The Committee on Ways and Means was called to order at 8:07 AM, on Monday, March 8, 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 Chair

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:

Mark Stevens, Assembly Fiscal Analyst

Gary Ghiggeri, Assembly Deputy Fiscal Analyst

Carol Thomsen, Committee Secretary

Chairman Arberry stated the committee would take agenda items out of order, hearing A.B. 219 as the first order of business.

Mrs. Barbara Cegavske, Assembly District 5, Las Vegas, informed the committee she would present A.B. 219. The purpose of A.B. 219 was to assure that school children had an adequate supply of up-to-date books, instructional materials and equipment, and that school districts adequately maintained their equipment, vehicles, and buildings. Mrs. Cegavske remarked that A.B. 219 would accomplish that by requiring school districts to set aside a certain amount of money each year for expenditures that had often been considered expendable, i.e., text books, instructional material, equipment, maintenance and repair. According to Mrs. Cegavske, an article in the Las Vegas Sun quoted a 1963 science book still used in the fifth grade in Clark County School District, as saying "During your lifetime, man will probably land on the moon."

Mrs. Cegavske noted when she spoke with constituents she heard more complaints about the shortage of textbooks than any single expenditure in the school district. An adequate supply of textbooks should be available to ensure that each child could bring one home to study. Instructional supplies, materials, library books, and computer software were also necessities for top quality education. Further, remarked Mrs. Cegavske, how could the state expect its children to "jump over the bar" that had been raised with the new standards in English, math, and science, without the availability of more rigorous books and materials. She noted that the legislature had attempted to fund those needs. Amounts actually expended for textbooks and library books were less in 7 of the last 9 years than the amounts contained in the legislatively approved budgets for those years, sometimes by as much as 30 percent less than budgeted for textbooks, and 56 percent less than budgeted for library books.

Mrs. Cegavske indicated that too often, as school budgets were "squeezed," the areas that suffered were classroom materials, equipment, and maintenance. She felt a sound maintenance program would prolong the life of equipment, vehicles and buildings, yet, far too often, maintenance was an area of budgets that suffered. Ongoing maintenance costs should be covered in annual operating budgets, however, there were bond issues that included routine maintenance for existing buildings, along with the construction of new buildings.

Continuing, Mrs. Cegavske remarked one thing learned early when working with the Assembly Committee on Ways and Means was the difference between "one-shot" and "ongoing" revenues and expenditures. Ongoing expenses for new positions, salary increases, and programs could not be funded with one-shot monies, such as windfalls or vacancy savings. A.B. 219 would attempt to hold school districts to the same rules the state attempted to follow. Mrs. Cegavske reported that section 2 of the bill required school districts to spend at least as much as the average spent per pupil over the prior 3 years on 3 different categories of expenditures, which had, unfortunately, often been considered discretionary expenditures.

Continuing, Mrs. Cegavske explained the first category, subsection 1 of section 2, included textbooks, library books, instructional supplies, and materials. The state could not expect its children to reach higher academic standards using the same old materials. She felt another important area of school spending dealt with equipment, the upkeep of equipment, and buildings. The state needed to ensure that school districts were maintaining the equipment and facilities they had before new items were purchased, or new facilities were built. The second category, subsection 2 of section 2, dealt with instructional equipment, including telecommunications, computers, and transportation equipment (including buses). Mrs. Cegavske went on to explain that the third category, subsection 3 of section 2, covered maintenance and repair of equipment, vehicles, and buildings or facilities.

According to Mrs. Cegavske, subsection 4 of section 2 indicated a school district would be allowed the flexibility of spending less in one area and more in another area within those three categories, as long as the expenditures for the total of the three categories met or exceeded the prior years total spending in those three categories. Of course, she stated, exceptions were allowed, as in subsection 5 of section 2, if reviews or enrollment declined. To ensure school districts kept spending under control and well within the limits of revenue available, the districts would be required to limit expenditures to an amount equal to revenues estimated to be received during the fiscal year. In other words, remarked Mrs. Cegavske, school districts would not be allowed to spend opening fund balances for ongoing expenses, except in a fiscal emergency.

Mrs. Cegavske explained if a district’s ending fund balance in its general fund had declined for 3 consecutive years, a written explanation of the cause of the decline would be submitted to the Committee on Local Government Finance. An exception was allowed in the case where the opening balance exceeded 10 percent of budgeted expenditures. In those cases, commented Mrs. Cegavske, the excess over 10 percent of budgeted expenditures could be spent for goods that did not create a recurring financial obligation, or for maintenance, which could be a recurring expense. Mrs. Cegavske said school districts would be required to file amended final budgets after the official count of pupils was completed each fall, and the state financial aid was counted. The amended budget would be due on or before January 1 of each year, as stated in subsection 6 of section 6.

Continuing, Mrs. Cegavske stated A.B. 219 would undoubtedly be criticized as unnecessary meddling by the state in matters that should be left under local control. She explained the bill attempted to assist school districts by ensuring that ongoing needs were met before new expenses were considered. The bill would compel school districts to function well within their means, and she urged the committee to support A.B. 219. Mrs. Cegavske indicated she had spoken with different entities, and one issue everyone agreed upon was the need for some type of avenue to ensure the districts did have those supplies.

Vice Chair Evans asked Mrs. Cegavske if she had any thoughts on state participation and support of such things as textbooks. The reason she asked that question was when reviewing education budgets in the past, there were a number of categories where the state allowed funds to be built in for inflation, with textbooks and instructional materials sometimes included. She noted in recent years that had not been the case, and asked if Mrs. Cegavske saw any obligation by the state to play a role in helping the school districts purchase textbooks and instructional materials. Mrs. Cegavske replied in the affirmative, and in her opinion that was the reason for A.B. 219, to ensure textbooks, software, and library books were available when a new school opened. There was no guarantee that the library would be full, and there would be a book for every student. She commented when her children entered middle school, she and her husband bought textbooks as a way to enable them to help their children at home. Mrs. Cegavske noted if the state was going to require higher standards, it had to ensure that children had the tools with which to progress.

Mr. Dini stated he felt the bill had merit, but asked if Mrs. Cegavske could provide reasons why districts were not expending money for textbooks, et cetera, and was it on a statewide basis, or were only a few districts involved. Mr. Dini also asked what the reason was for school districts not spending the money, because the formula provided money for those expenses. Mrs. Cegavske replied that absolutely there was a problem and she believed it to be statewide. One of the problems the state experienced, even with the maintenance of schools, was when the funds were allocated, the school districts had the luxury of determining what it would do with the money, and might deem something else more important at the time. She remarked she thought the problem was due to a difference in philosophy from district to district.

Ms. Giunchigliani offered her appreciation for both pieces of legislation, A.B. 219 and A.B. 241, and disclosed she was a public school teacher and had $500 worth of out-of-pocket expenses each year. She wondered if there was an inherent problem with the funding formula at local levels, regarding how districts distributed textbook and equipment money. Ms. Giunchigliani stated it was her understanding the funds were distributed on the basis of elementary, middle, and high schools receiving so many dollars per student, and within that formula there was a great deal of flexibility that came into play at school sites. While she felt there was a positive side of site-based decision making, there was also a down side, because there was no uniformity. She asked if the formula was taken into account when the issue was reviewed. Further, Ms. Giunchigliani advised as a special education teacher, she constantly fought for equipment or textbook money to be equally shared by her students, to which she felt they were entitled.

Through the State Board of Education there was a state textbook "list" that schools ordered from. Ms. Giunchigliani said the schools in Clark County were told by the Board of Education they could only order one or two books regardless of whether or not those books fit the curriculum, the reading level of the students, and the expertise of the teachers. As a result, because schools were limited to purchases from a minimized "list" that had been reduced by "someone" in secondary education, the textbooks that were purchased were never used. She remarked that was a fundamental problem, and inquired if Mrs. Cegavske encountered any discussions regarding the textbook "list." Mrs. Cegavske replied she had heard of the list, however, could not find anyone to confirm its existence, and believed the problem needed further investigation. The board needed to be notified of the importance of such materials, and the fact that schools were required to provide them. Ms. Giunchigliani stated teachers should know they could order any textbook available and allowed on the textbook list, not just those that had been screened or "kicked back." If books were purchased that could not be used, it was simply wasteful. There was also the problem of new textbooks not being used due to a change in administration.

Appearing next before the committee was Douglas Thunder, Deputy Superintendent, Nevada Department of Education, who was opposed to A.B. 219. He indicated in preparation for the hearing he developed a set of worksheets for both A.B. 219 (Exhibit C), and A.B. 241. The Nevada Department of Education (NDE) recognized the necessity of providing the materials needed, and he added that 90 percent of the budgets for FY 2000-2001 were designated for personnel costs, leaving the remaining budget balance for supplies, transportation, utilities, etc. Mr. Thunder said A.B. 219 amended Nevada Revised Statutes (NRS) Chapter 387, by requiring school districts to maintain at least a 3-year average in specific line items. That did not necessarily mean there would be an increase in those line items and, in fact, the spreadsheets he developed (Exhibit C) indicated there would actually be a decrease in the various line items. If applied to FY 2000-2001 budgets, the first year would result in a $5.2 million reduction, and a $1.9 million reduction in the second year.

Continuing, Mr. Thunder explained there might be some compounding factors from one year to the next that he did not attempt to figure into Exhibit C. Another concern was with the equity; if a 3-year average were attempted in each of the districts, there would be a significant difference in the amounts expended by the various districts. For example, stated Mr. Thunder, textbooks went from a low of $20.23 to a high of $231.12 per student in various areas across the state. The cost ranged anywhere between those two figures in the other districts. Mr. Thunder noted the same would hold true in each of the other categories, that there would be a fairly significant difference in the amounts on a per-student basis.

Mr. Thunder stated A.B. 219 provided reasons why districts would be exempt from the requirements of the bill, including decreased enrollment and reduction of revenue. The reasons applied to 10 "hold harmless" districts in the current fiscal year. One provision of A.B. 219 supported by NDE was in subsection 6, which required the submission of an amended final budget by January 1. The reason for the support was that a significant item in the distribution formula was the expected expenditures for the current school year. The more accurate the numbers, the better the disbursement of Distributive School Account (DSA) payments. A problem with subsection 6, explained Mr. Thunder, was there was no current provision in the law or in regulations that provided for an amended budget. He concluded by stating that issue needed to be addressed.

Ms. Giunchigliani noted when she reviewed the textbook list, the school district blamed the NDE for informing them that teachers could only utilize a limited number of books from that list. When the NDE was contacted, it clarified that it had never informed the districts that only certain textbooks could be purchased. Ms. Giunchigliani felt the "finger-pointing" did not belong in the State Department of Education.

Mike Schroeder, Business and Financial Services Administrator, Washoe County School District (WCSD) stated he would speak on behalf of the district in opposition to A.B. 219. He indicated the handout entitled, "Washoe County School District Categorical Expenditures FY 1995-96 and FY 1996-97," (Exhibit D), depicted a detailed account of what the district had spent in the last 3 years in the categories addressed by A.B. 219. He noted that over the last 3 years, WCSD had actually spent more in each of the categories overall than the prior year. Mr. Schroeder indicated he did not understand the intent of A.B. 219, because WCSD had actually spent more over the past few years.

Continuing, Mr. Schroeder said he would approach the issue from a philosophical, as well as a practical standpoint. He thought one of the underlying principals of government was to maintain local control, and added A.B. 219 would diminish some of that authority. Mr. Schroeder noted that every district had a board of trustees, along with a limited number of resources, and had to decide what the best method was to use those resources. He remarked the district needed broad latitude and flexibility within its budgets, in order to address various concerns that arose from time to time. He explained WCSD suffered rising special education and English as a Second Language (ESL) costs, rising health insurance costs, and at times it even had adverse labor arbitration rulings.

Referring to Exhibit D, Mr. Schroeder stated WCSD had been able to maintain an equal or greater amount of expenditures in the categories referred to in the bill. From a practical standpoint, he was unsure whether or not A.B. 219 addressed only general fund expenditures, or all expenditures of the school districts. When the WCSD issued bonds to construct schools, such bonds included allocations for textbooks, equipment, and supplies. Because bonds were not issued in 3-year increments, there was a distortion in the per-pupil amount, and if the general fund had to make up that difference in the fourth year, it would be an enormous burden. Mr. Schroeder advised a number of grants were also received and applied to expenditures, however, those grants were not received every year.

Mr. Schroeder stated section 3 discussed the ending balance. An ending balance was made up of reserves, unreserved designated items, and NRS conversion factors for some districts. He inquired if those items were what was intended by the term "ending balance," or was it the unreserved ending balance. In section 4, the term opening balance was used, and the same argument applied again. He asked if it was the unreserved opening balance, or the entire amount, because a portion of the actual opening balance was reserved for encumbrances and inventory, and was used for current year expenditures based on prior year commitments.

Referring to sections 4.1 and 4.2, Mr. Schroeder indicated those sections would not allow WCSD to plan ahead, explaining schools and departments were allowed to carry over a portion of operational budgets for larger items and materials they could not otherwise afford in a 1-year period. By not allowing schools and departments to expend a portion of the opening balance, those needed items could not be purchased. According to Mr. Schroeder, when WCSD entered into leases, a medium term financing package was submitted with the State Department of Taxation, which included information regarding where the district would secure the funds needed to pay for the lease over the course of time. Mr. Schroeder said because WCSD planned to make a pay-off, a bill stating they could only utilize the opening fund balance to do so, was not needed. As far as long-term debt for bonds, he noted the established rate in the debt-service fund was more than sufficient to address debt reductions.

Ms. Giunchigliani asked if WCSD depreciated equipment, to which Mr. Schroeder replied not in the general fund. Ms. Giunchigliani then asked about equity for older schools versus new schools, commenting it was always nice to open a new school with bond funds, while older schools contained obsolete equipment and became run down. She asked where the funds for maintenance of older schools were built into the district’s budget. Mr. Schroeder replied the entire cost was not built into the budget, but the issue was being addressed.

Ms. Giunchigliani stated one thing the committee could review legislatively was when budgets were submitted from the districts, not only could inflation be built in for textbooks, but a depreciation plan could also be developed. Mr. Schroeder replied that would be helpful.

Ms. Giunchigliani asked if WCSD could produce a list of equipment and textbooks that had been purchased by parties other than the districts, i.e., parent/teacher organizations that held fund-raisers. She remarked she thought it would be a good idea if fund-raisers were not held for a 1-year period, to ascertain how much the budgets were subsidized. Mr. Schroeder replied a list of equipment could be produced because fixed assets were tracked, but he was unsure about a supply list. Ms. Giunchigliani then asked if all materials and equipment were tracked, and remarked that there were discussions about bar-coding equipment to enable better tracking. Mr. Schroeder replied the equipment was tracked.

Ms. Giunchigliani solicited Mr. Schroeder’s comments regarding how the districts could better track the equipment purchased. Mr. Schroeder stated WCSD was mandated by the state to conduct an inventory every 2 years, and rules had been established in order to track equipment that was removed from the premises.

Larry Spitler, Clark County School District, said while Clark County School District did not disagree with the guidance offered in A.B. 219, there were some concerns about the proposal. Addressing the bill, Mr. Spitler made the following remarks:

Al Bellister, Nevada State Education Association (NSEA) indicated he was opposed to A.B. 219, but made it clear that NSEA supported the idea of maintaining adequate supplies and materials for both students and teachers in the classroom. Under NRS 288.150 supplies and materials for the classroom was a mandatory subject of bargaining, and many affiliates of NSEA had taken that opportunity to heart and wrote bargaining language into contracts to ensure that adequate supplies and materials were available in classrooms.

Mr. Bellister remarked that A.B. 219 was a bit of an "overkill." He called the committee’s attention to NRS 393.170, which placed the obligation on school districts to purchase all new library books and supplies, textbooks, and necessary supplemental schoolbooks as approved by the State Board of Education, and school supplies necessary to carry out the mandates of the school curriculum. Mr. Bellister indicated his concern focused on the details of section 4, the restriction of the opening fund balance. The Nevada Administration Code (NAC) defined the opening fund balance as an available resource to school districts, and school districts depended upon and utilized the opening fund balance as a resource. For example, Eureka County, which experienced declines in net proceeds recently, needed to utilize the opening fund balance as a resource from year-to-year to avoid financial hardship. Schools also realized windfalls in such things as assessed value and net proceeds, and relied on the opening balance to maintain ongoing programs.

Continuing, Mr. Bellister stressed the state’s role and obligation to adequately fund the schools. When remembering that Nevada’s per pupil expenditures were 40^th in the nation, the state again needed to review its responsibility to adequately fund its schools, particularly regarding the issue of inflation adjustment for supplies, materials, and textbooks in the DSA.

Leslie Fritz, Learning and Public Policy Specialist, NSEA, advised the committee that she had the opportunity to visit with a number of teachers throughout the state regarding the proposed legislation. Further, she remarked, A.B. 219 did present a dilemma regarding the issue of providing increased resources for textbooks, materials, and supplies, because it was virtually impossible not support such an endeavor. Teachers, administrators, and parents involved in site-based decision-making wanted to ensure they had adequate opportunity to assist in the determination of what was needed at the site-level regarding the purchase of textbooks. Ms. Fritz discussed textbook availability for every student with many teachers and received various responses. Many teachers preferred to purchase a class set of textbooks, which would be maintained in the classroom, and not assign a text to every student, because supplemental materials were also used. Oftentimes, explained Ms. Fritz, teachers were reluctant to purchase textbooks, which could sometimes cost $75 to $100 per book at the high school level, and release those books to the students.

Ms. Fritz pointed out the proposed legislation might become a management issue at the site and district level. If a school or district experienced a great amount of growth, oftentimes if extra textbooks were not purchased in anticipation of enrollment growth there would not be a textbook for every student. Comments made to Ms. Fritz by teachers were that planning for growth needed to be in place when purchasing textbooks for fall enrollment.

Mentioning the controversy associated with the state board list, Ms. Fritz noted what had been mentioned to her was there were different approaches as to how districts purchased large orders of textbooks. In Washoe County, the district purchased the same textbook allowing for a better deal on those books. In Clark County, the individual schools had a choice of textbooks, which meant that smaller numbers were being purchased, which prevented the district from getting the best possible deal. The trade-off, explained Ms. Fritz, was providing the individual sites the flexibility to choose the text that best met the individual curriculum.

In conclusion, Ms. Fritz shared the story of a White Pine County teacher, with whom she had spoken, which was an example of how the "hold harmless" language impacted some of the districts. She asked the teacher if she was receiving adequate support and resources for textbooks and supplies, and the reply was no, a great number of sacrifices had to be made. The teachers, administrators, and parents realized the importance of each student in middle school receiving a textbook, so sacrifices were made by the support persons in the area of building maintenance and budgeting for some of the various departments. That action was taken in order to purchase a textbook for each student. Ms. Fritz noted that was a classic example of the tough choices that were made, and she felt persons at the sites should be given the authority to make the choices that reflected the wishes identified as priorities by the parents, students, and faculty.

Ms. Giunchigliani asked with whom Ms. Fritz had spoken in the Clark County School District. Ms. Fritz replied one of her sources of information was the president of the local association. Ms. Giunchigliani stated Clark County selected textbooks much the same as the selection process in Washoe County. Textbook selections were streamlined in order to purchase in volume, whether or not those textbooks covered the curriculum being taught. She remarked that volume did a school no good if textbooks did not meet the needs of the student, and added the proposed legislation was trying to implement policy decisions while maintaining site-level flexibility. Further, Ms. Giunchigliani indicated, every time there was a change in administration, there was also a change in textbooks, which she felt was wasteful. More importantly, teachers did not always know what to order or how to screen for books, and it depended largely on which companies lobbied the best. Unfortunately, Ms. Guinchigliani stated, that had to be part of the teacher’s responsibility, to ensure that books were reviewed appropriately. As technology advanced, the libraries would not need to be completely textbook-oriented, and would need a balance of software, which the proposed legislation dealt with. Ms. Giunchigliani indicated she had real concerns about the actual policy matter of what books were accessible, and what books could be purchased.

Vice Chair Evans remarked she supported Ms. Fritz and her interest in protecting local control and flexibility for the school districts. She noted Ms. Fritz was interested in protecting the school district’s interests, however, she said the committee was interested in ensuring students had up-to-date material. She advised she would not accept the idea that it had to be one or the other. The premise of the legislation proposed by Mrs. Cegavske was that there were out-dated materials in the schools, and if the bill did not contain the method to correct that situation, NSEA and the school districts needed to inform the committee how the purchase of up-to-date material could be achieved.

Mrs. Cegavske remarked the issue was the developed standards, because that was the "street" education was headed down, however, schools were not providing the necessary tools for the students to approach those standards. As a parent, she knew how many textbooks she needed to buy in order to help her children at home, and she did not agree with the theory of providing one set of textbooks for classrooms. She commented that Mr. Beers’ fifth grade daughter just received her first textbook. Mrs. Cegavske indicated Ms. Fritz referred to textbook copies, and stated copied text was not adequate and, in fact, could have an adverse effect on any child with learning disabilities. She remarked if the state had standards, why not include the tools and materials necessary to help the students meet those standards.

In response, Mr. Bellister referenced NRS 393.170, which mandated that school districts purchase any new materials necessary to carry out the curriculum. He felt if there was a district-wide problem with the textbooks, the priorities of the school district were to ascertain the reason that money was not spent on adequate and up-to-date textbooks. If it was not a district-wide problem, but just a school problem where the faculty had decided for whatever reasons not to update the textbook, the issue needed to be taken directly back to the school. If outdated texts were being utilized by a school, that school’s priorities needed to be addressed. NSEA supported the need for updated materials that supported the curriculum, and wanted to alleviate the out-of-pocket expenditures that NSEA members incurred each year.

Mr. Dini asked how money would be utilized for books if it was not mandated, and the districts had local control and flexibility in the matter. Hearing that Mr. Beers’ daughter received her first textbook in the fifth grade was ludicrous. Mr. Dini realized the growth in Clark County caused many problems regarding the adequate provision of materials for students, and stated he had heard stories of students using textbooks 30 years outdated. He asked if a statutory change should be recommended to provide funds for the purchase of new textbooks.

Mr. Bellister replied the committee should review the obligation presently placed on the school districts to purchase materials relevant to support the curriculum, which would certainly need to be updated in order to support the new standards adopted by the state. He felt there was an obligation in place already, and the local level could be reviewed to ensure there was teacher input in the selection of materials that were up-to-date and designed to teach new standards and curricula. He supported the testimony regarding the need to have that review occur at the local level. Through the DSA, the legislature appropriated certain funds for particular line items in school district operating expenses, including textbooks, supplies, and materials. However, noted Mr. Bellister, because of local control, priority decisions were made that might be different from what was budgeted. Mr. Bellister urged the committee to review why school districts made certain decisions regarding how the money was spent; Mr. Bellister indicated he could not give an answer for all 17 counties.

Jim Parry, Superintendent, Carson City School District, appeared before the committee on behalf of the board. He said decision making within the district was pushed down to the lowest level. The Carson City School District had a healthy respect for the intentions of A.B. 219. However, explained Mr. Parry, there were yearly aberrations in the district’s budget for things such as opening schools on a year around basis, using the ending fund balance as a savings, and a variety of other things, which complicated budgetary planning. Mr. Parry felt the proposed legislation would take decision making away from the district. With respect to A.B. 219, Mr. Parry urged the committee allow the Carson City School District to make decisions regarding the needs of its students, by use of its board and staff.

Rick Kester, Director of Business Services, Douglas County School District, indicated he would speak on behalf of the district, which also had a healthy respect for the goals of A.B. 219, but also had some concerns with the bill. Douglas County School District was unsure if section 1, subsections 2 and 4 applied only to the General Fund and if it did not, there was a cause for concern. Mr. Kester indicated the district felt the 3-year averages might result in decreases and would not help the overall intent of where the districts stood concerning the average. Mr. Kester remarked on Mrs. Cegavske’s statement regarding the state’s sound budget practices in opening balances, and added school districts were different. A major difference, other than bargaining, was there was no categorical funding within the DSA. The DSA, on a statewide basis, funded certain elements to the state, the state distributed the funds by a set formula to the districts, and was only General Fund supported. Mr. Kester said one way to solve the problem was to turn the DSA into total categorical spending, including the percentage spent on salaries. However, he noted that was not the current situation with the DSA, which simply distributed monies to 17 districts on an individual basis, and those districts in turn determined how the money was distributed to its various schools.

Continuing, Mr. Kester stated A.B. 219 would cause immense problems in the Douglas County School District when a new school was opened. In 1992 a bond was passed for new schools. Within a 2-year period, facility capacity increased by 33 percent and the district incurred $2 million more in operating costs. The opening balance was used because the DSA did not issue money to school districts when a new school opened, but only when students arrived. Douglas County expended more than was received in revenue during times when a new school was opened. Had the opening balance not been used to mitigate the increase in expenditures, Mr. Kester indicated the district would have been forced to cut $2 million from its budget, thereby actually penalizing existing schools. Funds were then used to decrease expenditures over a 3-year period. Mr. Kester said those were issues included in A.B. 219 that would harm Douglas County School District if approved. However, the district supported the goal of the bill, and supported subsection 6, which required all school districts to file amended budgets by January 1, as that was critical to the allocations made from DSA.

Mrs. de Braga indicated she represented one of the poorest school districts in the state and, while she knew the districts needed flexibility due to limited funds, she could also appreciate the importance of the bill. She asked to what extent the Internet was being utilized as a learning resource in areas where textbooks were not current, and if adequate funds were provided in that area in order to mitigate the lack of current instructional supplies. Mr. Kester replied that in the case of Douglas County School District, he believed teachers and students were provided with up-to-date textbooks. As far as the Internet was concerned, the district was still in the process of making it available to all students.

Jane Moyle, Nevada Rural Alliance, stated because of the diversity among the 15 districts within the rural alliance, many of the issues were not agreed upon; however, all districts were in agreement regarding local control. While the Nevada Rural Alliance supported the principle behind A.B. 219, there were still many problems that needed to be addressed in the schools. A district priority was quality of instruction, and support of quality of instruction; therefore, districts required the flexibility to expend incoming revenue on important materials needed for the curriculum during the upcoming school year. Regarding the Internet, Ms. Moyle advised she had recently spoken with a representative from one district who mentioned many of the classrooms had computers, but the district did not have the money to network the computers in order to utilize the Internet.

Barbara Clark, Nevada Parent-Teachers Association (PTA) Representative, indicated the PTA really did not have a position regarding he bill, but she stated textbooks were a major concern for parents. Those parents wanted their children to bring textbooks home, thereby enabling the parents to help with schoolwork. She remarked that the equity issue between older and newer schools was also a major problem. Ms. Clark indicated she realized that providing for student needs was important, but parents wanted a part in the decision-making process at the district or site-level. Washoe County School District had very advocate-prone parents involved in the PTA, and education budgets were discussed at PTA meetings so parents could be knowledgeable participants in the process.

Mrs. Cegavske was concerned that the issue was being identified as a local/state issue regarding determination of textbooks and instructional materials, and that was not the case. A.B. 219 was a budget issue, and local control could still be maintained.

Hearing no further testimony, Chairman Arberry declared the hearing on A.B. 219 closed, and informed the committee it would next review cash management activities.

Ken West, Chief Deputy Controller, thanked the committee for inviting him to speak regarding cash management in the Office of the State Controller, and began by stating the controller had two major responsibilities relating to cash management.

• The first was the Cash Management Improvement Act (CMIA); and,
• The second was to monitor and enact policies assuring the availability of cash for authorized expenditures.

Mr. West commented that the Office of the State Treasurer had the additional responsibility of forecasting cash for investment purposes, and both the treasurer and controller had the responsibility of making cash management policy recommendations to the Board of Finance (Exhibit E).

Mr. West stated the CMIA was enacted because historically, federal agencies were suspicious that states were taking advantage of federal grants by drawing monies first, and investing those funds for state purposes, causing the Federal Government to lose the opportunity from that investment income. Mr. West explained In Nevada, some programs utilized state funds prior to drawing federal funds in the latter part of the year, and the state was also losing its investment opportunity. State controllers offices and the United States Treasury Department agreed to run pilot programs over the course of several years, explained Mr. West, and that resulted in the Cash Management Improvement Act, Public Law 101.453.

According to Mr. West, the purpose of CMIA was to ensure greater efficiency, effectiveness, and equity in the exchange of funds between the Federal Government and the states. A measure of the efficiency and effectiveness was an interest exchange calculation. The state would incur an interest liability if federal funds were received by the state prior to the date the state paid out funds for program purposes. Conversely, remarked Mr. West, the Federal Government would incur an interest liability if the state paid out funds for programs prior to receiving federal funds.

Continuing, Mr. West stated investment of funds was based on bank account balances, not book balances, and the interest exchange calculation was made based on what the bank balance reflected. There were significant timing differences between what was reflected in the book balance and what was reflected in the bank account balance. Mr. West remarked the CMIA was administered within the Office of the State Controller by first meeting with agencies that had federal program grants exceeding $3 million per fiscal year. The individual agency’s business processes and expenditure patterns were analyzed, and the controller’s office negotiated on the agency’s behalf with a draw-down procedure for each major federal program or part of a program. Mr. West indicated a Memo of Understanding between the Office of the State Controller and each agency was drawn up regarding how those funds would be drawn and disbursed. Continuing, Mr. West indicated the time flow of cash expenditures related to each procedure agreed upon was monitored, and an interest exchange was calculated. The interest exchange was computed on a simulated bank account for each grant.

Mr. Goldwater commented he had a background in cash flow management and was very interested in the interest exchange. He stated he was concerned with the state’s current budget constraints, and asked if the state had a charted cash flow for expected cash needs for state programs. Mr. West indicated he would review the charts contained in Exhibit E for the committee.

Referring to the graphs entitled "Bank Cash Interest Neutral Technique," and "Cash in Book for Interest Neutral Technique" as contained in Exhibit E, Mr. West explained the graphs reflected the difference between cash-in-bank and cash-in-book. He indicated there had to be a relationship between cash-in-bank and cash-in-book, however, it was extremely difficult to correlate, which was the problem facing the treasurer. The treasurer invested cash based upon the bank balance, rather than the book balance. Mr. West stated availability of cash for expenditures was another responsibility of the Office of the State Controller.

Mr. Goldwater interjected, suggesting Mr. West review the cash-in-bank versus the cash-in-books charts for the committee. Mr. West indicated the graph contained in Exhibit E entitled "Mock Expenditure Pattern," represented $17,000 worth of checks which would be issued over several days. The next chart entitled "Accounts Payable Clearance" depicted the clearance pattern of checks issued to the treasurer, and he noted that it took 7.2 days for a dollar amount to "hit" the bank account. Mr. West explained the controller’s office used that information to develop pseudo bank accounts for the federal programs. Continuing, Mr. West stated the chart entitled "Bank Cash Interest Neutral Technique" represented a pseudo bank account on cash flow, which indicated how the $17,000 depicted in the mock expenditure pattern was drawn.

Mr. Goldwater requested an explanation of the negative funds reflected on the chart entitled "Mock Expenditure Pattern." Mr. West replied the cash below $0 was a mock expenditure pattern on a simulated bank account, showing a distribution of vouchers and checks issued on certain days. That represented the problem for the controller’s office of when to draw monies down so it would be an interest neutral technique. Returning to the chart "Bank Cash Interest Neutral Technique," Mr. West explained that chart showed expenditures on days 1 through 3, and on day 4 revenue was received by the state, which returned the balance above $0, where it would remain as expenditures dropped.

Mr. Goldwater asked if the state ever experienced an account that fell below $0. Mr. West replied part of the responsibility of the Office of the Controller was to insure that the state did not experience a negative balance, however, the state did have one account fall below $0. He insisted it was not a problem since the state had cash-in-hand that had not yet been recorded. Mr. Goldwater then asked how the state dealt with the negative account, and the origin of the cash-in-hand. Mr. Beers remarked using cash-in-hand that had not yet been recorded to correct the problem implied the below $0 balance was an accounting entry on the books, and advised Mr. Goldwater might have been inquiring about an actual bank balance falling below $0. Mr. West replied that had never occurred.

Mr. Goldwater requested clarification on transfers from other accounts. Mr. West replied at the first of the year there were appropriations made within The Executive Budget, the Legislative Fund being an example. The controller had to determine whether or not funds should be moved en masse, or spread over time to be utilized when needed. He explained when the state was "rich," the funds were moved en masse, because it made no difference in investment purposes.

Mr. Goldwater asked what difference it made whether or not the state was "rich" as far as cash management was concerned, and indicated he felt one day’s interest would be more valuable when the state was not "rich." Mr. West replied it made no difference for investment purposes whether the monies were in the General Fund or Legislative Fund, as those monies were invested for the benefit of the General Fund. Mr. West explained further that it was simply an accounting transaction.

Mr. West indicated the chart entitled "General Fund ‘Book’ Balances," (Exhibit E), reflected the General Fund cash balance over a period of 2 years. A decrease in the account was experienced when the large distribution was made to the DSA of approximately $142 million every quarter. On February 1, the General Fund cash went slightly negative by approximately $18 million, on the book basis, not the bank balance. The state had $12 million in other funds the controller’s office had transferred out, but the funds still retained cash balances that could have been brought back in, along with gaming receipts that had not been recorded.

Concerning the accounting entry, Mr. Goldwater remarked the legislature budgeted for specific funds and balanced the budget. He requested explanation of how the funds could be moved around from account to account. Mr. West replied the legislature did not budget on a cash basis, but budgeted based upon revenues and expenditures. He explained cash was based upon receipts and disbursements. He explained further that, while the legislature might budget $10 million for its operation, that cash might not come in immediately, even though the money was transferred from the General Fund. The chart reflected the cash receipts and case disbursements, along with transfers-out, where revenues that supported those transactions had not yet been realized.

Mr. Goldwater asked if the state was at significant risk of adverse effects by moving monies from fund to fund, and asked what occurred when the state went negative by $18 million. Mr. West replied no money was moved, and the negative $18 million was an accounting entry that the state "floated" for 2 days. He likened it to having a check in hand that had not yet been deposited in the bank, while knowing outstanding checks had not yet cleared. Mr. Goldwater then asked what would have happened had the checks cleared, to which Mr. West replied the bank balance was substantially higher, and nothing would have happened, the checks would have cleared. Mr. West assured the committee that the situation was not that serious.

Mr. West reiterated what was indicated on the chart entitled "Accounts Payable Clearance," was a clearance pattern for checks, noting that various checks throughout the state had different clearance patterns. Accounts payable checks cleared in 6 to 8 days, payroll checks cleared immediately, and welfare checks cleared in 5 to 6 days. Mr. West stated the bank balance was always significantly higher than what was reflected in the books. The books should not have shown a negative balance, however, Mr. West asked the legislature to recognize the fact that the controller’s office was initiating a new accounting system because the reporting of information was not satisfactory.

Continuing, Mr. West indicated the profile of General Fund showed cash distributions which were not uniform, and which the controller’s office had to watch to ensure availability of that cash for expenditures. The low points shown on the chart for February 1, November 1, and August 1 indicated the $142 million that was distributed to DSA quarterly payments. The legislature provided the controller with the authorization and ability to change DSA distributions from a quarterly to a monthly basis to avoid experiencing a negative balance; however, the controller was reluctant to do that. Mr. West noted his calculation of interest earnings for the school districts would be a total of approximately $600,000 in interest lost if a change was initiated. The controller could schedule payments if necessary, however, there was not much else that could be done in cash management. The tools allowed for use by the controller were simply scheduling payments or switching the DSA payment from quarterly to monthly. Mr. West advised the controller experienced problems when the legislature put monies into different funds, because those monies came from the General Fund and, theoretically, there was no cash available for General Fund cash-flow purposes.

Mr. Goldwater asked if Mr. West could review the problem with switching to and from accounts, and transferring to accounts. Mr. West referred to the chart, stating the General Fund approached a negative balance when quarterly DSA distributions were made, and yet the "Rainy Day" Fund contained $129 million dollars in cash. Mr. Goldwater asked if the state ever used the money in the "Rainy Day" Fund on a short-term basis, to which Mr. West replied no, and added the money was set aside in total by making it a separate fund. Mr. Goldwater indicated the state probably wanted the separate funds, but was Mr. West indicating the controller would like to use that "Rainy Day" Fund. Mr. West said it would be beneficial to use the money on a short-term basis in order to make quarterly DSA distributions. Mr. Goldwater reiterated that, to date, the state had not used "Rainy Day" Fund money. Mr. West replied no, and added the state had not transferred any money into the General Fund, because the controller knew it would go positive.

Mr. Beers asked if there was a chart in Exhibit E that reflected actual bank cash balance. Mr. West said no, the bank cash balance contained all fund accounts invested by the treasurer, and to apportion the monies in the bank balance back to the funds would be a very difficult task. Mr. Beers then asked how many bank accounts the state maintained. Mr. West replied the state maintained one major account, and added the accounting system prior to January 4, 1999, could only handle one account. Mr. Beers remarked he reconciled 15 to 20 bank accounts for various non-profit agencies, and the statements reflected daily cash balances of the accounts. Mr. West stated the controller’s office knew what the cash balance in the bank was for the combined funds, because it was contained one account. However, the controller did not have the accounting mechanism in place to determine the cash balance for the General Fund, because various other funds were included in the same account. Mr. Beers understood the "General Fund ‘Book’ Balances" chart as contained in Exhibit E to reflect the book balance of the cash account in the General Fund. Mr. West replied that was correct. Mr. Beers inquired if the "Rainy Day" Fund money was in a Certificate of Deposit (CD), to which Mr. West replied the money was invested in the same account as General Fund monies.

John Adkins, Chief Deputy Treasurer, said with respect to the monies invested by the Office of the Treasurer, whether the monies were in the "Rainy Day" Fund, General Fund, or any other program fund, it was invested in Government Securities and not CD’s. Those Securities were monitored and rotated based upon what was forecast as the requirement for current expenditures. He said the format for the current expenditures was based on a 3-month period, and those items were a one lump-sum investment activity.

Mr. Beers remarked Mr. West should have been giving the presentation on accounting, while Mr. Adkins should give the presentation on cash management, to which Mr. Adkins replied he agreed. He said cash management in the Office of the Treasurer was related to investment activities, and the activities of the Office of the Controller were cash management with respect to monitoring the monies within each fund, compared to the appropriations made with respect to that fund.

Mr. Beers said what he understood was there was one physical bank account that contained all the cash in all funds, and the Office of the Controller prepared reports for the Office of the Treasurer periodically regarding how much cash was required for expenditures. The treasurer’s office then ensured the availability of cash to cover the necessary expenditures. Mr. Adkins responded that was correct, but indicated the Office of the Controller did not provide the Office of the Treasurer with that information, however the treasurer did complete the process described. The Office of the Treasurer reviewed the funds available in the bank on a daily basis, considered all expenditures that were forecast, monitored revenues, covered expenditures, and invested any remaining funds.

Mr. Beers commented if state funds were invested in Government Securities or any thing other than the bank, those funds transferred out of the one major account into an investment account. The bank transferred funds to whomever or whatever entity the treasurer invested with, and that entity sent a certificate of deposit to the treasurer. Mr. Beers noted funds of the state were not physically in one single bank account, but rather were split between one single bank account and investments. Mr. Adkins explained there were two types of activities, cash and cash equivalents, which were all contained in one custody account. Mr. Beers stated the state then had two accounts, one was the custody account containing long-term investments (cash equivalents), and a physical cash account for all funds in the accounting system. Mr. Adkins indicated that was correct, and that was one of the requirements of the new system, that the treasurer could have any number of bank accounts within the new system.

Mr. Beers said he was confused by Mr. West’s comment that he wished the "Rainy Day" Fund could be tapped into on a short-term basis. Mr. West indicated the "Rainy Day" Fund should be a reserve of the fund balance in the General Fund restricted for specific purposes. Mr. Beers noted the separate "Rainy Day" Fund in the accounting system of the Controller was merely an accounting entry. Mr. West replied the fund was in the same cash account in the bank. He was under the impression since it was a separate fund, and there was a history of advances made by legislature, that the "Rainy Day" Fund could not be used for short-term purposes. Mr. Beers stated he was again confused, as he thought that had to do with the categorization of cash into accounting entries of funds. Mr. West said it was short-term cash flow measured on the books, not at the bank.

Mr. Goldwater stated the legislature budgeted specific dollar amounts for specific things, and in discussing the amounts of money the state had on the line, it happened to be a significant dollar amount. Testimony that the treasurer had to "dig out" information regarding near-cash instruments that had to be converted to cash, and indications from the controller’s office that the state might suffer a negative balance, even though only as a book entry, would be very difficult to explain to the state’s taxpayers. Mr. Goldwater felt the way in which the legislature budgeted, and the way in which the state managed its cash, raised significant concerns because of the amount of money involved.

Mr. Adkins advised that the Deputy Treasurer of Investments began her day at 6:30 a.m. by receiving a statement of that bank account as of 6:30 a.m., which gave her the amount of actual money in the bank, based on the general ledger balance. The general ledger gross amount was reduced by the availability schedule applied to the various checks by the bank for that day. Mr. Adkins explained the general ledger was further reduced by the electronic fund transfer activity for payments made, and the controlled disbursement account, which was a separate bank account that allowed the treasurer to receive information indicating in the morning how much would be cleared in the evening. That amounted to another reduction of the total amount available for investment, and Mr. Adkins advised the Medicaid draw also had to be considered.

Mr. Goldwater asked if items discussed were part of the job description of the Offices of the Treasurer and the Office of the Controller. Mr. Adkins replied they were not, however, what was being discussed was the function of a technical area that anyone involved in cash management would be cognizant of, but was not specifically written into the job description. He indicated there were written procedures used by the Deputy Treasurer of Investments on a daily basis, and it was quite complicated. That was the meaning of the term "dig it out." The treasurer’s office had to forecast the expenditures that were known. Mr. Goldwater asked if the treasurer’s office worked with the controller’s office, to which Mr. Adkins replied in the affirmative.

Mr. Perkins remarked because he was not in the financial world, the testimony had been quite an education for him personally, however, he was concerned that all the different funds were in the same account. The quarterly DSA payment of $142 million was quite important, and he asked how that transaction was handled. Mr. West replied it was done through transfers, which was immediate. Mr. Perkins noted when the state was at a negative balance of $18 million on the books, then "Rainy Day" Fund money had been spent, because it was all contained in the same account. Mr. West indicated that was not exactly true, however, it was true on the books. Mr. Perkins asked what would happen if the state experienced a crisis the day after spending "Rainy Day" Fund monies, was unable to pay it back right away, and would the state have broken the law if that occurred. Mr. West replied yes.

Chairman Arberry advised committee members and the audience that he would declare the hearing on the "Review of Cash Management Activities" closed and, if necessary, it would be scheduled again at a later date.

Chairman Arberry then asked committee members to consider committee introduction of the following Bill Draft Requests (BDR):

• BDR S-1613 - makes appropriation to the city of Las Vegas for revitalization of Herbert Gerson Park into mixed-use, mixed-income development. (A.B. 415)

* * * * *

• BDR S-1596 - makes appropriations and requires assessments of certain state agencies for benefit services fund. (A.B. 416)

* * * * *

• BDR S-1627 - makes appropriation to Lander County for expenses related to trial of Kyle Ray and Colby Becker. (A.B. 417)

* * * * *

Chairman Arberry indicated the committee would commence hearing testimony on scheduled bills, beginning with A.B. 241.

Kathy McClain, Assembly District 15, Clark County began by relating a story about speaking with parents of school-aged children regarding problems in the school. Many parents of elementary school children had concerns regarding the personal and costly purchase of supplies and materials for the classroom. Parents of high school youths were concerned with the textbook issue. According to Ms. McClain, the information gathered supported the fact that schools were not providing the students with the needed tools to be successful within the public school system.

Ms. McClain stated prior to coming to Nevada, she worked for the public school system in another state for 15 years. The school finance law of that state set a dollar amount for every category that was part of that school’s per pupil allocation, which served the school well. Ms. McClain borrowed that concept when she was attempting to secure a BDR for A.B. 241.

Ms. McClain said the intent of A.B. 241 was to set a specific percentage of the General Fund to be spent on the following three areas:

• Section 1, subsection 1 – 2 percent of the total amount of estimated budget expenditures from the General Fund to be spent on textbooks, which did not include software.

• Section 1, subsection 2 – 2 percent of the total amount of estimated budget expenditures from the General Fund to be spent on materials and supplies including software for computers.

• Section 1, subsection 3 – 1 percent of the total amount of estimated budgeted expenditures from the General Fund spent on library books and materials including software for computers.

Ms. McClain stated she added an item in A.B. 241, which stated if a school district did need to purchase textbooks for the next year due to change in curriculum, the money could be used for a large order of textbooks relating to the new curriculum. Ms. McClain indicated she had no intention of interfering with collective bargaining, but felt strongly that the best and most important expenditure in a school district was for qualified teachers. Teachers also needed the tools necessary to help the students be successful.

Ms. McClain urged the committee to consider that even though the percentages in the bill were double what was currently being expended, obviously, what was currently being expended was not enough. She asked the committee’s assistance in passing A.B. 241 to provide consistent and adequate resources for the children in the public school systems.

Chairman Arberry asked if there was anyone who wished to speak on behalf of, or in opposition to, A.B. 241.

Douglas Thunder, Department of Education, indicated he had prepared Exhibit C in order to attempt to put dollar values on the proposal. Using the information from NRS 387.303, he computed what the results would be if the proposal had been in effect in FY 1998. Referring to page 1 of Exhibit C, he indicated 2 percent of the total expenditures were applied for the purchase of textbooks and materials. For the state as a whole, a total of $33,060,190 in additional funds would have been necessary for those line items, or about 2.42 percent more than what was expended. He then asked if, hypothetically, that additional revenue would be provided by the legislature, or would that amount have to be located elsewhere in the budget.

Referring to page 2 of Exhibit C, Mr. Thunder said that illustrated the effect if those line item requirements were added to the worksheets that supported The Executive Budget for the DSA. For FY 2000, there was an estimated additional requirement of $43,555,777 in order to meet the percentage amount increases in each of the various categories. In FY 2001, the amount would be $46,117,999. He indicated that 89.09 percent of the DSA budget was designated for salaries and benefits with the remaining 11 percent being utilized for all other expenditure items.

Mr. Thunder indicated there was a technical problem with requiring that a certain percentage of the total expenditures be used for specific purposes, in that every time a line item changed that was part of the total expenditure, those line items changed as well. That presented a circular argument.

Mr. Thunder stated a major concern was the diversity in the amount of equity that would be provided on a per student basis in the 17 districts. In Exhibit C, page 1, he indicated the last seven or eight columns represented the high’s and low’s in terms of the amount per student. The issue of how the state created equity among students in various districts would have to be addressed.

Chairman Arberry indicated that, speaking for himself, it was difficult to listen to the school board oppose both A.B. 219 and A.B. 241, sponsored by two different legislators from two different political parties. Both pieces of legislation requested funds for adequate and up-to-date textbooks and instructional supplies, which would benefit Nevada’s school children. He asked how that would read in newspaper headlines if the press desired to pursue the issue of the two pieces of legislation which the legislature felt might benefit the students of Nevada, however, the school board was appearing in opposition to that legislation. The situation, as viewed from the perspective of parents, was that their taxpayer money was being spent elsewhere while there was still a need for textbooks. Chairman Arberry stated the board was putting the committee in a difficult position, because it was understood what the board had to do in order to make the system work. On the other hand, the legislators also needed to convey what was needed in order to make the system succeed.

Mr. Thunder replied the board was not opposed to providing the student’s with adequate materials while keeping up maintenance, but unfortunately, it was difficult to meet all the needs with the structure that was currently in place. He added decisions the school districts had to make, given the set revenue to be received and the competing distribution factors, was a problem. He did not want to communicate the impression of total opposition to the legislation because the concern was indeed supported; however, wanted to call attention to the reality of the cost.

Vice Chair Evans asked if it was possible for the Board of Education to take initiative on the issue and determine how widespread the problem really was throughout the 17 counties. She thought the committee could approach the issue in a much more informed manner if it had knowledge of where the problems were occurring. Mr. Thunder replied the board would provide that information to the committee.

Ms. Giunchigliani asked if Mr. Thunder knew how the approved adopted list of state textbooks was disseminated. Mr. Thunder replied he was not directly involved in that dissemination, however, would research the matter. Ms. Giunchigliani indicated she would like that information, because she did not know if the list went only to superintendents, or directly to administrators. Many times the parents and teachers were the ones left out of the "loop," and she felt it would be interesting to see the flow of that information. Ms. Giunchigliani commented she concurred with the concerns of Chairman Arberry and Vice Chair Evans, and added although she did not believe every student should possess a textbook, additional textbooks should be available for parents who would like to help their child. Ms. Giunchigliani then asked Mr. Thunder how the districts budgeted and whether or not the counties fixed a dollar amount per student based upon grade level. She advised if the state was going to mandate additional standards, then it had to ensure the money was allocated accordingly for new textbooks, supplies, and materials.

Mr. Schroeder, Washoe County School District, advised the school district was not opposed to A.B. 241, and indicated it was a matter of a budget-balancing act. Currently, he noted, the school district expended $5,424,283 for the various categories included in A.B. 241. If the 5 percent category of total expenditures based on FY 1998 were used (Exhibit F), the district would have had to secure $5,689,996. Mr. Schroeder explained, essentially, that amount would have been located within the current budget.

Mr. Schroeder questioned whether or not there were mandates already in place that could solve the problem. He understood the district needed current textbooks, and those books did need to be replaced at least every 7 years. Washoe County School District was out of compliance with its social studies textbooks, and funds were adopted at the beginning of the fiscal year for replacement. Other than that, Mr. Schroeder felt the district was in compliance with most of the state mandates. Further, he did not feel Washoe County School District experienced such a problem. However, if there were a problem, he felt it would be an enforcement issue; ensuring that all school districts had current textbooks, and that the budgeted dollars flowed into those categories.

Henry Etchemendy, Nevada Association of School Boards, echoed the sentiments of Mr. Schroeder, indicating that the problem was a budget-balancing matter. He added he had reviewed the numbers contained in A.B. 241, and indicated the proposed budget for FY 1999-2000 totaled $1,700,000,000. The 2 percent for textbooks, 2 percent for equipment and supplies, and 1 percent for library books would equate to $85 million that would necessarily have to be spent the following year in those categories. The Executive Budget recommended appropriations in the amount of $39 million for expenditures in the three categories, and the added percentage would increase that amount to approximately $46 million. Mr. Etchemendy advised the school districts would need to make adjustments within the budget to accommodate those numbers. Mr. Etchemendy emphasized the Association of School Boards was not opposed to providing adequate textbooks, and added the districts did everything possible to stay within the textbook adoption schedules, and still provide textbook availability, whether in classrooms or on an individual basis.

There being no further testimony, Chairman Arberry declared the hearing on A.B. 241 closed.

Elgin Simpson, Executive Director, State Supreme Court Task Force for Implementation of Changes in the Justice System, advised he was appearing before the committee to request assistance in funding the task force’s budget for the upcoming biennium. Requested funds totaled $225,000 in the first year and $218,000 in the second year of the biennium. Mr. Simpson explained until last year, the task force had studied racial and economic bias in the judicial system. The study was completed in 1997, and a report was filed with the court system, and approved. According to Mr. Simpson, a plan was then developed which indicated how the study would be implemented, and the court authorized the task force to move forward in January 1998. Mr. Simpson advised he opened the office in May 1998 and gathered the implementation committee members together to form the plan for the task force. That plan was submitted to the court in August 1998, and was approved in October 1998; the committee had been moving forward with the implementation since that date.

Mr. Simpson remarked there had been additional complications with the process. One of the complications was that the task force would be asking the court to change some of its practices, which created a conflict. The court decided it would be in the best interest of the task force to function independently, rather than under control of the court. Mr. Simpson advised currently the task force was required to submit everything to the court for approval. Because of that, stated Mr. Simpson, the task force was requesting that funds be appropriated to amend and rename the task force to the "Nevada Task Force for Implementation of Changes in the Justice System."

Ms. Giunchigliani asked if there were recommendations that came about from the two-year task force, and Mr. Simpson replied in the affirmative. Ms. Giunchigliani then asked if those recommendations called for the task force to move forward to perform changes in legislation, the court, or training. Mr. Simpson said those were the recommendations of the standing committee. Ms. Giunchigliani asked how long Mr. Simpson envisioned the task force remaining in place, to which Mr. Simpson replied he had no firm answer. He remarked the task force just developed a relationship with the American Bar Association, which had recently received a large grant to develop a study in indigent defense, a key issue for the task force. The study would review counties in states that did not have public defender commissions, but had set priorities when dealing with the defense of indigents. Ms. Giunchigliani requested a copy of the original recommendations of the task force in order to see the direction in which the task force was moving. Mr. Simpson replied he would provide copies of the implementation plan to committee members.

Mr. Perkins asked if the task force had a budget. Mr. Simpson responded affirmatively, and added that the task force budget was developed with the assistance of the court’s budget director. Chairman Arberry was in possession of the developed budget, but Mr. Simpson indicated he would provide the committee with additional copies.

Richard Wyatt indicated he was a member on the task force, and was appearing before the committee in support of the continuation of the task force’s effort.

Karen Kavanau, Director, Administrative Office of the Courts, conveyed she was present before the committee to testify on behalf of the Supreme Court regarding A.B. 290. The court supported the goals of the commission, she explained, however, due to the potential for a conflict of interest, the court must respectfully recommend a separation between the commission and the court. Further, stated Ms. Kavanau, the commission had completed the assessment phase, and had developed scores of recommendations that would affect more than just the Nevada judiciary system. According to Ms. Kavanau, the commission was currently in the process of implementing those recommendations. She indicated the Supreme Court was concerned that if the commission continued to be administered through the Supreme Court, it would present an appearance of the court trying to manage the operations of entities outside the judiciary system, which would be highly inappropriate. More importantly, a large number of the commission’s recommendations would likely be subject to a final review by the Supreme Court, thus their implementation must be independent of the court.

In conclusion, Ms. Kavanau advised Justice Maupin requested that she convey his support of the funding contained in the bill because he believed the implementation phase of the commission’s work was important to the people of Nevada. The court unanimously agreed the commission should no longer be connected with the Supreme Court.

There being no further testimony forthcoming regarding A.B. 290, Chairman Arberry declared the hearing closed. The next order of business for committee review was A.B. 291.

Marcia de Braga, Assembly District 35, stated A.B. 291 asked for an appropriation $40,000 in each year of the upcoming biennium to the Division of Agriculture for the completion of a statewide public land grazing trend study, and economic analysis. She related a partial study had been completed, but did not cover the entire state, or some of the most important grazing areas.

According to Mrs. de Braga, the economic health and viability of rural Nevada’s economies and county governments were tired to their dependence on income and revenues derived from public lands. Unfortunately, she indicated, there was a continuing decline in access to, and commercial use of, those resources imposed by the Federal Government. One of the most easily understood examples of that trend was public land grazing, which had been declining over the past several decades. The decline was caused by many factors, explained Mrs. de Braga, including the market, drought, competition with wildlife and wild horses, and range conditions. However, much of the decline had come about through decisions made by federal agencies, which were not based on any sound scientific evidence or knowledge.

Continuing, Mrs. de Braga noted a good case in point was the case of an elderly gentleman in Lander County who had held a cattle allotment to run 580 head of cattle for most of his adult life. During one of the best range feed years in history, his allotment was cut to 90 head, which was not done for any clear reason, or based on the range conditions at the time. That decision completely "killed" his livelihood at a time in his life when it was difficult to find a new way to make a living.

Mrs. de Braga disclosed that information to help understand that the magnitude and scope of the grazing decline and its effect on local revenues was not readily available. She assured the committee that type of data was not readily compiled or reported by the involved agencies. A.B. 291 would provide the funds to define how rural economies were dependent upon access to, and use of, surrounding public lands. It would also show how rural Nevada economies were impacted by public land management policies, and would give state and counties a powerful tool to understand past and future effects of federal grazing programs. Armed with that information, Mrs. de Braga advised, entities could effective dialogue with the involved federal agencies to affect changes in public land grazing programs that were more cognizant of impacts on local governments, rural economies, and the range livestock industry in Nevada. Mrs. de Braga testified that the study would provide information to help counties help themselves, and would ensure that decisions regarding the multiple use of public lands were based on sound scientific knowledge, existing range conditions, and the rights of users.

Don Henderson, Deputy Administrator, Division of Agriculture, indicated he had been asked to speak on two points relative to A.B. 291. First of all, what was known about public land grazing trends, and secondly, how the division would use the appropriation if the bill passed. Mr. Henderson called the committee’s attention to the packet entitled "Public Land Grazing Trends in Nevada," (Exhibit G), and the map entitled "NV Grazing Trends Study Area." He reported there had been studies done on grazing trends in Nevada, and the shaded area of the map indicated the area that had been studied to date, and the light area had not been studied. The important areas of note that had not been studied were Elko County, the north and west portions of Humboldt County, and Washoe, Churchill, Lyon, Storey, Douglas, Mineral, and Clark Counties.

Referring to the chart entitled "NV Grazing Trends Results 1980-98" as contained in Exhibit G, Mr. Henderson explained that summarized the grazing trends in the three studied regions previously discussed. He explained the Northwest Study Area consisted of the Winnemucca Bureau of Land Management (BLM) District, and the forest service land it contained. He noted there had been a reduction since 1980 of 97,700 Animal Unit Months (AUMs). The Eastern Study Area consisted of basically the Ely BLM District, along with forest service land in White Pine and Lincoln Counties. The Central Study Area was the Battle Mountain BLM District, from Battle Mountain to Tonopah. Mr. Henderson stated in an 18-year period, there had been a loss of 342,600 AUMs of licensed preference, which reflected a change of 20 percent overall.

Again referring to Exhibit G, Mr. Henderson stated in the second column from the left on the chart entitled "1980-1998 Grazing Trends Economic Effects ($ Millions)," the change in permit values was depicted. He explained that grazing had a value to the base property and/or ranch of $37 for BLM AUMs and $47 for United States Forest Service (USFS) AUMs. The reduction resulted in a one-time loss of rancher wealth or property values of $12.8 million. Further, Mr. Henderson noted every AUM on public land had a value of $21. Mr. Henderson felt he should explain the Animal Unit Month (AUM), and stated that was the amount of forage needed to keep a cow and calf for one month on the range. To the livestock sector, that meant there had been an annual loss of $7.2 million as a result of the loss of AUMs over the past 18 years. That money also circulated through local economies and the bottom line was the AUM reductions resulted in an annual loss of $12.3 million within local economies.

Mr. Henderson indicated A.B. 291 basically proposed to continue the study to include the remaining areas of the state, and the appropriation would be "pass-through" funds, administered by the Division of Agriculture. The division would develop contract specifications for bid, and there would be a variety of issues that contributed to the selection of the successful contractor, based upon experience and capabilities. Mr. Henderson reported the idea would be to expand the existing database, and grazing trend information would be collected on an allotment level, through a geographical information database, so a specific allotment could be reviewed for its particular trend.

In conclusion, Mr. Henderson advised the report would be completed and available for review by the 2001 legislature, and reports would be provided to all state, local, and federal organizations who participated. The estimated cost to complete the study was $80,000.

Mr. Marvel asked if the study would only include cattle, or both cattle and sheep. Mr. Henderson replied it would include both. Mr. Marvel then asked what had happened to the sheep industry. Mr. Henderson replied that industry’s decline was reflected in the figures contained in Exhibit G, and it was more dramatic than the cattle decline. He thought there were approximately 50,000 AUMs of sheep in the state, where 20 or 30 years ago there were 100,000.

Vice Chair Evans noted the appropriation was for completion of the study, and asked if A.B. 291 was an extension of a previous bill from the 1997 legislature. Mr. Henderson replied not that he was aware of. She then remarked that the term "complete" a study sounded like there was something already in progress, or part was done and the appropriation would complete the study in its entirety. Mr. Henderson advised that the map included in Exhibit G showed the completed study area, which had been conducted by Resource Concepts, Inc. Basically, he explained, six counties and three grazing boards had commissioned the studies to date. Vice Chair Evans noted the study had been completed over a period of time, and asked if Mr. Henderson foresaw the appropriation for each year of the biennium in order to conclude the study. Mr. Henderson replied in the affirmative.

Mr. Price asked if Resource Concepts, Inc., a private company the division had contracted with, was familiar with Nevada’s grazing lands. Mr. Henderson replied the state had not contracted with Resource Concepts to complete the work done to date, and added that study was contracted through the counties. Mr. Price then asked if there were experienced companies who would deal with the issue; Mr. Henderson replied there were a number of consultants in Nevada who could perform the study.

Michelle Gamble, Program Assistant, Nevada Association of Counties (NACO), disclosed she was appearing before the committee to add NACO’s support to the bill. She stated Nevada’s counties had been experiencing many shortfalls in revenues at various levels, and NACO felt that determining what was occurring in grazing trends would put the state in a better position to understand and quantify the overall picture in rural Nevada. Ms. Gamble advised that NACO understood the state was in a situation where there was not sufficient money to fund such projects, and it had been working with the rural counties and other interested parties, in an attempt to locate additional funds to help offset the needed $80,000. Further, she reported, to date NACO had commitments from the grazing boards, Lyon and Churchill Counties, the Nevada Cattlemen’s Association, along with NACO. All entities were pledging funds, and if A.B. 291 passed, providing state assistance, the amount of money in additional contributions was approximately $10,000. Once again, Ms. Gamble remarked that NACO supported the bill, and felt it was extremely important. The rural economies were limited throughout the state, and public land grazing was one item the counties could depend on, however, trends indicated that was declining. Ms. Gamble stated NACO felt that the data gathered would allow discussion with federal agencies to demonstrate the effects of public policies on Nevada’s rural counties.

Jim Linebaugh, Secretary, Nevada State Grazing Board N-3, which was in the western part of the state, indicated the board received a small amount of funding from the grazing fee return monies, which were declining on a regular basis. In the process of completing the study for western Nevada, and attempting to solicit funds from counties, it was discovered that quite a gap still existed. Mr. Linebaugh indicated the feeling was that the issue needed to be reviewed on a statewide basis, because all areas had suffered significant reductions in grazing use in recent years. He disclosed that was the reason the state was being approached for assistance with the study. There were funds committed and there was a possibility for additional commitments. Mr. Linebaugh concluded by stating the information from a grazing trend study could be used to work more effectively to convey to federal agencies that grazing was important to rural Nevada, which might lessen the significant decline. Perhaps, indicated Mr. Linebaugh, there was a way to "level out" the decline, and call attention to the issue. There might be other ways in the rural communities to make up the differences through economic development efforts, if the actual facts regarding grazing decline were available.

Benny Romero, President, State Grazing Board N-3, and a member of the Division of Agriculture, remarked it was quite interesting to listen to discussions on the dissemination of education through the school districts, and added in the current situation, the board was also attempting to gather information for dissemination. Mr. Romero stated the study was quite critical to the livestock industry, which had been the foundation for the western part of the United States, and Nevada. According to Mr. Romero, it was critical that public land grazing continued, that the state took a proactive stand, and knew the status of public land grazing. The information was necessary in order to show the federal agencies exactly what was happening around the state. Mr. Romero stated there were vacant allotments throughout the state, and federal agencies were hesitant in allowing the allotments to be put back into use, which was critical for rural communities.

Doug Busselman, Executive Vice President, Nevada Farm Bureau, and Stephanie Licht, Nevada Wool Growers Association, wanted it on record that those entities supported A.B. 291.

With no further testimony forthcoming, Vice Chair Evans declared the hearing on A.B. 291 closed, and opened the hearing on A.B. 316.

Mr. Dini introduced Enrico Sacchini, Jennifer Block and Roberta Gardner, who had requested he seek the appropriation contained in A.B. 316. Mr. Dini noted the Lyon County Museum was actually not supported by the county, and noted Mr. Sacchini devoted his time to the museum, as Chairman, and was a lifelong resident of the community.

Enrico Sacchini, Chairman, Lyon County Museum Society, introduced Jennifer Block, who volunteered to give the presentation to the committee, and Roberta Gardner, a board member of the Museum Society.

Ms. Block explained she was a board member of the Lyon County Museum, and she would briefly familiarize the committee with the museum, and how it was funded, to outline the current goals and needs, and ask for the state’s assistance in carrying out those goals.

Ms. Block conveyed the museum was established in 1978 after donations were gathered during a 9-day fundraising event, which enabled the board to purchase the Mason Baptist Church, currently located in Yerington. That church was previously located in the Township of Mason, with the last service being held in 1930. The museum was currently governed by the Lyon County Museum Society, a non-profit organization consisting of 15 board members and four officers. Ms. Block remarked expansion occurred in 1982 with the construction of the annex at the north end of the church, and currently the museum grounds included six buildings. The main building was the Mason church and annex, which housed the following:

• An exhibit room for local artists’ work;
• Dioramas depicting early life in rural Nevada including the Nevada Copperbelt Railroad and Anaconda Mine operations;
• Native American and early Chinese American artifacts; and,
• Many other historical items that originated in Lyon County.

Continuing, Ms. Block explained another building was a turn-of-the-century general store, originally a two-room house located in downtown Yerington. The Natural History Building was refurbished last year, and Ms. Block indicated the building housed representations of local wildlife, rocks, minerals, and fossils that were abundant in Mason Valley. The Natural History Building was originally the Gallagher Schoolhouse, located just north of Yerington, and was built in 1880. The building was donated to the museum and moved to the site.

Ms. Block stated the East Walker Schoolhouse exhibited a one-room schoolhouse from the early 1900’s, and was originally located at the south end of the valley. It was acquired through private donations, and was permanently closed in 1953. She noted there was a blacksmith shop that housed early blacksmith tools, old saddles, and a diorama of an early bunkhouse. The latest addition, and largest building on the site, was the Thompson Schoolhouse that was built in 1911 and closed in 1928. The schoolhouse was originally located in Wabuska at the Thompson Mill and was later moved to a farm in Yerington and used as a bee house. The schoolhouse was donated to the museum by a private individual and moved to the site in October of 1998. Ms. Block advised plans for the Thompson Schoolhouse at the current time were to refurbish the building, which was structurally sound. However, she noted there were many needs associated with refurbishing, including a new roof, insulation, sheet rock, restoration of the original exterior, electrical wiring, installation of gas outlets, handicapped accessibility ramps at both entrances, and the extension of the boardwalk connecting the Natural History Building and the General Store. Inside the building, Ms. Block explained, there would be three displays:

• A boutique to display the extensive collection of early American garments and accessories;
• A doctor’s or dentist’s office to display items from Mason Valley’s earliest medical/dental facilities; and,
• A print shop to incorporate the collection from the original Mason Valley News print shop.

The alcove of the building was planned for display of historic photographs and postcards from Mason Valley.

According to Ms. Block, the current sources of funding included donations or funds from fundraising events, membership fees, endowments, grants, and proceeds from the small gift shop. The only county assistance the museum received was through payments of utilities and fire insurance. Ms. Block advised there was one paid staff member, a part-time custodian who worked approximately one day per week. The board was responsible for all repairs, maintenance, additions and upgrades to the building. It relied on volunteers to open the museum, operate the gift shop, provide tours, for groundskeeping and landscaping needs, and for maintenance and repair of displays, as the museum had no official collections curator at the current time.

In conclusion, Ms. Block stated she was present to request financial assistance, if funds became available, to help expand the museum and restore the Thompson School, and preserve part of Nevada’s history. There were many items of historical value in storage, which could not be displayed due to lack of space.

Mr. Marvel asked if an application had been made through the Commission on Cultural Resources. Mr. Sacchini replied no, however, he would look into that possibility.

Mr. Dini stated the museum might apply for restoration funds through the commission, however, since the interior of the museum would be used for display purposes, he was unsure if the museum would qualify for assistance. He noted the request was for a modest amount of money, and felt the Thompson Schoolhouse came from an interesting area in history. He explained there was a smelter in Wabuska where copper was taken from Mason Valley on the Copperbelt Railroad. When that era ended, the buildings were moved out of Thompson, and spread throughout the valley.

Mark Stevens, Fiscal Analyst, LCB, wanted it known for the record that Senator Amodei, who could not be present at the hearing, supported A.B. 316.

With no further testimony forthcoming on A.B. 316, Vice Chair Evans declared the hearing closed.

Vice Chair Evans announced that A.B. 300, scheduled for hearing on the current agenda, would be moved to the Ways and Means agenda for March 9 at 3:30 p.m.

With no further business to come before the committee, the hearing was adjourned at 11:03 a.m.

RESPECTFULLY SUBMITTED:

Carol Thomsen,

Committee Secretary

APPROVED BY:

_____________________________________________

Assemblyman Morse Arberry Jr., Chairman

DATE:_______________________________________