The Committee on Ways and Means was called to order at 7:45 a.m., on Thursday, May 6, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Mrs. Jan Evans, Vice Chairman

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

Mr. Robert Price

COMMITTEE MEMBERS ABSENT:

None

STAFF MEMBERS PRESENT:

Chairman Arberry announced the first order of business would be A.B. 372, and invited Ms. Giunchigliani to present her testimony.

Chris Giunchigliani, Assembly District 9, explained A.B. 372 was a "breakaway" from A.B. 373, which had already been heard by the committee. In drafting, Legislative Counsel Bureau (LCB) staff suggested separating the two issues. The bill was originally heard by the Committee on Judiciary, where it passed unanimously, and was then referred to the Committee on Ways and Means due to a pending fiscal note. Ms. Giunchigliani indicated A.B. 372 addressed group home protection for elder care. She reported as she researched the issue of elder care, she found that Nevada Revised Statutes (NRS) did not include protection for persons with mental disabilities, and she felt very strongly that the legislature also needed to ensure protection from abuse, exploitation, neglect, et cetera for those persons.

Ms. Giunchigliani strongly recommended that the committee consider the bill, because it added protection for persons suffering mental disabilities to the Older Persons Act, in order to provide coverage for those persons as well. Further, noted Ms. Giunchigliani, with the Nevada Disabilities Advocacy and Law Center (NDALC) no longer completing investigations, there was no one to protect, or watch for the protection of those individuals. She was unsure of the actual fiscal note attached to A.B. 372, but thought perhaps the impact would be based on the need for additional staff within the Health Division.

Vice Chair Evans concurred with Ms. Giunchigliani’s testimony in terms of the concern regarding abuse and exploitation of persons with mental disabilities, and the need for oversight in that area. Hopefully, abuse would not happen every day, but Vice Chair Evans felt the legislature had a responsibility to those individuals who were most vulnerable. Clearly, commented Vice Chair Evans, that was a population which needed help and support from the legislature.

Carlos Brandenburg, Ph.D., Administrator, Division of Mental Hygiene - Mental Retardation testified, as indicated by Ms. Giunchigliani, A.B. 372 would provide the division with the oversight to investigate the issue of abuse and neglect for persons with mental disabilities. The division had submitted a modest fiscal note, consisting of four Social Worker positions, two for southern Nevada, one for northern Nevada, and one for rural Nevada, in order to complete such investigations on a statewide basis. Dr. Brandenburg believed the fiscal note would be approximately $198,000 for the first year of the biennium, and $216,000 for the second year, which would include staff, executive positions, and travel. Chairman Arberry inquired if the fiscal note pertained to the additional positions only. Dr. Brandenburg replied in the affirmative.

Vice Chair Evans asked about the division’s anticipated caseload in that area, realizing it would take time to arrive at an exact number, but in light of the request for four additional Social Worker positions, what criteria had the division used to arrive at that number. Dr. Brandenburg advised the division contacted the Aging Services Division, and it was reported that a staff level of 5.5 Clinical Social Workers was currently in place to investigate the abuse, neglect, and exploitation of elder persons. Further, he noted that Clark County employed 6 additional full-time Clinical Social Workers, along with supervisors to work in the same area. Dr Brandenburg indicated a current staff level of 12.5 full-time positions was in place in those agencies to investigate roughly 3,049 reports of abuse and neglect in FY 1998, which was approximately 244 cases per staff member. He felt the requested Social Worker positions would probably review approximately 245 cases for the first year of the biennium. Dr. Brandenburg surmised there would be an initial "phase-in" stage to the program. The division would be more than happy to entertain a letter of intent, if the committee so desired, in order to bring the fiscal note down, and allow the division to approach the Interim Finance Committee (IFC) to request additional positions as the caseload increased.

There being no further testimony regarding A.B. 372, Chairman Arberry declared the hearing closed. The next item for committee consideration was A.B. 597

Ms. Giunchigliani advised A.B. 597 was the companion piece to A.B. 598, which was previously heard by the committee. Those were the two bills resulting from the School Construction Committee authorized by A.B. 353 of the 1997 Legislature. Ms. Giunchigliani presented a packet to the committee regarding amendments to A.B. 597, (Exhibit C), which would remove the entire fiscal note from the bill. According to Ms. Giunchigliani, A.B. 598 dealt solely with the issue of Americans with Disabilities Act (ADA) compliance when the State Public Works Board reviewed architectural plans. Further, she explained, A.B. 597 contained the "meat" of the recommendations from the A.B. 353 committee.

Continuing, Ms. Giunchigliani advised she had posted a work session on the bill, inviting Mr. Goldwater and Mrs. Cegavske to participate. Approximately 35 persons attended and helped streamline A.B. 597, and she conveyed that Exhibit C represented the end result of the recommendations from persons attending that work session. Ms. Giunchigliani wanted to present the amendments (Exhibit C) to the committee for consideration, and as a sounding board in order to ascertain if the language contained in the bill was close to becoming acceptable. Basically, the amendments to A.B. 597 would recommend deletion of almost all of the original language except the first three sections. In addition, section 1.5 (3) would remain in the bill, but Exhibit C suggested amended language.

Ms. Giunchigliani explained what was envisioned was the creation of a statewide fund in a three-tiered program: the first focused on emergencies, the second focused on the emergency school construction issue, and creation of a fund which would never allow schools to reach emergency status. Further, she hoped the legislature would deal with the Lincoln County and White Pine County conditions to some extent during the session. Ms. Giunchigliani noted the bill would also attempt to ensure that districts that were at the property tax cap, and had buildings that were condemned, could be assisted with preventive measures and not suffer dilapidated conditions again.

Randy Robison, representing Lincoln County School District, stated Ms. Giunchigliani had covered the first portion of Exhibit C, however, he would also address portions of the proposed amendment. The "Add by Amendment" section on page 1 of the exhibit dealt with the State Capital Improvement Fund, and suggested potential revenue sources. Mr. Robison called the committee’s attention to the proposal to use a portion of the state’s "Rainy Day" Fund, and a portion of the Disaster Relief Fund. The School Construction Committee indicated, when it was informed what the costs would be in the various school facilities, there might be a possibility of a State General Obligation Bond to meet some of those costs.

Continuing his presentation, and addressing the exhibit regarding amendments, Mr. Robison noted section 3 of A.B. 597 would remain the same, sections 4 through 11 would be deleted, along with sections 13 and 14. Further, the "Add by Amendment" and "The Emergency School Construction Act" portion addressed the criteria for school districts that found themselves in emergency conditions. The school districts were attempting to develop a plan by which a school district could prevent that type of situation in the future, however, Mr. Robison explained, when such a situation did occur, that section of the exhibit would set the criteria for school districts to seek state assistance.

Ms. Giunchigliani stated some of the proposed amendments were to insure that school districts were making an effort to secure local funding. However, when they reached the point where they suffered declining assessed valuation, had unhoused students, had reached the property tax cap, or the facility was found to be unsuitable for use, A.B. 597 would outline proposed procedures. She noted not every school district would qualify for state assistance, and the requirements would be very narrow. Ms. Giunchigliani wanted to ensure that also contained within the bill were options, so that when school districts had done everything possible at the local level to secure funding, they could apply to the state for assistance.

Mr. Robison added that one of the procedures would be if a school district found it met those criteria, it could apply to the Department of Education for emergency school construction relief. That application would be reviewed by the Department of Taxation to ensure the school district had made legitimate maintenance efforts. After review by the Department of Taxation, the application would then be submitted to the State Public Works Board to make sure that the facilities had been reviewed either by the board or another qualified structural engineer. Mr. Robison conveyed once those evaluations were completed and approved, the application would move forward and the project would move to the top of the Capital Improvement Project list.

Chairman Arberry asked who would select the structural engineer. Electing to respond was Ms. Giunchigliani, who advised she envisioned the State Public Works Board selecting the proper person to perform the evaluation. That would eliminate the possibility of a school district alleging it had a problem, or advising it had found an engineer to evaluate the facility. Further, she noted, the application would not even reach the State Public Works Board if the Department of Taxation determined capability still existed through assessed valuation, or through the cap, or other local funding sources. Ms. Giunchigliani reiterated an application would not even reach the State Public Works Board if it had not been certified by the Department of Taxation as having met the standards.

Continuing with his presentation, Mr. Robison again referred to Exhibit C, addressing the "Add by Amendment" section on Page 2, which would amend NRS 377B.100. That amendment was proposed by Al Bellister of the Nevada State Education Association, to help school districts show continued effort, and to provide a possible revenue source for extraordinary maintenance and repairs. Mr. Robison commented the amendment would allow the school districts to level one-eighth cent of the one-quarter cent sales tax, if not already levied, for extraordinary maintenance and repair. Additionally, Mr. Robison reported there would be a minimal amendment to NRS 354.611 to allow the school districts to deposit those funds in an existing repair and maintenance fund, and allow expenditure for the maintenance and repair.

Ms. Giunchigliani advised that last session, the Senate requested an amendment be added to A.B. 353 to allow assessment of a one-quarter cent sales tax that could be used for school construction in the rural area. What happened was the counties were capturing all of the money, or the county commissions were turning down the requests. The amendment would be a change, noted Ms. Giunchigliani, however, it would only effect populations under 100,000, as referenced in NRS 377B.100. The one-quarter cent sales tax would be split into one-eighths, so the county would retain its one-eighth and authority regarding the other one-eighth would be given to the school board for distribution. Ms. Giunchigliani stated she wanted to ensure school districts had made an effort; if the school board did not enact the one-eighth distribution, the districts would not be able to apply for funds. The school districts needed some tools to show they had made an effort at the local level to secure funding for their facilities.

Mr. Robison indicated the last section of the proposed amendment (Exhibit C) was the continuation of the State Planning Commission as established by A.B. 353 of the 1997 Legislature. There were proposed cursory changes to the board, in an attempt to define its mission in a clear and concise manner. The amendment would make the following changes in the membership:

• Four legislators, two representing rural counties;
• Superintendent of public instruction;
• One member representing local government finance – city;
• One member representing local government finance – county;
• One member representing local school district – finance;
• The director of the State Public Works Board or designee; and,
• The director of the State Department of Taxation or designee.

According to Mr. Robison, the purpose of the board was very similar to that proposed by A.B. 353 from the 1997 session. The funding for the commission in the proposed amendment was set at $150,000, which Mr. Robison felt would be adequate. Most importantly, the amendment proposed that all public notices were to be included in legislative committee notices. He explained that the meetings, for whatever reason, were either wrongly classified or the notice misplaced, and they were seldom noticed, which made public input quite minimal.

Referring to the proposal regarding sales tax, Mr. Marvel asked if school boards had the authority to levy taxes. Ms. Giunchigliani replied no, they did not. Mr. Marvel inquired who had the authority to levy taxes; Ms. Giunchigliani stated the bill would give school boards that authority, but only in the circumstance of the one-eighth cent sales tax. Mr. Marvel then asked if the proposed action was constitutional, and had Ms. Giunchigliani checked with the LCB Legal Division regarding the matter, to which she replied she had not. Mr. Marvel commented if every entity in the state could levy a tax, no one would have control of the taxing powers in a local jurisdiction.

Henry Etchemendy, Executive Director, Nevada Association of School Boards, informed Mr. Marvel the association had posed the same question. In a recent meeting with LCB, the question of how the school board could access that fund as a legal entity was asked. Mr. Etchemendy reported school boards were really not an entity of general government, such as cities, counties and the state. He felt that was a question the Legal Division had to answer. He envisioned if there was no way for the school boards to actually levy the one-eighth cent portion of the sales tax, then the statute should be amended to provide a means for the school boards to approach the county commissioners for access to those funds.

Mr. Marvel stated for several sessions he had proposed legislation to create a Lander County Airport Authority, and had run into the same problem. He found that the authority itself could not raise taxes, so it was proposed through the county commission, and the commission could initiate a raise in the sales tax, or it could go to a vote of the people. He felt the county commission would have to be the ultimate entity to levy the tax. Ms. Giunchigliani advised she would research that issue, as it had not come up when she was working with the LCB Legal Division in drafting the amendments. She stated she had been informed there were districts that had approached county commissions to request enactment of that money, and the commission had turned them down. The school districts were in dire need, and the advice she received was to make sure that school districts had done everything possible at the local level in an attempt to raise revenue. Ms. Giunchigliani stated it was unfortunate that school districts had attempted to access funds and were denied, with no other access available. She inquired if Mr. Price, as former Chair of the Taxation Committee, had any suggestions. Mr. Marvel noted museums and historical societies experienced the same problem, and there was proposed language which would make distribution of funds discretionary, but not mandatory.

Mr. Price stated his first guess would be that the legislature, by simple statutory authority, assuming the bill passed, could in fact authorize a school board, or other entity to disburse funds. Whether or not the legislature wanted to enact such language notwithstanding, he felt that statutorily it could be done. Mr. Price then asked for clarification regarding the notice of meetings, stating he believed meetings of state school boards were held under the stipulations of the Open Meeting Law. Ms. Giunchigliani stated she would attempt to clarify that concern. She sat as chair of the School Construction Committee, which was not actually an interim study, but was simply enacted by the bill, therefore, it was not put on the interim list and was never noticed on the calendar. There were special workshops set up with the help of the Associated General Contractors of America (AGC), where the committee received input from developers and contractors. Ms. Giunchigliani advised committee members did not realize it was not noticed, and she wanted to ensure that future meetings would be properly noticed.

Vice Chair Evans asked for clarification regarding section 1.5, subsection 2, of A.B. 597, which stated, "All money in the state distributive school account that would otherwise revert to the state general fund at the end of the fiscal biennium***". Without checking the budget, the amounts would vary from one year to another, and it would be difficult to determine the level of that account. There were many conditions that influenced the balance for reversion. Also, the proposed amendment (Exhibit C), which read, "A portion of the interest earned from the state ‘Rainy Day’ fund***," asking if the approximate balance of that fund at the current time was $130,000. Ms. Giunchigliani stated that was her understanding. The committee wanted to get a feel for the concept to see if it was moving in the right direction without raiding any one area, while finding the tools necessary to begin building a capital school fund. Therefore, members had viewed a portion of the interest from that fund as a funding avenue.

Vice Chair Evans asked exactly what the A.B. 353 committee was looking for in terms of interest from the "Rainy Day" Fund; was it a figure such as 5 percent. Perry Comeaux, Director, Department of Administration interjected he thought it was approximately 25 percent. If the total percentage was used, Vice Chair Evans noted it would amount to a $6.5 million allocation per year from the "Rainy Day" Fund. Her next question was regarding the balance of the Disaster Relief Fund; Ms. Giunchigliani replied it was approximately $5 million, but the balance varied.

For purposes of the bill, did the committee need to decide on a certain amount of percentage, asked Vice Chair Evans, because the use of "a portion" was inexact. Ms. Giunchigliani stated she would like to insert a definite percentage, but wanted some discussion regarding what that should be. The A.B. 353 committee did not want to create a fund that just simply grew ad infinitum, but did want to start with a percentage that could be utilized by districts which had entered the emergency status regarding facilities. The committee also wanted to assist with those school districts that continued to experience problems with assessed valuation, and extraordinary maintenance needs, so they never again reached emergency status.

According to Ms. Giunchigliani, it was not envisioned that the percentage would be a "raid" on other funds, but would be very narrow, while allowing assistance from the state to those local school districts for the first time. She advised a percentage would need to be placed in the bill, one that would not negatively impact the funds. The local school districts were at emergency status in Nevada, and the study completed by the committee in the interim identified over $1 billion in deferred maintenance needs throughout the state for public schools.

Vice Chair Evans asked if the interest realized from the "Rainy Day" Fund and the Disaster Relief Fund would be placed into a special fund or the General Fund. Mr. Comeaux explained the interest from the "Rainy Day" Fund currently went into the General Fund, however, effective July 1, a piece of that interest would go to the Disaster Relief Fund. He stated the earnings from the Disaster Relief Fund remained in that fund, if he remembered correctly.

Vice Chair Evans noted the deferred school district maintenance needs were enormous, and construction needs were an unknown, unless the committee had been able to arrive at an amount. She indicated it would seem, at least for the next few years, or 2 to 3 biennia, that the percentage placed in the fund for school maintenance would need to be meaningful. Cash needed to be placed in the fund and using only 1 or 2 percent of the interest earned from the "Rainy Day" and Disaster Relief Funds, would not amount to enough funding. For example, as previously discussed, using the entire amount of interest from the "Rainy Day" Fund would only generate $6.5 million per year. Whatever was decided, Vice Chair Evans hoped it would be a significant enough percentage to be meaningful. If the fund had its own principal balance, it would then generate its own interest over time, but first there had to be a commitment to put substantial dollars into the account. She indicated she would be comfortable with allocating the major portion of the interest from the "Rainy Day" Fund for a specified number of years, not ad infinitum, for school maintenance.

Ms. Giunchigliani stated that was what the committee envisioned, trying to arrive at an amount that would be substantial and begin to generate its own revenue, but not go on forever. Only those districts that met the criteria would be assisted. Many districts, such as Clark County, had the capability to pass bonds, and were not at the property tax cap, however, there might be future needs in Washoe County. One thing Ms. Giunchigliani wanted to point out was that the State Public Works Board would come up with a standard so that buildings were uniform and not fancy "taj mahal" types of buildings, when portable classrooms were called for. That was the other reason the State Public Works Board was included, so it could arrive at a standard design, one that was safe, well lighted, and where students could be housed.

Mr. Marvel likened that scenario to the problem experienced with prison construction, where like models were used for two separate prisons, and the state was sued because it did not own the plan. It was a good concept, and the state should own the plans, however, there was apparently some legality prohibiting such. He indicated use of a "boiler plate" plan that could be adaptable to all the school districts, would be helpful. Ms. Giunchigliani stated the A.B. 353 committee did discuss that issue, recognizing there were different needs in different areas of the state, but hoped to devise at least a somewhat standard plan, and not to the extreme. For example, in White Pine County, perhaps portable classrooms would make the most sense versus what would be suitable for another area of the state. The committee wanted that flexibility for the State Public Works Board to review the need. Also, she advised the committee that language contained in A.B. 597 did allow for gifts and grants to be accepted, as there were some individuals who wanted to help the school districts.

Ms. Giunchigliani referred to language in Exhibit C that referred to application for funding from the state Capital Improvement Project (CIP) list. The committee strongly believed when a building reached emergency status, the school district should be allowed access to the CIP list for funding, and that was the recommendation in the proposed amendments. A uniform school system was mandated by the constitution, and the state would be sued at some point if it did not begin to take care of the buildings that had reached emergency condition. Ms. Giunchigliani noted the state built wonderful "tech" centers at some area schools, and left other schools literally "falling apart," and she felt that K-12 children deserved the same degree of consideration. Those schools were not asking for a new gymnasium, or new computer room, but were asking simply to have adequate classroom space in a building that was safe and well lighted. There was nothing that prohibited school districts from accessing the CIP list, and the committee believed at least for the emergency status, it should be considered. Ms. Giunchigliani reported that situation might never arise, and if the legislature addressed the Lincoln County and White Pine County situations, and dealt with prevention, the CIP list would never need to be accessed. The committee felt that was a reasonable place when, and if, any district had a facility that was in emergency condition.

Mr. Price asked how many one-room schools were still operating in the state. Ms. Giunchigliani thought there were five or six, with the Good Springs School in Clark County being one. That school had been well maintained, which was the whole point. If there were maintenance dollars available, many of the facilities would never reach emergency status. The biggest problem was that maintenance was always the first area cut and, in fact, was not well funded in the current budgets under consideration by the legislature. The state continued to allow buildings to deteriorate, and proposed language in the amendment regarding the Emergency School Construction Act, (Exhibit C), indicated if emergency renovation costs exceeded 40 percent of replacement costs, the state was just throwing "good money after bad." That language was a recommendation from the private sector, which questioned the renovation of buildings which should be "bulldozed." That was the standard, and if the state was continually throwing that much money into maintenance and repair costs, et cetera, then a new facility should be considered.

Mr. Etchemendy stated he wanted to address the issue of permanent financing in an amount that would do some good, and build up a fund that could be accessed over the next several years. When the association met with the State Panel on School Construction, there were several suggestions, but there was one idea he felt would work very well for both the state and counties. Mr. Etchemendy stated a portion of that idea was contained in the first section of A.B. 597, and had to do with the Distributive School Account (DSA) reversions. What the association suggested was that a portion of those reversions, whatever percentage that might be, would go into the DSA Stabilization Fund as written in the bill. According to Mr. Etchemendy, that would serve two purposes:

1. The funds could be utilized whenever the state had to approve a supplemental appropriation; and,
2. The balance would always be available and could be utilized for the emergency type school construction addressed by the bill.

Mr. Etchemendy felt by using a percentage of the reversions, within a few years, there would be a significant balance, and the job could be done. The association strongly felt that should be considered. The current bill proposed to place all reversions into the "Rainy Day" Fund for the DSA, and only the interest on that could go in the stabilization fund, which would not build up the fund very quickly. He was not suggesting using all of the DSA reversions, but rather some percentage of it that could accommodate both a sizeable fund for school construction and enough to make supplemental appropriations whenever necessary.

Ms. Giunchigliani stated the committee agreed with Mr. Etchemendy’s position, and had originally envisioned utilizing just the interest, but if the legislature wanted to build a corpus properly, that could be the way to do it and still recognize that supplemental appropriations would have to be paid from it.

Mark Shellinger, White Pine County, thanked the legislature for its interest, and stated the county would support the changes to A.B. 597, mostly because it narrowly defined state involvement, which was critical. The conditions a school district had to meet were fair, and were what the state should expect a school district to do before it approached the state for assistance, to ensure it could meet the constitutional provision of providing a uniform system of public schools. Mr. Shellinger stated that piece was very important. White Pine County’s concern was that the issue was dealt with during the current session. The reason it approved the language in A.B. 597 was because the bill contained the narrow definition that a school district had to be at tax capacity, and the county had to show that revenue was declining in terms of assessed valuation. Mr. Shellinger felt it was important for the county to demonstrate it had done everything possible to meet its needs on its own. Under the criteria listed in the amendments (Exhibit C), only two counties in the state would qualify for assistance, Lincoln and White Pine, and in both cases the counties had done everything possible, and really did have schools that were in crisis.

Mr. Shellinger emphasized White Pine County’s situation truly was critical, and that was why representatives had been present during the session, making a real effort to communicate that issue. What he would encourage the committee to do in terms of funding, was not simply to deal with the immediate situation in White Pine and Lincoln Counties, but also to ensure there were provisions for the future. Also, to have a system in place whereby any school district could approach the state for assistance.

Further, Mr. Shellinger indicated, he felt the CIP list was an appropriate mechanism to help fund the issue, and thought K-12 schools should be weighed in terms of importance with all the other projects on the list. Mr. Shellinger stated he was sure every project on the current list was needed, but the question became a matter of priorities and long term funding for those issues. Once again, Mr. Shellinger stated he appreciated the effort and concern shown by the legislature, and the 145 lobbyists from White Pine County were very impressed with the legislators.

Mary Peterson, Superintendent of Public Instruction, reminded the committee that Nevada was one of two states in the country that did not participate in school construction. Further, she noted, the constitution did, in fact, require a uniform system of public education, and she would urge consideration of the recommendations brought forth by Ms. Giunchigliani in the revised version of A.B. 597.

There being no further testimony on A.B. 597, Chairman Arberry closed the hearing. The next item of business for the committee was budget closings.

Mark Stevens, Fiscal Analyst, Legislative Counsel Bureau (LCB) informed the committee the closing report was basically the same as reviewed by the subcommittee, however, did include some additional information from the court. The court budgets were not resolved in subcommittee, were brought to the full committee in the Senate, and were now being brought to the full committee in the Assembly. The base had been adjusted in the Supreme Court budget, including the two additional justice positions added in January 1999, plus additional staff, which had been funded for only 6 months. Those costs had to be annualized within the adjusted base budget.

Mr. Stevens reported the subcommittee indicated it felt the budget request needed to be revised downward, and noted that the court budgets, because they were a separate branch of government and not reviewed by the Budget Division, were somewhat different than the budgets routinely reviewed by the subcommittee. The subcommittee felt in the neighborhood of an 11 percent to 13 percent increase would be appropriate, and wanted to review the budget after funding was brought down to that level. The funding required to sustain a 13 percent increase would allocate General Fund dollars for the court’s top seven priority positions within its request. Over and above that, and not included in the 13 percent, were module M-300 costs, which were the result of additional group insurance premiums and other fringe benefit increases.

According to Mr. Stevens, court staff had worked with LCB staff to arrive at the figures based on the assumptions. The 13 percent increase included the court’s priorities, and LCB staff made no attempt to determine what those priorities should be, but basically followed instructions from the subcommittee to devise a budget that represented an 11 percent to 13 percent increase. He noted LCB staff simply worked with court staff to determine its priorities. The court also was requesting additional funding it felt was necessary to fulfill its mission during the next biennium, which would result in a 36 percent increase in General Fund above what was provided in the current biennium.

Mr. Stevens indicated the Senate Finance Committee closed the court budgets at the 13 percent level, plus approval of the M-300 costs, amounting to a 27 percent increase in General Fund. That committee also placed the court’s 20 percent add-on budget, encompassing items it included in addition to the seven top priority items, on the "priority list" for new funding, if funding became available later in session.

Mr. Marvel asked if a 26.69 percent increase in General Fund support was how the Senate Finance Committee closed the budget. Mr. Stevens replied in the affirmative, along with the additional court priorities being placed on the legislature’s "priority" or "add-back" list. Mr. Marvel then inquired how much funding those additional priorities would require. Mr. Stevens indicated it would be $384,194 in the first year of the biennium, and $423,595 in the second year.

Mr. Dini requested clarification regarding the figures used in the Senate closing. Mr. Stevens explained the adjusted base budget, annualizing the additional positions and other costs, represented an 11 percent increase in funding. He noted the subcommittee requested court and LCB staff to bring a budget which would show a total increase of only 11 to 13 percent above that adjusted base. The M-300 costs were added to the budget over and above the 11 percent. Including all items, and comparing the increase that would be approved to the General Fund appropriation as provided for the Supreme Court, the Division of Planning Analysis, and the Law Library in the current biennium, it would represent a 26.69 percent increase.

Ms. Giunchigliani stated the joint subcommittee was originally in agreement regarding the 13 percent increase, commenting it was attempting to accommodate the needs of the court without impacting it negatively. She advised she did not believe the court’s caseload really justified the huge increase that was initially requested. Ms. Giunchigliani noted the court had made cuts in their budget. She indicated the Assembly attempted to accommodate the needs of the court, however, the Senate had changed their position, and approved the higher dollar and percentage amounts.

Mrs. Chowning requested that a member of the Supreme Court answer a question for her, because the subcommittee had not reached a closing agreement, and therefore, had approached the Ways and Means Committee as a whole. She explained the court had prioritized its top seven positions, which was actually a cut from the 20.5 positions originally requested. Ms. Chowning stated it was a very difficult process, not only for subcommittee members, but also for staff and representatives of the Supreme Court, because there was a miscommunication regarding what the 13 percent represented. Her question was whether or not the seven positions were the absolute minimum the court felt it could work with. If one of the positions could possibly be eliminated and approved for the next biennium, other expenditures such as equipment, inflation and operating costs, et cetera, could be offset by the cost of that one position. Mrs. Chowning reiterated she would like to know what the court’s stand was, and apologized for not being able to finish the budget in subcommittee. She wanted the court’s opinion on record in order to arrive at a decision.

Karen Kavanau, State Court Administrator, respectfully reminded the committee that the first four positions of the remaining seven were originally requested during the 1997 session in A.B. 343, the bill that authorized the addition of two new justices. The legislature asked the court at that time to defer those four positions and request them again during the 1999 session, which the court agreed to. Ms. Kavanau advised the court desperately needed those positions because of caseloads.

Ms. Kavanau explained the first four positions were authorized by the 1997 Legislature, and the remaining three positions were all technology related. One was to support the case management system, which after 8 years was finally installed and operational, but terribly out of date in accordance with how the court conducted its business today versus 1991 when the system was first designed. The second technical position was to help the court amass the statistics the legislature had mandated for several years, which had not been done. She advised the court had made tremendous progress on that issue, but needed a staff person who could analyze the statistics and research meaningful information as needed by the legislature. The third position was a Management Information System (MIS) manager. She stated the entire Supreme Court, both north and south, had only two network administrators, who were neither educated nor qualified to provide the type of advice and operational oversight in technology that the court needed today, and would continue to need in the future. The last three of the seven positions were infrastructure that had been badly ignored in the past, for reasons Ms. Kavanau could not explain.

To simplify the answer to Mrs. Chowning’s question, Ms. Kavanau reported that the court felt it could not eliminate any of those seven positions. Further, she noted, the court had cut the budget first by $1.5 million and secondly, when it was realized there was a misunderstanding, another $1.6 million was cut. Of the $4 million in requested maintenance and enhancement items, the court had cut $3.1 million or 75 percent from its original request. The committee’s consideration of the budget as revised would be appreciated, indicated Ms. Kavanau.

Chairman Arberry asked when the budget was prepared, were the seven positions considered by the Budget Division upon review. Mr. Stevens advised the Budget Division did not review the Supreme Court budget or make recommendations. It was a separate branch of government, and the budget was placed in The Executive Budget as requested by the court. For that reason, Mr. Stevens explained, the court’s budget included a higher percentage increase than the Executive Branch budgets. That was because it did not go through the same process where funding was requested in excess of the available amount for all state agencies collectively in state government, resulting in reductions from agency budget requests to a manageable amount.

Mr. Marvel inquired if the Senate closing included the seven positions. In answer to Mr. Marvel’s question, Ms. Kavanau reported the Senate did approve the seven positions, and put all of the remaining items on the "priority list." Mr. Marvel asked how much those items totaled; Ms. Kavanau replied it would be approximately $700,000 over the biennium. Could the court "live" without those positions, asked Mr. Marvel. Ms. Kavanau replied that the court did not think it could. Further, she reminded the committee the court had already gone through $3 million worth of deciding what it needed versus what it wanted. Further, when the budget was assimilated during the summer of 1998, the economic projections were quite "rosy," and the court included everything it thought would make its operation more effective into the budget. Mr. Marvel thanked Chief Justice Rose and the court for providing the budget for review long before session convened.

Chairman Arberry inquired if anyone else wanted to present testimony; hearing none, he advised he would accept a motion.

Mrs. Chowning asked if the motion included all of the Supreme Court accounts:

• Supreme Court (COURTS-01);
• Division of Planning and Analysis (COURTS-19);
• Law Library (COURTS -43);
• Administrative Office of the Courts (COURTS –15);
• Uniform System of Judicial Records (COURTS-25); and,
• Judicial Education (COURTS-28).

Chairman Arberry replied in the affirmative. Mrs. Chowning then thanked the chairman and the committee for allowing closure of the Supreme Court budgets as a full committee, stating it had been an excruciating process that needed thorough scrutiny, and unfortunately, the subcommittee simply ran out of time.

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Mrs. Chowning, Chairman of the Subcommittee on General Government, presented the closing report for the Division of Insurance to the Assembly Committee on Ways and Means, as follows:

Vice Chair Evans inquired if there were any questions or comments from the committee regarding the Division of Insurance budget accounts.

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Mrs. Chowning, Chairman of the Subcommittee on General Government, presented the closing report for the Department of Information Technology to the Assembly Committee on Ways and Means, as follows:

Mrs. Chowning added that $4.98 million would have to be expended at the end of July for purchase of the R-36 enterprise server. The subcommittee envisioned that the oversight committee would review the costs of the purchase at that time, and possibly hold one or two meetings before July, to review and concur with the type of equipment and the final expenditure. The purchase of the R-36 server would only sustain the department over the biennium. After that, its capacity would increase and it would need to make additional equipment purchases for expansion. The subcommittee wanted the opportunity to have a legislative partner overseeing DoIT’s plan, thereby allowing the department to present that plan at the next session of the legislature, including legislative agreement and review, which Mrs. Chowning thought would better serve the state.

Mr. Dini noted the department commented it had been "cut to the bone," asking if the subcommittee had reviewed the problem of staff retention, noting the department had significant staff turnover, and had salaries been reviewed. Mrs. Chowning replied that area was not resolved, and there was a bill pending which requested a Chief Information Officer (CIO) be hired for the agency. Whether or not that happened, the subcommittee felt the oversight committee would serve a good purpose in that regard as well. The subcommittee also recognized that the state had not been able to "step up to the plate," and pay the $100 per hour for programmers. The director had done a very good job of managing and doing the best with programmers, et cetera, at the lower salaries. The department even had employees with Masters Degrees, employees that were of excellent quality, who were willing to give service to the state.

Jim Rodriguez, Program Analyst, LCB, informed the committee that the issue of staff turnover had been addressed, and the department developed a Staff Retention Plan. Some components of that plan required action beyond the time frame that the legislature had available to deal with its budget, and might also require some statutorial changes. The plan included such things as bonuses, and work differential pay. Mr. Rodriguez reported he was unsure of the current status of the plan, but knew it had been presented to the Budget Division. DoIT was also dealing with a training issue, which was reportedly the second most problematic area for the department. The subcommittee did deal with that issue, allocating extra training funds, and those two areas combined, took up a major portion of the subcommittee’s time. Mr. Rodriguez noted that, unfortunately, no real solution was reached regarding the staff retention problem.

Mr. Marvel asked if there was any discussion generated about privatizing the DoIT functions. Mr. Rodriguez requested clarification; Mr. Marvel explained he would like to know if the technological functions could be privatized, and would there be merit in such action. Further, Mr. Marvel advised he would echo the concerns of Mr. Dini regarding staff turnover, and it appeared the state had been training staff since the origin of the information system. Mr. Marvel commented staff turnover had been a problem in most of the programs, such as Project Genesis, NOMADS, ACES, et cetera. Mr. Rodriguez indicated that issue was not reviewed during subcommittee hearings, and he was unsure what functions of DoIT the state would want to privatize. It was a very wide-service organization that supplied communications, main frame services, technical services, and planning services. Those areas could not be privatized by one contract with one company. Mr. Marvel noted it was something that could be considered in the future. Mr. Rodriguez felt that also might be an issue for the oversight committee to consider.

Mr. Beers commented that he felt privatization was something that the committee should review, as it was one area where "institutional" knowledge would hurt the state on the computer program side. He explained technology was changing rapidly and, quite frankly, he thought the state had badly under funded the training function, even though the subcommittee felt it had provided adequate funding. The request per person for training that DoIT cringingly came forward with was approximately half the amount spent by his company per person in the private sector every year. Mr. Beers felt that was an area which would require further review. He also pointed out that, along with the problem of retaining programmers, DoIT had gone through three or four managers in 4 years, which probably had been as detrimental to its functioning as the actual staff turnover. Mr. Beers felt that he, along with the other members of the subcommittee, came away with a good feeling about the organization and planning that had been implemented by the department in the past 2 years, which had been sorely missing historically. There were many remaining issues that needed review, and in the subcommittee’s discussion with the Governor, he indicated he had many of the same questions that the subcommittee did, and planned on taking a closer look at the whole operation during the upcoming biennium.

Mrs. Chowning inquired if that motion included the proposal for the oversight committee; Chairman Arberry answered in the affirmative.

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Mrs. Chowning, Chairman of the Subcommittee on General Government, thanked Mr. Rodriguez for the work and assistance he provided to the subcommittee. She then presented the closing report for the State Employees’ Workers Compensation, Insurance and Loss Prevention, and Public Employees Health Program Budget Accounts to the Assembly Committee on Ways and Means, as follows:

Chairman Arberry asked committee members if there were any questions, and hearing none, indicated he would accept a motion.

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Vice Chair Evans, Chairman of the Subcommittee on K-12/Human Resources, presented the closing report for the Division of Child and Family Services to the Assembly Committee on Ways and Means, as follows:

Chairman Arberry asked for questions from the committee, and hearing none, advised he would accept a motion.

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Vice Chair Evans, Chairman of the Subcommittee on Human Resources/K-12, presented the closing report for the Welfare Division to the Assembly Committee on Ways and Means, as follows:

Mr. Marvel inquired how successful the Governor had been in his negotiations with federal representatives regarding NOMADS. Mr. Comeaux indicated that would depend on how the legislature looked at it. The meetings went well from the standpoint that the representatives were extremely happy with the level of interest shown by the Governor, and the commitments he was willing to make to get that system up and running by October 2000. Basically, reported Mr. Comeaux, some commitments were made informally by the federal representatives, and he thought the state was at least at the point where it was not viewed with as much suspicion as it had been in months past. Mr. Comeaux stated the majority of the money the state felt it was owed would be released by the Federal Government. Even though the state would be required to pay the penalties for the 1999-2001 biennium, if the program was up and running by October 2000, there would be a refund of 90 percent of the penalties for that year.

Vice Chair Evans concurred with Mr. Comeaux’s remarks, stating for the first time there was a sense of where the state was going with NOMADS, and that was why, with very little debate, the subcommittee approved the additional requested funds. Further, she reported without the Governor’s intervention, she did not know where the state would be, perhaps still "lost in the woods." Vice Chair Evans gave Governor Guinn very high marks for his willingness to step forward and work with the agencies, the contractor, the federal representatives, and the counties. She noted the counties were extremely upset that they had not been included early in the planning stages of NOMADS. As a result of the Governor’s action, Vice Chair Evans stated there was now a "road map" of where the project was going. However, she noted there was still some hesitation on the part of the counties in terms of making the modifications necessary to handle the project on that level. NOMADS was a huge project, with many screens to deal with, and Vice Chair Evans advised the manual alone was over 900 pages in length, all of which simply overwhelmed the smaller counties. As a result of all of the good work by the Governor, the state received reduced penalties; it was still paying penalties, but at a lower level. The government had been withholding between $6 million to $7 million, which was returned to the state.

Mr. Marvel commented that longtime members of the committee were beginning to get very frustrated with the NOMADS project. He noted he was really delighted to hear that perhaps the state was finally heading down the "proper road."

Mrs. Chowning stated, while the committee was discussing the subject of NOMADS, she wanted to give credit to Mr. Rodriguez, LCB Fiscal Division, along with the other staff members for their assistance. She noted there was a meeting with the Douglas County District Attorney and others to informally attempt to get the problems out in the open. At that time, the legislature was apprised of the fact that there was going to be a meeting in San Francisco on April 12. She and Senator O’Donnell asked to be a part of that meeting so that the legislature and the state could hear first hand what the penalties were going to be. It was from that meeting that the Governor decided to step in. His action gave a high state profile to the problem, and also a sense of commitment. Mrs. Chowning reiterated that credit should be given to the hard work done by LCB staff. The Douglas County District Attorney advised it would be faster for the county to do the work by hand than it would be with the computer system. It was a very frustrating situation, and Mrs. Chowning stated she hoped by October 2000, it would work smoothly and the counties would be able to handle the work that would be thrust upon them.

With no further comments forthcoming from the committee, Chairman Arberry called for a motion.

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Ms. Giunchigliani, Chairman of the Subcommittee on Public Safety, Natural Resources and Transportation, presented the closing report for the Criminal History Repository, Division of Parole and Probation, and the Colorado River Commission to the Assembly Committee on Ways and Means, as follows:

1. Contract for psychosexual evaluations of offenders. The division currently has five positions authorized for this program. Information provided by the division indicated it would be more cost effective to contract out the evaluations rather than have staff complete the evaluations. This resulted in general fund savings of approximately $37,498 in FY 2000 and $60,821 in FY 2001.
2. Adjust the contract to reflect the revised residential confinement contracts. The division has recently re-negotiated their contract for residential confinement monitoring. Reflecting the contract change in the budget resulted in General Fund savings of $222,313 in FY 2000 and $269,701 in FY 2001.
3. Redirect program officer positions recommended for the pre-release unit to the sexual offender registration unit. The caseload growth for the pre-release unit did not justify the 100 percent increase in the staffing level for the unit. The subcommittee recommended three of the five positions be reclassified to Program Assistant IV positions and utilized to handle the backlog in the sexual offender registration unit. This change generated General Fund savings of $16,171 and $5,229 in FY 2000 and FY 2001 respectively.
4. Authorized a pilot project to place program officers in the court services (pre-sentencing investigations) unit. The department testified that this activity was paper-intensive and did not generally require peace officer status. The subcommittee authorized a pilot project that would allow seven positions to be reclassified from parole officers to program officers. The subcommittee also recommended a letter of intent to report semi-annually to the interim finance committee on the status of the pilot project. If successful, the interim finance committee may wish to direct the division to expand the project as sworn staff vacancies occur.

Mr. Marvel advised the committee that for the Parole and Probation Division portion of the report, Debbra King, Program Analyst, LCB, had done excellent work and assisted the subcommittee in actually saving money. Ms. Giunchigliani thanked the subcommittee for its good work.

Chairman Arberry advised he would accept a motion from the committee.

Mr. Dini inquired if there had been thought about the request from the Colorado River Commission, asking if the Power Division Chief and the Water Resource Division Chief would be moved to unclassified positions. Ms. Giunchigliani advised the subcommittee had recommended that some positions be moved to unclassified; there was, however, one position not recommended for reclassification. Mr. Rodriguez noted that the recommendation from the subcommittee was to make the two chief positions unclassified, and the salaries would be determined in the Unclassified Pay Bill.

Mr. Marvel inquired why the Colorado River Commission budget was before the legislature, and was there not enough oversight of that commission already. Ms. Giunchigliani advised that issue was brought up during subcommittee meetings. The response was that it was considered the same as all other commissions that were reviewed by the legislature. Mr. Price noted the Colorado River Commission was a bi-state operation, and he felt Nevada should have input. Mr. Dini indicated 300,000 acre-feet of water was allocated from the Colorado River to the State of Nevada, and the commission was created to administer the water.

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Chairman Arberry presented the closing report from the Subcommittee on Higher Education/Capital Improvements to the Assembly Committee on Ways and Means, as follows:

Mrs. Chowning asked if the subcommittee was assured that by cutting back the funding from $281,000 to $50,000 that the illness suffered by the employees associated with the Sawyer Building would be addressed. She wondered why the request had been made if testing of the air within the building met standards. Chairman Arberry stated it was his understanding that the State Public Works Board had already taken care of numerous complaints, and had contractors review the building to ensure it was in compliance, and to ascertain if there was a problem. In that review, there were some areas that needed adjustments, and at the same time, cooking being done in the building was causing odors, et cetera, to enter the ventilation system and spread throughout the building. After completing all the assessments, the State Public Works Board felt that with all the checks and balances that had been done, it really would not need the total amount requested, and $50,000 would take care of the "balancing" that every building needed at a certain point in its life. Chairman Arberry stated the complaints would probably still be made, no matter what was done, because it was a relatively new building.

Mrs. Chowning inquired about the funding for the Clear Creek Center, noting there was $50,000 funded for the first year of the biennium, but nothing budgeted for the second year. Chairman Arberry stated it was his understanding that the funding could be spread over both years, however, it was a recommendation to show the commitment from the subcommittee that it wanted something done. Mrs. Chowning then inquired if that could be done through IFC; Chairman Arberry replied in the affirmative.

Mr. Hettrick stated he was happy to see the $50,000 allocation for Clear Creek, and it appeared the state was negotiating to have an organization take it over, so if the legislature expended $50,000 fixing the facility, perhaps then it would be taken over. Mr. Hettrick explained it was a wonderful facility and he felt it was a shame to let it fall apart. Chairman Arberry stated the subcommittee felt there was a need to take care of the facility, since it was a "stepchild" to the state, and the subcommittee was attempting to send a message that it wanted to put whatever effort possible into the facility.

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Mr. Stevens informed the committee the budget account reflected some adjustments from the Budget Division, and budget amendment 91 would reduce the transfer from Economic Development by approximately $80,000, increase the transfer from the Commission on Tourism by $56,000 and increase the transfer from the Department of Transportation by $20,000.

Mr. Goldwater stated that given the "tight" budget year, testimony did not indicate to him that the office was a worthwhile expenditure of the state’s money. The staff person had been removed from the office and if there was ever going to be an "easy" time for the legislature to save General and Highway Fund dollars, now would be the time to do it.

Mr. Hettrick advised the committee he could not agree with the motion, simply because the office had been in existence for a long time, there was a new Governor who would be spending some time in Washington, and he felt it would be inappropriate to eliminate the office. The office was already in the budget, and Mr. Hettrick felt it should be approved; it was not a large amount of General Fund money, and the Governor could provide additional justification for the office to the 2001 Legislature.

Mr. Goldwater advised that at the 1997 session, he had asked for some type of performance indicators regarding the function of the office, and again in 1999. To date, no such performance indicators had been received.

Vice Chair Evans noted that it was a "tough call," and she had long been an advocate for the Washington Office, as she felt it made a lot of sense to maintain that office. However, she also noted the office always seemed to be the brunt of much doubt and controversy regarding its ethicality. Vice Chair Evans stated the question was whether or not the money would be better spent in some other way, or through contract services. She commented she was not as convinced as she once was that the office was necessary.

Mr. Marvel stated he would also oppose that motion, because as Vice Chairman of the Standing Committee on Public Lands, he did use the Washington Office on occasion, and felt it had provided an invaluable service. Staff in that office also kept the committee very well informed as to what was happening in Congress, particularly with the public land ownership that existed in the State of Nevada, which was very vital to both agriculture and the mining industry.

Mr. Hettrick stated he actually agreed with Mr. Goldwater in terms of the lack of performance indicators, but obviously there was going to be a change in staff, and he felt the new administration deserved the opportunity to present the issues to the next session of the legislature. Mr. Hettrick thought the performance indicators should be requested again, and they should prove that the office was a worthwhile venture and worth the money. If not, the office could be closed by the 2001 Legislature. Mr. Hettrick emphasized he felt the new Governor should have the opportunity to maintain that office, staffed by the persons he put in place, and thought it was inappropriate to eliminate the office at the current time.

Ms. Giunchigliani indicated she appreciated Mr. Hettrick’s concern, even though since 1991 she had been arguing to eliminate the office. It was nothing of a personal nature, stated Ms. Giunchigliani, but she did not feel the job was being done in the way it was envisioned. The opportunity existed now because staff was not involved, and it was easier to eliminate the office now rather than later when staff was in place and the argument became who was there rather than whether or not the office was working.

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Mr. Stevens reported the requested adjustment in the account was a request from the Lieutenant Governor for in-state travel in FY 2001, because of the 2001 Legislative Session. The request suggested moving $5,000 in travel funds from the first year to the second year of the biennium.

Mr. Perkins requested clarification of module E-125, which provided for an additional administrative secretary position for the Carson City office. Not having heard the previous testimony regarding the budget account, he inquired what duties that position would perform. Mr. Stevens indicated the Lieutenant Governor wanted to maintain an office in Carson City due to the economic development responsibilities of the Lieutenant Governor. In recent years, the office had only been open during legislative sessions, and the new position would allow the office to remain open on a full-time basis. Mr. Perkins then asked if there was some projection on what would be accomplished by keeping that office open full-time. There had been numerous Lieutenant Governor administrations over the years that operated without maintaining a Carson City office on a full-time basis, and he wanted to know what the additional position would accomplish.

If memory served, Mr. Stevens indicated it was basically due to the Lieutenant Governor’s economic development responsibilities. Since the beginning of the current legislative session, the office had seen an increase in persons wanting to discuss economic development and other issues with the Lieutenant Governor or her staff, and she felt the position was necessary.

Ms. Giunchigliani commented she did not know if that was a justifiable interim position. She stated she could understand the traffic during session, however, the Economic Development Commission was open and available during the interim, and calls could also be made to the Las Vegas Office. Ms. Giunchigliani indicated she simply was unsure if the position was justified. She did not want to see a secretary just sitting in a room when there was no real business to take care of. Persons could go to Tourism or Economic Development in the interim. Because the legislature was in session and the Lieutenant Governor was accessible, persons were currently accessing her office. Ms. Giunchigliani stated she did not recall any testimony when the budget was heard in subcommittee that would provide justification for a new position.

Perry Comeaux, Executive Director, Department of Administration advised that Mr. Stevens’ explanation for justification of the position was basically the reason it had been requested. The Lieutenant Governor had expressed her intention to really focus on economic development issues, and she felt it was very important to maintain an open office in Carson City, year around, to assist her in that endeavor. Mr. Comeaux stated, to his recollection, there were no specifics presented during testimony about accomplishments that the Lieutenant Governor anticipated in terms of collecting information, et cetera. However, she did feel very strongly that it was important that a Carson City office be maintained, which was why it was included in The Executive Budget.

Vice Chair Evans noted there were currently five positions in the Lieutenant Governor’s Office, and asked if all the positions were located in the Las Vegas Office. Mr. Comeaux replied in the affirmative. Vice Chair Evans then asked if the workload in the Las Vegas Office merited five staff, could one staff position be transferred to the Carson City Office, if such action was warranted. There was also staff available to the Lieutenant Governor in Carson City via the Tourism and Economic Development Commissions. Vice Chair Evans felt it was more a matter of proper placement of staff, rather than the necessity for additional staff, as she could not see the reason for five staff positions in the Las Vegas office.

Mr. Comeaux mentioned that the Lieutenant Governor did feel strongly that she needed that additional position to keep the Carson City office open, however, at the current time, he could not provide specifics as to why one of the existing positions could not be transferred to Carson City.

Mrs. Chowning observed that never before had there been a secretary in the Lieutenant Governor’s Las Vegas or Carson City offices during the interim, which would mean two additional secretaries, and she did not understand why a position could not travel between the two locations if necessary. Mrs. Chowning wondered if travel expenses were included in the budget. Further, she noted it was an approximately $40,000 expenditure for the one position, and she felt the bulk of the work would be done in the Las Vegas office during the interim, because that was where the Lieutenant Governor resided. Once again, she wondered if the travel was included in the budget, noting that one of the positions in Las Vegas could travel back and forth.

Mr. Hettrick stated decision unit E-125 also included monies for replacement of the computer system, and asked if the motion included the extra travel and office expense. Ms. Giunchigliani replied in the affirmative. Mr. Hettrick then inquired if staff would be allowed to travel back and forth. Once again, Ms. Giunchigliani answered in the affirmative.

Mr. Stevens stated he could clarify the motion regarding the position, noting the elimination should include any related travel costs directly attached to that position. There were additional costs contained in decision unit E-125 that were unrelated to the position, so staff would need direction regarding elimination of those expenses.

Ms. Giunchigliani advised the office should have additional travel so a staff person could go back and forth between the Las Vegas and Carson City offices, however, noted all the costs were not necessary. Mr. Stevens stated fiscal staff would review the new position and identify whatever travel or operating costs were directly related to that position for elimination, but leave the remaining costs in the budget. Chairman Arberry advised Mr. Stevens to take that action.

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Mr. Stevens pointed out there were a number of adjustments to the budget:

• The budget included a $10,000 a year transfer from the Commission on Tourism to fund the Historic Marker Program in the Department of Museums budgets. That was funded with General Funds, and had already been done in the closing for the Department of Museums.

• Budget adjustment number 91 involved the Washington, D.C. office.

• There was a technical adjustment in decision unit E-300 to reflect the proper start date for the Program Assistant II position.

• Budget amendment number 88 adjusted decision unit E-805 regarding reclassification of positions.

Mr. Stevens stated the agency had projected room tax at a 3 percent increase this fiscal year, a 3 percent increase in the first year of the biennium, and a 4.5 percent increase in FY2001. When the budget was first reviewed approximately 3 weeks ago, room tax was at a 4 percent increase for the current fiscal year, through the first 7 to 8 months. One of the things discussed was whether some additional room tax dollars could be identified and, if so, if the committee wanted to transfer room tax dollars to other areas of the budget for enhancement, or General Fund savings. Those funds could be used in the museums or arts areas, or staff could identify other tourism-type programs.

Mr. Stevens indicated staff had increased the room tax to 4 percent, the actual figure for the first 7 to 8 months of the current fiscal year, while leaving the growth rate in each year of the biennium the same at 3 percent and 4.5 percent. The change would be in the room tax, from 3 percent in the current fiscal year to 4 percent, an increase in base, and the same growth rate recommended by the agency for each year of the biennium. Also, Mr. Stevens explained the reserve was at $1,104,000 the first year of the biennium, and $1,133,000 in the second year. Tourism maintained it needed a $1 million reserve fund balance.

According to Mr. Stevens, the re-projection of room taxes in the current fiscal year and using the same percentages in each year of the biennium, would generate an additional $82,605 for the current year, $85,084 in the first year of the biennium, and $88,913 in the second year. That would amount to approximately $256,000, and including an additional $133,000 from reserve, would be approximately $390,000 over the biennium available in Tourism funds that could be directed to other areas. Mr. Stevens stated when Thomas Tait, Executive Director of the Commission on Tourism testified before the committee, he was asked if room tax monies became available, could they be redirected elsewhere, and he indicated that based on the committee’s decision, he would not object.

Mr. Stevens reiterated it appeared to staff that approximately $390,000 over the biennium would be a conservative projection regarding room tax monies available. There were many new large resorts opening in Las Vegas, and there was always a question of whether they would "grow" the market or whether they would "steal" from another resort, however, Mr. Stevens stated it appeared the room tax collection projections were conservative.

If the committee chose to reallocate some of those funds, staff could generate a list of potential options for review, and if that was not the choice of the committee, technical adjustments could be reviewed with any possible changes.

Mr. Marvel stated that State Parks was woefully in need of additional funding, and asked if staff could present that possibility, if it would not hold up the process too much. Mr. Stevens stated it would depend on the choice of the committee. If the committee chose to allocate additional room tax funds, the Tourism budgets would close in that manner, and in a few days, staff would present an options list for use of the additional room tax monies; the additional funds would then be added to the appropriate budgets.

Ms. Giunchigliani noted when the budget for State Parks was closed, it was with a letter of intent regarding the approximately $30 million backlog in maintenance. She felt that should be a top priority for use of the additional monies.

Mr. Stevens advised staff would review the State Parks budget and attempt to identify those parks that had a large visitor and/or tourist volume, thereby justifying the use of room tax dollars, and present an options list for the committee.

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Staff recommended closure of the budget as recommended by the Governor.

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The budget was held from subcommittee closing, advised Mr. Stevens, and staff was instructed to review the account for possible alternative funding. The Hazardous Materials Training Center had a tough time funding-wise, because it was funded from Beatty Dumpsite fees. Mr. Stevens noted it was budgeted for each year of the next biennium for $180,000 per year, while fees had come in at approximately $45,000 during the current fiscal year, so the budget already included a $140,000 shortfall. Mr. Stevens stated staff had completed the review and recommended approval of the budget expenditures as recommended in The Executive Budget, providing 3 months of reserve to the budget for cash flow purposes, and eliminating the Beatty Dumpsite fees from the budget. If the dumpsite fees were eliminated and 3 months of reserve provided, and the budget funded at the level recommended by the Governor expenditure wise, Mr. Stevens advised it would require $177,221 in General Fund monies the first year, while the second year of the biennium would require less, $64,910.

In addition, Mr. Stevens indicated the Fire Marshal felt it was very important that the rural communities had a contract training person who went to the individual communities to provide training, versus persons traveling to Carson City for training. Mr. Stevens noted that would require approximately $20,000 per year. Staff provided an option to fund that training with any Beatty Dumpsite fees that were realized. In other words, Mr. Stevens explained, the first $20,000 in Beatty Dumpsite fees would fund that particular program, and if the fees came in higher, the difference would be reverted to the State General Fund.

Ms. Giunchigliani asked Mr. Dini if the 3-month advance would be satisfactory in assisting the Fire Marshal. Mr. Dini stated the biggest problem was that the Fire Marshal could not hire people without a steady stream of revenue. What was occurring at the present time was that the Fire Marshal was laying persons off, and therefore, never had a full complement of staff. Allocating money up front and reverting the money from the Beatty Dumpsite fees should compensate, and would at least provide the Fire Marshal with funding to hire staff.

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Mr. Stevens advised staff had received a letter from the Budget Division that indicated if the legislature fully funded the program, it would need to increase the assessment rate. The Budget Division indicated, in its opinion, the reserve that was built into the group insurance plan could be used to address the shortfall, however, Mr. Stevens stated if the legislature wanted to fully fund the program, it would have to increase the rates. The shortfall totaled approximately $500,000 the first year of the biennium, and approximately $950,000 in the second year from the General Fund. Mr. Stevens indicated it would be up to the committee to decide if it was comfortable with spending down the reserve in the Public Employees Health Fund, noting that staff was nervous about that option. The state previously spent the reserve down below zero, and just recently put $26 million in the health fund. According to Mr. Stevens, staff would recommend that the assessment be changed, and additional funding be provided. If the committee was uncomfortable with providing the additional General Fund monies that would be required, one possibility would be review the "adds" recently placed in the Governor’s budget, to ascertain if there were areas where funding could be deducted and placed in the Retired Employee Group Insurance budget. Mr. Stevens stated it was his recommendation that the committee add the money and figure out where it would come from later.

Mr. Comeaux commented the Budget Division did not recommend adding the additional funding. The $26 million that was requested to bailout the fund and re-establish the Incurred But Not Reported (IBNR) reserve at a level of approximately $11 million, the actuarially determined requirement, had to be in effect by the end of the current fiscal year. The Retired Employee Group Insurance budget in total was approximately $130 million per year, including approximately $75 million in claims, and was based on a series of assumptions and estimates, which Mr. Comeaux hoped were very close to correct. The worst that would happen if the committee did not increase the retired employees rate, was that the state would end up with an incurred but not reported reserve level of approximately $8 million instead of $11 million. Mr. Comeaux indicated that was why the Budget Division did not think it was critical that the additional funding be provided.

Mr. Stevens pointed out that during the 1997 session, the reserve levels were based on actuarial assumptions, and they were expended quite rapidly. The state would be that much further in the hole if the logic expressed by Mr. Comeaux was used last session. While he understood what Mr. Comeaux was saying, Mr. Stevens indicated if everything came in perfectly and the reserve level dropped to $8 million, that would be fine, however, there were multiple assumptions which, if not realized, could create an additional shortfall.

Ms. Giunchigliani noted the subcommittee had recommended that the funding be taken out of reserve, however, perhaps the committee should consider splitting the difference. In other words, take a certain percentage out of the reserve, and set aside additional General Fund monies that could be accessed through the IFC. Setting aside the entire amount from General Fund was pretty "steep," and Ms. Giunchigliani inquired if there was any way to do a split funding for the budget. Mr. Stevens stated that could be done; he noted that the Senate closed with approval to add the General Fund appropriation. If the committee’s chose not to agree with that closure, further meetings would be required in order to decide how to close the budget, because staff was only capable of re-balancing the budget once. Ms. Giunchigliani then asked if the agency did not need the $1.7 million, what would happen to the money according to the Senate closure.

Mr. Stevens explained it was a combination of funds, not just a General Fund appropriation, and all of the budgets would be assessed for a percent of payroll, with the General Fund paying its fair share, the Highway Fund its fair share, et cetera. Ms. Giunchigliani stated she wanted to know what would happen if the $1.7 million was not needed. Mr. Stevens stated it would then build reserves, which could be addressed during the next legislature. It would either build or reduce reserve, depending on the various happenings to the group insurance plan over the biennium.

Mr. Dini stated he felt there were two issues to be considered, and the most important one for the retired public employees was the Medicare "carve-out" of $3,000 per person before drawing from the group insurance. That was the "killer" for retirees. When those employees retired, the group insurance was given as a benefit, and the plan did not include a Medicare "carve-out." The legislature should phase in the restoration of that $3,000 fee, perhaps not all in the first year of the biennium, but at least begin the restoration so that retirees were not required to pay the entire $3,000. He suggested cutting the Medicare "carve-out" down to $1,500 and phasing it out completely in the second year of the biennium, and give the retirees what they were entitled to under the terms of their retirement. Mr. Dini felt that was the critical issue regarding the budget, and asked Mr. Comeaux to suggest how that might be done.

Mr. Comeaux commented the actuary for the group insurance program had been asked to provide information on the costs associated with the Medicare "carve-out," and that information had been provided to the Budget Division. Basically, it was what the Committee on Benefits decided to do when it was trying to figure out how to alleviate the tail-spin the plan was suffering, where every day the plan spent more money than it was taking in. The committee looked at a combination of rate increases, the state’s contribution and the employee dependent’s contribution, and also considered a reduction in benefits. Mr. Comeaux advised the rates that were recommended to the 1997 Legislature for the next biennium were set after benefits were reduced. He indicated probably the most expensive benefit that was reduced was the "carve-out," and the restoration of that would be fairly expensive. However, explained Mr. Comeaux, if the state increased its contribution to make up for restoring the "carve-out," the employee group insurance rate and the state contribution rate would increase, if not both, then one or the other.

Mr. Dini stated when the Committee on Benefits attempted to cut the spiraling costs down, it added $3.3 million on the retirees, which was a "back breaker" for many retired persons. Mr. Dini emphasized he did not feel that action was fair, and that was one of the reasons he voted to eliminate the committee, because it did not treat retirees fairly. He felt the legislature needed to work toward restoration of retiree’s benefits, even though it would be expensive.

Chairman Arberry advised the additional General Fund cost would be $448,000 in the first year and $645,000 in the second year of the biennium. He informed the committee it needed to make a decision on the budget in an expeditious manner so staff could proceed. Mr. Goldwater stated he understood the need to make a decision, and also understood the choices. Further, he was frustrated for the reason that the state acted like a de facto insurance company in the matter. Mr. Goldwater commended the Governor for the courage to take over the employee insurance plan, but there was a taskforce that was supposed to meet, and there were several issues that needed to be considered. In order to properly budget for the insurance company, there were a number of things the committee needed to know about. According to Mr. Goldwater, the committee had no idea where to adequately set the reserve, and could not rely on the actuaries. Also, the state was "messing around" with the policyholders and beneficiaries, with the shareholders, who were the current employees, and also the taxpayers. He did not feel the state had enough funding or information available to address the situation properly, and inquired if the committee could arrive at an adequate decision.

Mrs. de Braga asked where the increased revenue fit into the picture, because the rates had been raised 23.7 percent, and benefits were cut way back, which surely had to compensate for something besides just money that could not be accounted for.

Mrs. Chowning stated the reason the budget was held in subcommittee was because there was recently an infusion of $26 million into the Employees Health Fund, so there would be a reserve, and within days, there was a request to cut that reserve by $1.7 million. She asked whether it was a reserve or not, and if the committee just kept "chopping" away at it, there would be no reserve.

Vice Chair Evans asked if the "carve-out" was restored, what would the cost be. Mr. Dini indicated the last figure he saw was $3.3 million. Mr. Comeaux stated information he received from the actuary indicated that if the state were to pick up the entire cost of eliminating the "carve-out," that the state contribution increase would be 68 percent instead of the 23.7 percent that was currently recommended. The cost impact would be about $3 million in FY 2000 and $1.3 million in FY 2001.

Debbra King, Program Analyst, LCB, advised if the state paid 100 percent of the cost to eliminate the Medicare "carve-out," it would be a total additional cost of $3 million in FY 2000 and $3.6 million in FY 2001. Using the rule of thumb of 60 percent General Fund, that would be approximately $1.8 million additional General Fund needed in FY 2000 and approximately $2.1 million in FY 2001. That would be if the state picked up 100 percent of the cost of eliminating the "carve-out." If the state wanted to share that cost with the retirees; the state would pay 50 percent of the cost, and the retirees would pay 50 percent of the cost of the elimination. That would cost approximately $1.9 million in the first year of the biennium and $2.3 million in the second year, or $1.2 million and $1.4 million in General Fund monies. Ms. King stated it would be a rate increase for the retirees of between $20 and $75 per month.

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Chairman Arberry declared the hearing in recess until 3:30 p.m.

Respectfully Submitted:

Carol Thomsen,

Committee secretary

Approved by:

Assemblyman Morse Aberry Jr., Chairman

Date: