The Subcommittee on General Government was called to order at 8:10 a.m., on Friday, March 12, 1999. Chairman Vonne Chowning presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Mrs. Vonne Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia de Braga

Ms. Chris Giunchigliani

Mr. David Goldwater

Senator Joe Neal

Senator Lawrence Jacobsen

SENATE COMMITTEE MEMBERS ABSENT:

Senator William O’Donnell (Excused)

STAFF MEMBERS PRESENT:

Chairman Chowning announced the first item for committee consideration would be Budget Account 4219.

Alan Coyner, Administrator, Division of Minerals, informed the committee with him was Bob Atkinson, Principal Budget Analyst, Budget Division, who would assist with the budget presentation. Mr. Coyner stated Budget Account 4219 was a very responsible conservative forecast and budget model for the division. He called the committee’s attention to the handout entitled "Division of Minerals – Budget Account 4219 – FY 00 & FY 01 – Maintenance and Enhancement Recap," (Exhibit C), which would prove helpful in terms of sorting through the various budget items.

According to Mr. Coyner, the most controversial budget item was the revenue forecast. He called attention to line items in the base budget, Oil and Gas Permits and Fees, and Mining Claim Fees, explaining that the division received its revenue from five main sources, all of which were fees on industry. In other words, he stated, the division was 100 percent fee-based. Of those five fees, four were set by statute and one was set by regulation. Mr. Coyner indicated those two line items projected increases in FY 2000 and FY 2001. Those revenue increases were premised on the fact that the Commission on Mineral Resources, at its November meeting, voted to endorse a fee increase in oil and gas permits, and mining claim fees. Through the Budget Division, that increase was translated into A.B. 450, which would seek to change those two fee sources from statutory to regulatory. Mr. Coyner noted that would give the commission the tool it needed to make decisions regarding proposed fee increases.

Mr. Coyner went on to explain the two fee increases endorsed by the commission consisted of a $1 raise on mining claims and a 5 cent a barrel raise on oil. That action would increase mining claims to $2.50 and oil to 10 cents per barrel. Those increases were not without controversy, he stated, and there were parties that did not feel they were justified. Mr. Coyner conveyed one of the advantages of changing those two fee areas to regulation, was that it would allow the division to hold workshop hearings around the state and receive input from industry. There were approximately 7,300 mining claim-holders in the state, with about 80 percent holding 20 or fewer claims, and those would be the parties affected by the increase. Regarding the 5 cents a barrel increase on oil, Mr. Coyner felt the two major producers in the state would bear the burden of the increase.

According to Mr. Coyner, A.B. 103 also encompassed the fee increases, and sought to change the status of the division from a division to a commission, which would attach the staff directly to the Commission on Mineral Resources. Part of that bill would amend the law to change all fees charged by the division to regulatory. In other words, A.B. 450 was encapsulated within A.B. 103, and both, in terms of the will of the commission, would accomplish the outcome shown in the budget.

Chairman Chowning indicated that was a significant statement, because what the committee was concerned about was the "anticipated" portion of the division’s projected funding for the next biennium. It appeared the funding source would be available only if the proposed legislation passed; however, if the bill did not pass, the division would not have sufficient operating funds. Chairman Chowning inquired how supportive the industry was of the proposed increase.

Mr. Coyner stated the division recognized that fact, and either bill would achieve the division’s purpose and goals. He realized there was a risk that the division would incur budget shortfalls if neither of those bills passed. He explained the division had not been "sitting on its heels" waiting for that to happen, and had been very proactive in terms of looking for other revenue sources. Mr. Coyner stated he had two options on the horizon, one of which was a major new open pit mine, slated to commence operation in FY 2000. That particular mine would generate approximately $90,000 in revenue each year via payment of the public disturbance fee of $20 per acre. That would be a major boost to the division’s budget. Mr. Coyner reminded the committee the division’s expenditure level was only $700,000 per year.

The division had also negotiated a Memorandum of Understanding with the Bureau of Land Management (BLM) for a new program, which would commence October 1, 1999, with a total grant allocation of $100,000. Mr. Coyner stated that would ease the division’s current short-term needs regarding revenue, however, the problem still existed for the upcoming biennium in terms of revenue outlook.

Chairman Chowning agreed, stating the division’s first step was A.B. 450, and the second step appeared to be approval of the fee increases by the commission; she inquired if the division was assured industry would agree with that proposal. Mr. Coyner explained the commission was composed of six members from the industry, and one member from the public at large, and he felt the main face of industry was represented by the commission. Further, he related, the commission had endorsed the fee increase to provide a balanced budget for the division; however, he could not guarantee the committee it would act on the increases after passage of the bills, but that was the division’s understanding when the budget was prepared.

Chairman Chowning inquired how soon after passage of the bills would the commission make its decision regarding the fee increases. Mr. Coyer stated both bills included an effective date of July 1, 1999, and he assumed the commission would move promptly by directing the division to hold the necessary workshops with the idea of voting to implement the increase by August. One of the keys to the proposed fee increases was mining claims, the division’s main revenue stream. Mining claim payments were very seasonal, explained Mr. Coyner, and were paid mainly in October, November, and December of each year. In order for the increases to impact the division’s budget for the upcoming biennium, it would have to be in place by September.

If that scenario did not occur, asked Chairman Chowning, had the division or the Budget Office contemplated a contingency plan. Mr. Coyner replied no contingency plan had been finalized, however, he had ideas in terms of the priority of cutbacks the division could make to meet its revenue. Again, he emphasized, all revenue streams for the division were based on projections and were at the will of industry activity. Mr. Coyner explained the division was dependent on such things as the price of gold, or the amount of money companies dedicated to exploration versus development and production; there was a very symbiotic relationship between the division’s mission and the industry. The revenue source also fell into the much larger realm of how proactive the state was in terms of engaging exploration and providing incentives to industry.

According to Chairman Chowning, the committee was very proud of the state’s proactive endeavors, and it was also very appreciative of the revenue produced by the mining industry. Chairman Chowning advised the committee was well aware of the volatile relationship between the division and industry, however, felt a contingency plan was imperative. Mr. Coyner stated he understood, and the division would work toward constructing such a plan.

Mrs. de Braga noted the last audit performed by Legislative Counsel Bureau (LCB) auditors contained a criticism regarding the division’s ability to conduct timely research regarding responsibility for abandoned mines, and noted the budget did not include an increase in that area. She inquired if the division had sufficient money to carry on with that project as it should be done and, in light of current mining laws and regulations, was the mining industry also securing abandoned mines.

Mr. Coyner stated the division’s record in that area consisted of approximately 5,000 "securings" of the 7,000 abandoned mines currently on the books and identified. He disclosed the audit did point out a failure to conduct timely research, and the division had responded with an approved plan of correction. Further, he explained, the estimates ran anywhere from 160,000 to 500,000 openings statewide, and the division had only secured 5,000. Depending on how the committee wanted to see the division attack that problem, it simply did not have sufficient funding for a more aggressive program. Regarding industry cooperation, Mr. Coyner stressed it had been extremely cooperative, and a significant portion of the 5,000 securings had been done in a cooperative effort with industry. One thing in the division’s favor was the fact that its programs received strong support from industry.

Mr. Coyner went on to explain at a recent hearing on A.B. 103 an industry spokesperson testified regarding education related to abandoned mines, and he guaranteed there were several hundred other persons who would also defend the program. He indicated the Abandoned Mine Land (AML) program also received very strong industry support, and the mining companies were just as cognizant as the division regarding the danger of abandoned mines.

Senator Neal noted the division’s responsibility was the furtherance of development and production of the state’s minerals, and other resources such as gas, and geothermal energy. He inquired how many oil wells were currently in operation statewide. Mr. Coyner stated there were approximately 80 wells currently operating, however, that varied on a day-to-day basis because of oil prices. Those prices were seriously depressed at the present time, with Railroad Valley crude oil selling for $6.50 a barrel on the open market. He explained approximately 1 year ago, that oil sold for $12 to $14 a barrel, so the number of operating wells on any given day fluctuated with regard to economics. In terms of total production, the state produced approximately 1 million barrels per year, which was commensurate to the 1983 levels, an indication of the state of the industry. According to Mr. Coyner, Nevada was not in the league of California, Wyoming, or Oklahoma, the major producers of oil, but it provided a significant revenue stream to the state, generating approximately $6 million per year for the school fund via the royalty payment program with the Federal Government.

Senator Neal then requested information regarding geothermal energy. Mr. Coyner stated that was also a unique situation, in that many of the plants were constructed, built, and run under subsidized programs, which were coming to an end. The industry was facing a critical situation, and deregulation was also a factor in the geothermal industry. He classified Nevada’s geothermal industry as somewhat fragile, and in terms of production, it had reached a plateau in the kilowatt-hours produced. The industry was not growing and had remained status quo for the past 5 years, however, there was much uncertainty because of deregulation and termination of subsidy funding.

Senator Neal asked for information about the state’s gold and gypsum mines. Mr. Coyner related the active, major producing gold mines numbered approximately 37 statewide, but if the figure included inactive mines, it would be 80 to 100. Regarding operational gypsum mines, Mr. Coyner estimated there were approximately four or five, mostly in the southern Nevada area. There were also kaolinite clay mines, along with diatomaceous earth mines in the Fernley area. He explained there was a significant portion of industrial minerals produced statewide, with a revenue stream of approximately $400 million, whereas gold or silver would be in the range of $2.2 to $2.3 billion. The division had recently announced its production figures for 1998, which indicated the state would be right at or near 9 million ounces of gold for 1998, which was a 1.1 million ounce increase over 1997 figures. The state’s producers had been quite busy in terms of mining more gold, however, as a caveat to that statement, he explained the total production value would decrease slightly, to approximately $2.2 billion. Mr. Coyner stated even though the mines were producing more gold, the net gross value was slightly lower due to a decrease in gold prices.

Given the number of individuals working for the division, Senator Neal asked what its function was as related to the furtherance of development and production, and was the division relegated to simply issuing permits. Mr. Coyner responded that the division’s four main goals were:

• To advise and promote issues of concern with regard to mining to both the legislature and the public.

• Maintain a strong educational role with the Las Vegas teachers’ workshops, northern Nevada teachers’ workshops, classroom presentations, the AML program, and securing the physical safety hazards of abandoned mines, which was branching into an environmental aspect.

• The oil, gas, and geothermal programs were more of a regulatory program, with a petroleum engineer on staff who conducted various safety inspections on wells. The division ruled on spacing and drainage issues, which was also more of a regulatory function.

• The division also administered the state bond pool. That pool consisted of money amassed in order to assist small to medium-sized companies with their bonding requirements. All mining operations of any size in the state were required to be bonded, and quite often the smaller companies did not have the ability to secure such a bond.

Senator Neal inquired about funding for the bond pool; Mr. Coyner advised the major portion of funding for the bond pool was contained in Budget Account 4220. The expenditure listed in Budget Account 4219 consisted of money expended by the division on behalf of the bond pool in terms of operation costs. He explained revenue was generated within the pool, and the current balance was approximately $600,000 to $700,000, which would fund against an approximately $1 million obligation in outstanding bonds. That money earned interest, and the division did an annual transfer to cover the operating costs.

As far as gold mines were concerned, Senator Neal asked what the production levels were. Mr. Coyner advised the production for 1998 was 9 million ounces, which placed Nevada third in the world, and fast closing in on second place Australia, with production at about 9.5 million ounces, and first place South Africa, which produced about 15 million ounces. Gold and silver were the major mine producers in the state. Senator Neal then inquired what role the division played in securing the state’s share of net proceeds via taxes or fees; Mr. Coyner stated the division played no role in that area, however, he indicated the state’s share had been in the $30 to $40 million range. While the division was aware of that figure, it received no revenue from those taxes and/or fees, and that was a matter for the Department of Taxation, the legislature, and the mining companies.

Chairman Chowning stated if committee members had the opportunity to visit an underground mine and actually see the process, they should do so because it was very interesting. She then addressed the division’s performance indicators, noting it had exceeded projections in the category of awareness and education presentations. Chairman Chowning stated she had the privilege of viewing a presentation and felt it was a marvelous program. In many cases, children who grew up in cities had no knowledge of mines, and the program allowed children to visualize what the industry did for the state and how it operated. She also noted in the abandoned mine area, the division had failed to meet its projections, and hopefully those goals could be attained in the upcoming biennium.

In Module E-125, there was a proposed increase in costs, and Chairman Chowning instructed Mr. Coyner to explain the increase. Mr. Coyner called the committee’s attention to Exhibit C, which enumerated the maintenance and enhancement units. In the area of maintenance, the division had little control over costs, as those were tied to personnel costs, and remained fairly fixed. In FY 2000, maintenance and enhancements totaled $6,148, and in FY 2001, the total was $4,785, and one of the main items was training at a cost of $2,000 each year of the biennium. That amount was simply budgeted for each of the ten employees to receive a $200 course in computer skills. Mr. Coyner explained the division had expended $30,000 last fiscal year in upgrades to its computer hardware components, both in Las Vegas and Carson City, as part of its ongoing attempt to become more technologically up-to-date. He felt it would be a shame to purchase that type of hardware without providing an opportunity for employees to receive the training necessary to utilize the equipment, and that accounted for the training costs requested in the budget. Those costs could be reduced if necessary, but Mr. Coyner stated he felt it was a minimal attempt to at least provide basic training for each employee.

Senator Neal requested clarification of the category depicting Treasurer’s interest, stating the actual figure in FY 1997-98 was $18,410; in FY 1998-99 the work program figure was $12,000; and, in FY 1999-2000, the Governor’s recommendation in that category was $6,000, which increased to $12,000 in FY 2000-2001. Mr. Coyner stated the division carried a reserve and at the beginning of the year, the balance of that reserve was approximately $200,000, which generated a fair amount of treasurer’s interest. The division was currently experiencing a decrease in the number of new open pit mines which generated the $20 per acre fee, was not seeing an increase in mining claims, and was experiencing decreasing revenues from oil and gas, causing its budget to fall approximately $90,000 behind FY 1998 revenue. Mr. Coyner advised the division was emptying its reserve at a fairly rapid pace and, in fact, without the aforementioned $100,000 grant from BLM, the division budget would enter negative balance status by August 1999. The extrapolation outward was if the reserve remained low, on which the budget was predicated, the treasurer’s interest would also reflect that. He cautioned committee members to remember that was only treasurer’s interest in Budget Account 4219, and had no impact on that same category in Budget Account 4220.

Senator Neal then asked for clarification regarding the reserve brought forward from previous year category, with showed the agency request for FY 2000-2001 as $229,471, and the Governor recommended amount as $132,520. Mr. Coyner stated he personally did not know the origin of the $229,471 figure, and given the state’s financial situation, he did not feel that was a realistic number; the more realistic number was the Governor recommended amount. He stated he had been advised that category needed to reflect somewhere in the neighborhood of $100,000 to $150,000 in order to provide a margin of safety with regard to the reserve.

Senator Jacobsen asked Mr. Coyner to inform the committee where the industry stood today, and what the future might hold. As one of the state’s revenue sources, he inquired whether or not the industry was flat due to the recession in the price of gold. He went on to state when Mr. Coyner referenced different mine locations, the committee was unable to identify those, and asked for a map which showed the producing mine locations. He advised the committee needed to be able to look at the various sites in order to determine the magnitude of the operation. Mr. Coyner stated the division had aggressively distributed maps and, in fact, several legislators were in receipt of maps which showed the major producing localities in the state; he indicated he would be happy to make copies available to interested legislators.

Regarding an overview of the status of the industry, Mr. Coyner stated he was capable of providing that information, along with other persons present at the hearing who were also very capable of providing that information. In general, he advised the mines were fairing well, given the stress under which they were operating. Those mines were envisioned when the price of gold was $400 an ounce, and with current prices just under $300 an ounce, they were forced to cut costs and operate more efficiently. According to Mr. Coyner, the upside of the situation was the overall geological picture in Nevada, where there was a tremendous geologic natural base that required management, and the division was attempting to do just that. Nevada was one of the lowest cost producers in the world, and if the price remained depressed, there were other locations that would feel the "pinch" much harder than Nevada. The state had been very aggressive in its attempt to keep the mines viable, however, the industry was suffering some pains in the form of bankruptcies. Fortunately, Mr. Coyner stated, industry looked to Nevada as a model in terms of how to create a partnership between industry and government.

Mr. Beers inquired if Mr. Coyner could provide the committee with interest calculations which reflected both the agency and Governor recommendations; Mr. Coyner indicated he would provide that information.

Chairman Chowning asked for further information regarding the contemplated computer staff training, including where the courses would be held. Mr. Coyner stated the current training courses were being offered through Western Nevada Community College (WNCC), which kept costs below $200 per course. There was a divergent range of skill levels among employees and, therefore, some needed less training than others. Chairman Chowning stated last session the legislature had encouraged agencies to take advantage of the opportunities presented by WNCC, and she was encouraged to see the division utilizing that resource.

Chairman Chowning reminded Mr. Coyner to provide information to the committee regarding the contingency plan. If the legislation went into effect to align the division with the commission, there would be cost allocation revisions which could be addressed via budget revisions. She then queried the audience for additional testimony.

Russell A. Fields, President, Nevada Mining Association, stated he wanted to assure the committee the association supported legislation which would grant the Commission on Mineral Resources the ability to adjust fees. As previously addressed by Mr. Coyner, there were two bills, A.B. 450 and A.B. 103 which would address that issue. The association’s board of directors had taken a position of support and would support either or both of the bills, or whatever legislation came about as a result of combining them. Further, he advised, the Nevada mining industry, as represented by the association, was also very supportive of the work done by the Division of Minerals. The division acted in the role of liaison in the partnership between government and industry, in an effort to help Nevada become the leading hard-rock mining state in the United States. He noted while Arizona might produce a bit more revenue, in terms of the impact of the mining industry on the economy, mining was more important to Nevada. Mr. Fields emphasized the association appreciated having a state agency available to assist the industry through the various hurdles necessary to maintain its business.

Chairman Chowning requested a letter from the association outlining its support for the Division of Minerals, which would also give the committee an idea of industry support for the proposed fee increases. Mr. Fields stated he would be pleased to provide that information. Chairman Chowning then inquired if there was a representative from the oil industry present at the hearing; hearing no response, she instructed Mr. Coyer to assist the committee with written assurance from that industry regarding support of the fee increase. Mr. Coyner stated the Commission on Mineral Resources would meet on March 24, 1999, and he had invited an oil industry representative to brief the commission on the current status of the oil industry, which would afford him the opportunity to comply with the chairman’s request.

Chairman Chowning inquired if there was any further testimony regarding Budget Account 4219, and hearing none closed the hearing. The next item for committee review was Budget Account 1330.

Donald Bailey, Sr., State Printer, introduced Jennifer Galentine, Management Assistant, Printing Office, and Jim Manning, Principal Budget Analyst, Budget Office, who would assist him with the budget presentation. He went on to explain the Printing Office had responsibility for the printing program for the State of Nevada, serving the legislative branch, the executive branch, and the judicial branch. The office’s responsibility was to print and oversee copies and copy centers. According to Mr. Bailey, the office printed forms, stationery, letterhead, business cards, and textbooks, covering the entire gambit that the commercial printing industry handled. It operated under statutory authority of Nevada Revised Statutes (NRS), Chapter 344. Mr. Bailey emphasized the Printing Office diligently completed its duties to state agencies and citizens. It offered cost reductions and a faster turnaround time for projects, in order to be competitive with the commercial industry.

In regard to performance indicators, Mr. Bailey stated at the 1997 session, the two financial committees instructed the Printing Office to initiate data collection regarding quality, time frames, and costs, which had been done. From agency feedback, he felt the results had been exceptional. Customer satisfaction with quality was at 99 percent, and satisfaction regarding time frames was at 95 percent. Mr. Bailey explained his office had gone from 21 days to 14 days as the general turnaround for an average job, and at the present time there were 500 active jobs at the State Printing Office, not counting legislative work.

Continuing his presentation, Mr. Bailey informed the committee that customer satisfaction with cost was 97 percent. To arrive at those percentages, the office conducted three major surveys with various state agencies, asking for feedback on quality, cost, and turnaround time. Also included with every invoice and package mailed was a flyer that measured those same three areas. He admitted there had only been a 10 to 15 percent response to the surveys, and while the office would have liked a better return, it was pleased with the percentages, and felt agencies were happy with the product, the cost, and the turnaround time.

Chairman Chowning stated the Printing Office’s efforts were to be applauded. The turnaround time reduction from 21 days to 14 days was excellent, but she then asked why the time frame was projected to increase once again in the upcoming biennium. Mr. Bailey explained the Printing Office was hoping for a larger volume of work in the next 2 years and when the volume of work increased, the turnaround time would also increase. The projection was for a 16 to 20 day turnaround on jobs. He stated the 500 current print jobs varied in size, from simple business cards to major publications that required a greater turnaround time than 14 days.

Chairman Chowning addressed the performance indicator regarding printing impressions, which indicated the cost was expected to decrease, and she asked how that could happen if the price of raw material increased. Mr. Bailey replied the office measured printing impressions on a "parent sheet," which allowed for printing material to be cut down to size. The cost of raw material was based on the historic figure of 8.5 percent for cost increase from the vendors and mills, but the Printing Office had no control over increases in raw materials.

In the performance indicator that addressed the percent of jobs returned due to printing errors, Chairman Chowning asked if the figure of 59 percent was correct. Mr. Bailey stated the Printing Office actually faltered on 59 jobs, and was projecting 44 percent across-the-board. He indicated the office hoped to have more work and maintain better control of quality.

Chairman Chowning stated the committee was very supportive of the State Printing Office, and hoped it would offer savings to state agencies, however, she did not see an indicator which compared state versus commercial printing costs. Mr. Bailey called the committee’s attention to the booklet entitled "Department of Administration – Nevada State Printing Office – Accomplishments – February 1999," (Exhibit D), which included a cost study of the commercial industry versus the state’s independent operation. The documentation indicated the state offered lower rates and was doing an excellent job in the cross structure.

In reviewing the exhibit, Chairman Chowning mentioned a publication previously presented to the committee by the Controller’s Office with a cover designed by a graphic artist at an expense of $5,000, and asked why that publication had not been done by the Printing Office. She also asked if the office offered graphic art service and, if so, were agencies aware of that service. Mr. Bailey stated his office did not employ an individual with the title of graphic artist, but did have persons with experience who could produce layout and graphic design. That service was offered to agencies and was included in the cost and fee estimate for jobs. Mr. Bailey stated the office had a very talented staff, who could put a variety of design work together for the agencies at a lesser cost. He explained the office was somewhat restricted, however, and if an agency requested difficult or extremely detailed design work, it would recommend that work be taken to an actual graphic artist. He noted that Printing Office staff was well trained in the fields of composition, layout work, design and printing.

Chairman Chowning inquired if the Printing Office printed the Controller’s report, including the cover; Mr. Bailey replied in the affirmative. She then asked if the graphic artist portion was subcontracted out. Mr. Bailey stated his office printed the entire report, however, the Controller’s Office had provided the completed cover design and the Printing Office reproduced it for the finished report. He stated his staff had assembled the report, designed the layout, and was very proud of the document, but did not provided the cover design.

Senator Neal referred to the office’s organizational chart contained in the packet provided by the Department of Administration, Exhibit E, stating the way it was set up, it appeared either the Printing Service Manager or Printing Management Analyst position was unnecessary. Mr. Bailey stated he disagreed, and pointed out there were only three managerial positions in the entire Printing Office, and it had downsized to 38 positions. Further, he emphasized he could not control the entire office, and relied heavily on those two positions. The Printing Services Manager, Rod Corbit, worked the production line, which included the presses, et cetera. The Printing Management Analyst, Jennifer Galentine, was responsible for front office and quick print operations. Senator Neal declared the organizational chart did not depict those job responsibilities, and Mr. Bailey agreed, stating he felt it would be an excellent idea to redesign the organizational chart to include greater detail.

Chairman Chowning explained the committee was concerned about information provided in The Executive Budget and advised it was not possible to determine if other agency budgets were adequately funded to support the Printing Office budget recommendations. She asked the Budget Office to provide assurances to the committee that other agency budgets could support the expenditures contemplated by the Printing Office budget.

Answering Chairman Chowning’s inquiry was Mr. Manning, who advised it was a difficult task to align budget costs for the various agencies to the figures projected for the Printing Office, primarily due to the differences in the various general ledger programs used by the agencies. He disclosed he had been working on that problem for the past three sessions, and as yet, had been unable to persuade the agencies to use the same general ledger classification specifically for printing costs. What the Budget Office attempted to do when preparing the budget, was build an inflationary cost based on the increase in the Printing Office budget, 2.5 and 8 percent when originally compiled, and attempted to ensure the other budgets included sufficient funding in maintenance and enhancement units. He agreed with Chairman Chowning, stating there should be a better way to identify the funding classifications. He advised until other state agencies agreed to use similar general ledger programs, which would allow the Budget Office to query the program information in order to arrive at a match in figures, it would continue to project funding via maintenance and enhancement units

Continuing his presentation Mr. Manning stated the Nevada Department of Transportation (NDOT) was a good example, because its budget contained a large amount of printing costs, however, none of those costs were reflected in a general ledger that was accessible to the Budget Office. Chairman Chowning asked why all agencies could not be instructed to use the same general ledger format. Mr. Manning stated the Budget Office had attempted to do that, to no avail. Was legislative action necessary, inquired Chairman Chowning, because the committee felt that was an extremely important area, and if the Budget Office could not ascertain that each agency was budgeting expenditures to the Printing Office in the same manner, it would be impossible to arrive at legitimate projections. Mr. Manning stated the percentage of increase in the Printing Office budget during the next biennium was approximately a 2.5 and 7 percent increase, the historical increase which had worked in the past.

Chairman Chowning asked if it would help to let agencies know the use of similar general ledger programs was legislative intent. Mr. Manning stated perhaps a "hard-line" approach would simplify his job, and Chairman Chowning asked if he wanted a letter of intent from the committee. Perry Comeaux, Director, Department of Administration, advised the committee he did not feel a letter of intent was necessary, and he volunteered to draft a "persuasive" memorandum to all agencies, which should improve cooperation.

Senator Neal requested a restructured organizational chart that depicted the lines of responsibility within the Printing Office, and also included the relationship with the Elko Copy Center, which was not even represented on the chart contained in Exhibit E. Further, Senator Neal asked for the technical oversight in terms of purchasing copies. Mr. Bailey indicated he would provide the requested information.

Chairman Chowning next addressed Module M-100, inflation, stating it appeared charges to other agencies would not cover the raw material cost increases, and asked Mr. Bailey to explain how the increases were determined, and whether or not potential rates had been set for the current biennium. Mr. Bailey reported the historical figure used for the past 10 years to measure such cost increases was 8.5 percent, and that percentage was used for each year of the upcoming biennium. To arrive at that figure, the Printing Office communicated with suppliers, vendors, and mills that manufactured the raw materials it used in the way of paper and envelopes. Reports had indicated it would be in the range of 7.5 to 8.5 percent, which was the figure used for projections. In FY 1997-98, the Budget Office projected 21 percent, however, that proved too high, and he felt use of the historic percentage figures would provide sufficient funds. Mr. Bailey informed the committee raw materials were "big dollar" items, over $1 million each year of the biennium. He explained an audit performed several years ago asked the Printing Office to request a rate increase, which had been done. The agency was currently in the midst of conducting a study regarding further restructuring of its rates, and would announce the end result within 60 days. He suggested there would be an increase in the quick print operation and in the overall printing cost.

Chairman Chowning asked for clarification regarding the impact on other agency budgets when a rate increase was announced by the Printing Office. Mr. Bailey stated it would be a very minor increase, and the major printing operation costs would most likely not be increased. He predicted it would be a small increase or none at all. The quick print operation would be a very minor increase because the cost of the raw material used in that process had gone up. Mr. Manning stated as far as any potential increase the Printing Office would determine necessary in the future, that would need to be addressed somewhere down the line before budget closings. The raw material cost was only one component of a printing job order, and did not include the entire inflationary cost built into the budgets. The Budget Office had attempted to build that increase into the total printing job order costs paid by other agencies. Chairman Chowning expressed concern that the rate increase would be announced after close of session, and inquired how the committee could close budgets with an unknown element. She asked Mr. Bailey if he could provide a realistic estimate; he acknowledged those figures could be provided to the Budget Office within the next several days, as the surveys were almost complete. The quick print figures were set, and the general printing operation was close to completion.

Senator Jacobsen extended his compliments to the Printing Office, and stated as a local legislator, he seldom, if ever, received a complaint about the Printing Office. He then asked if the office now had adequate space, because last session, there had been a request for additional room for storage of raw materials. Senator Jacobsen encouraged Mr. Bailey to comment regarding the Printing Office needs to keep it competitive with private enterprise; he noted the legislature had somewhat neglected the Printing Office at past sessions. Mr. Bailey stated he had approached the Public Works Board for an extension to the current building because the office actually leased outside space for warehousing. He felt those leases could be terminated and the operation contained under one roof. That proposal would also include the legislative material housed on Highway 50, and would work in unison with the warehouse there. He understood the state was suffering a shortfall because he worked hand-in-hand with the Budget Office and Public Works Board. Mr. Bailey advised the Printing Office would wait its turn and would ask again for additional space.

Chairman Chowning asked Mr. Bailey to update the committee regarding the new printing press approved last session, including the actual cost. He stated the printer would be received by the Printing Office on March 15, and hoped to have it up and running by the end of March or first part of April, and would invite the committee for a tour. The printer cost amounted to almost the entire allocation approved last session, almost $400,000. Chairman Chowning then asked if the exact amount of the expenditure had been provided to the Budget Office, in the event there was funding left over; Mr. Bailey replied in the affirmative.

Mr. Bailey indicated Module E-125 would establish a quick print office for agencies in Las Vegas. That operation would be equal to the same section housed in the main Carson City Printing Office and would accomplish several things:

• First, it would cut freight costs, because agencies in Las Vegas sent projects to Carson City, and after completion, the jobs were sent back to Las Vegas;
• Second, it would cut the turnaround time for agencies in Las Vegas; and,
• Third, it would provide a higher level of service.

Mr. Bailey encouraged the committee to support that module. He explained it would also drive the revenue up in the quick print category. The budget projected $932,000 in quick print revenues for FY 2000 and over $1 million in FY2001, which would be quite a "sales haul" for what was considered a small printing operation. He felt strongly that Las Vegas was in need of such a copy center. Chairman Chowning asked where quick print revenue increased were reflected in the budget. The chairman also asked Mr. Bailey to estimate the savings such an office would provide to agencies versus commercial printing. She also asked Mr. Bailey to develop an indicator which would demonstrate dollar cost savings, and to address the issues of total cost for the project and the proposed location. Chairman Chowning explained the committee wanted to make sure the shop would be housed close to the location of main agency offices, such as the Sawyer Building.

Mr. Bailey assured the committee he was currently working with Buildings and Grounds (B&G) for space. He had been told there probably would not be space in the Sawyer Building and B&G was unsure of availability in the Bradley Building. He advised he had asked that the quick print shop at least be situated between those two buildings. As for revenue and savings, Mr. Bailey stated he had not yet compiled the total program costs because the operation was not yet fully approved, however, he would provide the information to the committee as soon as possible.

Chairman Chowning asked if The Executive Budget included a funding recommendation for non-state owned building rent; Mr. Bailey replied in the affirmative. She then asked Mr. Bailey to present more detail to the committee. She noted Cashman Field was across the street from the Sawyer Building and she wondered if there might be available space there; Mr. Bailey stated he had not yet been to Las Vegas to conduct research. His most recent communication from B&G granted him permission to travel to Las Vegas and work with a realtor to locate outside space.

Chairman Chowning then inquired about the requested position for that office; Mr. Bailey explained it would be a quick print position, Offset Supervisor, which would be funded from the existing budget. There were several positions vacant in the Printing Office, and Mr. Bailey explained one would be eliminated in order to fill the position in Las Vegas. Chairman Chowning asked for information regarding the type of position necessary for that office. Mr. Bailey replied the Offset Supervisor was simply an operator, and would answer to him in the Carson City office, as he would act as overseer.

Regarding the use of a realtor to secure outside space, Chairman Chowning asked why B&G had directed Mr. Bailey to use such a source. He replied he did not know the reason, however, had been told to use a realtor. Chairman Chowning stated she felt there should be sufficient expertise in B&G to accomplish the search for the Printing Office. She instructed Mr. Bailey to advise B&G to look across the street from the Sawyer Building.

Ms. Giunchigliani asked for clarification regarding the revenue that would be generated by the Las Vegas office. Mr. Manning stated the $900,000 referred to the summary section which included the entire quick print sales volume, and Module E-125 referred to the quick print revenue generated in the south. Ms. Giunchigliani advised it appeared the agency anticipated total sales to be approximately $932,000 and $1 million in each year of the biennium respectively, to which Mr. Bailey replied in the affirmative. She inquired if it was the intent of the quick print office to provide service to state agencies, and thereby eliminate the need for outside contractor services. Mr. Bailey stated that was correct.

Ms. Giunchigliani then asked if the committee would see commensurate budget reductions for those agencies which would no longer be using outside contractors. Mr. Comeaux informed the committee the Budget Office contemplated an overall savings if the quick print office was established in Las Vegas, however, had not recognized any changes in budgets, and he was unsure exactly how that would be estimated. Eventually, those savings would become evident. Ms. Giunchigliani inquired if Mr. Comeaux envisioned a directive from administration to state agencies instructing them use the quick print office. Mr. Comeaux stated he did not think administration would do that, and the important thing was to establish the office at a location where it would be convenient for agency use. He felt the most appropriate location was the Sawyer Building, and he intended to talk to Mike Meizel, B&G Administration regarding the location. He felt agencies would use the quick print facility if it was conveniently located. Further, Ms. Giunchigliani advised she wanted information regarding a commensurate decrease in other agency budgets, so those dollars might be put to use in other areas.

Ms. Giunchigliani suggested perhaps the best method to arrive at the decrease would be to get a commitment from Mr. Meizel to house the quick print office in the Sawyer Building, then those agencies also located there could be reviewed for possible reduction in their budgets. Chairman Chowning added it was not only those agencies located in the Sawyer Building, but rather all agencies located in the south. Part of the cost savings would be in the freighting of items from the north to the south. Mr. Bailey indicated the Printing Office hoped all state agencies in Las Vegas would utilize the quick print office, because he felt the costs would be very competitive with commercial industry, or he would not recommend establishing that office. He also felt it was very important to be located in one of the state buildings, and that was his goal. Further, explained Mr. Bailey, once the office was operational, it could review the various copiers located in the agencies in Las Vegas, and perhaps reduce the number of machines. There was a positive side to the operation, and Mr. Bailey indicated he was very enthusiastic with the venture.

Mr. Beers inquired if the Printing Office had a business plan, and advised if it was part of the private sector, that would be a requirement. He stated he had some grave concerns about the "fuzzy" nature of the proposal, as well as the entire operation. He stated the cost for 500 legislative business cards was $120, which was rather shocking, and significantly higher than the private sector price. Mr. Beers indicated the committee needed to see some analysis of what monies would be saved, where it would be utilized, et cetera. Mr. Bailey stated the Printing Office would create a business plan, and would also make note of Mr. Beer’s criticism regarding business cards. Chairman Chowning inquired when Mr. Bailey anticipated providing the requested information to the committee. He stated the information would be forthcoming within a week.

In Module E-129, there were increased overtime costs built in, and Chairman Chowning inquired if the new, more efficient equipment would reduce the necessity for overtime. Mr. Bailey explained the overtime was different each year of the biennium, due to legislative sessions. Much overtime derived from the legislative session itself, particularly now that the session was limited to 120 days. The Printing Office was logging more overtime hours earlier this session than ever before, and that skewed the overtime. Mr. Bailey claimed the Printing Office had actually cut back on overtime.

Chairman Chowning noted many agencies were feeling the heavy load of the 120-day session. Regarding his statement about additional revenue generated by the new printing press, Chairman Chowning asked if that revenue had been built into the budget as well; Mr. Bailey replied in the affirmative, and the agency was already counting on that revenue.

Referring to Exhibit D, Chairman Chowning inquired why the Printing Office had not done a cover for the Controller’s Office booklet similar to the one on the exhibit. Mr. Bailey advised the customer dictated the cover design.

With no further testimony forthcoming on Budget Account 1330, the hearing was closed, and Chairman Chowning opened the hearing on account 1354.

Frank Revell, Administrator, testified he would review the Motor Pool budget for the committee. He explained Motor Pool existed under authority of NRS 336, and operated facilities in Carson City, Las Vegas and Reno. The Motor Pool serviced and maintained approximately 740 vehicles for use by state employees on official business, and also serviced between 200 and 400 vehicles for other agencies at those facilities. Its job was to provide safe and reliable means of transportation for state employees in an easily accessible, professional, and economical manner.

Regarding performance indicators, Mr. Revell advised the committee the projected number of rental requests for FY 1998 had been seriously underestimated. Rental requests had increased by over 2,500 reservations, which was approximately 5 percent over the projection, and the total number of vehicle miles driven had increased by approximately 350,000 miles over the projection. He went on to explain that based on those overages, Motor Pool had included an enhancement request, Module E-125, requesting an additional chauffeur position for the Las Vegas operation during FY 2000. Mr. Revell commented an identical position had been approved for the Reno Motor Pool during last session, and had evolved into an excellent time and work saving vehicle, which greatly streamlined its operations. He hoped to initiate the same program at the Las Vegas Motor Pool due to the significant increase in agency use of that facility.

Also included in Module E-125 was a request for an additional position which would eliminate a student and two inmate positions, and create one full-time, entry level Garage Service Worker I position at the Carson City Motor Pool. Mr. Revell explained the agency spent approximately 6 months training student and inmate workers, who only remained on staff approximately 6 months. Also, he noted the prison system was not always able to respond quickly to Motor Pool needs regarding inmate workers, which left the agency understaffed. Chairman Chowning advised it appeared 2½ positions would be deleted and replaced by the requested full-time position. Mr. Revell explained the student position normally worked from 3:00 p.m. to 7:00 p.m., working alone for the last 2 hours of the day, and it was becoming increasingly difficult to maintain a sufficient level of service with short-term employees. He summarized that by adding the full-time position, Motor Pool would have an employee it could train on a continuous basis, and once trained, that person would have the ability to move into a higher position when staff vacancies occurred.

Chairman Chowning asked if the two positions in Module E-125 were approved, would the Motor Pool still require the additional overtime funding requested in Module E-126. Mr. Revell informed the committee Module E-126 represented the first request for overtime in a Motor Pool budget. Normally, he explained, because it was a small agency with only 12 full-time employees, when one of those persons was absent, the remaining employees had to assume the additional workload duties. Mr. Revell stated Motor Pool actually avoided overtime when at all possible, and 99 percent of that request would be used for emergency situations, or to provide coverage for absent employees. With the addition of the positions requested in Module E-125, within a very short time the agency could determine exactly how much overtime would be needed. The agency was very cognizant of the fact that additional staff would definitely effect the overtime request in Module E-126 by reducing the number of hours needed. Further, explained Mr. Revell, there would always be occasions where certain positions would be required to work overtime. The addition of the chauffeur position in Reno definitely cut overtime hours significantly.

Chairman Chowning indicated committee members had been advised that the proposed chauffeur position in Las Vegas would be a good addition to agency staff, in order to assist persons in arriving at their destinations within a reasonable time frame. Further, she advised, it had been reported that persons sometimes waited up to an hour or more for the Motor Pool shuttle to pick them up at the airport. Mr. Revell emphatically stated it had never been corroborated that any person waited at the airport for that length of time. If that did occur, it would be because Motor Pool had not been provided flight information, and a simple phone call to the agency would bring the shuttle within 5 minutes. Chairman Chowning then asked what duties the chauffeur position would perform in Las Vegas. Mr. Revell stated that position would run the shuttle exclusively, a function currently being handled by garage workers and supervisors, to the detriment of their other duties. He revealed when persons returned vehicles and needed a ride to the airport, very often the garage supervisor or workers had to drop current tasks in order to accommodate those persons. He reiterated the addition of the chauffeur position would provide the agency with one person absolutely dedicated to driving the shuttle.

Ms. Giunchigliani referred to performance indicator number 7, average cost per mile, and asked what drove the cost up, and was it tied to reimbursement for state employees driving their own vehicles. Mr. Revell replied it was simply revenue versus miles driven, and Motor Pool did not control the cost for private vehicle reimbursement. Basically, he explained, the amount of money allocated, divided by the number of miles driven, amounted to the formula used to establish the figure for that category. Ms. Giunchigliani asked if the Motor Pool budget increased, would the agency simply increase the cost per mile to fund the budget. Mr. Revell disclosed the cost per mile figure was driven by several different factors, such as unreimbursed accidents, additional insurance requirements, or purchasing costs for vehicles, and as those costs increased, divided by the number of miles driven, the cost per mile figure increased accordingly.

Ms. Giunchigliani stated she wanted to see the formula used by Motor Pool to drive that cost per mile, because that should be a measurement of the agency’s efficiency, rather than simply setting the cost per mile to fund other budget needs. Mr. Revell explained the cost per mile indicator reflected cost increases that were beyond Motor Pool’s control, such as insurance costs. Ms. Giunchigliani stated it was her understanding insurance costs were going down. She asked if the committee would then see a commensurate reduction in that area. Mr. Revell stated the actual cost per mile figures would reflect such reductions, and Motor Pool could only project the cost for the upcoming biennium. Ms. Giunchigliani then asked if the budget actually reflected a reduction in insurance. Mr. Manning declared that it did, and in Module M-100, inflation, the Budget Office allowed for the reduction in the vehicle liability insurance. The original insurance figure was $188.24 per vehicle and that was reduced in The Executive Budget to $117.04 per vehicle; Ms. Giunchigliani requested information regarding the total number of vehicles, and Mr. Revell advised he would provide that figure.

Referring to previous testimony, Ms. Giunchigliani, asked when Motor Pool would initiate a uniform general ledger system of reporting expenditures for fee-based agencies. Mr. Manning advised he would like to begin work on that immediately, in an attempt to devise a system which would better serve the various agencies. Ms. Giunchigliani then asked for information regarding the estimated time line, because everyone in the budget process would be better served with such a system in place.

Chairman Chowning asked Mr. Revell to provide the committee with a comparison of Nevada’s Motor Pool with like agencies in other states. Mr. Revell stated he would research that area and provide the information. Chairman Chowning noted the projections for performance indicator number 2, percent of requests filled by Motor Pool vehicles, was 95 percent for the upcoming biennium, and asked what that figure was based on. She also inquired if that percentage contemplated the approval of A.B. 346 for purchase of 47 new vehicles. Mr. Revell revealed the 95 percent figure for rental requests per year filled by Motor Pool, did not take into account any of the vehicles requested in the bill, as those vehicles would be used as rentals to agencies. The percentage simply reflected the number of daily rental requests that the agency accommodated.

According to Mr. Revell, Motor Pool did not always have sufficient vehicles available to meet agency requests and averaged between 90 to 96 percent, depending on the number of vehicles available in its fleet. Those numbers fluctuated by as many as 60 to 70 vehicles during the year, due to accidents, untimely mechanical failures, or retirement of vehicles because of age. When the agency was able to replenish its stock, the percentage would increase. It simply took into account the number of vehicles versus number of requests, and Motor Pool had no idea at any given time how many requests it would receive.

Chairman Chowning asked if the Budget Office could provide information regarding A.B. 346, which proposed to purchase 47 additional vehicles, and inquired if all agency requests would be met if that legislation passed. The committee also needed a chart depicting which agencies would be served directly by passage of the bill, and did agency budgets include sufficient rental costs. Senator Neal suggested the agency provide statistics regarding the utilization of vehicles for the past year, indicating which agencies used those vehicles and services, and how those figures were used to make the projections. He indicated state employees using Motor Pool vehicles were required to sign for Motor Pool vehicles upon receipt, and when the vehicle was returned the total mileage was noted. Mr. Revell advised Motor Pool did maintain a listing of employees who rented vehicles and the agency filled approximately 1,500 requests each month. The vehicles requested in A.B. 346, were not for those agencies which normally rented vehicles from Motor Pool, and would be purchased and assigned to individual agencies for continuous use.

Chairman Chowning stated the committee wanted to make sure that agency requests were going to be fulfilled, and inquired if there would be a sufficient number of vehicles to match the request agencies were making in their budgets. She advised the committee did not want Motor Pool to be unable to fulfill requests from agencies. Mr. Manning advised LCB was provided a spreadsheet and chart in early January, which identified the agencies that would be assigned the 33 vehicles originally requested in the bill. The cost for those vehicles was coordinated with the Budget Analyst assigned to each agency, in order to ensure that matching costs were included in their budgets. Subsequently, Amendment 31 was proposed, which sought to add 14 additional vehicles to A.B. 346, thereby increasing the total to 47 vehicles. Those 14 vehicles would be allocated to the Department of Motor Vehicles/Public Safety (DMV/PS), 13 of which would be used by the Parole and Probation Division. The Budget Office provided LCB staff with copies of the proposed amendment for those additional vehicles, and requested those costs be included in the agency budget in Module M-200, which identified one-shot costs.

Chairman Chowning stated she simply wanted to ensure that the committee had a clear picture of the outcome of passage of A.B. 346, and asked Mr. Burke, Program Analyst, LCB, to clarify the issue. Mr. Burke advised Mr. Manning that the LCB was in receipt of the Budget Office listing of the 47 vehicles and the agencies to which those would be assigned. He explained what the committee would like to see was a matching listing of the recommended funding for those agencies assigned vehicles from the A.B. 346 list. As a specific example, Mr. Burke stated in the Mental Health/Mental Retardation budget, there was funding for Motor Pool rental, but there were several vehicles on the agency list that were not on the A.B. 346 list, which created a funding imbalance. It was that clarification that the committee was looking for, explained Mr. Burke.

Mr. Manning stated if Mr. Burke was referring to total dollars funded for vehicle cost, some of those costs were ongoing and would not be associated with the additional cost for new vehicles. He then advised the Budget Office would review the bill and provide the committee with the requested information.

Senator Neal asked if there were agencies that were authorized to purchase vehicles without going through Motor Pool. Mr. Revell replied in the affirmative. Senator Neal then asked if those agencies used federal or state monies for purchase of vehicles. Mr. Revell advised many agencies, such as the Employment Security Department, did purchase vehicles with federal funds, but vehicles could also be purchased via an internal service fund, or General Fund appropriation. When those agencies failed to make provisions for replacement costs, or had to comply with federal regulations regarding those costs, several years later when the car was no longer functional, those agencies were required to seek further funding. On the other hand, he explained, Motor Pool leveled those costs for agencies by leasing vehicles at a set price. Mr. Revell went on to explain if an agency owned its own vehicle, it had to establish individual accounts with fuel and service providers, however, Motor Pool took care of those functions for leased vehicles.

Senator Neal inquired how many state agencies were authorized to purchase vehicles; Mr. Revell stated he thought any agency could purchase a vehicle if it wanted to do so, and he was not aware of any prohibition or statutory requirement against such purchases. Did Motor Pool receive notification of individual purchases by agencies, asked Senator Neal. According to Mr. Revell, Motor Pool did not maintain records on any vehicles other than those it owned, and he was not notified when an agency independently purchased a vehicle.

With no further testimony forthcoming on Budget Account 1354, the hearing was closed. The next item for committee review was Budget Account 1356.

Mr. Revell explained Motor Pool would purchase 74 vehicles in FY 2000 and 85 vehicles in FY 2001, for a total of 159 vehicles over the biennium. That basically followed the normal replacement policy. Senator Neal asked what factors came into play when determining the number of vehicles needed. Mr. Revell stated Motor Pool had established replacement criteria that stipulated when a vehicle reached a certain age, mileage, or combination thereof, or became unserviceable due to major mechanical malfunction or an accident, it was slated for replacement. Senator Neal stated he could understand replacement due to an accident, but requested clarification regarding mileage. Mr. Revell stated if a normal sedan reached 80,000 miles, or 8 years of age, it would be slated for replacement. He reported after 8 years, vehicles began to cost the state money, no matter what the mileage, simply because of age. Senator Neal then asked if there was a maintenance record kept on all vehicles; Mr. Revell replied in the affirmative.

Chairman Chowning asked what type of vehicles Motor Pool anticipated purchasing, and how many would be used as daily rental vehicles. Mr. Revell stated Motor Pool would be purchasing different types of vehicles, primarily four-door compact sedans, and intermediate or mid-size sedans would be purchased for law enforcement. Occasionally, he explained, Motor Pool would purchase sport utility vehicles, trucks, or large vans, and those vehicles were utilized to the fullest. All vehicles were used in the daily rental fleet, and all new vehicles, except those purchased via one-shot appropriations for specific agencies, were moved into the Motor Pool fleet.

Chairman Chowning then asked why Motor Pool was requesting the additional 8 vehicles in Module M-200, depreciation/intra-fund transfer, along with the 47 requested in A.B. 346. Mr. Revell stated Motor Pool had approximately 740 vehicles of which 31 were out of service, and 25 had been ordered to replace them, creating a shortage of 6 vehicles. Over the past 2 years, he explained, Motor Pool had lost vehicles for various reasons, and actually was approximately 60 vehicles short. By the time replacement vehicles were ordered, Motor Pool usually had more vehicles out of service than were ordered. Originally, he indicated he had asked for additional vehicles for the rental fleet to be included in A.B. 346, however, the Budget Office determined that 8 vehicles could be funded from the internal service fund, as additional replacement vehicles in order to make up the shortfall.

Senator Jacobsen asked if vehicles were removed from service for mechanical reasons, or because they were worn out. Mr. Revel replied in many cases they were out of service for mechanical reasons. According to Mr. Revel, in FY 1988-89, Motor Pool purchased a large number of Chrysler "K" cars, which had a deficiency in the air conditioning system. Every year in Las Vegas, Motor Pool replaced a large number of air conditioners, however, once a "K" car reached 80,000 miles or more, it was no longer feasible to replace those systems. Other vehicles were driven past the 80,000 mile mark if they continued to run without requiring major repairs. Motor Pool also lost vehicles due to major mechanical malfunctions and, in Las Vegas, there were a significant number of vehicles involved in accidents. Senator Jacobsen then inquired how Motor Pool disposed of the vehicles, and did the state realize Blue Book prices for those vehicles. Mr. Revell indicated Motor Pool disposed of vehicles via the Purchasing Division by public auction. Historically, the vehicles sold for very low prices at auction, because they had been utilized by the state as long as possible.

Senator Neal asked if there was anyone within the state who knew the total number of vehicles utilized within state government. Mr. Revell indicated perhaps State Purchasing could provide that information, because it maintained an inventory of all state property, including vehicles. Would they also keep track of credit card transactions, asked Senator Neal. Mr. Revell replied each individual agency that used a vehicle was responsible for establishing its own account with the state fuel provider; however, Motor Pool also offered that service for its vehicles, whether they were daily rental or monthly leased vehicles. Senator Neal then inquired if Motor Pool purchased vehicles for DMV/PS, and Mr. Revell replied that Motor Pool purchased vehicles for DMV/PS, Parole and Probation Division, but not for the Highway Patrol, Nevada Department of Transportation, or the Employment Security Department.

Next, Chairman Chowning inquired about the alternative fuel vehicles, asking who instructed Motor Pool that a certain number of its total vehicles must use alternative fuel. Was that a federal mandate, was it stipulated in NRS or Nevada Administrative Code (NAC), and what percentage of current and anticipated vehicles used the alternative fuel. Mr. Revell advised Motor Pool operated under a mandate from the state, NAC 486A, passed by the legislature 6 years ago, through the Environmental Commission. Under that regulation, vehicles purchased in Washoe and Clark Counties were required to be 90 percent alternatively fueled beginning in FY 2000; in FY 1999, the requirement was 75 percent. The requirement would continue at the 90 percent rate from FY 2000 on; there were exemptions for law enforcement vehicles and certain trucks over the 8,600 gross vehicle weight, but all other vehicles in those two metropolitan areas had to meet the requirement of 90 percent alternative fuel. The federal mandate applied only to Las Vegas, and was modified to 75 percent; if the state mandate was met in Las Vegas with federally approved alternative fuel sources, it would automatically meet the federal mandate. Mr. Revell stated 2 years ago he had asked the Environmental Commission to maintain the 50 percent acquisition rate for at least 4 more years to allow vehicle fueling infrastructure to catch up with the acquisition rate, however, the commission declined to allow that percentage to remain in effect. Currently, he explained, Motor Pool was required to have 90 percent of its vehicles alternatively fueled. That regulation was administered by the Environmental Commission, under its air quality program.

Chairman Chowning pointed out if fuel sources were not available, how would Motor Pool meet those requirements. Mr. Revell stated there was good infrastructure in place in Las Vegas where the program was working quite well, and the problem was the Reno/Carson City area. She then asked if fuel was not available, did Motor Pool still have to meet the regulations. Mr. Revell replied in the affirmative, however, the commission would make some concessions. For example, Motor Pool had some converted vehicles on which the conversions had failed, and the only company that provided fuel conversions was out of business, so Motor Pool had three vehicles that did not work. If Motor Pool was unable to access the fuel to operate the alternate fuel vehicles, asked Chairman Chowning, would those vehicles be useless to state agencies. Mr. Revell indicated Motor Pool did have bi-fueled vehicles, which used both alternative fuel and gasoline, and in Las Vegas there were vehicles dedicated to alternative fuel only.

Chairman Chowning then asked what those vehicles cost versus the standard gasoline fueled vehicles. The alternative fuel vehicles averaged between $4,000 and $7,000 more each for the initial purchase, and that was built into the budget. Chairman Chowning asked if Motor Pool ever used Liquid Petroleum Gas (LPG) fuel. Mr. Revell stated he had researched LPG fuel, but historically the only vehicles available from manufacturers were trucks and Motor Pool had very little use for trucks. Conversions were an option, however, the Federal Government failed to recognize several of the conversions as being appropriate. Chairman Chowning stated she understood LPG fuel currently cost only 6 cents per gallon and Compressed Natural Gas (CNG) cost 22 cents per gallon. Actually, explained Mr. Revell, the cost for LPG was 60 cents per gallon, and CNG was approximately 80 cents per gallon.

Chairman Chowning advised she would ask staff to follow up on that issue, because the committee needed to know what was truly driving the mandate to pay so much extra for alternative fuel vehicles if the state could not use them.

Ms. Giunchigliani stated she believed legislation was passed at the 1991 session that caused a change in state law, and the percentage was then crafted by the code; Mr. Revell agreed, and stated the Environmental Commission could change the percentage. She then referred to A.B. 346, asking if it was feasible to reduce the requested replacement vehicles, and redirect non-state revenues to vehicles via the bill. Mr. Revell stated the Budget Office had suggested the funding as contained in the budget. Ms. Giunchigliani asked him to review the funding source, inquiring if there could possibly be a saving to the General Fund if the cost of some of the replacement vehicles were redirected through the bill. He stated the 47 requested vehicles were not replacement, but additional vehicles. The only possibility for redirect would be with the 8 vehicles originally requested in A.B. 346, and then redirected back to the Motor Pool Vehicle Purchase budget via Module M-200. Ms. Giunchigliani stated the committee wanted to take the cost of those vehicles out of the Motor Pool Vehicle Purchase budget and redirect it to the bill, and inquired if that would also redirect the costs. Mr. Revell stated that would create a larger General Fund appropriation.

Ms. Giunchigliani then addressed Tracy Raxter, Administrator, Administrative Services, stating several years ago she had requested that the state create a policy for vehicle replacement, and inquired if that had been adopted. Mr. Raxter replied in the affirmative.

Chairman Chowning noted that a 1993 audit recommended a formal cost analysis to enhance decisions regarding vehicle replacement, and since Module E-710 contained a request for software upgrades, she inquired what role the software upgrades might play in making those decisions. Mr. Revell stated Motor Pool had anticipated having the software installed by August 1998, but due to the various assorted glitches associated with computer programming, it had not been fully implemented. The software adopted by the agency, which was in the process of being installed, was fully capable of providing a vehicle-by-vehicle cost analysis, such as cost per mile, cost per gallon, et cetera. Motor Pool had used the program to produce physical reports, and by next session, he anticipated there would be valid data available via the computer system for any vehicle in Motor Pool’s fleet.

Chairman Chowning advised the committee would be unable to address the remaining agenda items due to time constraints. She instructed the Budget Office to provide the committee within 2 weeks, an account-by-account analysis regarding the assessment proposal contained in Budget Account 1358, Purchasing. That analysis should determine if adequate funding existed in the budget to meet Purchasing revenue needs for each year of the next biennium. Mr. Manning indicated the Budget Office would comply with that request.

There being no further business to come before the committee, the meeting was adjourned at 10:25 a.m.

RESPECTFULLY SUBMITTED:

Carol Thomsen,

Committee Secretary

APPROVED BY:

Assemblywoman Vonne Chowning, Chairman

DATE:_______________________________________