The Committee on Ways and Means was called to order at 3:50 p.m., on Thursday, April 1, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Mrs. Jan Evans, Vice Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. David Parks

Mr. Richard Perkins

COMMITTEE MEMBERS ABSENT:

Mrs. Marcia de Braga (Excused)

Mr. Lynn Hettrick (Excused)

Mr. John Marvel (Excused)

Mr. Robert Price (Excused)

STAFF MEMBERS PRESENT:

Assemblyman Richard Perkins, Assembly District 23, said A.B. 652 was one of the bills to determine the use of the tobacco settlement monies. The bill described how Nevada would spend $1.2 billion in tobacco settlement revenue over the next 25 years. The state budget was tight, so the bill ensured every state dollar did the most good for the people most in need. A.B. 652 and its companion, A.B. 474, would have profound implications on health care and education in Nevada for the next 25 years and beyond. With so much at stake, it was important to know how and why A.B. 652 was drafted.

Mr. Perkins explained in the past few years, 48 states sued the tobacco industry to pay for health problems related to tobacco addictions. It was not a small or quick task and required hard work, determination, and courage. On the front line was Nevada Attorney General Frankie Sue Del Papa. The state owed a great deal to Ms. Del Papa for securing those funds for all Nevada’s citizens. Last year, most states, including Nevada, settled with the tobacco industry. Since then, 39 states had devoted all or a majority of their tobacco settlement revenue to health care purposes. Seven other states had used the settlement for other things, such as relief for tobacco farmers in North and South Carolina.

A.B. 652, Nevada’s plan, remained loyal and true to the basic purpose of the tobacco settlement, using the majority of revenues to support, improve, and expand Nevada’s health care system. A.B. 652 would set aside 25 percent of tobacco revenues for direct health programs and long-term care for senior citizens. Another 25 percent would help people, especially young people, stop smoking or using illegal drugs. Fifteen percent would go toward block grants to support county health programs, and 10 percent was addressed by the companion legislation, A.B. 474.

Mr. Perkins said A.B. 652 gave 25 percent of tobacco revenue to Nevada scholarships to help young people with grade point average of 3.0 or better go to college. The bill would help families pay for the education with $2,500 per year for enrollment in a university or $1,250 per year for community college. But, given the current budget situation, when the state could not afford raises for state employees or teachers, when the state could not pay for Medicaid waivers for the disabled, when all Nevada residents could not be provided with health insurance, and when the state could not afford improvements in long-term health care, it was fiscally irresponsible to give scholarships to millionaires who could easily afford to send their children to college. A.B. 652 deserved careful and open consideration. Too much was at stake to let partisanship tear down a good idea. A.B. 652 was a good piece of legislation that made financial sense and good policy sense. It was a great step forward for health care and health education in Nevada.

Assemblywoman Barbara Buckley, Assembly District 8 in Clark County, said she was pleased to present the health care component of A.B. 652. When speaking of the bill’s health care component, it made sense to discuss Nevada’s health care system and why the sponsors of A.B. 652 felt 75 percent of the tobacco settlement must be used for health care programs. Nevada was ranked 50^th for per capita spending on health care. There were 20,000 to 30,000 uninsured children and 100,000 to 120,000 uninsured adults in the state. According to the National Healthcare Comparison, Nevada varied between 41^st in 1992, progressing to 45^th in 1995, 48^th in 1996, and 47^th in 1997.

Ms. Buckley said the picture of the state’s health care system, from birth to death, was pretty bleak. Twenty-three percent of pregnant women did not receive prenatal care in their first trimester in the state. There were 6.2 deaths per 1,000 live births, 7.6 percent of births had low birth weight, and 28 percent of newborns to 2 year-olds were without immunizations. Twenty-five percent of all children eligible for WIC were not served, and every 25 minutes a child was reported abused or neglected. The adolescent statistics were not any better. Nevada was ranked at the top of the nation for teenage pregnancy, but thanks to work by teens and the Attorney General, the state was making gains and strides in that area. Fifty percent of all sexually transmitted diseases affected adolescents. Twenty percent of adolescents were overweight and at risk for heart disease and other ailments. There were over 30 teen suicides in 1998.

Ms. Buckley said Nevada was ranked first among adult mental health problems leading to suicide. In 1998, there were 3,700 deaths from heart disease, 2,900 deaths from cancer, and 800 deaths from pulmonary disease.

Thirteen percent of Nevada’s population was over age 65. There were 1,500 to 2,000 new senior citizens moving to Nevada monthly and 20,000 to 30,000 seniors were without Medicaid or private insurance. The state had a high turnover in nursing home staff, poor quality, and not enough alternatives to institutional care.

Ms. Buckley said the dire statistics and the reason the state received tobacco funds was why the sponsors of A.B. 652 felt the majority of funds received should be devoted to health care. By devoting 75 percent of the tobacco settlement funds to health care, the state remained true to the settlement agreement. Ten percent of the funds to be devoted to health care would be placed in a trust fund, as stated in Vice Chair Evans’ companion bill, A.B. 474. The innovation and thoughtfulness behind the trust fund was self-explanatory. The state could spend all the money and leave nothing for the future, or the money could be invested in the state. Vice Chair Evans’ bill would preserve funds in perpetuity for Nevada’s children and grandchildren. The health care proposal looked at healthcare comprehensively and did not fund just one or two programs. Anything else was not good enough for the healthcare needs of the state.

In addition, Ms. Buckley continued, the bill met the needs of the state’s entire healthcare system. The bill suggested funding programs at state and county levels. It provided care for young and old alike. It offered an opportunity for public input by creating a special legislative committee designed to collect input on the need for specific programs. The proposal called for input from an advisory committee to make specific recommendations on how each category of expenditure should be made, utilizing a request for proposal system. It made sense to see which programs could receive what funds and deliver what results. Anything short of that did not give the accountability needed to make sure health care needs were met through the use of tobacco funds.

Ms. Buckley said 25 percent of the state’s tobacco settlement should be used for direct healthcare appropriations. Noting she had the opportunity to serve on the Interim Health Care Committee for the first time during the last interim, she said it was amazing to see the health care needs that went unmet and the services that could be provided. If the state had $2 million, it could be spent on waiver programs that would allow individuals with disabilities to return to work. There were programs that would allow individuals diagnosed with cancer to get insurance. If a person worked hard every day, was diagnosed with cancer, and had to stop working, that person would have to wait 2 years to receive Medicaid. If a person’s social security benefits were $1,000 per month, that person made too much money to qualify for Medicaid. There was a new waiver program for which the state could apply, with some tobacco funding that would allow individuals diagnosed with cancer and other serious illnesses to have insurance during the 2-year waiting period.

Twenty-five percent of the tobacco funds used for direct health care, as well as the other 75 percent, could be used for senior citizens’ health care programs. There were seniors who could not afford the price of prescriptions, and Medicare did not cover prescriptions. A person was not eligible for long-term care unless he or she qualified for Medicaid. A person had to spend down all resources in order to qualify for Medicaid. There were provisions for a spouse left at home, but if a person was alone, he or she had to spend all savings in order to qualify for nursing care, and that was not right. There needed to be alternatives to keep people in their homes as long as possible. If a person was forced to leave, there needed to be assurances that he or she did not have to spend their life savings.

Ms. Buckley explained A.B. 652 recommended setting aside 25 percent of tobacco settlement funds to stop children from starting to smoke, stop children from developing alcohol and drug addictions, and assist adults who wanted to stop smoking, but needed help through the use of a cessation program. A significant amount of the funds received as a result of the addiction must be used to stop future addiction. Prevention must be part of the plan. The bill also recommended a legislative special committee and an advisory committee establish the exact programs to be funded. There had to be accountability to ensure the non-profit agencies selected to run the programs would deliver.

Ms. Buckley said it was important to recognize the state did not have all the solutions and counties paid for uncompensated care. Many counties had developed innovative ideas on ways to better serve the healthcare needs of their county, but had no money. Mr. Dini had been working with a coalition of rural communities to find an innovative way to deal with their healthcare needs. Therefore, 15 percent of the tobacco settlement funds should be available to fund such innovative programs in all counties throughout the state.

Assemblyman Wendell Williams, Assembly District 6 in Las Vegas, reiterated 25 percent of tobacco settlement funds would be directed toward education. Priority would be given to students who major in health care disciplines or health education. Priority would also be given to students who had worked with anti-smoking, anti-drug, and pro-health issues in school. Those priorities remained true to the intent of the tobacco settlement.

Mr. Williams assured the committee the scholarship plan provided accountability and responsibility. The state could not afford to spend the tobacco funds "willy nilly" or "hully gully." A.B. 652 demanded annual reporting and scholarships for middle- and low-income students, not the wealthy. The bill also stated use of other financial aid must be used first, repayment for dropping out, and repayment for not maintaining good academic standing. Accountability was critical to the plan.

Mr. Williams said the budget situation meant the state had to stretch every dollar. The state had to serve people most in need over those who were less in need. That may be a difficult decision, but public trust demanded such wise and careful use of taxpayer dollars. For every $2,500 given to a millionaire, there would be one less wheelchair, one less health insurance policy for a needy family, and one less medical procedure for a person in need.

Chairman Arberry noted the Chair of the Assembly Committee on Health and Human Services, Vivian Freeman, was present.

Mr. Goldwater said Mr. Perkins spoke of limiting the ability of the very wealthy to access the limited scholarship dollars. Mr. Goldwater asked if the language contained in Section 5, Paragraph 2, gave enough direction to the Board of Regents to establish that criteria. He questioned whether the resources of the Chancellor's office were more than sufficient to administer the program.

Mr. Perkins said he thought the language in the bill was sufficient and the Board of Regents was very capable. Once the intent of the legislature was made clear through testimony and the bill passed, the board would take charge and move forward with the legislation in the spirit in which it was intended. Regarding the administration of the money, the bill did not establish a new governmental board. The money would be administered by the Board of Regents and the administrative costs in A.B. 652 were limited to 2 percent.

Mr. Goldwater asked if the tobacco monies could be used to establish match programs from the Federal Government and whether there was enough flexibility to do innovative things in healthcare. In the HIV/AIDS Taskforce, for example, there were programs that paid a policy’s premium, rather than paying for the treatment. Ms. Buckley replied yes, the program allowed and encouraged matching programs. For example, the program that allowed individuals with disabilities to return to work may receive a 50 percent match if the state applied for it. She thought there was enough flexibility to utilize both matching programs and innovative approaches. One of the things considered in drafting A.B. 652 was, with the 25 percent, whether appropriations should be made, given the 60 days left in the session. It was decided that would be a disservice to the public. Instead, a legislative committee with an advisory committee from the community was needed in order to consider the most innovative programs and programs that brought in matching funds.

Ms. Giunchigliani said the scholarships would be given "pursuant to a career in education or healthcare." She asked if that would allow scholarships for any area in a health care course of study. Mr. Williams said priority would be given to students entering health-related fields or health education, but that did not preclude other students from participating. Ms. Giunchigliani asked if the education scholarships applied to teacher education or just health education. Mr. Williams reiterated priority would be given to students in health-related fields, but students in any area were eligible. Ms. Giunchigliani said she appreciated that, because she thought that was the legislative intent from Congress.

Ms. Giunchigliani said she especially appreciated subsection 3, which would help people who performed poorly in school to return for an education. Those people would still be able to participate through some criteria and access scholarships. Mr. Williams said that was correct. Ms. Giunchigliani said that was a key element of the bill, and met the needs of middle-class and working-class people who actually had a need.

Ms. Buckley presented letters in support of A.B. 652 from Thelma Clark of the National Silver Haired Congress, Dalton Wellman of the National Silver Haired Congress, The Success By Six Statewide Coalition, The Ron Wood Family Resource Center, The Children’s Cabinet at Incline Village, The Sun Valley Resource Center, and the Sparks Family Resource Center (Exhibit C). Ms. Buckley said Ms. Del Papa would like to say a few words in support of the bill.

Chairman Arberry said he would hear the companion bill, A.B. 474, then take testimony.

Mr. Perkins thanked Ms. Freeman for her participation and hard work she put into A.B. 652 and said her expertise in the healthcare area had been invaluable.

Vice Chair Evans said it was essential to acknowledge and thank Attorney General Frankie Sue Del Papa for her hard work and initiative in being one of the Attorneys General who pursued the funds from the tobacco industry. She said it was nice to see the states achieve what the Federal Government could not. A.B. 474 came about as a result of a discussion with Ms. Del Papa not long after the tobacco settlement was announced the previous Fall. Vice Chair Evans said she expressed her concern to Ms. Del Papa that there would be a "gold rush" for the tobacco funds. She wanted to make sure a portion of those funds were preserved in perpetuity for future generations. There was no better way to achieve that than a trust fund.

Vice Chair Evans said A.B. 474 was simple in its structure. Section 2 explained the duties of the State Treasurer in establishing and administering the trust fund and specified that only interest income would be expended on 10 percent per year of Nevada’s tobacco settlement. Subsection 4 of Section 2 specified where the funds would be directed. Simply put, the funds would be used for the promotion of public health and programs for the prevention of disease and illness, which was the "key thrust" of public health. Subsection 4 called for research on issues related to public health, which was quite broad, and provided for direct healthcare services for children and the elderly. There were no empirical arguments for selecting children and the elderly, but in speaking with many people on the subject, the consensus was that the greatest need for services fell to children and the elderly.

Vice Chair Evans said Section 4 designated the 11 members of the governing board. The board was broad-based and included those who had knowledge and experience of healthcare issues in Nevada. Section 5 directed the board to develop policies and practices for distribution of the interest income, as well as the procedure for a request for proposal process. Finally, section 5 required the board to make an annual report on its activities.

Frankie Sue Del Papa introduced herself as the State Attorney General. She congratulated the sponsors of A.B. 652 and A.B. 474. She was very supportive of A.B. 474 in particular. She said Vice Chair Evans was correct that it was imperative to establish a trust fund. She preferred to approach the discussion about public health and the tobacco settlement in terms of percentages, rather than dollar amounts.

Ms. Del Papa referred to a document submitted to the committee several weeks prior, which very comprehensively outlined the tobacco litigation and settlement process, and included the consent decree. Nevada’s consent decree specified, in terms of the intent and recommendation, the proceeds be used for public health purposes only. The definition stated "including, but not limited to, state and local governmental entity health service programs, tobacco related prevention and education programs, medical research, tobacco and substance abuse related health and education programs." There was a lot of leeway within the decree.

Ms. Del Papa explained, as she had stated in discussions with legislators, individually and before committees, there were certain federal challenges remaining. With reference to the actual allocation of funds, a proposal had been drafted based on the best practices mode of the Center for Disease Control (CDC). The proposal included an element to be considered after prior claims for medical care for tobacco-related illness, which would consider rural health needs in addition to other state and local health needs. The proposal included prevention programs, such as county prevention programs, state and targeted community-based programs, school programs, enforcement, partnership grants, a multi-media campaign, cessation programs, and research and evaluation on local incentive programs.

Ms. Del Papa said she received a briefing the previous week in Washington, D.C., in reference to the tobacco proceeds, and reiterated her caution of spending any settlement money until it was actually received. In her briefing she had been informed that due to the "gray market," there was a possibility the states’ share of the tobacco proceeds would be reduced by 10 to 20 percent. The sale of cigarettes on the gray market may actually reduce the number of reported cigarettes sold and reduce the amount received in the tobacco settlement. It was important to consider legislation such as Senate Bill 244, which dealt with gray market cigarettes, reducing the chance of cigarettes being sold on the gray market. Even if the statutes were in place, as they should be, due to preemption, the issue would have to be followed at the federal level.

Ms. Del Papa said she would discuss the issue of state-specific finality. The master settlement agreement did not allow any funds to be distributed until 80 percent of states achieved state-specific finality or June 2000. Currently 40 states had achieved state-specific finality, including Nevada. However, those 40 states only represent 50 percent of the allocation proceeds because New York, California, New Jersey, and Pennsylvania were among the states in the process of achieving state-specific finality. The proceeds could not be counted on, with any certainty, until June 2000.

The good news was an independent auditor had been selected at the federal level. That was a major step forward in getting the system established so when the state-specific finality was achieved, the money could be distributed to the states. There were also separate IRS issues that had come up.

Ms. Del Papa said, therefore, she would continue to advocate for the positions the state had taken in the proposal. She thought education should be a strong component of the plan; however, throughout the litigation and settlement process, a commitment had been made to the public health community. She would like to see a more in-depth discussion of the healthcare needs raised by Mr. Perkins, Ms. Buckley, and Mr. Williams. She continued to urge caution until the challenges had been overcome. She thought Vice Chair Evans’ idea of a trust fund was excellent. She did not want to raise expectations that could not be followed through.

Mr. Goldwater said the Federal Government had recently settled a large case on gray market cigarette importation with RJR. He asked if Nevada had sufficient statutes and enforcement to prevent gray market sales. Ms. Del Papa said the state would be better prepared if S.B. 244 was passed. S.B. 244 made various changes relating to the sale of cigarettes.

Chairman Arberry asked for public testimony in support of A.B. 652 or A.B. 474.

Jan Gilbert said she represented the Progressive Leadership Alliance of Nevada, which was a broad-based 39-state organization. She was pleased to see both bills, which were supported by her organization. She said if the bills were passed, the state could finally change some of the statistics presented by Ms. Buckley. In the 16 years she had been a lobbyist, the statistics had not changed.

On a daily basis, working families faced decisions about whether to pay the doctor bill, the phone bill, or buy food. Nevada’s food banks were showing an enormous influx of people, and both bills would tremendously help working families.

Regarding the education portion of A.B. 652, Ms. Gilbert said she did not know how the state could, in good conscience, support spending 50 percent of the tobacco settlement on scholarships that would benefit mostly wealthy people. She was pleased to see it was only 25 percent. She had recently interviewed four women who had been in the state’s program to assist low-income single parents re-enter school. The women described how difficult it had been to stay in school and how they applied for every grant available. A.B. 652 would make an enormous impact on those women’s lives. Those women would never need to be on public assistance again because they would have an education and marketable skills.

In closing, Ms. Gilbert said she strongly supported A.B. 474 because it was incredibly smart of the state to set aside long-term savings for the health and safety of Nevada’s children and seniors.

Paul Gowins said he represented the Nevada Healthcare Reform Project, which was a coalition of approximately 540,000 Nevadans who were concerned about Nevada’s access to quality health care. As a board member of reform project, which was a non-partisan health advocacy group, he supported A.B. 652 and A.B. 474. Every dollar that could be spent on healthcare needs was one dollar better for the state because Nevada was one of the most unhealthy states in the country.

On a personal level, from his experience with having a disability, Mr. Gowins applauded Ms. Del Papa’s support of both bills and her actions in the past. However, he was very unhappy about Ms. Del Papa’s involvement in the L.C. and E.W. vs. Olmstead case because it required people with disabilities to be dictated institutional care. If there were more money for healthcare, Ms. Del Papa would not have to join those types of lawsuits. In closing, he said he strongly supported Vice Chair Evans’ trust fund.

Kaitlin Backlund said she would be presenting testimony on behalf of Dr. John Ellerton, Chair of the Clark County Anti-Tobacco Task Force. She said he was unable to be present and read his prepared testimony:

Elaine Lancaster, President of the Nevada State Education Association (NSEA), said she was a first grade teacher on a leave of absence. NSEA and its 20,000 members worked every day to ensure the children of Nevada had a promising future with a good job, successful relationships, and achievement based on solid skills. Reading, science, and mathematics were among the tools NSEA used to help students realize their hopes and dreams. Nevada’s teachers and other school employees knew the road to academic success was built on an attitude that school is important and hard work in school would have a lifetime benefit. Any discussion of scholarships must take place in the context of the quality of the program that leads to higher education. Consequently, NSEA was deeply disturbed by the anticipated drop in per pupil funding over the next biennium. Failing to provide an adequate academic environment in school would make attainment of a B average a less than meaningful accomplishment. NSEA called on the Governor, the legislature, and the public to work with NSEA to address the problem of decreased funding for Nevada’s schools.

Ms. Lancaster said the NSEA recognized the importance of using money from the tobacco settlement to encourage healthy attitudes, especially to keep young people from smoking. She commended Ms. Del Papa for her attention to the health and welfare of the children and citizens of Nevada. NSEA believed money should be allocated from the tobacco settlement in sufficient amounts to provide comprehensive programs to keep students from using tobacco. Programs should include cooperative projects with Nevada’s media community to promote the dangers of smoking, anti-smoking education projects targeted at parents in the home, and school-based prevention programs to address the social influences and risk factors associated with tobacco, alcohol, and other drug use.

Ms. Lancaster explained almost everyone had acknowledged scholarships were a good use of some of the tobacco settlement monies. However, for the scholarships to be effective, they must have a thorough and comprehensive program support structure that provided accountability for the settlement funds. NSEA believed college students should maintain at least a B average while receiving the scholarship. NSEA also believed the creation of any new commission to oversee the scholarships would be unnecessary. The program should be structured so as not to require the use of funds beyond the settlement money. For that reason, NSEA urged the legislature to balance the amount available to each student against the ongoing commitment to all students. It would be unethical and unfair to promise what could not be delivered. NSEA believed further analysis and study was needed to determine the underlying causes that kept Nevada’s students from seeking post-secondary education. While lack of financial capability may be the cause in some cases, there were others that needed to be addressed, including the availability of service jobs, lack of parental encouragement, and alignment of the future job market with current higher education programs. Because the overall cost of a college education exceeded that of the scholarships, NSEA proposed a scholarship center that would help Nevada students secure funding in addition to any scholarship funded by the tobacco money. NSEA and its school counselor members across the state were ready to assist with the development of an Internet-based service that would connect students with appropriate scholarship and educational opportunities and encouraged interested businesses and organizations to join in the partnership.

Ms. Lancaster said Nevada faced the continued prospect of the shortage of teachers until at least 2010. NSEA proposed a scholarship bonus for students preparing to enter the teaching profession at no less than 125 percent of any scholarship determined by the legislature. Recipients would be required to complete 2 years of teaching in a Nevada school to be eligible for the additional funding. The future of Nevada rested on the ability to rise above partisanship and to give the children the best.

Jim Richardson, representing the Nevada Faculty Alliance (NFA), said he greatly appreciated the commitments made by Nevada’s Democratic leadership and Governor Guinn to scholarships. He thought that was an excellent use of tobacco settlement funds and would contribute to the better health of Nevadans. It had been well-documented that the higher the level of education, the less use of tobacco one saw. He then read a prepared statement:

Vice Chair Evans asked Mr. Richardson for information on Nevada’s four year institutions’ attrition rates. Mr. Richardson said Shannon Ellis, University of Nevada, Reno Vice President for Student Services, was better able to answer the question. Dr. Ellis said Nevada’s attrition rate for freshmen was higher than the national average. At least 70 percent of the entering class moved to the next grade, but it had been as high as 75 percent. The retention rate decreased in the sophomore and junior years, for a wide variety of reasons. A student who entered a Nevada university as a freshman had a 40 to 50 percent chance of graduating from the same institution in 5 to 6 years, which was slightly below the national average.

Vice Chair Evans said it was a struggle to find the exact formula to make the scholarship program workable. There was no intention of making it difficult for students to obtain scholarships or unduly burden institutions. However, students were expected to take the scholarships seriously. Clearly, the program needed flexibility. There was no precise income threshold to determine need and the determination of need would largely be the responsibility of financial aid offices. She hoped the greatest attention and the greatest amount of funds would be directed to those with the greatest need. But, there were also instances where a child with wealthy parents did not receive financial assistance from his or her parents, and that child needed scholarship assistance as well.

Vice Chair Evans recognized it took longer to finish college than in the past, but the program did not want to encourage students to attend college any longer than necessary to graduate. The struggle was to design a program that was not unduly complicated and rigid, but there needed to be assurance that the people who needed help would get it.

Mr. Richardson said Georgia had no semester limitation for its scholarships; rather, there was a credit hour limitation. That seemed to work well because it focused on the reality of people taking longer than 4 years to graduate. In addition, A.B. 652 required the Interim Finance Committee (IFC) to approve payments. He hoped there could be something more flexible worked out, such as a requirement for reports to the IFC and the legislature, and a direct interaction between the program and the State Treasurer’s office.

Vice Chair Evans said not to expect the legislature to distribute money without accountability, which was its responsibility.

Mr. Goldwater asked how large Georgia’s HOPE scholarship program was. Mr. Richardson replied 136,752 students benefited from the program and $173.3 million had been spent in 1997. One of HOPE’s brochures claimed over $1 billion had been distributed among 305,000 students. Mr. Goldwater said it was difficult to use the HOPE program as a comparison, though it was nice to draw from its experience. The HOPE program was a much larger program than the program proposed by Governor Guinn. He did not feel comfortable with the administrative arguments against eligibility restrictions. The money could not be given out without accountability, which unfortunately, meant administration costs.

Mr. Goldwater said Mr. Richardson had questioned the flexibility of Section 5, Paragraph 2, noting the use of Pell grants as a parameter for eligibility. He asked if the language would prohibit the flexibility of the Board of Regents to establish criteria for eligibility. Mr. Richardson said the language could be interpreted in many ways. If the language required new criteria for eligibility, other than the ones already established by financial aid officers, that could be a problem.

Mr. Goldwater asked Mr. Richardson if he interpreted the language as flexible enough. Mr. Richardson replied if Vice Chair Evans thought the language was flexible enough, he did as well.

Dr. Ellis said University of Nevada, Reno President Joe Crowley asked her to inform the committee he was not present because he was leading a memorial service for a deceased faculty member. As Vice President for Student Services, she worked with all areas related to student life on campus, including enrollment management, which consisted of recruitment, admission, and financial aid. She planned to give the committee information and counsel on the scholarship program.

Dr. Ellis said there were many excellent components of A.B. 652. Three pieces of information she thought would be useful to the committee in its deliberation were 1) procedures for awarding and packaging financial aid; 2) patterns of student academic success and career choices; and 3) factors that determined a student’s chance of academic success. She then outlined her prepared statement (Exhibit D).

Dr. Ellis explained any student wanting to receive financial aid must file a Free Application for Federal Student Aid (FAFSA). The criteria considered were the family’s income, assets, size of household, and the number of family members in college. After the information was reviewed, the student was given an Expected Family Contribution (EFC). On the university level, packaging was done with any scholarships for which the student was eligible, based on the EFC. That was done to reduce the need for federal and state dollars and helped reduce the number of loans the student received in the package.

Regarding patterns of student academic and career choices, Dr. Ellis said Nevada’s universities were at the nationwide rates. On average, Nevada students change their major three times and nearly every student changed their major at least once. It was not uncommon for students to enter the university with an undeclared major. She recommended as much flexibility in those areas as possible because students changed their minds.

Dr. Ellis said it was important to review factors that contributed to academic success. As a taxpayer, she felt time to degree and graduation was important because the longer a student took to complete school, the longer tax dollars paid for the student to be at the institution. The single strongest predictor of degree completion was a student’s high school grade point average and SAT math and verbal scores. The single largest negative effect on retention was associated with working full-time while in school, followed by working off campus.

Vice Chair Evans thanked Dr. Ellis for her presentation and asked if it was possible to calculate the amount of unmet need, after all scholarships had been awarded. She said she would appreciate it if those figures were provided at some point in the near future. She said the program’s purpose was to make more students want to attend college. However, she hoped the executive branch and the legislative branch would do their part in funding those additional students at community colleges and institutions, because right now they were not. Full Time Equivalency (FTE) was increasing at Nevada’s institutions so there had to be a commitment from state government.

Mr. Perkins said he understood from Dr. Ellis’ previous testimony 25 to 30 percent of college students did not complete their education. The scholarship plan was different from the Governor’s initial plan, but it was the Governor who first spoke of providing college scholarships for students with B averages. A.B. 652 had different details than the Governor’s plan. One difference was the repayment plan for those students who dropped out of school. Thirty percent of $7 to $10 million for a scholarship plan was a lot of money. The accountability and personal responsibility aspects of the plan corresponded with the Governor’s vision.

Dr. Ellis said of the students in Nevada’s universities who entered college as freshmen in 1997 with a B average, 43 percent had a B average at the end of their freshman year, and for community colleges in Nevada, 50 percent maintained their B average.

Robert Hadfield, Executive Director of the Association of Counties, thanked the sponsors of A.B. 652 and the legislators who recognized the vital role counties played in providing indigent healthcare, especially those affected by tobacco-related illnesses. He was greatly encouraged by the provisions of the bill that would allow counties and agencies within counties to receive critically needed funds to help assist education programs and to offset those costs. He expressed appreciation for the recognition of counties in A.B. 474. It was encouraging that in times when counties faced critical problems in meeting needs, particularly with the Medicaid match program and indigent healthcare, the legislature recognized the role of the county.

Mary Walker, representing Carson City, Douglas, and Lyon Counties, said the counties leant support for funding of long-term care. She was a technical committee member on the S.B. 253 committee, which requested local governments come to the committee and discuss their problems. The number one problem discussed was long-term healthcare. In many rural counties, the assessed valuation was declining due to centrally assessed properties and mining problems. For example, in FY 1997, Mineral County’s assessed valuation decreased by 28 percent, while its long-term care costs increased by 79 percent. In White Pine County, in FY 1997, the assessed valuation decreased by 6 percent, while the long-term care costs increased by 24 percent. Even in small communities where assessed valuation was increasing, long-term care costs were increasing at higher rates than assessed valuation. The long-term care match from the counties was a failing system. If smaller counties could not make the match, then the entire $15 million in federal funding would be lost.

Scott Watts, Nevada’s President of the National Council of Senior Citizens, said he was present in support of both A.B. 652 and A.B. 474. He said there was an enormous influx of senior citizens into the estate, especially in Clark County and the bills would be very helpful to the healthcare of Nevada’s seniors.

Tim Fries, representing the Nevada Nurses Association, said he had numerous points he had planned to make, but they had already been made. He said he supported A.B. 652.

Bobbie Gang, on behalf of the Nevada Women’s Lobby and the Nevada Chapter of the National Association of Social Workers, said she supported both bills. She said the Nevada Women’s Lobby had issued a press release shortly after the State of the State address, which was a very positive release that commented on the millenium scholarships and hoped more money from the tobacco settlement could be used for healthcare services. The needs for healthcare were numerous and many were listed in the Nevada Women’s Agenda. She submitted (Exhibit E), which listed areas that could be served with tobacco settlement funds.

Kyle Davis introduced himself as a student at the University of Nevada, Reno and an intern for Assemblyman Bernie Anderson. He felt it was very important any scholarships from the tobacco settlement were based on need. That would give the most opportunity to the most students. It was most important to have more students in college, not just fund the universities. He thought the 12 credit minimum was a good number and should definitely not be any higher because it cost more than just tuition and fees to attend college. Further, not everyone was able to be a full-time student due to family and work commitments.

Ms. Giunchigliani said she thought the 12 credit minimum was reasonable as well. She thought insurance companies viewed full-time as 12 credits or more.

With no further questions of comments on A.B. 652 or A.B. 474, Chairman Arberry declared the hearings on both bills closed.

Assemblyman Joe Dini, Assembly District 38, said A.B. 237 had been heard in the Natural Resources Committee and the object of the bill was to put money into a program to start conservation of water in Nevada. The bill brought irrigation districts and water conservation districts into the conservation mode. The state water plan stated conservation was key to the preservation of the state’s integrity in the long run. The bill used an existing method of financing, which was the state board of water financing. The board was created in 1991 and issued bonds and grants to cities and domestic water supply companies. The board could develop regulations to administer the plan. Senator Reid had stated the previous month it was time for the State of Nevada to make water conservation a priority.

Mr. Dini said A.B. 237 also provided an increase in the State Water Board’s statewide bonding authority from $40 million to $50 million. There was approximately $7 million currently left in the fund for the cities and the small water districts the board handled. The additional $10 million would be enough money to start demonstration projects for irrigation districts. The only way to save Walker Lake was to conserve water on the Walker River. If irrigation systems, canals, and diversions in the river structure were improved, more water would end up in Walker Lake.

Mr. Dini introduced a mock-up of an amendment proposed by Fred Welden (Exhibit F) and Colorado’s plan for demonstration grants (Exhibit G). There were other states making water conservation efforts, such as Montana and Texas. A.B. 237 mirrored what was done and had been successful in other states. Without adding $10 million in bonds, he did not think the board would have enough to fund scheduled projects. Mr. Dini then read the changes in the mock-up of the proposed amendment (Exhibit F). He reiterated A.B. 237 was a good plan to get the state started in its water conservation efforts. The bill remained true to the state water plan and the desire of many Nevada’s citizens to make the best use of water. In the farming industry, the use of sprinklers and updated systems could save as much as 50 percent of water usage. In his district, onion and garlic growers now used sprinkler systems and pumped the water instead of using river water. There were a lot of things that would help bring Nevada into today’s age of water conservation.

Naomi Duerr, State Water Planner, said she was present in support of A.B. 237. She reiterated Mr. Dini’s statement that water conservation was important to the State of Nevada and was highlighted as a key element of the state water plan. The current program had successfully awarded over $20 million to communities in Nevada and had been extremely successful. The rural communities, in particular, had been the beneficiaries of the program. She had met with the Board for Financing Water Projects, which administered the program, and found the board was very enthusiastic about the program and was willing to take on the responsibilities involved, including making rules, reviewing additional grant applications, and working with the state’s agricultural community.

Joe Guild, President Elect of the Nevada Cattlemen’s Association, expressed his support for A.B. 237. Many members of the association were also members of irrigation districts, water districts, and water conservancy districts. He thought the bill would be beneficial to members of the association and the state as a whole.

With no further questions or comments, Chairman Arberry declared the hearing on A.B. 237 closed.

Assemblywoman Chris Giunchigliani, Assembly District 9, said she would make brief introductory remarks, then people who contracted with the interim committee that studied the issue of school construction and facility needs would present summaries. A.B. 597 was a skeleton piece of legislation that was supposed to take into account about 8 of the 10 recommendations from the committee that studied school facility needs, school construction needs, modernization, and rehabilitation. "In skeleton form" meant many things were left out of the bill and there would be at least one amendment for the committee to consider because one of the main issues was out of the bill, causing the money to come forward.

Ms. Giunchigliani said the State Planning Commission for New Construction, Design, Maintenance, and Repair of School Facilities had voted to recommend to the committee that all school districts be allowed access to new revenues that were created in A.B. 353 of the 1997 Legislative Session—the 1 percent room tax, and the 75 cent per real property transfer tax. That was supposed to have been in the bill, but the drafters of the bill had not realized there was no format to include it. There had also been a rollover bond issue. The bill was to allow any ad valorem revenues generated in excess of debt service and a required reserve balance, to be used for capital projects if it was contained within the rollover bond question. The bill was to create a statewide loan and grant match fund to assist districts in funding capital improvements. Districts would be required to generate a portion of the project cost from local revenues, which still allowed for voter approval and oversight. Funding would be allocated based on need and would come from state bonds, distributive school account reversions, land swap fees, and a real property transfer tax. It assumed creation of a distributive school account stabilization fund, which would receive reversions from the Distributive School Account (DSA). Interest earned on that fund would then be used to fund the statewide loan and grant match program. That language was missing from the bill and there would be an amendment to amend and re-refer so that could be added.

Further, Ms. Giunchigliani explained, A.B. 597 eliminated the June 30, 2008 statutory termination date of a rollover bond question because some districts may not be able to take advantage of the flexibility that was provided until after 2000, 2002, or later. In those districts, they were able to plan for a 10-year horizon, which was a significant benefit to them, but the commission felt the rollover bond question should be allowed to be applied to the other districts.

An additional request voted on by the commission was to amend the statutes to prohibit municipalities from requiring school districts to make off-site improvements beyond 100 feet from the school building. Municipalities and utilities were required to review plans for school construction within 60 days of plan submission. There had been a lot of testimony from developers and contractors who were frustrated with the length of time it took to review plans. The commission had originally discussed a shorter time period, but decided 60 days was reasonable. She said in the 1993 Legislative Session there had been agreement from a few local entities to do an expedited process for school building plans, so that was a possibility. Some local governments may have been caught off guard and would want to note their concern in the day’s hearing.

Ms. Giunchigliani submitted financial findings of the State of Nevada School Commission (Exhibit H). Regarding land grant schools, over the last 2 years, there had been discussion of two properties that the state had never paid for. One location was the Sahara property where the Bradley building was located and the other was located on West Charleston. If the committee wanted to take that into consideration, those monies could be captured from the state since it was still owed. Those monies could go into the DSA as constitutionally mandated and then be diverted into the capital school fund construction account as startup money.

Referring to The Education, Labor and Job Training Committee Update (Exhibit I), Ms. Giunchigliani noted Congress was also looking at the issue. If Nevada had a statewide capital school construction fund established, the state could capture dollars if any legislation was passed through Congress, and allocate those funds accordingly, based on need. Under A.B. 353 of the 1997 Legislative Session, the school commission was charged with hiring a contractor and had originally asked for $1.5 million to properly conduct a true assessment of all schools in the state, but were only allocated $300,000. She felt the commission had a good report, but it could have been far bolder and more accurate if there had been full funding to do the "on sites" rather than having to do them the way they did. Even so, the computer generated report available at the State Department of Education, was of value and could be updated. If anyone wanted a copy of the Intelligent Systems Engineering Services (ISES) report, she would provide it.

Ms. Giunchigliani explained the overall dilemma was that in the executive summary, the detailed project total facility condition analysis for all buildings in the state indicated a capital need of $77 million, deferred maintenance would cost $282 million, plant program adaptation would cost $74 million, and routine maintenance would cost $2 million, for a total facility replacement cost need of $3,453,884,000. She recognized the state could not totally participate to that extent, but she thought it was time for a partnership, as was done with the state’s public higher education institutions. A bill to explore amending the state constitution by a vote of the people to add more to the state bond indebtedness had been voted out of the Assembly Committee on Constitutional Amendments. That was another potential funding source and the money would be allocated for school construction. The committee amended that and the bill’s proponents were now waiting for that to come forward.

Ms. Giunchigliani said the main issue was that children needed a quality environment in which to learn. The working conditions and the students learning conditions were one in the same. If there was a leaky roof, bad water, poor lighting, or inadequate seating, it all contributed to the learning environment. The Legislative Building had been remodeled because people were not happy with the size of offices, the layout of the building, and the poor wiring. If legislators could do that for themselves, the least they could do was make sure they provided adequate and appropriate buildings and facilities for Nevada’s schools. She recognized that was still a local issue and asked the committee to consider entering into some form of a loan grant project to help districts that did all they could but could still not generate enough revenue. She thought the state had an obligation to make sure proper facilities were available for students.

Mr. Goldwater said the rollover issue had been passed, as had bond issues by the legislature, which clearly delineated the need for rehabilitation of schools. But, the legislature could not seem to communicate that to the Clark County School Board. He asked if A.B. 597 would emphatically state how much money, as a percentage, was needed for rehabilitation and rebuilding of older schools. Ms. Giunchigliani said she anticipated the bill would contain language asking districts to not just deal with rehabilitating schools. Part of the testimony from the private sector indicated after a facility hit about 50 percent of its usage and money had to be constantly spent to fix roofs, air conditioning, and heating, the building should no longer be rehabilitated. At that point the building should be rebuilt. Assemblyman Beers, Assemblywoman Cegavske, Assemblyman Williams, Senator Porter, Senator Wiener, and Senator Rawson were trying to work with the local school district, but the problem was not unique to Clark County. There were buildings that should be condemned and money should no longer be thrown away on rehabilitation and modernization. She anticipated and hoped A.B. 597 would include and send a very clear message to not "throw good money after bad" at the problem. There was an inequity built in. Older neighborhoods had some of the oldest facilities in the state. The restrooms at some schools were still not even handicapped accessible. Every day during lunch the sink at her school backed up and caused flooding of 1 to 2 inches on the floor, which was clearly a health hazard. Because there was only one drain, if the sink was emptied during one of the three lunch periods, the lunchroom was flooded. As another example, her school’s air conditioner had gone through six air compressors the previous year. Maintenance funds were being wasted and at some point school boards had to stop the mentality of rehabilitating instead of rebuilding.

Mr. Goldwater agreed older schools were often in deplorable condition, which was wrong. He appreciated Ms. Giunchigliani urging school districts to act responsibly, but there was $100 million in rollover money, $25 million of which was going to rehabilitation of new schools.

Mary Peterson, Superintendent of Public Instruction, introduced Lynda Harvey of Howarth and Associates. Ms. Peterson reiterated A.B. 353 of the 1997 Legislative Session created the Statewide Planning Commission for New Construction, Design, Maintenance, and Repair of School Facilities and charged the commission with two major tasks. The first was to conduct an assessment of existing school facilities in the state and the second was to design a set of recommendations for funding school construction. The commission contracted with Howarth and Associates for the second task. Ms. Harvey would present highlights of the School Facility Funding Report by Howarth and Associates (Exhibit J).

Ms. Harvey said the report was made based upon the need feasibility study conducted by ISES. The ISES study estimated a total of $437 million would be needed to improve and equip existing schools, $3.5 billion would be needed for new school construction, and about $620 million would be needed for capital replacement and repair over the next 10 years. The ISES report was about $260 million higher than the school districts’ estimate.

Mr. Harvey explained Howarth and Associates’ initial recommendation was for the new funding mechanism to be provided in three major areas: existing facility needs as identified by the districts, new construction, and future capital replacement and repair. Historically, the school districts relied mainly on general obligation bonds or capital projects taxes to pay for the large capital projects. Smaller projects were generally paid for by the motor vehicle privilege tax, General Fund, and in some districts, by the residential construction tax. The capital projects tax required voter approval and could be levied up to 75 cents. The tax could be used to fund capital projects on a "pay as you go" basis or leveraged to secure a medium-term bond. In areas where the tax rate was at or near the $3.64 limit, the tax was not a feasible option.

Ms. Harvey said in the 1997 Legislative Session, two new revenues that could be used for schools were authorized. The quarter-cent sales tax, which required the county commission’s approval, could not be used for schools in Clark County or Washoe County. The other revenue designated for schools was the residential construction tax, which had been increased to $1,600, and also required the county commission's approval and could be levied in any amount up to the maximum. A.B. 353 was also approved in the 1997 Legislative Session and provided flexibility in bond questions and created new revenues for the Clark County School District. There was a real property transfer tax increase as well as a room tax increase.

Howarth and Associates’ report (Exhibit J) made recommendations for new revenue sources and increases to current sources. It recommended a 1 percent room tax increase in all counties for schools. A.B. 597 incorporated that increase. The report also recommended a real property transfer tax, which was also incorporated in A.B. 597. It recommended the distributive school account increase its annual allocation to each district in the amount of $50,000 per school facility for maintenance and repair. That was not included in A.B. 597. The funding for maintenance of existing facilities was a critical issue for schools. If future revenues were leveraged to generate the funding of new facilities, there would be a possible shortfall in the revenues available for maintenance and repair of existing facilities.

A.B. 597, Ms. Harvey concluded, incorporated some of the recommendations in the report, such as the tax increases and the state grant program. The recommendations were developed as a possible statewide solution but it would take a combination of diverse funding sources to meet all the school districts’ needs. Individual recommendations may or may not provide a benefit to certain school districts. A.B. 597 was a good beginning, but without state participation it was unlikely to provide funding solutions to districts with the greatest need.

Ms. Peterson added A.B. 597 took positive steps in addressing school construction needs in Nevada. She thought a mix of solutions would be necessary, as Ms. Harvey said. A.B. 597 was a positive step, but the most needy and rural districts still had other needs as well. If the recommendation to create a capital financing fund at the state level was passed, she hoped staffing needs to administer the fund would also be considered.

Henry Etchemendy, representing the Nevada Association of School Boards, (NASB) submitted his written statement on A.B. 597 (Exhibit K), which specifically concerned six districts impacted by the $3.64 tax cap and/or by the limited assessed valuation due to tax exempt lands. The NASB worked with the state panel on school construction, a bill was drafted modeled after the current water and sewer grant program. The language in that bill incorporated that type of concept to help the districts that could not do anything else. The bill also included criteria for eligibility, priorities, and setting. He concluded by noting there were monies potentially available to districts if approved by the board of county commissioners, such as a residential construction tax in certain counties and the quarter-cent sales tax in the smaller counties. Page 3 of Exhibit K listed how much each district might be able to raise with those funds and funds from the real property transfer tax and the room tax in A.B. 597. Except in one or two cases, that did not raise enough money to do very much for the needs of the districts.

Paul Johnson introduced himself as the Finance Officer for the White Pine County School District. He supported A.B. 597 and thought it could be a great mechanism for K-12 school facilities. However, he was concerned the bill did not address many of immediate facility needs in many rural counties. He wished there was clarifying language that would consider a granting mechanism, as he thought there would be, for school facilities that demonstrated an inability to generate necessary dollars. There was also a need for a clear priority for students that were "unhoused" or communities that did not have a school. In addition, language needed to be added that would tap into the state’s bonding capacity, much like in A.B. 274. He submitted a highlight of A.B. 274 (Exhibit L).

Debbie Cahill of the Nevada State Education Association expressed support for A.B. 597. In the last several legislative sessions, there had been a proliferation of bills from individual school districts seeking solutions to the problem with meeting the need for capital construction. If the problem was not addressed at the statewide level, there would be serious inequities from county to county.

Randy Robison of Lincoln County School District (LCSD) said consequent to the understanding that the ISES corporation was unable to personally visit Lincoln County schools, the county was advised to and subsequently contracted with the Martin & Peltyn, Inc. engineering firm to perform a limited facilities survey of a few of the county’s most critical schools. The same firm had been hired in 1983 to review the same buildings and offered some remedial recommendation, which were acted upon, thereby adding life to the buildings. After the firm’s most recent visit, it made recommendations LCSD had hoped it would not make. Mr. Robison said the Martin & Peltyn, Inc. report was included in Lincoln County’s Physical Facilities Report (Exhibit M). The firm concluded, based on visual observations, the structural capacity of the auditorium and the gymnasium had been compromised and posed a potential life safety hazard to its occupants. The firm recommended LCSD proceed with a comprehensive investigation of the existing structures including destructive testing. With that information, a meaningful repair and retrofit program could be undertaken. However, the firm concluded, the repair and retrofit could easily exceed the cost of a replacement facility.

Vaughn Higbee, Superintendent of Schools for Lincoln County, said when the district contracted with the firm, the county had been interested in seeing exactly how bad the older facilities were. In doing so, LCSD had been informed three of the district’s four buildings were uninhabitable by students. Page 2 of Exhibit M showed the age of LCSD’s schools. Pioche Elementary School was 94 years old. Caliente Elementary School was 86 years old and was in the process of replacing the classrooms in a series of building projects. The unsoundness of the school did not allow LCSD to keep students in the building. Panaca Elementary School was 52 years old. Lincoln County High School was 48 years old, but did not give a good picture of the age of the school because an auditorium about 20 yards east of the high school was 70 years old, as was the school’s gymnasium.

Mr. Higbee said Lincoln County was basically a ward of the state, as 86 percent of its funding came from the state, which was greatly appreciated. The county’s assessed evaluation was $80,156,172. The county could not afford to build new buildings. LCSD had buildings that were not just unpleasant; the condition of the schools was deplorable and unsafe. The last thing he wanted to do was beg the committee for money, but if something was not done about the three previously-mentioned schools, someone would be killed. Martin & Peltyn would not state it in writing, but had admitted if there was an earthquake between 3 and 4 on the Richter scale, the walls would fall to the outside and the roof would cave in and crush someone.

Mr. Higbee explained Lincoln County received grants from the state and small grants from the Federal Government, but those were "stop gap measures, at best." LCSD needed a revenue source to replace the old buildings because the county could not do it on its own. The county had done everything it could do. It had used maintenance crews and honor camps, solicited private funding from one of the county’s few businesses, and had received United States Department of Agriculture (USDA) and Community Development Block Grants. The county needed help right away or someone would be killed. Mr. Higbee said he would be the person responsible for that and he had no other place to turn than the state. He apologized for making such an emotional case and assured the committee he had not said anything that was untrue.

Mr. Goldwater asked Mr. Higbee for an overview of Lincoln County’s budget, specifically where the ad valorem revenues were allocated. He had requested the same information from White Pine County and had still not received it. Mr. Higbee said that was shown on Page 3 of Exhibit M, listed under "other." Mr. Goldwater asked what the "other" category included. Mr. Higbee replied it was used for things such as building construction.

Mr. Robison clarified Page 3 of Exhibit M was the Lincoln County School District’s budget, not the budget for all of Lincoln County. Mr. Goldwater said he wanted to know what percentage of the ad valorem tax was used for school construction. Mr. Higbee said he did not know, but would provide the information later. He said Lincoln County really did not have any ad valorem taxes, as 98.6 percent of the county belonged to either a federal or state agency. Mr. Goldwater said he was aware of that, but had still not received the answer to his question.

Warren Kirch introduced himself as a parent of three students in White Pine County schools. He said he would take any building previously discussed, as 55 children in Pleasant Valley had no school at all and had to be schooled in Utah.

Jane Moyle, representing the Nevada Rural Alliance, said the alliance supported A.B. 597 and any other legislation for the construction of schools. The increase in room tax and the real property transfer tax would do little in rural counties to raise money necessary to meet the needs. One million dollars in room sales would generate $16,000 in tax revenues and one million dollars in transfer taxes would generate $12,000. Those taxes, and any other taxes that would generate money for school construction, were greatly appreciated, but A.B. 597 fell short of meeting school construction needs.

Maddy Shipman, Assistant District Attorney for Washoe County, said the Washoe County Commission reviewed A.B. 597 the previous week and voted to oppose the bill. The county was concerned about imposing a tax when revenues would go to a state fund. Usually the committee passed those along to the local government when it was imposed for the counties’ own purposes. Washoe county was also concerned because the bill did not specify who would be required to build all infrastructures necessary for schools. The bill said no conditions could be imposed, so the intent needed to be clarified. The Washoe County School District was involved in Washoe County regional planning efforts and generally tried to conform the placement of schools where there was existing infrastructure. The Washoe County School District was exempt from the impact fee structure in Washoe County and was exempt from assessment districts. If there was a road or a sidewalk necessary for the safety of children in order to get them to or from a school, there would obviously be a requirement for those to be provided as part of the construction project.

Ms. Shipman said she had spoken with Steve Williams of the Washoe County School District and though he had not authorized her to speak on his behalf, her understanding was all necessary costs were included as part of a new or remodeled school’s budget. She added Mr. Williams had not authorized her to say Washoe County had taken any position on A.B. 597.

Rennie Ashleman, speaking on behalf of Clark County, said there was no coordinated planning between the school districts and the other zoning and planning agencies to the degree the bill would require. Roads were planned on a long-term basis, not just because the school district announced it would build a school. If the developers were taxed for what the school district did not pay for, the developers would defeat that in court, as Nevada and federal law had proven. The bill would require Clark County taxpayers to pay the burden. When he previously represented the homebuilders, he agreed with the transfer tax to try to pay for what they had been told budgeted items were for the school district, including their share of the improvements. That was not to say there was not some justice to what he heard the proponents say privately, which was that the allocation between the developers and the school district was not correct. He would be happy to reexamine that issue to determine if each entity was being charged the proper amount for the burden it created. A regional planning coalition had been developed, which he thought would accomplish a lot. He welcomed school districts’ participation in the coalition.

Ron Lynn, speaking on behalf on Clark County, said he would address Section 4, Subsection 3. Line 1a required the State Public Works Board to review the plans, designs, and specifications not later than 60 days after receipt from the school district, which he thought was probably appropriate. The board had the ability to charge for and hire engineers and regulate new schools, additions, and remodels. However, in Subsection 3, that was not how it was set up. The original language that still existed required the school district to submit a copy of its final plans, designs, and specifications for any project to which that section applied to the building and planning department of the appropriate city or county before completion of the project. That was a valuable tool and made sure hazardous or incompatible facilities were not placed in proximity to schools. But there was no point in plan-checking something if it was submitted prior to completion. There was no inspection element and no fees to pay for the plan-checking. The building could be complete and occupied prior to the end of the plans checking and therefore, any irregularities or violations would be incorporated. Then the school district and the local entity would be on constructive notice of the violations.

Mr. Ashleman said he had been informed the school district did not want the county inspecting them or dealing with their plans, so he thought there must be a typo in the bill or it was a skeleton bill error. "We are proposing legislation that if they want us to do it we will enter it locally and work with them, but we would do that with a more workable scheme than we see here."

Betsy Fretwell, representing the City of Henderson, said she echoed the concerns raised by Mr. Lynn and Mr. Ashleman. She agreed with Mr. Ashleman that the language contained in Section 4 was in the wrong place. She thought the intent was to get the plans out in 60 days, not rotate the responsibility for the plans. She was also concerned about how Section 11 would impact the assessment districts and noted she was willing to work with the sponsor of the legislation to get that resolved.

Ms. Giunchigliani asked what board had voted to oppose the bill. Ms. Shipman replied the board of Washoe County Commissioners voted to oppose it. Ms. Giunchigliani asked if the board had voted to oppose the entire bill. Ms. Shipman said the board reviewed a lot of legislation in a very short period of time and had a general description of the bill. Ms. Giunchigliani asked Ms. Shipman to relay to the board it had made an irresponsible vote, in her opinion. She said she understood if the board disagreed with sections of the bill that would directly impact Washoe County, but the majority of the bill was for statewide needs for schools. Further, she took offense to the board’s vote because no one on the board had spoken with her about the bill. In addition, she said the portion of the bill with which Mr. Ashleman disagreed was probably in the wrong area of the bill, but it was not inadvertently put in the bill. It had been voted on by a public body charged with studying the issue. In the entire year-and-a-half of meetings, she had not seen one person from any local governments in the state.

Vaughn Higbee, Superintendent of Schools for Lincoln County, said the county’s share of the ad valorem tax was $50,000. Mr. Goldwater asked for the county’s total ad valorem collection. Mr. Higbee said he did not presently have that information.

Eric Raecke, Manager of the State Public Works Board, said he thought Section 4 was aimed at utility departments because plans were held up for months and months in utility departments. Section 11 required the county to ensure the subdivision in which a school was built to provide the utilities. Many schools were not approved until they agreed to put in a waterline or road, and were often treated like developers for profit. A public school was not built to generate a profit. He thought part of the aim of the bill was to get the developer to pay for part of the cost of a building that would serve a public need.

Martin Johnson of Johnson Consulting Group said he had worked on financing plans for the vast majority of school districts in the state. The direst need for schools was in the area of maintaining, remodeling, and rehabilitating existing facilities. When voters see the need for new facilities, they were generally willing to support that and vote for a bond issue. As salaries and benefits comprised the vast majority of Lincoln County School Districts’ budget, there was not enough money for the district to maintain facilities. A.B. 597 would help, but there needed to be more funding to develop the state loan program.

Mr. Johnson said there were two existing models for wastewater and drinking water in revolving fund programs. He had worked on the wastewater program for many years and had helped implement the program and developed the financial model. There were good models to use that would allow school districts to receive money at very low interest rates, but the school districts needed help in developing a revenue source that would allow the loans to be repaid.

In response to Mr. Goldwater’s question regarding ad valorem taxes, Mr. Johnson said the tax rate in Lincoln County in the Caliente area was at $3.64. Of that $3.64, $0.22 went to pay the debt incurred from new facilities in the Lincoln County School District. A very small portion of the overall tax rate was used for facilities. Mr. Goldwater said he understood and suggested the county commission reexamine its priorities to determine whether any other portion of the ad valorem tax could be used for schools. The issue needed to be addressed by the Federal Government.

Mrs. Cegavske said over the years, the state had given money to school districts for rehabilitation and textbooks. When the money had been sent to school sites, the decision was not always to use the money as the legislature intended. The issue needed to be addressed and school districts needed to make rehabilitation, maintenance, and textbooks priorities.

Ms. Giunchigliani asked Chairman Arberry if the committee would accept a motion to amend and re-refer A.B. 597. The motion would be that the legislature establish a distributive school account stabilization fund to capture the reversions from the DSA and place them in the stabilization fund. The interest earned would be placed in the school fund for capital improvements. That was what had been requested in the drafting, but that had not been done in the skeleton form.

There being no further business before the committee, Chairman Arberry adjourned the meeting at 6:25 p.m.

RESPECTFULLY SUBMITTED:

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Christina Alfonso,

Committee Secretary

APPROVED BY:

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Assemblyman Morse Arberry Jr., Chairman