The Assembly Committee on Ways and Means was called to order at 3:30 p.m. on Thursday, March 25, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Mrs. Jan Evans, Vice-Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

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

COMMITTEE MEMBERS ABSENT:

Mr. Robert Price (Excused)

STAFF MEMBERS PRESENT:

Chairman Arberry called the meeting to order and opened the hearing on Assembly Bill (A.B.) 364.

Assemblywoman Sandra Tiffany, Assembly District 21, introduced Leon Miller, Director, Utah State Division of Information Technology, and David Moon, Chief Information Officer, State of Utah. Assemblywoman Tiffany provided an overview of the bill.

Assemblywoman Tiffany provided biographies of Mr. Miller (Exhibit C) and
Mr. Moon (Exhibit D). She also provided letters of support from Representative Bob Burns, Arizona Legislature (Exhibit E) and from John B. Kelly, Arizona State Chief Information Officer (CIO) (Exhibit F).

Assemblywoman Tiffany stated she had served on the Assembly Ways and Means Committee in her first two terms of office. At that time the committee was constantly hearing about problems with information technology. Requests for Proposal (RFP’s) were a state requirement and by the time those were responded to, 4 years had passed and so had the technology originally requested. It seemed there was never enough money for the appropriate technology and the Department of Information Technology (DoIT) had gone through three or four managers. Out of those problems came a number of large projects that did not work well. Currently, the word that seemed synonymous with technology problems was NOMADS (Nevada Operations Multi Automated Data Systems).

Assemblywoman Tiffany went to Arizona and spoke with the information services staff and the CIO. She had also gone to Utah and spoken to their information services staff. She met a Utah senator who was responsible for crafting the bill that created that state’s CIO and technology commission.

Assemblywoman Tiffany stated her bill was crafted along the lines of the Utah program. In A.B. 364 the CIO would be a cabinet level position reporting to the Governor. The CIO would be separate from the data processing bureau and the data processing function would become the Operations Bureau.

Other functions headed by the CIO would be planning, research and contracts. The CIO was structurally separated because DoIT provided services and charged the Executive Branch for that service according to a rate schedule. Complaints Assemblywoman Tiffany had heard included "they were empire building," "we don’t trust them," and communications problems existed.

If policy, planning and research were separated from operations it helped to build a trust from the Governor’s office out to the executive branch departments. Definitions of qualifications were sometimes a problem so
A.B. 364 contained a suggested set of qualifications for the CIO. In DoIT (or Operations) business would remain as usual except for the functions placed under the CIO.

Assemblywoman Tiffany stated there was currently a Technology Advisory Committee that did not meet very often and was relatively ineffective. The bill created a policy-making commission. The commission would report back to the Governor and could suggest legislation for each session. Hopefully the commission would have suggestions for how to work large projects, policy for contract workers, how to establish salaries, and perhaps establish a contingency fund with the budget office so some of the projects could move along between legislative sessions. A.B. 364 also created a rate commission providing a structure outside of Operations that allowed more than one person to review rates and establish rate changes.

Assemblywoman Tiffany stated Governor Guinn had indicated his approval of the structural changes made by the bill.

David Moon, CIO, State of Utah, testified Utah had found some success in allowing the CIO’s office to focus on strategy, vision, coordination, project planning and management. The separation of the rate-charging function from those trying to build a relationship of trust had been helpful.

Mr. Moon stated he had a good working relationship with Mr. Miller who managed the operations side of information technology (IT) in Utah. Those central services would remain a key part of the program. However, agencies seemed to like having what they viewed as a trusted third party in the office of the CIO to deal with policies, procedures and strategic visions. IT strategies and directions would remain an integral part of the reengineering of government and the changes that took place in government processes.

Having the CIO be a cabinet-level position that worked closely with the Governor and executive directors of agencies was very helpful and productive. In the past year Mr. Moon had conducted the annual IT strategic planning session with the cabinet members rather than with the IT managers as was normally done. It was also a method for the cabinet to get executive level support and "buy-in" for the kinds of good planning, good project management, and good processes necessary.

Mr. Leon Miller, Director, Information Technology, State of Utah, testified concerning some of his experiences. In 1981 the State of Utah established the position of Data Processing Coordinator. Then in 1992 that position was renamed as a Chief Information Officer that reported to the Director of Budget and Planning. Another position existed at the time was that of Deputy of Policy that reported to the Governor. The three positions worked well together up until the point the deputy left. If the CIO was not a cabinet level position, it did not have the clout to make policy decisions.

Mr. Miller commented Mr. Moon had called the CIO position a "third party."
Mr. Miller stated he appreciated that "third party" because in his position, he was the one at which "arrows were hurled." The CIO stood between the manager and the "arrow throwers." When decisions were being made on very large projects, it was always better to have another person conducting a review of the plan as well.

Mr. Miller stated he appreciated the portion of A.B. 364 that moved the CIO position into planning functions, as that was what caused the Utah program to work so well.

Chairman Arberry asked if Mr. Miller and Mr. Moon felt creation of the CIO formed another layer for government offices to work through. Mr. Moon replied in the Utah program all approval or disapproval of IT projects rested in the office of the CIO. Therefore no duplication existed. The process was facilitated by the fact that Utah agencies had a great deal of autonomy regarding development of their own applications. The central operations provided mainframe services, wide area networking, and telecommunications services. All project and development plans were done through the agencies and approved by the office of the CIO.

Assemblyman Hettrick asked how Mr. Miller’s agency was funded. Mr. Miller replied the Operations Division recovered their costs through a rate-charge system. Assemblyman Hettrick continued the Utah system was similar to Nevada in that respect and asked if Mr. Miller felt having the CIO in between helped in terms of situations causing friction. Mr. Miller responded definitely. The CIO assisted with the rates themselves but if there was a frictional issue there was someone else to hear the problem and attempt to arrive at a solution.

Chairman Arberry asked how long Utah had used their current IT structure.
Mr. Moon replied there had been a CIO position for 3 years but it was not until the previous year that the position had been elevated to a cabinet-level position.

Marlene Lockard, testified she was the Director of the Department of Information Technology in Nevada (DoIT) and she was a member of the Governor’s cabinet. She stated DoIT supported efforts to increase its organizational effectiveness. DoIT believed any restructuring efforts should consider the recent legislative audit of the department, the department’s response, and the department’s continuing efforts to implement it’s strategic plan. Any changes in organizational structure should address the fundamental issues facing the department and offer a complete and integrated solution.

While A.B. 364 adopted a model for a state information technology organization that had been successfully implemented elsewhere, the bill would be enhanced by giving full consideration to those factors that contributed to a successful reorganization. DoIT’s most recent legislative audit noted the departments efforts to implement sound management controls had been hindered by turnover in top management positions and constant changes in organizational structure. DoIT was concerned that A.B. 364 would continue that trend.

Consequently the department researched different successful IT organizational models and selected Washington State because of the number of similarities and the ability to incorporate improvements with the least disruption to the current organizational structure. The department had traveled to Washington and spent time studying their organization. Washington was the only state to receive an "A" rating by Governing Magazine’s recent review. Washington had also received national recognition as the nation’s "digital" state. As a result of their valuable assistance and other research DoIT had developed various initiatives within its organizational structure to improve effectiveness.

One example was the establishment of a quality assurance team added to provide project oversight, report on areas of risk, and recommend intervention strategies. The department had recently acquired quality assurance monitoring tools that would allow project managers to more accurately monitor project success.

The department was in the process of a critical transformation of the old planning unit to provide overall guidance and collaboration with customer agencies in development of important technology plans and initiatives.

Ms. Lockard provided committee members with the impressive credentials of the newly transformed planning unit (Exhibit G). The individuals on the team would also provide oversight to the implementation of the Carnegie Mellon’s Software Engineering Institute’s Capability Maturity Model that was included in the Governor’s recommended budget. That model would improve the quality and productivity of software development and establish a baseline for tracking improvement initiatives. Continued organizational churn might impair the success of those important quality initiatives.

Fundamentals not addressed in A.B. 364 would also limit DoIT’s success.
Ms. Lockard gave an example of an article in Governing Magazine that rated states on government performance. The states receiving the highest technology grades were noted for their integrated technology systems and enterprise-wide standards. States receiving poor ratings were noted for their lack of enterprise-wide policy, procedures, standards, guidelines and de-centralized information technology systems. Nevada stood out for having several exempt agencies. The bill did not appear to address that issue.

DoIT believed the effectiveness of A.B. 364 would be enhanced by clarification. She asked what agency assumed responsibility for the Year 2000 (Y2K) Project. The bill fragmented the department’s Y2K team. It also recommended expanding the current advisory board to include up to 10 members from the private sector. On the current advisory board it was difficult to fill the two private sector positions because of conflict of interest issues with vendors who might wish to do business with the state.

A successful reorganization required a well-developed transition plan. The July 1, 1999 effective date of A.B. 364 might not provide enough time to develop such a plan. The Governor had indicated his intent to examine and potentially restructure state government operations so the bill might be premature in that context.

Robert van Straten, State Records Manager, read from prepared testimony (Exhibit H).

Exhibit H also includes two sheets containing standards for technology purchases and records imaging established by the advisory board.

Chairman Arberry declared the hearing on A.B. 364 closed with no action and opened the hearing on A.B. 472.

Gene Porter, District Judge, Eighth Judicial Court, Clark County testified in support of A.B. 472. The bill very simply changed the longevity formula for district court judges from 1 percent to 2 percent.

Judge Porter provided the committee with a copy of NRS 245.044 (Exhibit I). Under that statute all elected county officers currently enjoyed a longevity pay of 2 percent after a 4-year period. Justices of the peace were not included in NRS 245. However, he provided committee members with the agenda of the September 19, 1995, Clark County Board of Commissioners Meeting (Exhibit J) that showed an action item which ultimately provided justices of the peace in Clark County with a 2 percent increase after 4 years of service.

Judge Porter stated A.B. 472 would bring the district court judges to the same level concerning pay increases as the justices of the peace. He requested two amendments to the bill.

Amendment 1 would include the seven supreme court justices who were Judge Porter’s bosses in the bill. He apologized for that omission from the bill.

Amendment 2 would change the 5 years to 4 years, which would match the longevity pay enjoyed by other county officials under NRS 245.044 and the plan as adopted by the Board of Commissioners of Clark County.

Assemblywoman Chowning noted the fiscal note would need to change to include the seven supreme court justices. She asked if the fiscal note would also change with the proposed amendment changing years of service from 5 to 4 years. Judge Porter replied the 1 percent change for the seven justices amounted to $5,000 or a total of $3,500. He indicated there were 54 district court judges including supreme court justices. Only one judge would impact the budget with a change from 5 years to 4 years and that was Judge Porter.

Chairman Arberry declared the hearing on A.B. 472 closed with no action and opened the hearing on A.B. 345.

Don Hataway, Deputy Director, Budget Division commended the Legislative Counsel Bureau’s (LCB) fiscal staff in general and Jeanne Botts in particular for publishing the "Nevada Plan" document. He explained it was a definitive document on how the Nevada Plan worked and the role the General Fund had as a guarantor of for the basic support per pupil. There were a series of years that required supplemental appropriation requests. There had also been a series of years where reversions to the budget were made. In the current fiscal year a supplemental appropriation was needed.

There was "good" news and "bad" news. The appropriation was still needed but based on what appeared to be occurring with the largest block of revenue as yet to be decided, the Local School Support Tax (LSST), the Budget Division felt a material change could be made in the amount of need as originally estimated in the Fall of 1998.

At the December meeting of the Economic Forum it was predicted that the general sales tax would increase 6.9 percent for FY 1999. The Economic Forum always revisited the base year before projecting out into the "out years." The first 6 months of collections which was the most recent available, showed that the LSST was increasing at 8.9 percent. Based upon that information, both the Budget Division and the LCB fiscal staff did projections on what it felt was the current need. The final need would not be known until the Economic Forum met on May 1, 1999.

Mr. Hataway stated he had arrived at a figure of close to $17.6 million of need and LCB had arrived at a projection of $17,859,000. Mr. Hataway agreed to accept the LCB projection until after the May meeting of the Economic Forum.

Mr. Hataway stated the appropriation could not be held until May 1, 1999, because the cash flow was needed to meet the fourth quarter payment due on May 1, 1999. In addition to the appropriation requested in A.B. 345, the Budget Division would have to go to the Controller as authorized by statute for an advance from the General Fund of approximately $65 million. The primary reason for the advance need was that slot tax was not paid until the end of the year.

The Budget Division recommended A.B. 345 be passed as amended reducing the $28,985,515 appropriation requested by $11,125,892. The new appropriation requested would become $17,900,000.

Chairman Arberry asked by what date the bill needed to be passed.

Mr. Hataway replied action was needed May 1, 1999 to meet the fourth quarter payment. Whether the Controller’s office would accept payment on a quarterly or monthly basis was up to that office. He assumed a quarterly payment would be needed on May 1, 1999.

Chairman Arberry closed the hearing on A.B. 345 closed with no action. There being no further business, the meeting was adjourned at 4:25 p.m.

RESPECTFULLY SUBMITTED:

Cindy Clampitt,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE: