact and non-General Fund agency impact. As the subcommittees met, they may decide those plans were not well thought out, they may not make a recommendation for that change.

Mr. Stevens said committees made the policy decision and informed staff of their decision. Staff would make changes to each budget based on the decisions of the committees.

Mr. Stevens said staff recommended closing Budget Account 3802 at Governor’s recommendation.

Chairman Arberry asked Mr. Stevens to present the budgets to be closed in the Department of Motor Vehicles and Public Safety (DMV/PS).

Mr. Stevens said for Budget Account 3674, staff recommended increasing the grant expected to be received by Budget Account 3674 by $355,362. The grant award for the last 4 fiscal years averaged approximately $750,000. The amount included in The Executive Budget was much lower than that. Information on whether the grant should be increased and why it was lower was requested from the agency. In staff’s opinion, the request was dodged on several occasions. The committee needed to decide how they would like staff to handle those types of situations. It appeared to staff the agency would receive at least $750,000. It could probably be handled through Interim Finance, once the exact grant amount was known. It did not seem reasonable to budget under $400,000 when the grants had been approximately $750,000. Staff could not presently get agency concurrence. Staff had written to the agency several times and could not get what they considered an appropriate response. He asked the committee if they wanted staff to continue requesting information from the agency of whether they wanted staff to come forward with their recommendation to close.

Chairman Arberry said if numerous requests had been sent to the agency in order to get information and they did not respond, the committee needed to move forward with staff’s best judgment. Mr. Stevens said his recommendation increased funding, but there would be instances when staff would recommend a reduction.

Mr. Dini said Emergency Management was very important to volunteer fire departments and first responders in rural areas. He thought there were problems with Emergency Management that needed to be reviewed by the committee. He wanted to hold that budget account until the entire Emergency Management budget was heard. Ninety percent of Nevada’s first responders were volunteers and the money they received came out of Budget Account 3674. If the agency would be receiving $400,000 instead of $700,000, they needed to be aware of that.

Chairman Arberry said the only concern was whether the agency would respond. As Mr. Stevens said, numerous requests were ignored by the agency and staff recommended giving them more money. The budget could be held, if the committee desired. Mr. Dini said he thought there were problems in the agency and the committee needed to find out what those problems were.

Mr. Stevens explained Budget Account 4687 was comprised of federal dollars. Staff recommended closing the budget at Governor’s recommendation.

Mr. Stevens said staff recommended adjustments in Budget Account 4688. A position was filled after The Executive Budget was completed. It was a relatively small account and the agency felt it would be helpful if the budget reflected the actual grade and step level of the employees. Those adjustments had been made. For M-100, the calculations recommended in The Executive Budget were changed based on the budget instructions. For M-200, small changes were made for cellular phones and pagers recommended in the budget. Finally, E-710 was also changed. The DMV office was currently being substantially renovated and felt funding for furniture could be obtained within that particular funding source. If the one-shot appropriation for Carson City modular furniture was not approved as recommended in The Executive Budget, amounts would have to be restored in Budget Account 4688. If the one-shot recommendation was approved, the furniture could be funded with the one-shot.

Mr. Perkins asked if Budget Account 4688 administered a grant program. He said he did not see the amount that would be granted to other governments. Debbra King, Fiscal Division, explained the account had staff that administered the grants. The grants to local governments were primarily in Budget
Account 4687.

Mr. Stevens explained two changes were recommended in Budget
Account 4689. There were a number of programs, shared pagers and cellular phones recommended by staff to change in several accounts. There was a small adjustment for that in Budget Account 4689. In addition the revenues had been adjusted to reflect projected population growth. Thirty-five cents for each driver’s license issued or renewed was included as a revenue source in the account. Staff calculated that figure using projected population growth.

Mr. Stevens said staff had a few recommendations for Budget Account 4691. Staff had the same recommendations for the previous three budgets (Budget Accounts 4689, 4688, and 4687) for pagers and cellular phones. Staff also recommended reducing travel funds for training personnel to conduct motorcycle driving tests. That funding was provided in the base budget and in M-200, so staff tried to eliminate the duplication. In addition, community college costs had been reduced using true cost figures for FY 1998. The agency had used cost figures that were not complete for FY1998. Finally, in E-375 staff did not recommend the trainer conference in FY 2001, due to funding issues. The agency was getting dangerously low in its reserve level, and staff felt if the agency did not have the money, that conference could be deferred. The agency would have to take a hard look at the revenues versus the expenses in Budget Account 4691. If those costs were eliminated, the reserve level would be higher, and therefore less of a concern.

Mr. Perkins said he was reviewing Budget Account 4687, DMV, Traffic Safety, and found in the base, the aid to counties and cities was eliminated, while the aid to the state agencies remained. He asked for an explanation as to why money for traffic safety went to the state and was eliminated from local entities.

Ms. King said that was due to an accounting adjustment. The agency no longer broke down the category into local entities; it became one category.
Mr. Perkins said the base showed there was an addition of aid to local entities. He asked if aid to cities and counties was now combined into aid to local entities. Ms. King replied that was correct.

Mr. Perkins asked Chairman Arberry if the committee could hold Budget Account 4687 until he found out why approximately 75 percent of the money went to the state instead of local entities. Many more traffic safety programs were administered locally than by the state. Chairman Arberry said Budget
Account 4687 would be held.

There being no further business before the committee, Chairman Arberry adjourned the meeting at 10:30 a.m.

RESPECTFULLY SUBMITTED:

Christina Alfonso,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE: