The Subcommittee of Senate Finance and Assembly Ways and Means on
K-12, Human Resources was called to order at 8:25 a.m., on Thursday,
April 8, 1999. Chair Jan Evans presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

ASSEMBLY SUBCOMMITTEE MEMBERS PRESENT:

Ms. Jan Evans, Chair

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Parks

ASSEMBLY SUBCOMMITTEE MEMBERS ABSENT:

None

Senator Bob Coffin

Senator Bernice Mathews

Senator William Raggio

Senator Raymond Rawson, Chairman

None

STAFF MEMBERS PRESENT:

Chair Evans said it was essential for the subcommittee to close budgets, so that would be done first. She said the budget closings would begin with the Division of Child and Family Services (DCFS).

Larry Peri, Senior Program Analyst, explained staff recommended closing Budget Account 3149 as recommended by the Governor. He said the subcommittee might wish to pursue the potential collection of additional Title IV- E revenue. In conversations with DCFS and the Budget Division, it was established there was potential to earn additional IV-E revenue in Fiscal Year (FY) 1999, so the subcommittee may wish to question DCFS or the Budget Division. Chair Evans said that was an excellent idea and asked if anyone from DCFS or the Budget Division was present to address the issue of IV-E revenue.

Don Hataway, Deputy Director of the Budget Division, said he did not have details on IV-E revenue, as he was not aware the issue would be raised that morning. If the issue would prevent the budget from being closed, the Budget Division would be happy to work with Fiscal Analysis Division staff to resolve the issue.

Chair Evans said she appreciated that and asked Mr. Peri approximately how much additional IV-E revenue could be earned. Mr. Peri replied the estimated amount for FY 1999 was between $135,000 and $150,000. Chair Evans asked Mr. Peri to work with DCFS and the Budget Division to bring back a recommendation to the subcommittee. She stated Budget Account 3149 would be held.

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Mr. Peri explained Budget Account 3262 was a new budget account established in the current fiscal year to accept the office of Juvenile Justice and Delinquency Prevention with a block grant of $2.1 million. The grant was accepted by the Interim Finance Committee (IFC) on September 23, 1998. The Governor’s recommendations mirrored the acceptance of the grant and the spending plan approved by the IFC on September 23, 1998. The budget currently submitted overstated the balance forward into FY 2001 by $324,915. There was inadequate revenue in the budget to support the recommendations that continued into 2001.

Mr. Peri said since the submittal of The Executive Budget to the legislature, the second year federal FY 1999 grant award had been authorized by the Federal Government for the continuance of the program. Therefore, the decision before the subcommittee was to consider acceptance of the revenue for the second year. The revenue was slightly higher than in the current year. A revised spending plan had been submitted by the Budget Division. However, the Budget Division did not have the benefit of the newest grant amount. Nevada’s grant increased from $2.1 million to $2,221,800.

In addition, Mr. Peri explained, there was a technical adjustment recommended by staff in decision unit E-125. The adjustment would align the funding recommended in the budget to transfer out of Budget Account 3262 to two other budget accounts: the Youth Alternative Placement Budget Account and the operating budget for the proposed juvenile facility. The facility was approved in the 1997 Legislative Session and would be constructed in southern Nevada with an anticipated opening of June 2000. If the subcommittee approved the transfers out, Fiscal Analysis Division staff recommended allowing staff to align them properly to reflect what was going out of the account into the two receiving accounts.

Chair Evans said a motion would need to approve the second year of the grant and align budgets. Mr. Peri said that was correct and explained the slightly larger grant amount gave the subcommittee the opportunity to allocate the additional funding, approximately $55,700, according to the grant provisions. By federal regulations, 75 percent of the funds must flow directly to local entities, 10 percent of the increase had to be set aside for administration of the program, and 15 percent was discretionary. In The Executive Budget, the Budget Division utilized the discretionary funding for support of the new juvenile facility and placement costs for either in-state or out-of-state placements in lieu of the construction of the new juvenile facility. The subcommittee could consider transferring $8,355 to the Youth Alternative Placement Budget Account or to assist in funding contract placements, which would have a corresponding decrease in General Fund support in FY 2000. His understanding was the Budget Division was also considering an alternative use for those funds. The new secured juvenile facility, which would be considered by the subcommittee for privatized operation, had in the contract with the proposed operator, a contract monitor who would be an on-site state employee and monitor the performance of the contractor, in conformance with the approved contract. The monies earmarked for the contract monitor were limited and did not provide for equipment or operating cost. He understood the Budget Division was considering suggesting the $8,355 be utilized for equipment and operating costs for the new position.

Ms. Evans said in addition to the two issues already mentioned, there was the issue of how to allocate the $8,355, and asked for suggestions from the subcommittee. With no suggestions from the subcommittee, she said it was not very much money and thought it was reasonable to allocate the $8,355 for the support of the new contract monitor. The subcommittee agreed.

Reviewing the subcommittee’s decisions, Chair Evans said the motion would accept the second year grant, align allocations, and direct the $8,355 for the new facility.

Chair Evans noted the motion carried only for the Assembly, as the Senate did not have a quorum.

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Mr. Peri said the first consideration for Budget Account 3179 was a decision whether to increase the Transfer from Education revenue to equal the amount currently authorized in FY 1999. In November 1998, the Caliente Youth Center submitted a work program increasing the revenue to $322,135 for FY 1999. The Executive Budget showed an amount of $291,544 for FY 2000 and FY 2001. If the subcommittee decided to increase the revenue, $30,591 in General Fund reductions could be made in each year of the 1999-2001 biennium.

Mr. Peri explained the second item of consideration was The Executive Budget recommendation of a Capital Improvement Project (CIP), CIP 99-M1, which would provide a second exit in the existing dormitories for fire safety. When the project was heard by the CIP subcommittee, it was learned if the project was completed as proposed, one bed would be lost from each of the seven cottages, for a total reduction of seven beds. The CIP subcommittee expressed concern about losing beds and asked for the development of an alternative plan by the State Public Works Board. If the seven beds were lost, the budget might have to be reduced accordingly to accommodate an anticipated reduction in the census.

Chair Evans said there had been discussion on the two options and thought staff had not received further information on an alternative plan from the State Public Works Board. She suggested leaving that section of the budget as it was, and said the subcommittee may have to go back and adjust that section, pending the decision of the State Public Works Board. She thought Budget Account 3179 could be closed with the subcommittee’s pleasure on Transfer from Education, increasing the FY 1999 level to $322,135.

Chair Evans noted the motion carried only for the Assembly, as the Senate did not have a quorum.

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Mr. Peri said Budget Account 3259 was heard in subcommittee on February 18, 1999. The base budget recommended the continuance of 96 Full Time Equivalent (FTE) positions. No new positions were recommended in the budget. However, the budget recommended the transfer in of two FTE existing academic teacher positions from the center’s Chapter I and II Remedial Education budget. Support from the Department of Education in the area of Chapter I and II revenues had been declining. Therefore, the budget contained a recommendation to fund 0.49 FTE of the two positions with General Funds, which was included in E-900 and E-901 of The Executive Budget.

Mr. Peri said there were two technical adjustments for the subcommittee’s consideration. The first would adjust the Bureau of Alcohol and Drug Abuse (BADA) expenditures in the category 08 to equal the available BADA grant funding once position costs were subtracted. The offsetting entry was a General Fund reduction of $892 in FY 2000 and $1,446 in FY 2001. The second technical adjustment was to properly fund the two positions transferred in. For half-time positions, the budget system provided positions with social security benefits and not state retirement. The increase of the 0.51 FTE to full-time in E-900 and the elimination of the 0.49 FTE position in E-901 would correctly fund the split position.

Mr. Peri said the subcommittee may wish to consider increasing in-state travel for the Nevada Youth Training Center to its requested amounts of $7,094 in FY 2000 and $7,136 in FY 2001. If the subcommittee chose that option, it would require adding General Funds of $4, 141 in FY 2000 and $4,183 in FY 2001. Those amounts were recommended and requested by the superintendent and the administrative services officer to travel to attend business meetings in Carson City, Reno, and Las Vegas. The requested level of funding would also approximate the amounts recommended in each year of the biennium for the Caliente Youth Center, which was similarly located away from a metropolitan area. Additionally, the in-state travel would appear to be necessary in conjunction with the proposed construction and operation of the new secured juvenile correctional facility in southern Nevada in June 2000.

Chair Evans noted both the Assembly and the Senate had a quorum.

Senator Coffin informed the Senate subcommittee members the Assembly subcommittee had approved Budget Accounts 3262 and 3179. He stated he had listened to the discussion and felt Senate subcommittee members could also close those budgets if they were prepared to do so. Senators Coffin, Matthews, Raggio, and Rawson voted in accord with the Assembly subcommittee members on Budget Accounts 3262 and 3179.

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Chair Evans thanked Mr. Peri for his excellent work on the DCFS budgets and asked Rick Combs, Program Analyst, to explain the Public Defender budge

Mr. Combs said staff recommended one minor technical adjustment in Budget Account 1499 for the cost of five reception chairs. In addition, the subcommittee needed to make decisions regarding decision units E-125 and E-127. The budget had been submitted with two alternate proposals for providing legal services to Lander County. The Public Defender’s office had indicated it would not have a decision on which choice the county would make before April 12, 1999. He said he had asked the agency to indicate which choice was most likely and the agency felt E-127 was most likely. E-127 provided a full-time deputy public defender, a half-time secretary position, and costs for a new office space. E-125 would provide a deputy public defender who would travel from the Winnemucca office to provide services during the week. Mr. Combs said staff recommended closing Budget Account 1499 with E-127 in place. It would give the authority to the Public Defender’s office to collect the fees from Lander County. If Lander County chose the alternate proposal, E-125 would cost less, so the office would still have the authority to collect the appropriate fees

Mr. Combs explained E-375 allowed for the installation of a half-door and a panic button at the Winnemucca office. Apparently, there were some security risks associated with a secretary there and staff felt that recommendation was reasonable. There various equipment was provided in E-710 and E-711. Funding for modems, Internet access, and Internet Law Service Subscriptions was provided in E-721.

Senator Raggio said he thought the recommendation to approve E-127 was reasonable, as were other E-375, E-710, E-711, and E-721.

Chair Evans asked Mr. Combs to explain M-200. Mr. Combs said there was a new deputy public defender position recommended for the Carson City office in M-200. The position would provide services to both Carson City and Storey Counties and would be entirely funded through county fees. The need for the position was based on demographic growth and the number of cases the office was required to process.

Chair Evans said pending the April 12, 1999 decision, if there was a different decision by Lander County, she assumed the subcommittee would be informed and could revisit the budget if necessary.

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Chair Evans said the subcommittee would be closing education budgets and asked Jeanne Botts, Senior Program Analyst, to explain the budgets.

Ms. Botts said Budget Account 2705 supported the activities of the Teacher Education and Licensing Branch and the Professional Standards Commission. Teacher licensing and activities were supported by a General Fund appropriation and licensing fees. The share contributed by licensing fees was expected to increase from 72 percent in FY 1998 to nearly 100 percent in FY 2001. The Executive Budget contained licensing fee increases to make the licensing budget and licensing operation self-supporting. The fee increase recommended was a $15 increase in the licensing fee which would become effective July 1, 1999. The fee for an initial license would increase from $86 to $100 and license renewals would increase from $65 to $80. The cost of adding an endorsement to a license in order to teach another specialty area would increase by $5. The fee increases were expected to generate approximately $326,000 more in licensing fees in the next biennium, compared to the current biennium. Approximately $212,000 of that amount was attributable to the fee increase. The remainder was due to growth in the number of licenses.

Ms. Botts explained the current statute stated a minimum, not a maximum, licensing fee. There was no bill draft requested to increase fees, because fees were set by the Commission on Professional Standards in Education. The commission was holding a hearing on May 7, 1999 to pass the necessary regulations to effectuate the fee increase. The adjustment in the budget was an increase of $1,354 in the current year’s reserve to be balanced forward for two subsequent years, which was a change sent over from the Department of Education.

Chair Evans asked how often teachers renewed their licenses. Ms. Botts replied teachers renewed their licenses every 5 years, and every 6 years for a teacher with a master’s degree. Chair Evans asked if the Budget Division approved of the fee increase. Mr. Hataway replied yes.

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Ms. Botts said Budget Account 2709 contained several small federally- funded programs. The Department of Education had submitted revised estimates of revenue and adjustments to expenditures, and several adjustments were made. The Technology Literacy Challenge Grant was contained in Budget Account 2709. Several adjustments were made, using the department’s suggestions to increase contract services. The amount available to hire a contractor to evaluate the state’s educational technology program was increased by reducing out-of-state travel and other enhancements to the operating budget. Ms. Botts suggested the subcommittee might wish to direct the agency, through a letter of intent, to use any excess administrative cost allowance that might become available under the grant to help pay for evaluation of the educational technology program; to provide training to teachers on how to integrate educational technology into the classroom; or to increase aid to schools, rather than retaining the excess administrative cost allowance in reserve.

Ms. Botts said she had done a brief summary of the federally funded programs in the Discretionary Grants budget. She noted the Emergency Immigrant Education Program and the Homeless Assistance Act both contributed to add a new quarter-time management assistant and a half-time education consultant to administer programs for the homeless and immigrant children. The positions would be funded 40 percent by the Emergency Immigrant Education Program and 60 percent by the Homeless Assistance Act.

Senator Rawson said the subcommittee needed to decide whether to use the excess administrative costs within the Technology Literacy Challenge Grant program for a thorough evaluation of the education technology program, to provide training on how to integrate technology into the classroom, or to increase aid to schools. He asked if the subcommittee had any preference where the money should be spent. Chair Evans said those were certainly all worthwhile ways to spend money.

Senator Raggio said he thought all the programs were important and asked if the programs could be lumped together and give the agency flexibility to spend those funds. Senator Raggio suggested a letter of intent to allow the authority to use the funds for those purposes.

Senator Coffin asked if there were any items for which there were adjustments because they weren’t in the budget, due to oversights. Ms. Botts replied most changes were due to new estimates of federal revenues. The larger change was in the area of the Technology Literacy Challenge Grant. There was "unbooked federal authority" was directed to be used, rather than retained for administrative costs.

Senator Coffin asked which budget the Department of Education submitted in which the Governor unintentionally omitted some items. He wanted to make sure the subcommittee was not missing some items the Governor said he would put in The Executive Budget. Ms. Botts said there was a school improvement budget account, which was not being heard that morning, that contained several one-shots from the 1997 Legislative Session which were not recommended to continue. Senator Coffin asked if those programs would need legislation to continue. Ms. Botts replied no, some of those programs could be continued within the budget process. Ms. Botts said she would call attention to those budgets when the school improvement budget was heard. She did not think the discontinuance of the programs was an oversight by the Budget Division. Rather, the programs were eliminated due to the shortage of funds.

Don Hataway, Deputy Director of the Budget Division, said Budget Account 2709 was for small federal grants and was unrelated to state programs. He explained the Governor had made comments about supporting some things that were not in The Executive Budget, but that was only on the basis of whether the funds were available and the priorities were there. That would be addressed later in the session. In addition, Mr. Hataway noted at the last meeting, the Budget Division had recommended transferring the Goals 2000 grant program from the school improvement budget to Budget Account 2709.

Senator Coffin said it was difficult to know what was in The Executive Budget because of the manner in which budgets were closed. The subcommittee looked at changes in budgets and it was difficult to determine if some of the comments made during hearings were reflected in the budgets.

Doug Thunder, Deputy Superintendent of the Department of Education, asked Senator Coffin to restate his question. Senator Coffin said he was satisfied with the answer he received from Ms. Botts. He thought when those budgets were heard the subcommittee should note the Governor had stated he would support those programs. The issue would have to be reconciled before those budgets were closed or a new one-shot would have to be created.

Mr. Thunder said the issue about which he spoke to Ms. Botts regarded the personnel enhancement in Budget Account 2709. There was a half-time education consultant position and a half-time management assistant position in the budget. The half-time education consultant position went with a half-time position in Budget Account 2712 for similar types of programs.

Senator Rawson said he had seen the Stargate 2000 program in the Legislative Building the previous day. If the legislature allowed the agency flexibility to spend those funds, programs such as Stargate 2000 could be funded without extra legislation. He recommended closing the budget account at staff’s recommendation with the letter of intent.

Chair Evans said before the budget could be closed, the issue of the transference of the Goals 2000 into Budget Account 2709 had to be explained.

Mr. Hataway said the school improvement budget only had two programs left in The Executive Budget. In an effort to streamline and decrease the number of budget accounts, Goals 2000 was appropriately moved to the Discretionary Grant budget, and the apprenticeship program, which was state funded, could be transferred to Other State Education Programs, Budget Account 2699. If the subcommittee did not want to transfer Goals 2000, the Budget Division would not have a problem with that.

Mr. Thunder said his only concern was Budget Account 2709 had many small budget accounts. An alternative to consider would be to move some of those into Budget Account 2706 and focus on whether the federal programs were charged at the indirect restricted cost rate, or the unrestricted rate so all the programs in one budget account would have one indirect cost rate and all the programs in another budget account would have another rate.

Chair Evans said that made sense.

Senator Rawson said he would like to change his motion to reflect the comments of Mr. Thunder.

Senator Raggio said he thought Mr. Thunder was suggesting moving some accounts out of Budget Account 2706. Mr. Thunder said that was correct. Senator Raggio said he thought both budgets should be closed authorizing staff to work with the Department of Education.

Chair Evans asked Ms. Botts if that was feasible. Ms. Botts replied yes, as she understood, the apprenticeship program would be taken out of the School Improvement budget account and put into the Other State Education Programs budget account. The other remaining program in the School Improvement budget account was the Goals 2000 program, which would be combined with the myriad of federal programs in Budget Account 2709. Those federal programs with a restricted cost rate would be placed in one budget account and the programs with an unrestricted cost rate would be placed in another, split between Budget Accounts 2706 and 2709.

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Melinda Braun, Education Program Analyst, said for Budget Account 2666, one correction was recommended to the base budget. Under decision unit 26-7070, Information Services, the addition of $1,890 was recommended for each year of the biennium to purchase an annual computer maintenance agreement. Funding for the agreement began in FY 1999 and was inadvertently left out of The Executive Budget.

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Ms. Braun explained staff had no recommendations for Budget Account 2667.

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Ms. Botts explained Budget Account 2605 was a federally funded account. The Safe and Drug-Free Schools and Communities Act provided funding to implement drug abuse education and prevention programs in elementary and secondary schools. Federal revenue had been reduced and the adjustments contained the reduction in revenue. Corresponding reductions were made in travel, operating costs, aid to schools, and proposed positions. The Governor recommended adding a half-time Education Consultant and a quarter-time clerical position (0.75 FTEs total) to handle the increased workload created by the addition of safety and violence prevention to the program. However, because federal funding was declining, staff had asked the agency to review the issue. The agency realized it was not possible to fund an additional 0.75 FTEs. Staff recommended adding only a quarter-time Education Consultant and deleting the proposed quarter-time clerical position, resulting in the addition of only a quarter-time Education Consultant to the budget account.

Ms. Botts said another adjustment was the biennial student survey on students’ use of drugs and alcohol. In the revised budget, the Department of Education requested an increase in printing costs, based on the report recently produced. She said staff suggested directing the department, through a letter of intent, to take a leadership role in selecting and implementing effective, research-based substance abuse programs and help school districts evaluate the effectiveness of their programs and measure progress toward achieving goals. The department would be required to report to the 2001 Legislature on action taken by the department to ensure school districts adopted programs found to be effective in preventing substance abuse and to assist school districts in conducting evaluations of their programs. An evaluation of drug-abuse prevention programs completed in response to a letter of intent and A.B. 376 of the 1997 Legislative Session concluded most districts did not conduct systematic evaluations of prevention programs. The evaluation was unable to link programs with outcomes to determine whether programs were implemented consistently across schools and classrooms within a district, or whether each student received a comprehensive substance abuse program. Further, the study did not identify how the programs were funded.

Chair Evans urged the subcommittee to give strong consideration to the letter of intent regarding an effective research-based review of the substance abuse prevention programs. A study conducted in January 1999 found Nevada had a much greater proportion of young people in state facilities with substance abuse problems. The state was spending a lot of money, but was not doing a very effective job, so the issue needed to be reviewed.

Mr. Hataway asked if the motion included the staff adjustment, per the department’s request. Chair Evans replied yes. Ms. Botts clarified staff had deleted the quarter-time clerical position, so it was not exactly per the department’s request. Ms. Botts submitted a reconciliation of the Department of Education’s positions (Exhibit C). There were many split-funded positions within the department, and there were a number of positions recommended to be deleted or added. Some of the budget accounts shown on Exhibit C had not been closed, but contained the Governor’s recommended changes.

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Ms. Botts explained Budget Account 2670 contained funding for the Nevada Revised Statute (NRS) Chapter 395 program, which paid the cost when a handicapped child was unable to receive an appropriate educational program in his or her home school district. The child may be placed in another district within the state, or receive those services out of state. Staff recommended closing Budget Account 2670 at the Governor’s recommendation. There was also a suggested letter of intent to continue the quarterly reports the Department of Human Resources was required to submit to the IFC throughout the coming biennium. As in the past, the reports would include the placements made or pending; an explanation of why an appropriate program had not been available; year-to-date expenditures; estimated expenditures through the end of the fiscal year and any projected shortfall or surplus; evidence of Medicaid benefits; and in cases pending for more than one quarter, an explanation of why an appropriate placement had not been made.

Although the Department of Human Resources would continue to pay the costs of children placed pursuant to the provisions of Chapter 395 of the NRS in facilities operating under the authority of the Department of Human Resources, the Department of Education would continue throughout the 1997-1999 biennium to track the costs of such placements and review the Department of Human Resources’ calculations of those costs for reasonableness, appropriateness, and accuracy.

Chair Evans clarified that the motion also stated the language for the appropriations act specified that the money could be used in either year of the biennium.

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Ms. Botts said Budget Account 2676 contained federal funding. There was a small state match, but the budget was primarily supported by the Carl D. Perkins Vocational and Applied Technology Education Act. The Executive Budget recommended eliminating the Occupational Education Consultant in the area of business education and marketing because the position had been vacant since April 1998. Previously, funding to support the position had been split 50:50 between state and federal funding. The Department of Education had provided a plan to restore the position using 100 percent federal funds. To fund the position, the department suggested reducing aid to schools. The position was restored in staff’s adjustments to the base budget.

In addition, the Department of Education had been asked to determine the amount of federal grant authority that was "unbooked." To track all available federal authority, revenue from the federal Carl D. Perkins Basic Grant was increased, and aid to schools was increased by a corresponding amount in each year in decision unit M-200.

Mr. Dini asked the Department of Education to explain why the Occupational Education Consultant position had been vacant for so long.

Keith Rheault, Deputy Superintendent of the Department of Education, reiterated the position had been vacant since April 1998. The department ran an advertisement for the position as soon as the position was vacant. The position was to be housed in the Las Vegas office. There were only two applicants who met the criteria, so the department re-advertised in late July 1998. At that time, the position was moved to either a Carson City or Las Vegas location. When the department was ready to interview the second round of applicants, the budget freeze was enacted. Therefore, the position was frozen in October of 1998. The department had made a request to fill the position and received approval for it in January 1999. When the position was available, the department found the position was deleted from the budget, so the department felt it was not reasonable to fill the position if there was a possibility it would end June 30, 1999.

Chair Evans said the issues under consideration for Budget Account 2676 were the restoration of the Occupational Education Consultant position, adjustments to the base budget, and aligning federal revenue to the grant authority.

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Ms. Botts explained Budget Account 2678 currently contained both General Fund appropriations for School-to-Careers and federal funding from a 5-year School-to-Work implementation grant. The federal grant was intended as seed money to implement programs focusing on the transition from school to work. The amounts to be received for each of the 5 calendar years the grant covered would total $11.4 million. The amount received diminished, starting in 1999. The Budget Division now required the Department of Education to book all unused federal grant authority. A recent work-program revision from the department added $108,765 of unused authority for administrative costs to reserve in FY 1999. The closing sheet balances forwarded those unused funds to help fund the continued positions in the federal account. The rest was passed through to local school districts as aid to schools.

Ms. Botts said there were currently two full-time equivalent positions: an Assistant Director, a half-time Grants and Project Analyst I, and a half-time Management Assistant I. In The Executive Budget, both half-time positions would be eliminated on June 30,1999, and the full-time Assistant Director’s position would be eliminated at the end of the first year of the biennium. The Governor recommended no authorized positions in Budget Account 2678 during the second year of the biennium, although federal funding would still be flowing through to the school districts through December 31, 2001, 6 months into FY 2002. The Department of Education admitted its budget had been out of sync with the grant funding and submitted a revision to request continued funding for the existing positions throughout the coming biennium. Instead, staff recommended the Assistant Director position be continued, but reduced to half-time in FY 2001 and eliminated at the end of FY 2001. The half-time clerical position would be reduced to quarter-time in FY 2000 and eliminated at the end of FY 2000. The Grants and Project Analyst I position would be eliminated on June 30, 1999.

Ms. Botts stated for the last 4 consecutive fiscal years, $2 million a year, for a total of $8 million, had been appropriated for state-funded school-to careers programs. That was not recommended in the Governor’s budget, as it was viewed as a one-shot appropriation. If the subcommittee wished to continue the program, either at the existing level or a reduced level, funding might be appropriated through a separate bill, thereby allowing Budget Account 2678 to be closed.

Senator Raggio recognized there had been a great deal of interest in the program, but said he needed a review of the program. Ms. Botts said the
5-year grant, which was intended to be seed money, would end on December 31, 2001, 6 months into that biennium. Senator Raggio asked if the program had a minimum requirement to school districts. Ms. Botts said there was a required minimum pass-though to schools. Senator Raggio asked Dr. Rheault to elaborate on the program. He was concerned because funding often ran out for federal programs. Ms. Botts reiterated there had been $2 million in state funding for each of the last bienniums, but the federal grant total was $11.4 million, over a 5-year period.

Keith Rheault, Deputy Superintendent of the Department of Education, said the grant was a 5-year grant with a progression of funding. The first year funding was $1,950,000; the second year it was $3.8 million; the third year was $2.7 million; the fourth year was $1,950,000; and for the last year of the grant, funding would be $950,000. Senator Raggio asked if that money was used to subsidize employers who hire youths. Dr. Rheault replied that was not connected with the grant. The funding was used to connect students to employers, but there was no subsidy to employers in the grant.

Senator Raggio asked what would be the result of the 5-year grant, specifically whether the program had a continuing benefit. Dr. Rheault replied the continuing benefit was to students who had participated in the program. He reiterated the grant was intended as seed money for systematic change within the state. The Department of Education felt there had been systematic change. Quite a bit of the grant money was used to work with all teachers in schools, both academic and occupational, to get a better understanding of what was required in the business world and to adjust their curriculum to make sure it matched those requirements. There had been a minimum 85 percent pass-through in the first year, and then for the last 4 years of the grant, 90 percent of the funds had to be passed through to the school districts.

Mr. Dini said he thought it was an important program, given the attempt to bring new industry to the state. The program was a way to help prepare a workforce for the new industries. He asked to hold Budget Account 2678 until the results of the Economic Forum were known. Perhaps funding could be added to the program if it was determined additional funding would be available.

Senator Rawson noted a few budget accounts had been closed and put on a priority list for any available funding. Chair Evans agreed it was a possibility to close the budget as it was and put it on the priority list that was being compiled.

Chair Evans said the Department of Education had asked, at legislative request, for reconsideration of the program’s funding level to help sustain the program during a tight budget period. She asked Dr. Rheault for the revised amount. Dr. Rheault stated the revised amount, after conferring with the state’s School-to-Career Council, was $1,250,000. He noted in the revised request for Proposed School Improvement Priorities (Exhibit D), a breakdown was provided for the $8 million in available funding. On page 2 of Exhibit D, the School-to-Careers program was proposed to receive $1 million.

Chair Evans stated the subcommittee had not yet reviewed Exhibit D. Senator Rawson said he thought the budget should be closed and put on the priority list. Since all the money would be passed through to schools, not salaries, it could be easily moved as a bill or an addition to the budget later. Chair Evans said she thought it would be best to leave it on the list as an addition to the budget.

Mr. Goldwater said he would like to know exactly how the priority list worked. Mr. Stevens, Assembly Fiscal Analyst, said he and Dan Miles, Senate Fiscal Analyst were keeping a list of the additional requests made by subcommittee members. There were currently four or five items on the list, including Health Division items and Aging Services Division items.

Senator Rawson explained the idea of the priority list as follows: if the Economic Forum showed there was additional revenue, funding would be distributed among the items on the list. Mr. Goldwater asked if the items would be allocated money only if new revenue was identified. Senator Rawson said he thought any revenue generated could be used for items on the priority list.

Chair Evans said the subcommittee had concluded its budget closings for the day. The subcommittee would return to the Distributive School Account and the Class-size Reduction Budget Accounts, because there were unresolved issues in both accounts. Before closing sheets could be constructed, the issues needed to be resolved. Chair Evans thanked Ms. Botts for an extraordinarily thorough presentation of budget accounts and asked her to continue her presentation.

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Ms. Botts said the first issue to be resolved by the subcommittee was whether four state-funded categorical programs should be consolidated into one budget account. The four programs were special education unit funding, class-size reduction program funding, funding for elementary school counselors, and funding for the adult high school diploma programs. The subcommittee had heard testimony about the pros and cons regarding the consolidation of those accounts. Ms. Botts said she had met with a select group of school district and department representatives to try to determine what would happen if the accounts were consolidated. Ms. Botts said there would be problems if all the money was put into the Distributive School Account (DSA) and distributed in one lump, through the formula. Mainly, the class-size reduction program funding would not get distributed to the districts with the largest class-sizes and the largest need for teachers. The consensus was that it was not reasonable to put the class-size reduction funding within the DSA. Those monies would have to be allocated on the basis of need, based on each school district’s population, unless the legislature was going to consider amending the laws requiring certain ratios in the primary grades.

Ms. Botts said generally, the school districts felt funding for special education units was better left as unit funding. Children with disabilities were not uniformly distributed among the districts. Some districts received proportionally more funding because of a higher incidence of handicapped students. Also, some districts developed more extensive programs than other districts that sometimes served as hubs, providing services to neighboring districts. Therefore, districts felt the special education unit funding should remain as it was, with units allocated to the districts and the state board having a number of discretionary units to be distributed on the basis of need.

Ms. Botts said there were approximately 50 elementary school counselors funded through the elementary school counselor program. Generally, each district had one counselor and the larger districts had more. If the funding was consolidated into the DSA and allocated by the formula, some districts would not receive enough funding to retain an elementary school counselor. That was a concern of some of the small districts, but other districts felt, due to the small amount of money ($2 million statewide), it may be reasonable to put the program into the DSA.

Ms. Botts added that districts asked for flexibility in the definition of a special education unit. Currently, a district must have a properly licensed teacher employed and an assigned caseload or class list of students who had been identified as disabled and offer that program for at least 9 months of the school year to be eligible for funding. The districts had asked for other types of employees to also be covered, such as school psychologists, physical therapists, and teachers’ aides.

Ms Botts explained the adult high school education program presented some problems similar to the elementary school counselor program. Some districts received a small amount and because of their small enrollments, if the money were combined into the DSA, those districts might receive far less than they currently received. The department allocated a base amount to districts that wished to have adult high school diploma programs. In general, the districts with very large programs that had been functioning for quite some time received more of the funding. Some districts would, of course, not favor putting the program into the DSA, especially if the district had a large, well-developed program and received a proportionately larger amount of money.

Ms. Botts said there were alternatives for funding the adult high school education program. One option would be to leave the program as it was. The Governor recommended consolidating the adult diploma program into the DSA and including it in the per-pupil basic support. A second alternative was to transfer all funding for adult education programs, both prison and regular, from the DSA into the budget account for Continuing Education, Budget Account 2680, which contained federally funded adult education programs, the Job Training Partnership Act (JTPA), and state-funded adult literacy programs. A third alternative was to send a letter of intent to school districts directing them to maintain current levels of spending for adult diploma programs, which would alleviate concerns about what would happen when funding was no longer earmarked. The fourth alternative was to require, by law, school districts to maintain their existing effort in adult diploma programs. The fifth and final alternative was to provide a base level of funding for each district’s adult diploma programs, through the DSA, allowing the excess to flow through the formula.

Ms. Botts said an unresolved issue in the class-size reduction program was what degree of flexibility, if any, should school districts be given in meeting the required pupil-teacher ratios. The subcommittee needed to decide whether to expand the current flexibility in the use of third-grade funding for approved remedial programs to cover all class-size reduction funding. Also, it needed to be determined whether school districts should be allowed flexibility in the ratios and the grades covered by the funding and what changes were needed in law. Ms. Botts noted the Budget Division had distributed new recommendations on class-size (Exhibit E).

Ms. Botts said she thought the subcommittee should discuss the four issues she described before moving on to other unresolved issues. Special education unit funding, class-size reduction, elementary school counselors, and adult high school diploma programs were all part of the Governor’s recommendation to consolidate state-funded programs within the DSA.

Mr. Goldwater said he thought Ms. Botts’ highlights were outstanding and extremely helpful. He asked what would happen if class-size reduction and special education unit funding were not consolidated into the DSA. He asked if anything would change if the programs were left where they were and whether that would have an adverse affect. Ms. Botts, replied no, but class-size reduction did not necessarily have to change by consolidating it into the DSA, as long as the money was still distributed to the districts on the basis of their enrollment needs, not just through the Nevada Plan’s formula distribution. One of the strong arguments made by the Budget Division for the inclusion of the class-size reduction program funding into the DSA was that the previous year, the class-size reduction program had to come before the IFC for a $2 million allocation. Further, a $15.4 million supplemental appropriation had just been approved for the program because the estate tax revenue had not been coming in as expected. If the class-size reduction program was combined with the DSA and its considerable resources and its ability to borrow forward from the second year’s appropriation into the first year, class-size reduction funding would not be reduced.

Mr. Goldwater said as he understood Ms. Botts explanation, the legislature would not have to make supplemental appropriations if they program was rolled into the DSA. He asked if it was good budgetary policy and whether that amounted to cost shifting. Ms. Botts said the class-size reduction program had been funded by a combination of estate tax revenue and General Fund appropriations. In earlier years, class-size reduction did not extend to all three grades. Estate tax revenue was coming in a little better so the proportion of General Fund appropriation was lower. In the current biennium, the estate tax revenue had not come in as expected so more General Fund revenue was needed. Given that the class-size reduction program was budgeted at approximately $82 million and there would be approximately $680 million available in the DSA, if the class-size reduction program was a few million dollars short, that could be made up if the program were included in the DSA. In addition, the revenues to the DSA and the interplay between the increases in local revenue, the sales tax for schools, and the property tax made the DSA a much more fluid account. There would be more room to compensate for downturns in estate tax revenue.

Mr. Goldwater said he appreciated Ms. Botts’ explanation, but thought that would be "a dangerous road to go down." He said that was frequently done in Medicaid. For example, in disproportionate share, for ease of administration, cost shifting was done and the entire budgetary process, which was designed to keep things clear and accountable, became very difficult and even more difficult to undo. For that reason, he was concerned about consolidating the class-size reduction program into the DSA.

Ms. Botts said she understood Mr. Goldwater’s concerns. In the class-size reduction program, all money was spent on salaries and fringe benefits of teachers. The teachers were hired under contract for the school year. As experienced in FY 1998, when the account ran short, the department had to come before the IFC for an allocation from the contingency fund because there was no other way to remedy the situation. Consolidating the class-size reduction program into the DSA would allow more flexibility.

Mr. Stevens said the reason an IFC allocation had been required was because there was not statutory authority in the class-size reduction bill to allow appropriations to be transferred between fiscal years. He was not sure what the decision of the subcommittee or the legislature would be regarding rolling class-size reduction funds into the DSA. If it was decided to isolate those funds, as was currently done, the language to authorize transfers of General Fund appropriations between fiscal years could be included in the bill. Then the $2 million allocation from the IFC during the current biennium would not be necessary next time.

Chair Evans said she would like to address the unresolved issues of the adult high school diploma program and the elementary school counselor program. As she understood, the way the elementary school counselor program was currently established, each district was assured at least one counselor and the larger districts received more. It seemed the concern was if the program was rolled into the DSA, the amount that would go to some of the smaller districts would not permit them to cover the cost of a counselor. She asked to which districts that would pertain. Chair Evans said she had a similar question regarding the adult high school diploma program. She asked whether the amount that would go to some of the smaller districts would be at all meaningful. In addition, she asked which counties would be negatively impacted by that.

Ms. Botts replied if either the elementary school counselor program or the adult high school diploma program were rolled into the DSA, there would be an increase in the per-pupil support for each district. The districts would not be able to identify how much they were receiving for those programs. She noted Doug Thunder had prepared a spreadsheet allocating the amounts currently spent for those programs on the basis of enrollment. That was not exactly how it would flow through the formula because there would be other factors in the formula, such as wealth adjustments. The smaller districts, such as Esmeralda, Eureka, Lander, Lincoln, Mineral, Pershing, Storey, and White Pine, would probably be unable to retain their counselors if the dollar amount was distributed purely by enrollment. However, under the formula they received more than the statewide average for basic support. Those amounts would be increased. Churchill County and Humboldt County School Districts would probably have enough funding, under the formula, to retain their counselors. Funds would no longer be earmarked for school counselors; it would all be consolidated into the per-pupil support. It would be up to the districts to decide how they wished to allocate those funds.

Chair Evans recalled Ms. Botts had given the subcommittee a number of options for the adult high school diploma program. She asked if the impact on smaller districts would be mediated by the option of transferring all funds for adult education programs to the continuing education budget. She asked if that would be the best solution. Ms. Botts replied it was not up to her to decide which option was best. That option would consolidate all the programs for adults into one budget account within a branch of the department that handled those programs and could provide direction and leadership in that area. There had been some problems with how those funds were allocated. In 1987 the formula approach for the prison programs was abandoned because there was evidence it was providing more money than necessary to operate the programs. In 1991, the formula was abandoned altogether for the regular adult education programs because it was very hard to predict, and the actual expenditures for one year were double what had been budgeted. Since then, there was a capped amount and prison programs were separated from regular adult programs. It had always been a challenge to determine how those funds would be distributed because if a district had a long-operating and well-developed program, it received more funding. The smaller districts or districts that had not previously been involved in adult diploma programs and were just establishing those programs did not receive very much money. The department had worked out a formula for allocating those funds that was more reasonable than in the past. She thought in terms of sending a letter of intent or requiring a district by law to maintain its current level of spending, if the funds were rolled into the DSA, it could prove difficult for some of the smaller districts to maintain that level of spending.

Chair Evans asked the subcommittee to consider whether, if special education was retained, the definition of a special education unit should be expanded to include teachers’ aides, school psychologists, and/or physical therapists. She said she would not have a problem with including school psychologists, physical therapists, and occupational therapists, but was not sure she could support including teachers’ aides, due to the cost differential.

Chair Evans asked for further discussion about the consolidation of the four budget accounts into the DSA.

Ms. Botts distributed a letter from the Carson Adult Education program (Exhibit F) and a letter from Marcia Bandera, Superintendent of the Elko County School District (Exhibit G). A number of the consolidation concerns were addressed in the letters.

Chair Evans asked for representatives from any other local school districts who wished to give their perspective on the consolidation. She said she would also like Mr. Hataway to explain the Budget Division’s revised figures.

Rick Kester, Director of Business Services for the Douglas County School District, said he would briefly address the consolidation. He said the State Superintendent’s Finance Committee, comprised of representatives from all school districts in the state, supported all four budget accounts being rolled into the DSA with several stipulations. First, the committee would support the consolidation if the special education funding was left with the existing unit funding approach and distributed to districts accordingly. Second, class-size reduction distribution within the DSA would have to be based upon the same mechanism and formula that currently existed in distribution of those funds outside the DSA. Third, adult education and the elementary counselors program funding would have to be rolled into the DSA with a floor established to protect the smaller districts that would lose funding. Finally, the remainder of the funds would have to run through the Nevada Plan formula. Only under those conditions would the school districts’ committee support the consolidation.

Mr. Goldwater asked Mr. Kester if he felt the accountability would remain, regardless of the distribution. Mr. Kester said he felt if the current formula, mechanism, and law remained in place, there would be no change in the accountability for class-size reduction or special education. Obviously, if some portion of the adult education and elementary school counselors programs ran through the DSA, with a floor, there may not be the current degree of accountability for those two programs.

Mr. Goldwater asked Mr. Kester what the State Superintendent’s Finance Committee thought would be the advantages to consolidation if the programs would be allocated and accounted for in the same manner. Mr. Kester said the only advantage would be the additional flexibility in funding between years, which could be handled in a different manner.

Mr. Goldwater asked Mr. Kester if Mr. Stevens’ suggestion to grant the authority to transfer funds between fiscal years was accepted, would his concern be alleviated. Mr. Kester replied yes, because the distribution mechanism and formula that the State Superintendent’s Finance Committee would support left the distribution and accountability exactly the same as when those funds were handled outside of the DSA.

Chair Evans asked if the position by the State Superintendent’s Finance Committee was unanimous. Mr. Kester replied he thought it was unanimous among all those present and he thought all districts were represented.

Ms. Botts said there were some concerns expressed, particularly by Lincoln County School District, about the effect on small counties. Chair Evans said that was a concern for the subcommittee as well. Mr. Kester noted he thought the issue had been addressed by the addition of a floor. Ms. Botts said if a floor was put in so each district received approximately $40,000 for the elementary school counselor program and $40,000 for the adult high school diploma program, then the smaller counties were in favor of the consolidation. Mr. Kester explained that the motion made by Marcia Bandera, Superintendent of the Elko County School District at the Superintendent’s Finance Committee, meeting included a floor for those two programs.

Mark Shellinger, representing the White Pine County School District, said the district reluctantly supported the consolidation because it was very concerned the floor would not be a "hold-harmless floor." Mr. Shellinger said the DSA had a negative impact on White Pine County, because it was not a 2 percent increase. The district’s current funding of $5,142 per student was increased by $16 in the Governor’s proposal. The increase was clearly not 2 percent. White Pine County’s economy, like other rural counties, was depressed. The assessed valuation and the ad valorem continued to decline, so what districts received differed from county to county. A large county, such as Clark County, could see a 5 or 6 percent increase, but White Pine County would receive an increase of approximately 0.5 percent.

Fixed costs in White Pine County were $160 per student. The recessive economy had a large impact. As shown on Page 2 of Exhibit H, Mr. Shellinger reviewed the district’s fixed costs per student. Technology costs would add $86,000 to the district’s budget in the coming year, which was a $43 per student increase. The technology system put in place by the state was tremendous, and he thought legislators should be proud of it. The maintenance of the technology system had a huge impact on school districts’ budgets.

Utilities increased by $32.50 per student. Maintenance for transportation and facilities increased by $26 per student. Most of the school busses were over 30 years old, so maintenance was very expensive. The district had no means to purchase new busses because of the county’s economy. Education costs increased $23.20 per student. Education costs were the additional costs to pay teachers who went from a bachelor’s to a master’s degree and was a fixed cost. The district’s insurance benefits increased as well, which led to a $22.50 increase for health insurance for staff. There was a $13.70 increase per student for special education, which was also a fixed cost. Therefore, the district was very concerned that the manner in which the DSA had been calculated would cause the district severe problems. The proposal to consolidate funds was even more of a concern.

Mr. Shellinger said the White Pine County School Board asked him to explain the items that could not be funded, even with cuts in student programs. In order to meet the increase in fixed costs, the district had to cut positions, which it was in the process of doing because there was no other way to balance the budget. Therefore, the district was unable to implement the curriculum piece it wanted for 6^th through 12^th grade. He said the subcommittee had seen the success of the curriculum program, Core Knowledge, on test scores in elementary grades. The district was ready to implement the curriculum for middle school, but it could not do so, given the budget constraints. The district would like to add a reading specialist, as it had been found to be a very effective way to help teachers become better teachers of reading and to directly assist students. The district was unable to replace aging school busses. Further, the district had no way to provide school lunches. Only 2 of the 11 schools in the district had a school lunch program, which was a problem, especially since 50 percent of the district’s children qualified for free or reduced-price lunches. The district could not provide step increases for additional experience. The school board had differentiated between education costs (the cost of moving from a bachelor’s to a master’s degree) and step increases (costs that increase with years of experience). Step increases could not be budgeted for the coming year. A salary increase for staff was totally out of the question. The principal’s advisory committee wanted the district to fund art and music specialists, but it was so far down the list of priorities, it had not even been seriously proposed. And finally, it was not possible to budget an ending fund balance. Therefore, the district was very concerned that any tinkering with the system could cause major problems for a small county.

Mr. Shellinger said 4 percent of the DSA was lost every year because of the collapse of the school district in 1995, which had a huge impact on the White Pine County School District. The 4 percent loss significantly reduced the district’s revenue. A.B. 480 would help because it would use the Nevada Plan and DSA as they were intended to provide that equity. A.B. 480 would give the district a bump to make up for the difference in what was lost from the financial collapse. The bill would have a positive influence on the district and the White Pine County School Board was in favor of it.

Mr. Shellinger said the district was facing increasing costs and declining revenues. The district was concerned that historically, there was a decline in K-12 support, but an increase in higher education. He did not want to take money away from higher education, but felt K-12 needed to be the priority.

Special education costs continued to increase as well. The proposed increase in funding did not make up for the increase in costs. The district received $28,000 for each special education teacher, but spent over $58,000. The difference had to come out of general revenues for regular education. Nationally, regular education dollars had fallen from 80 percent of school budgets in 1967 to 60 percent in 1996.

Mr. Shellinger said those challenges would continue. There were higher standards and higher expectations that should be met. He thought it was admirable the state was moving in that direction, but the funding needed to follow. There was a need for alternative programs and summer school. The district was down to only six students who had not yet passed the high school proficiency test. Teachers had volunteered to teach morning and weekend classes in order to achieve that, but there eventually needed to be fiscal support as well.

Mr. Shellinger proposed making sure each district could show a real increase when reviewing the final DSA figures to ensure each county received a 5 or 6 percent increase. He agreed it was a difficult situation and urged the subcommittee to be careful when considering any proposal to combine different revenues for public education. He insisted a county by county breakdown be established to determine the effect on school districts.

Mr. Shellinger concluded by expressing his appreciation that every subcommittee member had been willing to talk with parents who came from White Pine County. It had made a positive impact on the county’s communities and made the parents and the district feel the legislature was concerned and willing to listen.

Senator Coffin said his last discussion with Paul Johnson, White Pine County School District’s Finance Officer, had been on approximately February 16, 1999. He was sympathetic to the district’s needs, but his position had not changed since he last spoke with Mr. Johnson. Senator Coffin said he thought something could be done to remedy the situation through an increase in property taxes and asked Mr. Shellinger if anything had been done in that regard. He felt smaller districts should try to raise their own revenue so larger districts would not have to bear the burden of smaller districts. Mr. Shellinger said even if the tax capacity in White Pine County was raised to the legal limit of $4.50, the problem would not be solved because the county government was currently buying down to get to $3.64. The difficulty was the decline of assessed valuation in the county. Another mine had closed that week and the largest property owner in the county equated one-third of the assessed valuation. The property owner had seen that property devalued three times in the last year. It was not a situation the county could control. That was why the Nevada Plan was set up the way it was. Legislators had been forward thinking in establishing the Nevada Plan because they avoided litigation that other states had to deal with. Generally, the Nevada Plan worked well, but A.B. 480 would help.

Senator Coffin said Mr. Shellinger was making a strong case. He noted he would support increasing the tax to $5, which was the constitutional maximum. He had submitted that statement in writing to Mr. Johnson. He understood declining depreciation, but did not recall anyone coming into the Senate Committee on Taxation to specifically deal with the problem. A bill had just been passed to allow the county governments to increase tax capacity to $4.50 to keep their hospitals operational. He thought hospitals were just as important as schools. He did not see any reason why the tax could not be raised to $5 for schools, hospitals, or anything else and asked if White Pine County had made any effort to do so. Mr. Shellinger said White Pine County’s Board of Trustees was very concerned that, given the economic situation in the county, putting that level of tax on property owners would be distressing, particularly for people on fixed incomes. That was not a decision to be made by the Board of Trustees. Instead the board brought the issue to the legislature and asked for assistance. It the legislature determined an increase in property tax would be the best solution, the board would appreciate the decision.

Senator Coffin thought the issue ought to be taken to the people to vote or the county commissioners should do something. He thought the elected officials were the ones who would be distressed by a proposed increase in property taxes because they did not want to put the issue on a ballot or vote for it. Mr. Shellinger said White Pine County voters had approved $6 million in bonds, but those could not be sold even if the property tax was raised to the legal limit of $4.50. He did not believe the bonds could be sold even if the property tax was raised to $5. Senator Coffin said he had asked Mr. Johnson for an answer to that 2 months previously, but Mr. Johnson had not responded to him. Mr. Shellinger said he would provide that information to Senator Coffin.

Chair Evans asked for information from other school districts.

Dan Fox, Superintendent of Pershing County School District, introduced Exhibit I, which illustrated the increasing costs of textbooks. For the 1996-1997 school year, three textbooks were randomly selected and cost $48. For the 1998-1999 school year, the new editions of those same three books would cost $69.99, an increase of 45.8 percent.

Walt Rulffes, Assistant Superintendent, and Chief Financial Officer of Clark County School District, said he was representing the State Superintendent’s Finance Committee, of which Mr. Kester previously spoke. The committee asked him to address its concern about the vacancy savings factor that had been introduced into the DSA formula. He thought the committee did not expect increases beyond normal inflation, but did not expect funding cuts. There had been a proclamation that K-12 would be protected, but the vacancy factor was a $2.3 million statewide cut, and may reflect into some of the problems addressed by Mr. Shellinger and Mr. Fox. The committee did not dispute there may be some vacancy factor occurring, but the committee felt there had been "a double hit." In the process of assembling the budget the state used the actual base of school district expenditures and put that into the formula for the next budget. When actual salaries were reported, the committee thought the vacancy factor had already been taken into account. He asked the subcommittee to reexamine the vacancy factor. Speaking only for himself, he felt if the state believed K-12 should be cut to take its share of the state budget shortfall, "we would step up to the plate and do that." He requested the state not inject an artificial vacancy savings that would hurt the school districts.

Tony Wiggins, Superintendent of Humboldt County School District, said he would like to discuss the net proceeds of minerals tax proposal and the possible change in allocation of those funds. There had been some very reasonable and worthwhile efforts over the years by the legislature to make the tax as efficient as possible. In Humboldt County, due to an overtax or overestimate in 1995-1996, the Newmont Gold Corporation paid more than it was supposed to pay. In September 1998, Humboldt County School District was notified by the Department of Taxation and the corporation that the county owed a $136,000 refund to the corporation. In addition to the refund, statutes required that interest be credited to a taxpayer who overpaid. The interest had been $10,548, bringing the unexpected total repayment to $147,289. On behalf of 16 of the 17 school districts affected by the tax on net proceeds of minerals tax, Mr. Wiggins thanked Mary Peterson, Superintendent of Public Instruction, and Ms. Botts for their assistance.

Mr. Wiggins said the solution to the problem was to make no major changes to the tax or the manner in which the tax was collected. The only change would be an adjustment in the allocation of the tax, based on one year in arrears. With that minor change, school districts would be receiving and spending such tax revenue based on actual, not estimated, numbers. That would allow school districts to budget those funds and would prevent the over budgeting.

Chair Evans thanked Mr. Wiggins for his testimony and said the net proceeds on minerals tax and the vacancy savings issue were to be discussed that morning, but the subcommittee had only discussed the first few items. The issues were very much a concern to the subcommittee and would be addressed.

Chair Evans, following up on Mr. Shellinger’s suggestion for the subcommittee to hear a county by county breakdown of how each district would be affected, said the subcommittee needed to be fair to all school districts. That could not be done unless there was a full understanding of the impacts on each district. The subcommittee was concerned because there were "third world" school districts in Nevada and there was a very real disparity among the districts. It would be irresponsible to take care of only the larger, better funded school districts, telling the smaller districts to fend for themselves.

Mr. Goldwater said he thought the downside of the subcommittee’s options had clearly been presented, but he failed to see the upside. He recognized there needed to be a more accurate reflection of what was spent per pupil on education and more flexibility, which he thought was bad budgeting.

Chair Evans asked Mr. Hataway to present the Budget Division’s revised recommendations for the Distributive School Account (DSA).

Mr. Hataway emphasized The Executive Budget had been built on a good faith effort to place maximum flexibility of decision making with the local school districts. He felt it was still an admirable goal, but depending upon what decisions were made as an outcome of the discussions, he did not know if that would be possible. Unfortunately, there were transitional issues. The Budget Division had no problem with temporary funding guarantees to make the transition work, but the accounts might as well be left separate if there were going to be ongoing guarantees. He also emphasized that regardless of whether the accounts were combined or kept separate, the funding problems of small school districts would not go away and would not necessarily be solved by the Budget Division’s recommendations.

Mr. Hataway said the only new information in the Budget Division’s revised recommendations for the DSA (Exhibit J) was the updated assessed valuation figures provided by the Department of Taxation. In December 1998, the Department of Taxation expressed concern that the Budget Division’s estimates were too high, but Taxation’s official estimates were now $1.3 billion higher than the Budget Division’s estimates. Mr. Hataway called attention to Line 53 on Page 3 of Exhibit J. Total school expenditures were projected to increase 19.5 percent in the first year (1999-2000) over the base year of 1998, as shown in Column X. For the second year (2000-2001), total school expenditures were projected to increase 5.26 percent, as shown in Column Z. He had not been invited to the State Superintendent Finance Committee’s meeting, so he was not aware of what the committee’s recommendations would be on those issues.

Mr. Hataway said he would not explain in detail the Budget Division’s recommendations for statutory change and spending authority related to class-size reduction and the estate tax (Exhibit E). He said the Governor’s office had directed him to work with the Fiscal Analysis Division to work the recommendations into final wording, if the subcommittee wished. The Budget Division wanted flexibility built into the use of class-size reductions for grades one, two, and three, but was not in support of the wording in S.B. 466 which would give the school districts broad authority in the use of those funds. The Budget Division felt there should be some type of business plan outlining how the funds would be specifically used in terms of flexibility related to the ratios. The Budget Division also was of the opinion that federal Title I funds, although those were entitlement funds, should also be highlighted, and school districts should be required to follow the same process of preparing business plans regarding how the funds would be used and how state remediation funds would be meshed with federal remediation funds to achieve maximum flexibility. Even the Federal Government had expressed reservations on the usefulness of those programs over time, and the districts would receive $22 to $24 million each year of the biennium for Title I programs.

Mr. Hataway said the $8 million recommendation for the use of estate tax was currently very fluid because if the subcommittee decided not to consolidate class-size reduction into the DSA, the flexibility to use the $8 million for other school improvement activities would be lost. He added Exhibit E reiterated what the Budget Division had presented at the subcommittee’s last meeting. The Budget Division was willing to work with the subcommittee to determine how much funding should go toward remediation or professional development, for example. Mr. Hataway said the Governor had asked him to emphasize that his top priority was remediation. Consequently, anything beyond the four programs should fall into the education reform remediation criteria and would not address things such as operating costs for staffing.

Mr. Hataway said the Budget Division also recommended the course of action estate tax should take, in terms of rolling it all into the DSA and funding those specific programs that were ultimately identified in the amounts related out of the DSA, as was done with the adult prison programs. The division felt those steps would lead to higher achievement levels on the part of students.

Chair Evans thanked Mr. Hataway and said he was correct, in that whether or not the four programs were consolidated into the DSA, the problem would still not be solved in smaller counties. The consolidation may even exacerbate the smaller counties’ problems, which is why the subcommittee needed to review the impact on a county by county basis. She reiterated it would be irresponsible to not take care of small counties because legislators were responsible for the entire state, not just their home districts. She informed the subcommittee it was only part of the way through the issue and there were tough decisions ahead, so the subcommittee would be having additional work sessions on the subject. She acknowledged there were many people who wished to speak, but due to lack of time, said there was only time for Fred Dugger, Commissioner on the Nevada Commission on Educational Technology.

Mr. Dugger said the Commission on Educational Technology was created in the 1997 Legislative Session by the Nevada Education Reform Act, S.B. 482. The commission was charged with three tasks. The first task was to develop standards for educational technology in schools. The commission did that and the standards were issued in November 1998. The second task was to create a statewide plan for educational technology, which was delivered in December 1998. The third task, which most people felt was very critical, was the distribution of approximately $36 million, on a need basis. The money had been appropriated, which was very challenging to do correctly. The statute required the commission to have at least 4 meetings per year and the commission met 29 times in order to do the very best job possible. The distribution ranged from approximately $26 per child in Caliente to about $60 per child in Clark County.

Mr. Dugger explained at the end of the planning process, the commission had a statewide plan and had received a recommendation from WestEd, which had been the contractor that developed the plan for the commission, to ask for approximately $66 million for the next biennium. The spread sheet for the proposed funding was shown on Page 3 of Exhibit K. The commission thought $66 million was a lot of money and more than the commission anticipated would be available. The commission reduced the request to approximately $24 million in November 1998, as an appendage to the technology plan the commission had issued.

Mr. Dugger said, recognizing there was still little money available, the commission established three priority items, which further reduced the amount of money the commission requested for technology. The first priority item was for $5.5 million for repair and replacement, maintenance, and software contracts to keep computers operational. The funding appropriated the previous year had not been sufficient to replace all computers. The second priority item was $500,000 for a statewide license for databases, which would allow all school libraries to have the same resources as public libraries and would be a tremendous research tool for students. The third priority item was a special type of funding for schools that had not yet been brought up to level one funding or schools considered to be in need of specific help. The $8.7 million total for the biennium was roughly comparable to the $8.6 million contained in Section 61.2 of S.B. 482 of the 1997 Legislative Session.

Chair Evans thanked Mr. Dugger for his comments and said the breakdown of funding within the commission’s priorities had been extremely helpful to the subcommittee.

Ms. Botts said there were a few items in Marcia Bandera’s letter to the subcommittee (Exhibit G), that had not yet been discussed. Much of the letter was similar to the State Superintendent’s Finance Commission’s report presented by Mr. Kester. The Elko County School District had requested an allowance for an option for school districts that could provide classroom space to implement a pupil-to-teacher ratio of 22 to 1, in order to move away from team teaching in the district’s elementary program. The district had also suggested, for the expanded definition of special education unit, that funding also be used to provide two teacher’s aids, in addition to physical and occupational therapists. The letter suggested language for an amendment, which would be statutorily required if the definition was changed.

Ms. Botts explained there was some evidence motor vehicle privilege tax estimates contained in The Executive Budget may be high. The Department of Taxation had provided figures to school districts for budgeting purposes. The department’s estimates showed approximately a 6 percent increase, yet The Executive Budget had been built on approximately an 11.8 percent increase. The Fiscal Analysis Division would need to meet with the Department of Administration, the Department of Taxation, and the Department of Motor Vehicles and Public Safety (DMV/PS) to try to work out the difference.

Mr. Hataway said the Budget Division had worked with the DMV/PS on the department’s estimates of population growth and new car sales. The department saw no reason why growth would not continue at the same level, which had been at the same double-digit level since 1995. If the Department of Taxation was the official entity that made the projections, the adjustments would have to be made. He added he thought the Department of Taxation had "lowballed" the estimate.

Chair Evans said the subcommittee thought the department had done so, too. She said the subcommittee would need to consider the assembly bill relative to the motor vehicle privilege tax in Washoe County. The subcommittee needed to know what the impact would be if the bill went into effect.

There being no further business before the subcommittee, Chair Evans adjourned the meeting at 11:05 a.m.

SUBMITTED BY:

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Christina Alfonso,

Committee Secretary

APPROVED BY:

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Assemblywoman Jan Evans, Chair

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Senator Raymond Rawson, Chairman