The Committee on Ways and Means was called to order at 10:35 a.m., on Wednesday, April 7, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Ms. Jan Evans, Vice Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph E. Dini, Jr.

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

COMMITTEE MEMBERS ABSENT:

Mr. David Goldwater (Excused)

Mr. Bob Price (Excused)

Ms. Chris Giunchigliani (Excused)

STAFF MEMBERS PRESENT:

The Chair recognized Russell Benzler, Assistant Chief, Bureau of Enforcement, Department of Motor Vehicles and Public Safety (DMV).
Mr. Benzler explained A.B. 271 was a department-requested bill to establish rights and responsibilities for parties involved in vehicle consignment sales, provisions for distribution of the proceeds of a consignment sale, and specified penalties for failure to comply with those provisions. He told committee members the bill would have no fiscal impact.

The Chair recognized Mr. Hettrick who asked if the bill had passed out of the Assembly Committee on Transportation with regard to policy and Mr. Benzler replied it had.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the Chair declared the hearing on
A.B. 271 closed.

The Chair recognized Ron Sparks, Executive Director, Western Interstate Commission for Higher Education (WICHE). Mr. Sparks explained A.B. 587 would allow WICHE to receive an advance on the amount of revenue it anticipated collecting from the repayment of student loans in order to make its December tuition payment to the regional office no later than
December 1.

The Chair recognized Don Hataway, Deputy Budget Administrator, Budget Division, Department of Administration. Mr. Hataway explained at the time the legislation was originally submitted to the bill drafting office, WICHE was seeking the authority to receive an advance from the General Fund. The proposed bill before committee members had been modified to limiting the advance to 25 percent of anticipated collections. Based on that limitation and experience of the last several years, the budget office prepared
Exhibit C, a cash flow projection analysis. He pointed out the year 2000 budget had an overall anticipated authority of $1.3 million. In addition to that appropriation and the projected balance forward, the budget office anticipated receiving $1 million in student fees, loan repayments, etc. up to December 1. Mr. Hataway explained December 1 was the deadline for each state participating in the WICHE program to pay its tuition to the main office for distribution to participating colleges. Under that scenario, the budget office had projected a payment requirement of approximately $1.1 million in the first year of the biennium and $1.3 in the second year of the biennium. Exhibit C demonstrated the 25 percent limitation would not cover the shortfall. He said the original purpose of the bill was to provide the WICHE program the ability to cover the shortfall.

Mr. Hataway was requesting a "do pass" with an amendment from the committee. The amendment would increase the 25 percent to 50 percent and provide necessary flexibility for payment of the shortfall. He explained the purpose of the legislation was to meet the one-time payment within the fiscal year.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the Chair declared the hearing on
A.B. 587 closed.

The Chair recognized Alex Haartz, Administrative Services Officer, Nevada State Health Division. Mr. Haartz appeared before committee members to testify on behalf of the Department of Human Resources. He explained
A.B. 238 would allow the health division and the school of medicine to establish a statewide collection system for birth defects, stillbirths, and other adverse birth-related conditions. The bill would also provide a vehicle to identify needed services for infants born with such conditions and also to allow for linkages of data from the collection system to vital records. He explained the bill would strictly limit access to the confidential information. Mr. Haartz told committee members A.B. 238 had no fiscal impact.

The Chair recognized Mrs. Cegavske who asked if the March of Dimes already performed that type of service and Mr. Haartz said they did not. Mrs. Cegavske asked for written confirmation regarding that information.

The Chair asked what would happen when the 3-year grant from the Centers for Disease Control and Prevention (U.S. Public Health service) expired. Mr. Haartz responded the mechanism would have to change to a passive collection system and there would no longer be a grant-funded staff person actively tracking cases for data. The Chair asked if the health division would return to the legislature for General Fund dollars to refurbish the program and Mr. Haartz responded he was not aware of any intent to do so.

The Chair recognized Vice Chair Evans who followed up on Mrs. Cegavske’s earlier question regarding possible program duplication by the March of Dimes. Vice Chair Evans explained while some data was available through the Bureau of Vital Statistics, the source was deficient. On the subject of funding, Vice Chair Evans explained that while the project involved a 3-year grant, it was her understanding there was the possibility of a 2-year extension. She confirmed to committee members there was no request nor expectation for any General Fund support.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the Chair declared the hearing on
A.B. 238 closed.

The Chair recognized Kathy Augustine, State Controller, who explained
A.B. 638 was a housekeeping measure to comply with generally accepted accounting practices. While the old accounting system at the Controller’s Office operated on a cash basis, the new Integrated Financial System (IFS) was designed to incorporate better business practices. The bill would enable the Controller’s Office to take advantage of those practices.

Ms. Augustine told committee members the Controller’s Office was not prohibited by law from recording receivables as revenue, however, receivables had not been justified as revenues before the implementation of the new IFS.

Section 1, Subsection 1 would authorize agencies to send out bills for services. The IFS would then allow those agencies to record their receivables for those services. Section 1, Subsection 2 was permissive language stating revenue may be available for current period expenditures, not to exceed 60-days, depending on the individual agency’s billing history.

Ms. Augustine introduced the Assistant Controller, Janine Coward, and the Chief Accountant of Operations, Mark Winebarger. The Chair asked if the legislation was the result of the new accounting system and Ms. Augustine replied that it was. She explained the bill would allow state agencies to record their receivables. When a bill was sent out by an agency and the bill was paid, the information could then be entered in IFS.

The Chair recognized Mr. Beers who asked how the Controller’s Office had historically dealt with expenditures. Mr. Winebarger explained expenditures were recorded on a modified accrual basis. Mr. Beers asked for more detail. Mr. Winebarger explained the Controller’s Office currently recorded an expenditure when it received a bill and that bill was paid. He said there could be a short delay in the actual disbursement of funds. Mr. Beers said the bill provided for no change on the expenditure side and Mr. Winebarger said the Controller’s Office would be able to pay invoices it received because it would be able to record the revenues the bills would be paid from.

The Chair recognized Mark Stevens, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau. Mr. Stevens explained cash would have to exist in a budget account before a bill could be paid. The bill would allow cash to be used based on a receivable that had been recorded. An agency would not necessarily have to have cash in its budget account to pay a bill. Except for payroll, an agency currently had to have cash on hand for a bill to be paid. His understanding of the bill was that if an agency booked a receivable, it would not necessarily have cash on hand, but could make payments based on that receivable.

Mr. Beers commented a bank would have a problem with that scenario.
Ms. Augustine responded the bill included permissive language that would allow the Controller’s Office to make a decision on an agency-by-agency basis, dependent on the agency’s billing and collection history.

The Chair recognized Mr. Dini who referred committee to the last three lines of section 1., "If recorded, and to the extent approved by the state controller pursuant to subsection 2, the revenue shall be deemed to be available for payment from the state treasury" and asked if that language affected the legislature’s credibility with regard to the annual report. Ms. Augustine responded the quoted language would have no affect on the credibility of the annual report that would still be generated using standard accounting practices. Mr. Dini asked if the bill would open the legislature to the criticism of spending money it did not have in the treasury. Ms. Augustine responded it would not. She told committee members the Controller’s Office had received a qualified audit during 1998 that it was trying to remove. She added the proposed legislation was the result of the previous administration.

The Chair asked what the impact was if the bill did not pass. Ms. Augustine responded the Controller’s Office was not currently prohibited from recording receivables, although those receivables had not historically been justified as revenue.

The Chair recognized Janine Coward, Assistant Controller, who brought committee members’ attention to a paragraph in the audit report prepared by the Legislative Counsel Bureau (Exhibit D) that referred to management and collections of the state’s accounts receivables. She quoted that paragraph as follows:

Ms. Coward explained the old accounting system did not allow staff to book receivables and that was one reason the Controller’s Office had experienced problems keeping track of its debt.

The Chair said it was his understanding the Controller’s Office already had the authority to book receivables and no statutory change was necessary. Ms. Augustine explained a system did not exist in the past that would allow staff to post those receivables. She said the new IFS would provide that function and the Controller’s Office wanted statutory language that would "allow" the posting of receivables. Committee members were advised by Ms. Augustine that the Controller’s Office was not prohibited from posting receivables.

The Chair recognized Mr. Hettrick who thought it was a good idea to book receivables and wondered why the rationale was for the bill to be permissive in nature. He commented one problem with a number of state agencies was that they did not do a very good job in the collection of their receivables. He felt that receivable posting should be mandatory for all state agencies. The Chair recognized Mr. Dini who commented the down side of the legislation was that the revenue to cover the receivables would come from the state treasury. He was concerned the state treasury would not be solvent.

The Chair recognized Mr. Beers who asked Mr. Stevens if he was aware of other legislation that addressed the audit findings with regard to the collections of accounts receivable. Mr. Stevens replied none that he was aware of. He felt there were two issues involved with the proposed legislation -- should receivables be recorded and, if so, should those receivables be expended as cash.

The Chair recognized Mr. Beers who said the legislative audit had addressed significant problems with many state agencies. One solution discussed was to have a central point for tracking receivables, a scenario that did not currently exist in the state. He said that even though the bill was the result of the last administration, the legislature may be able to use it as the vehicle to address the accounts receivable issues faced by Nevada. Ms. Augustine told committee members a bill had been introduced that dealt solely with debt collection (S.B. 500). She commented there was no set procedure within state government to provide for debt collection. The Controller’s Office had proposed an amendment to that bill that would centralize debt collection within its office.

The Chair recognized Ms. Coward who said it was her understanding that generally accepted government accounting principles would only record the debt as revenue if it was reasonably thought it would be collected within 60-days, and it would be available for payment within the period that the disbursement would be made. The disbursement would not be made if the cash was not in the account. If there was cash in the account that could cover the disbursement until it was reasonably assumed the debt would be paid, the Controller’s Office could then decide to pay that bill. She explained the example used to draft the bill was regarding payment for fire fighting services. Several governmental agencies generally shared the cost of fighting a fire. The Controller’s Office wanted to be able to pay those individuals fighting the fire prior to receiving the actual payment from the agencies sharing the costs.

The Chair recognized Ms. Augustine who referred committee members to Exhibit E, an excerpt from Governing Magazine, that gave Nevada a grade of B in financial management.

The Chair recognized Don Hataway, Deputy Budget Administrator, Budget Division, Department of Administration. Mr. Hataway told committee members the division would support the bill in concept, with one word of caution. The Controller’s Office would be tasked with ensuring the state’s cash was not affected. He commented the budget office was not sure the bill went far enough in the areas of invoices and billings and felt it should also address advances made on the General Fund as the result of projected income.

The meeting was recessed at 11:35 a.m. to reconvene in room 3137 of the legislative building following floor session.

The meeting was reconvened by Chairman Morse Arberry Jr. at 2:21 p.m. in room 3137 of the legislative building.

The Chair recognized Ms. Cegavske who referred committee members to Exhibit F, the revised amendments to A.B. 219. She explained Assemblywoman McClain and she had combined their bills. A.B. 219 would remain the same with the following exceptions:

• Section 2, Subsection 3 would exclude expenditures financed with bond proceeds from the expenditures made over the past 3-year period for maintenance and repair of equipment, vehicles and buildings, and facilities;

• Section 4 was deleted in its entirety; and

• A new section was added to provide a legislative audit of public schools in Nevada.

The Chair recognized Mr. Dini who questioned the audit of public schools in Nevada. Mr. Stevens explained the goal of the audit was to include
10 percent of 45 school sites. The Chair recognized Gary Crews, Legislative Auditor. In response to a question from the Chair, Mr. Crews explained the provisions of the amendment could be carried out with existing resources. He said the amendment was very selective in the elements to be audited and was more time consuming than difficult.

Mr. Stevens told committee members he had discussed the bill with its sponsor, Assemblyman Nolan. The proposed amendment was to page 2, Subsection 3, and would remove the provision starting on line 5, "any money remaining in the budget account of the director of the department from fees charged by the central repository for criminal investigations at the end of the fiscal year." Additionally, new verbiage would be added to Subsection 5 to include the provisions stated in Subsection 5 would not apply to any money appropriated by the legislature. He said if the legislature chose to provide money for the purpose outlined in the bill, it would not be used in the calculation of the interest earned on the account, nor would the state money be balanced forward, but would revert to the General Fund at the end of the fiscal year.

The Chair recognized Mrs. Chowning who told committee members A.B. 271 was passed out of Transportation to deal with a problem when consignors left their vehicles with a business or person to sell and that business or person either did not pay the consignor, or did not pay the consignor in a timely fashion. The bill provided for stringent requirements and punishment ranging from payment of restitution to a charge of embezzlement.

Mrs. Chowning thought the bill would have a fiscal note attached to provide for additional staff to perform the work. She said the Department of Motor Vehicles had reconfirmed to her that only 1 percent of dealers caused those kinds of problems and staff had the ability to continue processing the associated workload. The department wanted to see the penalties strengthened, the provision of no co-mingling of funds, and that the money actually had to trade hands within three days. Based on the fact there was no fiscal note, Mrs. Chowning urged passage of A.B. 271.

The Chair recognized Mr. Hettrick who moved the word "may" in the first line of Subsection 1 be changed to "shall" and the remaining verbiage after the word "state" in line 5 of Subsection 1 be deleted in its entirety.

The Chair recognized Mr. Beers who suggested Subsection 3 remain in the bill and staff and committee members agreed.

Mr. Stevens told committee members A.B. 653 had been heard on
March 31, 1999. The intent of the bill was to require anyone attending a law enforcement training academy at the expense of his employer be liable for those expenses if they resigned from state employment within 2-years after graduating from that academy.

There being no further business, the meeting was adjourned at 2:34 p.m.

RESPECTFULLY SUBMITTED:

Debbie Zuspan,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

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