The Committee on Ways and Means was called to order at 7:45 AM, on Wednesday, May 12, 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. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry, Jr., 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

COMMITTEE MEMBERS ABSENT:

Mrs. Jan Evans, Vice Chair (Excused)

Mr. Robert Price (Excused)

STAFF MEMBERS PRESENT:

Senator Valerie Wiener, representing Clark County District 03, greeted committee members and commenced her testimony by explaining that she had introduced this bill in an effort to improve on legislation she had introduced in the previous legislative session to establish therapeutic communities in prisons in Nevada.

She reiterated that the three recommendations she offered the Senate Judiciary Committee had mirrored federal requirements more closely. She explained the first recommendation had been to expand the pool of participants by lifting the restriction imposed during the previous legislative session, which required inmates to volunteer for the program. While attending a substance abuse conference sponsored by the U.S. Department of Justice last October, she had learned that "volunteerism" had no effect on how well the inmate progressed in the program. In fact across the country, in many prison systems, even the most resistant inmates succeeded in therapeutic communities.

Next, Senator Wiener related that she had asked the Senate Judiciary Committee to delete the requirement that the inmate be a first-time offender. She explained that after spending time with the experts at the 1998 substance abuse conference, she understood that this also had no impact on the inmate’s level of success in the program. In this regard, she averred the law should still exclude those who were sentenced to life without possibility of parole and those who were serving a death sentence. She stated that others could still be excluded at the discretion of the director or prisons and other prison officials.

The third change she advocated in the current legislation was related to "when" the inmate could participate in the therapeutic community. Current law required that the inmate be within one year of release. This was difficult to determine because the decision was often left up to the parole board.

Thus in order to help the prison administrators to appropriately place inmates in the program, she requested that the committee add language following the one year requirement to reflect the "reasonable expectation" for release as determined by the director.

Senator Wiener stressed the viability of the program by regaling committee members with her experience visiting the Therapeutic Community at the Warm Springs Correctional Center. She had discovered that 75 inmates had graduated from the first 6 months of the program and that on April 26, 1999 a new class had begun its "sojourn to a new life."

Explaining how a therapeutic community operated, Senator Wiener stated that participants started their program at around 8:00 a.m. and did not finish until after 9:00 p.m. Inmates worked constantly with substance abuse professionals who were helping them make permanent changes in their lives. Those changes would affect their attitude and behavior within the community, which was segregated from the rest of the facility. Subsequently, those changes were expected to carry over upon the inmates parole or discharge, after which time the aftercare component of the law applied.

Exemplifying the program’s success, Senator Wiener cited testimony given by Warden Robin Bates before the Senate Judiciary Committee, which indicated that officials had run more than 500 drug screenings with the therapeutic community inmates. The tests had not produced any positive results.

Senator Wiener then emphasized that the therapeutic community program was in its nascent stage of development. In fact, she reported the first class would graduate in the following month. Nevertheless, she believed the program's results thus far had been meritorious. She hoped that the therapeutic community programs would continue to produce such positive results, but stressed that it would not occur without continued legislative support.

She then reminded committee members that in the 1997 Legislative Session, the committee had been generous enough to budget $500,000 for the biennium. However, because of the restrictions already described, the therapeutic community program was unable to spend a substantial portion of what had been budgeted. She thought that if the law had been written as the Senate Judiciary Committee had currently approved it, many more inmates would already be converting their substance abusing behaviors to productive lifestyles.

Prior to the hearing before the Senate Judiciary Committee, Senator Wiener stated that she had learned about the state’s access to matching funds for the program. As the federal commitments to substance abuse programs in prisons had grown, so had the financial support. For that reason, she requested that Mary Lynne Evans attend the present committee hearing to expound upon the state’s opportunity to access substantial matching funds for the therapeutic community program.

Senator Wiener then added that with enhanced legislative support the therapeutic community program would create positive permanent changes in the lives of substance abusing inmates who, one day would return to Nevada communities.

She felt the state could not default money to prisons without making a commitment to creating permanent, positive changes for those inmates who would be leaving prison facilities. With the changes approved by the Senate Judiciary Committee on February 12, 1999 the future of therapeutic communities within the state was fortuitous. Senator Wiener was optimistic that inmates who went to prison because of drug related crimes would one day be viewed as a non-threat to Nevada’s communities. Therefore she urged the committee to express its support for S.B. 57.

Mr. Marvel interjected to comment that the therapeutic community in place at the Lovelock prison had recently graduated a class from its program. He then acknowledged the extent of their enthusiasm.

Chairman Arberry then asked if the grant funds would continue in the future. Senator Wiener deferred response to Mary Lynne Evans, former Administrator of the Criminal Justice Assistance Office.

Ms. Evans related that she had spoken with the Corrections Program’s Office, a component of the U.S. Department of Justice. She thought the federal entities were very interested in the therapeutic community program and had consistently increased their financial support of the program.

She then referred to a table (Exhibit C) which illustrated the annual federal grant allocations to the state over the course of several years. She felt that federal funds that had been allocated for prison construction would be weaned away to increase funding for the Residential Substance Abuse and Treatment (RSAT) program better known as the therapeutic community.

Mrs. Chowning remarked that although she had been unable to attend the recent graduation of inmates from the therapeutic community in the Lovelock prison, her intern did attend and was touched by the positive experiences of the graduates. She also commented that committee members had visited the Southern Nevada Women’s Correctional Facility and had been witness to a program similar to the therapeutic community. She asked if that program was part of Nevada’s therapeutic community program or if it was an alternate program sponsored by the private corporation which operated the prison.

Before deferring to Warden Robin Bates, Senator Wiener explained that the therapeutic community legislation had been designed to carefully define substance abuse and it stipulated a regimental program that was segregated from the rest of the prison population. Such segregation amongst inmates participating in the therapeutic program extended beyond an inmate’s graduation date should the inmate remain in incarceration. It was critical to refrain from integrating program participants from the general prison population.

Then Warden Robin Bates, Warden for the Warm Springs Correctional Center, explained that the program cited by Ms. Chowning was similar to the therapeutic community program in that it was a "total immersion program" lasting 12 to 16 hours a day. Also similar, the program included group therapy, individual counseling, 12-step programs, substance abuse education, and relapse prevention. The program itself specifically treated all types of addictions, including gambling, alcohol, drugs, and co-dependency.

He then stated that therapeutic communities were experimentally used across the nation. All of those programs were similar in their modalities.

Ms. Guinchigliani, referring to Exhibit C, inquired if inmates had to be under confinement to participate within a therapeutic community as the program was defined as a "residential" substance abuse treatment program. She also wondered if the program was voluntary or required for inmates incarcerated due to substance abuse.

Senator Wiener stated that initially she had drafted the legislation to ask inmates to volunteer for the program in order to increase the program’s success. She had been under the impression that inmates who volunteered to participate in the program had the will to succeed. However, after attending a national conference, she had learned that volunteerism did not significantly alter the effectiveness of the program.

Additionally, she had presumed that a multiple or long-term offender would not have the same ambition to succeed in the RSAT program. She was also apprised of information indicating that the length of time under incarceration was not a factor, which affected an inmate’s potential success in the program. For those reasons, she had drafted changes to the existing legislation.

Next, Ms. Guinchigliani asked if the grant funds could be used for "aftercare." Senator Wiener replied affirmatively. Ms. Guinchigliani then inquired how the inmate was treated after their release from the prison facility.

Senator Wiener answered inmates who were released received aftercare through outside programs.

Ms. Guinchigliani wondered how the senator defined aftercare in the legislation. Senator Wiener explained that aftercare was not as intense as the therapeutic community program, but it provided similar counseling and support activities.

Ms. Guinchigliani asked if non-profits assumed the role of providing aftercare for paroled inmates. Senator Wiener responded that non-profits provided a strong system of support for paroled inmates. She related that because inmates were most vulnerable 90 to 180 days from their release, non-profits were able to provide the critically needed aftercare services.

Ms. Guinchigliani wondered if the program included a housing component after an inmate was released from prison.

Warden Bates responded federal funds were not available to support aftercare. Nevertheless, every graduate of the therapeutic community benefited from custom designed non-profit aftercare services. He explained that prior to an inmate’s release, inmates, their families, and therapeutic community therapists designed a discharge plan concerning the inmate’s future residence. The therapist made a determination on whether or not an inpatient or outpatient program was needed as part of the inmate’s aftercare. He reiterated that for each inmate, the discharge plan was different.

He stated that the Division of Parole and Probation and the Board of Parole Commissioners had worked with the therapeutic communities to develop agreements on how to structure the order granting parole and the release plans. Regardless of the absence of federal funding, Warden Bates stated programs were being set up to assist released inmates with aftercare. Out of the 75 therapeutic community graduates released from prison, customized aftercare programs were now in place for 15 paroled inmates.

Ms. Guinchigliani then remarked that more needed to be done along the lines of a therapeutic community and aftercare services so that inmates had a greater chance of success after their release from prison.

Ms. Evans then interjected that unfortunately RSAT funds would not be available for use by aftercare programs. However, 10 percent of prison construction funds were available for aftercare programs. Beginning on September 01, 1999, almost $388,000 would be used to develop more aftercare programs.

Steve Riddell, Director for the Advancement for the National Council of Juvenile and Family Court Judges, which operated the National College of Juvenile and Family Law, testified on behalf of the college’s dean and executive director, Lou McCarty, who wished to express his thanks and appreciation to the Legislature in their foresight in setting up the legislative trust 10 years ago. Although Governor Guinn rescinded those funds because of budgetary constraints, he supported the Governor’s decision to do so.

He then stated that the National Council of Juvenile and Family Court Judges was the nation’s judicial membership organization, founded in Chicago in 1907. The council moved to the University of Nevada, Reno in 1969. In the past year, the college trained over 25,000 judges and court related personnel. Out of those participants, 5,000 emanated from the state of Nevada. In fact, Mr. Riddell reported that the college was preparing for what it called its "Triple- Header" program, which was a program dealing with juvenile justice.

Additionally, the college produced almost 500,000 pieces of literature each year in the form of a national magazine, brochures, and other documents. Those publications reflected that Nevada was the home of the National Council of Juvenile and Family Court Judges.

Mr. Riddell explained the council worked in close cooperation with its sister organization, the National Judicial College, and the William Boyd School of Law at the University of Las Vegas.

He then emphasized that the council strongly supported the direct appropriation requested in S.B. 303.

Mr. Marvel inquired how much money the legislation provided to the council.

Mr. Riddell replied that 70 percent of the council’s budget was derived from the federal government, whereas the other 30 percent came from the private sector.

Mr. Marvel then asked for the specific amount of funds provided by the private sector.

Mr. Riddell deferred response to Carol Guarino, Comptroller for the National Council of Juvenile and Family Court Judges, who answered that the private sector, which included private foundations and the State of Nevada, was responsible for approximately $2 million of the council’s budget. Ms. Guarino then explained the council’s budget totaled $12 million, of which $8 to $9 million was derived from the federal government and $2 to $3 million which came from private sources.

Mr. Riddell added that the year 1999 represented the centennial year of the creation of America’s system of juvenile courts. He recalled that the council had invited former Chairman of the Joint Chiefs of Staff, General Colin Powell, to help the council celebrate its 65^th anniversary at a dinner in Reno. To encore the event, the council had organized an event that would showcase the council nationally. The event was scheduled to be held in October 1999 and would highlight the former Prime Minister of Great Britain, Margaret Thatcher. The event would honor the council’s longstanding relationship with the British Society of Juvenile and Family Court Magistrates and the 100^th anniversary of the founding of America’s juvenile court system.

Mark Stevens, Fiscal Analyst for the Fiscal Division then explained the Governor had recommended that the monies set aside for both the National Judicial College and the National College of Juvenile and Family Law be brought back into the General Fund due to the current budget shortfall. The appropriation was recommended by The Executive Budget to allow the operating funding to remain whole during the current biennium. He reiterated that the Governor hoped that state finances would improve so that the money would be re-appropriated back to those entities as an endowment.

He reiterated S.B. 303 attempted to replace the interest that would be earned off the endowment since its transfer to the General Fund.

Mr. Goldwater then inquired if another endowment would be created as a result of the bill.

Mr. Stevens answered that this was the second time in which endowment funds had been transferred to the General Fund. He stated that both organizations had a specific amount of money, which the state appropriated to them through an endowment fund. Interest was then earned off the monies in the endowment fund. However because a provision allowing the state to bring that money back into the General Fund existed, the Governor was able to propose to revert those funds back to the General Fund for the upcoming biennium.

S.B. 303 attempted to cover the lost interest which normally accrued on the endowment fund. S.B. 71 supplemented the loss of that interest. Subsequently, the bill also requested for the return of the endowment funds if funding was sufficient enough to do so.

Janice Wright, Director of the Division of Health Care Financing and Policy (HCF&P), testified that S.B. 284 extended the date for the reversion of funds for the appropriation for the managed care tail to the end of the next biennium. She advised this was already included in The Executive Budget.

She reminded committee members that during the 1995 Legislative Session, $12.8 million from the General Fund had been appropriated to pay for the managed care tail. The managed care tail was not-yet-paid-for claims for Medicaid eligible who went from the fee-for-service program into the mandatory or voluntary managed care programs. Thus any cost incurred prior to enrollment into the mandatory or voluntary managed care programs was paid for through the managed care tail.

Through S.B. 284, the division had requested to extend the date for the reversion of funds from the end of the current biennium to the end of the upcoming biennium. The division could then continue to make payments on behalf of those who had voluntarily entered the program in northern Nevada as well as those who were mandatorily enrolled in the program in southern Nevada. She anticipated the conversion would be complete by the end of the fiscal year, which would give the division two years to pay off the managed care tail.

Chairman Arberry then inquired as to the total amount of the tail. Ms. Wright replied that $8 million was scheduled to move forward. She thought the division would spend most of that amount in the current fiscal year. The remaining amount would roll into the next biennium. By the end of the following biennium, she thought that the tail would only amount to $1 million, which would then be reverted into the General Fund.

As no additional questions concerning the bill were submitted, the hearing on S.B. 284 was closed.

Percy Luney, President of the National Judicial College (NJC), next testified in support of S.B. 304. He introduced Chief Justice Bob Rose of the Nevada Supreme Court and Jim Williams, Director of Finance for the National Judicial College.

First, testifying in support of S.B. 304, Chief Justice Rose emphasized the importance of both the NJC and the National College for Juvenile and Family Court Judges were to the state. He was amazed that two premier judicial education facilities were located within the state and he believed the colleges were the nation’s best.

He explained that every judge within the state of Nevada was trained at NJC and used the facility for additional training programs. Moreover, the National Judicial College was not only a resource that trained judges but was also a resource center for the judiciary itself.

In addition to providing those benefits, Chief Justice Rose thought the college was a tremendous public relations tool for the state. Every year, thousands of judges were educated in Reno and they left the state with a positive image of the state. Thus, he stressed both colleges were useful tools for the state, the judiciary, as well as for the nation and he urged committee members to accommodate the college by supporting S.B. 304.

Next, Mr. Luney added that NJC had been located in Nevada since 1964 and it had provided training to over 66,000 persons who had come to the college from other states and from 150 foreign countries. NJC trained 3,000 individuals each year for federal and state administrative law judgeships. Additionally, hearing officers and trial judges were also trained.

Although he supported the decision of Governor Guinn to recall the college’s endowment, he felt it would place an extreme hardship upon NJC should S.B. 304 fail. He related that the college had expanded its services to new areas of the state and was providing services in training judges, prosecutors, defense attorneys, as well as training in death penalty litigation. Those services would save the state money by reducing the number of appeals in the court system.

Furthermore, the college worked closely with the Boyd School of Law at UNLV to develop an evening program at the law school and at the college’s facilities in Reno. This was scheduled to occur during the second stage of the law school’s development and after it had received its initial accreditation.

Next, Mr. Williams stated that Nevada had been an important resource to the college for many reasons. He maintained that the state played a leadership role in judicial education and he appreciated the state’s contributions to the college.

He repeated that approximately 3,000 judges came to the judicial college each year and stayed in Reno for almost three weeks. This added substantially to the economic impact the college had in northern Nevada.

Mr. Williams contended the state’s leadership and its contribution of funds to the National Judicial College had served the judicial system well. He mentioned that the college had been able to train the state courts in managing the finances of their judges and in finding new methods of obtaining funds to support judicial training.

Even though he too supported the Governor’s decision to rescind the college’s trust fund allocation, he felt the passage of S.B. 304 was critical to the continued operation of the college and its programs. Eventually, he hoped the trust would be restored.

Next, testifying against S.B. 304, June Wisiniewski, averred that because the NJC did not allow unfettered public access to its facilities, S.B. 304 should not be passed. She stated that the college had pledged not to draw upon legislative appropriate funds for instructional and administrative costs and she felt the college reneged on this pledge by supporting the passage of S.B. 304.

Referring to a packet she had prepared for the committee (Exhibit D), she stated that she had highlighted what she had felt to be important issues of which committee members needed to be apprised. Broken down into exhibits, she first cited page D-19 of Exhibit D, which contained the college’s statement that there would be no request for legislative funds. That page also contained a statement made by National Judicial College officials that indicated the program intended to be financially self-supporting.

Ms. Wisiniewski contended that the National Judicial College had been a drain on the Legislature since its inception. In fact, after reviewing the Fleischmann Files, she opined that the college would forever be dependent upon funds from the Legislature.

Next, she referred to page D-38 of Exhibit D, which contained the college’s grant proposal to the Fleischmann Foundation. Within that document, she stated the college reported that it would never be self-sustaining or profit making. Nevertheless, when the foundation started the judicial college, they had expected the judicial college to obtain matching grants and to become a self-sustaining institution. In fact, because Chief Justice Burger had been unhappy with the way the judicial college had been operating, the National Center for State Courts was created.

She then informed committee members that this information was available in the Fleischmann Files as well as in reports made by the National Center for State Courts. She said she had obtained a 20-year history of the National Judicial College in addition to information concerning the operation of the new technology center. The technology center operated free of charge to all courts (see page D-23 of Exhibit D.)

Ms. Wisiniewski testified that the technology center had been in operation since April 09, 1999. Also, in the early 1990’s, NJC had constructed a new model courtroom, which the judicial college had not yet opened. Ms. Wisiniewski insisted that the judicial college was ten years behind the times and that it duplicated many of the services that were provided by other agencies. For example, support for services requested in Senate Bill 249 were already being done at the State Justice Institute. Moreover, she said that the National Center for State Courts provided services free of charge and were in direct competition with the National Judicial College.

Ms. Wisiniewski then disclosed that she had been asked by a committee member to evaluate the judicial college’s impact on tourism in Nevada because of her background in market research. Based on her own evaluations, the National Judicial College appeared to have no impact on tourism in Nevada. In fact, she stated that the college routinely held clandestine meetings which the public was restricted from attending.

She reiterated that she had previously attempted to attend these meetings as a member of the press or the public but was told that the meetings were closed to the public. She did not understand why public resources were restricted from public use.

Ms. Wisiniewski begged the committee to withhold budgetary support to the National Judicial College until such a time that the college opened its facilities to the public.

Ms. Wisiniewski also cited page D-7 of Exhibit D, which included a report that had been issued evaluating the quality of teaching at NJC in addition to the quality of the technology center. The report described how the National Judicial College was in competition with the National Center for State Courts, which provided similar services free of charge.

Ms. Wisiniewski’s then disclosed that she had attended the State Judicial Educator’s Conference in October of 1997. At this conference she had been party to a discussion of the public’s concern over the failings of the legal system and the failings of the National Judicial College. She maintained that the judicial system, including the National Judicial College, purposefully excluded the participation of the American public by charging high prices.

Ms. Wisiniewski also held that other organizations such as the National Organization for Probate Judges were self-sustaining and did not request supplemental funding from state governments.

Next, Ms. Giunchigliani interjected to express her concern for distributing public funds to organizations that restricted public access. She inquired why public access was restricted at the National Judicial College.

Mr. Luney responded by presenting committee members with a memorandum (Exhibit E) that he had distributed to members of the Senate Finance Committee explaining the judicial college’s position on the issue of public access. He guaranteed NJC granted public access.

However, he further explained that because Ms. Wisiniewski and another party had filed suit against the National Judicial College several years prior to the hearing, legal counsel for NJC had advised the college to deny Ms. Wisiniewski access to their facilities until the lawsuit had been resolved. They were the only two individuals who had been denied access.

Ms. Giunchigliani asked why legal counsel chose to advise restricting public access in reaction to a lawsuit. Mr. Luney replied that Margo Pescovich, legal counsel for the college, had made that recommendation. He explained that an incident between the previous Dean of NJC and Ms. Wisiniewski, where Ms. Wisiniewski had attempted to gain access to a conference that had been closed to the general public, had incited that recommendation.

In regard to Ms. Wisiniewski’s testimony concerning the tension between the college and the National Center for State Courts, Mr. Luney stated that testimony was false. Emphasizing the strength of their relationship, he disclosed that he had even received a personal invitation from the center’s administrator to attend the conference to which Ms. Wisiniewski had referred.

He then explicated that the conference, held in Washington D.C., would convene to discuss a report from the Hurst Foundation, which included a public survey on public confidence in the judiciary. Invitations had only been sent to state Supreme Court officials, as the conference would not be able to accommodate the general public. Subsequently, Justices were asked to bring working groups from each state to develop a methodology to treat areas where public confidence was lacking.

Ms. Giunchigliani then asked if judicial colleges underwent an accreditation process. Mr. Luney answered that in the early 1960’s, Justice Clarke had created the first judicial college program. Since that time the college had specialized in judicial training and its faculty was comprised of 300 to 400 judges from throughout the nation. Most states had adopted similar judicial training programs based on the pattern developed by the National Judicial College. Thus, the college had trained many of the justices who formed the faculty of various state judicial education programs.

Ms. Giunchigliani then asked if a standard for judicial colleges was in place. Mr. Luney replied negatively, however he stated that the National Association of Judicial Educators included representative from every state. The association worked in unison with the state judicial education programs to meet state judicial requirements. He related that NJC provided services, which were not provided by those state judicial education programs.

Next, Ms. Giunchigliani recalled that new judges in Las Vegas were trained at the National Judicial College. She wondered if all of the judges in the state were trained in the same manner.

Mr. Luney answered that introductory courses were offered for appellate judges, state trial judges, administrative law judges, and for non-law training judges or special jurisdiction judges. However there was no accreditation service in place to evaluate any judicial college.

Ms. Giunchigliani then asked if an entity provided oversight to the courses and training provided by the National Judicial College. She also asked if judicial college training was required of judges to continue in their positions.

Mr. Luney answered that unlike other countries, which required 2 years of training for members of their judiciary, training was not required for judges in the United States because funding was not available to support such a requirement.

Next, Ms. Wisiniewski added that when the National Judicial College was conceived they had been accredited by the National Association of Law Libraries as well as by the judicial section of the American Bar Association (ABA). Since that time however the college lost its accreditation.

She explained that unlike other university professional programs, training conducted by the National Judicial College did not meet the standards of the Graduate School for the University of Nevada, Reno. Moreover, she had contacted the accreditation agency and had discovered that the college had lost its accreditation in 1978. Accreditation for the library at the college had also lapsed and even though the library had re-applied for accreditation several times, it had been denied because the facility did not meet standard American Bar Association requirements.

Ms. Wisiniewski stated the only accredited institution that provided legal training was the Paralegal Training program at Truckee Meadows Community College. Requirements for that program were strict and paralleled requirements for most law programs throughout the country.

In regard to the National Center for State Courts "Public Trust and Confidence Conference", she stated that the State Justice Institute was very concerned about the restrictions concerning public comment at the conference. State officials and representatives of state judiciaries were supposed to meet with the public to obtain comments relating to the public’s concerns.

She then argued that the survey conducted for the conference’s discussion was skewed. She thought that results from the survey could not be taken seriously as officials could choose to present whatever results they wished. She felt the public should be able to provide input as to where it felt the judicial system erred.

Finally, Ms. Wisiniewski related that construction of a new model courtroom at the National Judicial College duplicated resources as there were model courtroom’s located at the College of William and Mary and in Sacramento. She thought the judicial college was looking to duplicate resources by using state monies. The National Center for State Courts, on the other hand, used mostly grant money.

Finally, Jim Richardson, Director of the Master of Judicial Studies program at the National Judicial College spoke in support of S.B. 304 He also related the support of UNR president, Joseph Crowley, who could not attend the hearing. He mentioned that President Crowley was proud of the development of a sound relationship between the judicial college and UNR over the past few years. Thus, President Crowley urged his support for this bill.

SPEAKER DINI MOVED TO DO PASS.

ASSEMBLYMAN MARVEL SECONDED THE MOTION.

Bob Shriver, Executive Director on the Nevada Commission on Economic Development, voiced his support for S.J.R. 12. Mr. Shriver said efforts to provide seed capital through a trust fund that utilized state monies had existed for quite some time.

He reiterated that the bill proposed to exempt certain portions of Article 8, Section 9 of the Constitution of the State of Nevada or the "Anti-Donation Clause." This would allow the Legislature to enact legislation upon passage by the voters by the year 2000. The plan entailed a concurrent resolution, which called for an interim study on the implementation of S.J.R. 12.

Mr. Shriver emphasized that Nevada was disadvantaged by its inability to provide seed capital, thereby causing a failure to compete with surrounding states for entrepreneurial investment. He felt S.J.R. 12 encompassed a prudent plan to ask the voters to support. Legislators would set up a mechanism that would allow the state to provide seed capital, subsequently making the state more attractive to investors.

The business community was in the process of developing a much stronger public information campaign. Mr. Shriver commented that he concurred with criticism given by the media that the effort had not been undertaken very well.

Mr. Shriver then referred to Question 7, which appeared on the ballot in 1996. He felt that the anti-donation clause in S.J.R. 12 would fare much more successfully because the business community was much larger and they fully realized the benefits of such a clause. In fact, in a recent meeting, business leaders discussed options for the development of a program that would advertise the benefits of an anti-donation clause. As a result he thought that a much stronger public campaign could be developed.

Furthermore, Mr. Shriver contended that if the measure was passed unanimously, legislators could easily return in the following biennium and write the legislation needed to implement the plan.

Mrs. de Braga stated the thought that the ballot question in 1996 had been defeated primarily because people viewed the measure as risky. Therefore she wondered what the differences between the old resolution and S.J.R. 12 were and how the new resolution would alleviate the concerns expressed in 1996. She recalled that the old resolution had required businesses, which were granted investment monies from the state, to have a minimum number of employees under their employ.

In reply, Mr. Shriver articulated that S.J.R. 12 was the commission’s third attempt to create an anti-donation clause and in each attempt to do so, the commission has attracted greater support for the measure. After surveying voters concerning the lack of support for previous measures, the commission exempted certain portions of the anti-donation clause, rather than deleting the clause to allow the Legislature to enact legislation that would be popularly supported. He hoped the resolution would acquire the necessary votes needed to pass in the Nevada State Legislature.

Mr. Shriver then reiterated that the joint resolution was tied directly to economic development and to high-wage jobs. He admitted that the language of the joint resolution was broad, however he anticipated that after its adoption, the skeleton legislation, which was required would be more detailed. Moreover he contended the joint resolution could be tied to other state incentive programs that were currently in operation.

Dick Clark, Chief of the Peace Officers Standards and Training (POST) Commission first introduced Dennis Kollar, Commander of the POST academy. He said that both the Assembly Committee on Ways and Means and the Senate Finance Committee had closed the POST budget with sufficient operating to funds to operate POST as envisioned in S.B. 68.

Chief Clark indicated that the bill had been derived from a legislative request to complete a study, the Senate Concurrent Resolution 21 study. He noted the concerns of the Sheriff’s and Chief’s Association, the Department of Motor Vehicles and Public Safety, and the Legislature regarding the POST budget structure and its responsibilities and placement within state government, instigated the formation of a special committee to study the causes of those concerns. The committee consisted of representatives from DMV & PS and the Nevada Sheriff’s and Chiefs Association and a total of six committee meetings were held. During those meetings testimony was heard from outside experts on law enforcement education and training as well as from other interested parties and stakeholders.

He reported that a survey had been conducted by all Nevada Law Enforcement agencies regarding their thoughts on POST and a final report had been completed with specific recommendations. Those recommendations were embodied within the bill, S.B. 68, sponsored by Senator Jacobsen.

First, the bill recommended that POST exist as a stand alone commission separate from DMV & PS, as POST was expected to serve the interests of the state, local, and county criminal justice agencies equally as a regulatory agency. Furthermore, it was preferable that the agency maintained its autonomy and avoided the appearance that actions were dominated by one criminal justice agency.

Second, the bill recommended that the POST commission would remain funded by court assessments in an acceptable, stable percentage. Also the legislation advocated that the POST commission have the authority and responsibility to adopt regulations establishing minimum standards for the certification, de-certification, recruitment, selection, and training of peace officers. Without mandates at the state level, recruitment, selection, basic and in-service training could suffer. This would result in substantial variations in the quality of police service within the state.

Also, to a varying degree, the POST commission would certify, conduct, facilitate, and manage basic and in-service training for many of the law enforcement agencies statewide. Stakeholders and law enforcement executives across the state unanimously supported the continuance of allowing POST’s current level of diverse responsibilities.

Finally, the bill suggested that an executive director be appointed by the commission to manage the day-to-day operation of the agency. The executive director would then establish a staff structure and garner the materials needed to accomplish the objectives of the POST commissions.

Chief Clark clarified that the bill stipulated certain duties and responsibilities to be assumed by the commission. He then deferred to Senator Lawrence Jacobsen.

Senator Jacobsen related that S.B. 68 was one of his most valued initiatives. He reiterated that the bill supported granting the POST commission self-autonomy, as was recommended by the Sheriff’s and Chiefs Association.

Describing the POST academy’s location, Senator Jacobsen stated the academy utilized an older facility located at the Stewart Indian Colony. The complex included living quarters and a cafeteria.

Next, Senator Jacobsen relayed the importance of the POST academy by explaining its significance to the rural areas of the state. POST allowed all of Nevada’s law enforcement agents to train in one locale and in a similar manner. The harmonization of law enforcement training amongst law enforcement officials through-out the state, allowed rural counties to coordinate support. For instance, Douglas County depended upon law enforcement assistance from other counties to manage the New Year’s events at Lake Tahoe.

Moreover, he felt the academy itself, was finally able to address its own needs efficiently, especially as it addressed the needs of law enforcement agencies throughout the state. Even though the services were not catered to fit the needs of Clark County, the other 16 counties within the state heavily relied on the POST academy to train their personnel. He repeated that one of the benefits to POST training was that officers were trained in unison. This also allowed for more officer mobility between areas.

He then urged committee members to visit the academy, as it was a first-class operation. In fact, a new firing range had been constructed near the academy. The close proximity of the firing range to the academy facilities minimized transportation problems.

Although, he noted that law enforcement training could be provided more cheaply at the community college, community college training lacked the unity, which was present at the POST academy. Furthermore, he stated living quarters and training rooms were adequate.

In regard to the content of POST training, Senator Jacobsen reported that the Sheriff’s and Chief’s Association determined the course content. This was important especially as societal concerns were constantly changing. He stated that as domestic violence issue became more prevalent, POST added a related training program to its course regimen.

Mr. Marvel then took notice of Sheriff Gene Hill of Humboldt County, whom he believed could provide a unique perspective of rural law enforcement agency’s reliance upon POST. Sheriff Hill introduced himself to committee members and disclosed his position as President of the Nevada Sheriff’s and Chief’s Association and a POST committee member.

Sheriff Hill indicated that the bill would benefit the rural law enforcement agencies more so than the urban and more populated law enforcement agencies within the state.

Specifically, the Humboldt County Sheriff’s office worked closely with the City of Winnemucca Police Department. Sheriff Hill also said that his officers occasionally worked with Lander and Pershing counties as well as with the City of Lovelock. Because his office frequently transferred officers amongst the surrounding counties, he insisted that the consistency, the uniformity, and the familiarity associated with POST training was a tremendous boon to rural law enforcement agencies. POST training eliminated confusion when officers where used for assistance in alternate locales.

He reiterated that in emergency situations, an officer was forced to rely upon his knowledge and skills, as time was not available to work through a solid strategy. To date, he insisted that POST had adequately trained officers to think on their feet and to manage emergency situations effectively.

Sheriff Hill maintained that the passage of S.B. 68 would further improve POST’s ability to train peace officers throughout the state. As an autonomous agency, POST could better manage its own finances. This would benefit the POST committee in determining what subjects needed to be covered in training.

He repeated that rural areas benefited the most from POST training and would benefit the most from making POST an autonomous agency.

Next, Captain Jim Nadeau of the Washoe County Sheriff’s Office, spoke representing the Nevada Sheriff’s and Chief’s Association and Washoe County Sheriff Richard Kirkland. He related their support for S.B. 68. He held that the bill would benefit the state law enforcement agencies greatly.

Senator William Raggio, representing Senate District No. 3 testified in support for S.B. 71. Providing a background to the bill, he stated the legislation allowed for the creation of a legislative budget, which had been an oft-discussed topic in previous legislative sessions.

In 1993, Senate Concurrent Resolution 46 required the Legislative Commission to study the prospect of formulating a legislative budget. In an interim committee, the study was conducted and several recommendations were made. Those recommendations as well as others, which had been derived from an earlier study, were combined to construct the proposal made in S.B. 71. In fact, most of the budget review procedures used included changes in the budget format and the creation of joint subcommittees.

The interim study also recommended that the Legislature involve itself earlier in the budget development process by allowing the respective members of the Senate Committee on Finance and the Assembly Committee on Ways and Means to meet in advance of the session in order to preempt the budget review process.

Thus as result of those studies and constitutional changes, the budget review had been completed more quickly. He felt the current Legislature had been very effective in dealing with the Governor’s recommendations and the results seemed promising.

Next, Senator Raggio indicated that the S.C.R. 46 study of the legislative session in 1993 had also requested a formal opinion on the Legislature’s constitutional authority to expand its role in the formation of the state budget. He related that a Legislative Counsel Bureau opinion had concluded that the formulation of the state budget was clearly a legislative prerogative. In fact, he reported that the Constitution of the State of Nevada did not contain a provision requiring the Governor to submit a budget to the Legislature. He felt that fact needed to be understood as a response to criticism, which emanated from the Office of the Governor, that the Legislature should have no part in creating the state’s budget.

He reiterated that the opinion had concluded that the lawmaking power rested solely within the Legislature. Public funds could only be expended through legislative authority. The Legislature in the exercise of its lawmaking power established state policies and priorities and through the power of appropriation, gave those policies and priorities effect. He averred that budget decisions clearly set the state’s policy by determining which social values prevailed. Senator Raggio then repeated the Constitution of the State of Nevada left those policy decisions solely to the power of the legislative branch of government.

Therefore, it was the opinion of the Legislative Counsel Bureau that the manner in which the state budget was prepared was a statutory matter within the sole discretion of the Nevada Legislature. Historically in many states responsibility for the preparation of the proposed budget had been delegated to the Executive Branch by statute because it had the resources and expertise necessary, whereas most state Legislatures had little experience in that area due to their schedule of meeting part-time.

He argued that this opinion did not suggest that the Executive Branch be left out of the budgetary process, however it revealed the fact that some state Legislatures had been able to create for themselves a much stronger presence in the budget development process. For example, states like Idaho, Arizona, Arkansas, and Texas either developed only the legislative budget or a legislative proposal with which to compare the Governor’s budget proposal.

One such state with which the senator was familiar was the case of Colorado. He stated that the Colorado State Legislature had a very strong presence in the budgetary process, as it created its own legislative budget. Colorado served as a proper comparison because the state had similar capabilities and similar opportunities, as did the state of Nevada.

Senator Raggio articulated that the bill would require the formulation of a separate legislative budget along the same lines and in the same format as The Executive Budget. This neither diminished the role of the Governor in submitting a budget proposal nor did it limit the Governor’s ability to present, justify, and defend the Executive’s proposals and priorities.

Regardless, Senator Raggio contended that legislators could no longer be confined to the proposals made in The Executive Budget. This bill would give the Legislature and its staff the opportunity to receive the same information from the state agencies and from others who wished to participate in the budgetary process. In that manner, the Legislature could more effectively determine which social concerns should receive a higher budgetary priority. This would be done jointly between both legislative houses.

He then cited section 2 of S.B. 71, which required the Fiscal Analysis Division to prepare the legislative budget proposal in a similar format to The Executive Budget. The legislative proposal would be delivered on the second day of the session.

In Section 3 of the bill, Senator Raggio pointed out that the Interim Finance committee would be installed to oversee and guide the preparation of the proposal. Also, section 7 included provisions, which required the sharing of information electronically between the Budget Division and the Fiscal Analysis Division.

He then mentioned that a modest fiscal note was attached to the bill, which indicated that there would be no additional cost to the Budget Division. However, the Fiscal Analysis Division had indicated that they would need a one-time allocation of $60,880 for the anticipated computer programming costs, which were needed to create a program that could compare the two budget proposals. He stated that he would not have supported those additional costs unless the fiscal division felt they had the capability to complete the task. He thought that money committee members should have great confidence in the fiscal staff who served their purposes. Furthermore, he thought the bill would allow for a more equitable participation for the Governor and the Legislature in the creation of the state’s budget.

He explained that when the legislative session commenced, two proposals for the state budget would be submitted to the money committees. The legislative proposal would include support for the programs it espoused and it would give the Legislature the opportunity to compare proposals without feeling compelled to choose from only one option.

Senator Raggio then expressed his sincerity in pursuing the passage of S.B. 71. He felt that it was apparent that he supported this measure regardless of what individual held the position of Governor of the State of Nevada. He felt the measure was essential to efficient government in the State of Nevada. Finally, he expressed his hope that the measure would pass out of the Nevada Assembly and would avoid a pocket veto that could be issued by the Governor.

Chairman Arberry asked if Senator Raggio believed that the Governor would veto the measure.

Senator Raggio replied that he expected any Governor who was concerned about the possible erosion of authority of the Executive Office to veto the bill. He reminded the committee that the Senate had passed a similar bill during the previous legislative session but due to pressure from then Governor Miller, the bill had failed in the Assembly. He anticipated that Governor Guinn would also veto the bill.

Nevertheless, Senator Raggio insisted it was his duty to cross partisan lines in support of the measure. He reiterated that it was not a valid argument to suggest that the Constitution of the State of Nevada directed only the Governor to prepare a state budget. Although there was no authority in the state’s constitution for the Governor to create a budget, by failing to take action on a budget of its own, the Legislature delegated that authority to the Governor.

He then re-emphasized that S.B. 71 did not attempt to emasculate the authority of the Governor to submit a budget proposal. The creation of a legislative budget proposal to compare to The Executive Budget was vital to a growing state like Nevada.

Senator Raggio recalled that when he first began serving on the Senate Committee on Finance The Executive Budget consisted of a single volume comprising 50 separate budget accounts. Currently, the Governor’s budget proposal included 469 individual budget accounts and spanned three large volumes of text.

Mr. Marvel interjected to comment that the Legislature had been planning on creating its own budget proposal to compete with the proposal submitted by the Governor for quite some time. He did not feel the measure was a partisan one, but simply a means with which to increase the participation of the Legislative branch of government in the budget process. The bill would allow the Legislature to be fully prepared at the outset to comprehend the various nuances of the budget proposals. Mr. Marvel stated that the bill would provide the Legislature with a valuable tool, as it assisted the body in conforming to the
120-day session regulation. He also felt that the measure did not attempt to disparage the Executive branch.

Next, Denice Miller representing the Office of the Governor testified against S.B. 71. Reading from a prepared statement (Exhibit F) she stated,

Ms. Miller then paused to clarify that the Constitution of the State of Nevada had been changed since the opinion to which Senator Raggio had referred had been issued.

• In 25 states, the executive branch may reorganize state departments without legislative approval.

• In 37 states, the executive branch may reduce spending without legislative approval.

• In 33 states, the executive branch may spend unanticipated federal funds without legislative approval.

• In 43 states, the Governor has the power of line-item veto.
• In 41 states, the Governor has the power of item veto of appropriations.
• In 15 states, the Governor has the power of veto of selected words.
• And in 3 states, the Governor has the power to change the meaning of words.

Chairman Arberry stated that in Ms. Miller’s testimony, the Office of the Governor did not want the Legislature to have to review two separate budgets. Yet, the Legislature did so anyway as the number of budget revisions submitted by the office equated to the amount of work that would be created by a legislative budget proposal.

Mr. Marvel asked if Ms. Miller thought the Governor should be given the power of line-item veto.

In reply, Ms. Miller stated that the Office of the Governor had not discussed the issue.

Next, Don Hataway, Deputy Director of the Budget Division, testified that he concurred with Senator Raggio on a number of issues. For instance, he agreed the Constitution of the State of Nevada did place the ultimate authority for the adoption of the budget in the hands of the Legislature. In essence, he felt the budget became the Legislature’s budget.

He said there were three alternatives a legislative body could utilize when considering a budget like this. One alternative was to adopt the budget without any changes. The second option was to reject the budget totally and to create a new budget aligned with the desires of the body. The third alternative was to adopt the budget in a modified form. Mr. Hataway indicated that the latter alternative was the most oft-used method.

Furthermore, he agreed that positive changes had resulted from the 1993 modifications to the Constitution of the State of Nevada. He felt that this was why The Executive Budget comprised three volumes. The purpose of those changes was to make the legislative review of the budget easier to complete, as the Legislature could focus on the Maintenance and Enhancement issues within each budget account. He maintained that the checks and balances in place in the state’s constitution were sound and did not need to be changed.

Moreover, the duplication of costs and effort by Budget Division staff and other state agencies was not worth the potential advantages derived from a legislative budget proposal. He held that the Legislature played an important role in the budgetary process, in spite of the absence of a legislative budget proposal. And for those reasons he was strongly opposed to S.B. 71.

Mr. Marvel then commented that he thought the current budgetary process had been frustrated by the inability of Fiscal Division staff to discuss budget information with legislators during the budget’s inception. Legislators were not allowed to participate in the budgetary process until after the budget had been presented by the Governor. Mr. Marvel felt this tied legislator’s hands and he hoped that legislators could meet with agency heads prior to the presentation of The Executive Budget so that they could get a good understanding of the issues at hand.

Mr. Hataway responded that he did not know why a gag rule had been imposed on Fiscal Division staff, but he indicated that Fiscal Division staff was involved in the budget’s inception from the beginning so as to prepare legislators to address the various agency budgets.

Mr. Hataway then guessed that a former Governor, who desired to keep the details of the budget proposal secret until the formal presentation of the budget, had imposed the gag rule of fiscal staff.

Referring to the meetings of the Legislative Commissions Budget Subcommittee in January 1999, Mr. Marvel thought that hearings before the commencement of the legislative sessions were helpful in informing legislators about The Executive Budget.

Mr. Hataway then stated that he saw no reason why the agency heads could not give legislators a briefing concerning their budget requests before the legislative session was scheduled to begin. He thought the system needed to be fine-tuned rather than changed by the method which S.B. 71 proposed.

Mr. Hataway articulated that everyone would benefit if the legislative branch were kept more informed of issues relating to the budgetary process.

Mr. Goldwater commented that he saw no reason why the Desert Research Institute (DRI) could not continually roll the money over into their budget. Due to the language of the bill, he thought they could forever issue debt securities after the project was completed. He argued that DRI could keep building projects or keep the revenue in their own budget, when in effect the monies should be returned to the state.

He was not clear where the revenue would be directed once the project was finished. He repeated his concern that the language of the bill indicated that DRI would be able to continually absorb bond revenues for their own projects without returning the revenue to the state.

Next, Mr. Stevens explained how DRI was funded. He stated that the core group of administrators used to operate the organization were funded with state General Fund dollars. The remaining expenditures that were required by the agency were funded through indirect costs and other revenues that were generated by DRI. Thus the only funding that the state provided to DRI in a substantial amount were the salaries related to the administrators.

Mr. Goldwater stated he understood how the organization was funded but he was concerned that the wording of the bill, particularly in section 15. He thought that DRI was building a project that would be an asset to the state and that DRI was pledging revenues, which were leased revenues. This meant that DRI would have the authority to forever re-issue the debt, even beyond the completion of this project. Although Bond Council stated that this was not true, Mr. Goldwater had trouble understanding why that was so. He stated that beyond completion of the project, this asset of the state would produce income. He wondered where that income would be funneled.

Mr. Stevens could not respond to Mr. Goldwater’s concern, as he did not know if debt could be reissued. However, he responded that DRI currently had lease revenue from the Environmental Protection Agency (EPA) and the state did not take this into account in the current state budgeting process. The state only felt it was responsible to fund that group of administrators who were needed to run the organization.

Speaker Dini commented that securities law needed to be analyzed while reading the bill. He felt the language was boilerplate language that was placed in every bill. Limits were in place to restrict DRI from re-issuing bonds to fund another project. They could however, under Section C, re-issue the bonds to get a lower interest rate. At the time all state government bonds were being re-financed to save $9 million a year. The bill intended to allow DRI to re-issue the bonds solely for the purpose of realizing a lower interest rate. He had no concerns over the reissuance of the bonds as stipulated by the bill.

Mr. Marvel remarked that the state truly benefited from its ability to refinance state government bonds.

Mr. Beers then cited page 4, lines 32 through 34, as the answer to Mr. Goldwater’s concern. It appeared that DRI could repeatedly reissue the bonds, but only for 5 years following the enactment of the law.

Next, Mr. Stevens read from line 31, which stated that the principle amount could not be more than $8.6 million. Then the bill stated the bonds could be issued all at once or in phases. For instance, he thought that the provisions indicated that bonds could be issued in three separate phases of $2 million, $2 million, and $4.6 million.

Mr. Beers inquired if the bill should include a provision concerning the reissue of bonds for refinancing purposes in order to take advantage of changes in interest rates.

To answer, Speaker Dini pointed out that on page 5, lines 1 and 2 in the bill, the act did not prevent DRI from refunding or reissuing the bonds for refinancing purposes.

SPEAKER DINI MOVED TO DO PASS.

Mr. Stevens remarked that S.B. 282 was required to change the amount of the appropriation offered in a bill that was passed in the 1997 Legislative Session from one category to another. In this manner there would be a zero net effect on the writing standards portion of the Academic Standards Council’s work.

Next, he addressed a proposed amendment made by the Department of Education that would transfer funds relating to tenth-grade Terra-Nova Tests from the original appropriation made in 1997. He explained an additional $11,500 was needed for the tenth-grade Terra Nova costs and the department suggested that this be funded through a reduction in the category of costs related to the remedial education consultant. Should the committee endorse the amendment proposed by the Department of Education, this would add a new section to the bill as well as reduce the $48,200 request in Section 2 of the bill to $36,700.

Mr. Stevens said that S.B. 47 would provided a $20,000 General Fund appropriation for costs related to the certification of the National Board of Professional Teaching Standards. He related that Mr. Marvel thought that the bill should be amended to require a payback of this amount if the teacher left state employment within a certain number of years.

Mr. Marvel inquired about the requirements of the WICHE program. He thought there was a 2-year requirement and that that length of time seemed a reasonable requirement to add to the bill.

Mr. Price then relayed his concern that there might be valid reasons for a teacher to leave employment suddenly such as National Guard Service.

Chairman Arberry responded that he thought the bill could include a provision excluding a teacher in circumstances of hardship.

Mr. Stevens related that this bill provided for increased salaries for public school teachers with national certifications related to S.B. 47. He then informed committee members that a request for an amendment to the bill had been made from the Nevada State Education Association (NSEA). If passed the amendment would change the language of the bill, which required a district to add 5 percent to the salary for a teacher that had been certified. NSEA suggested that the bill read "a district shall provide not less than 5 percent."

Mr. Marvel commented that the bill should be left unamended. If needed, the law could be changed in the following legislative session.

Mr. Stevens reported that A.B. 342 had been passed the previous day, however new information had indicated that a section of the bill needed to be changed. This related to a bill that had been passed out of the Assembly Committee on Transportation. He wished to discuss the issue with Assemblywoman Chowning before the bill was addressed.

Chairman Arberry explained that A.B. 673 was a bill that had been presented by the Retailer’s Association. He stated certain amendments existed which affected the Auto Dealer’s Association. Also, the bill had a significant fiscal note attached, as it requested five new positions.

He related that the sponsors of the bill had agreed to include one position in their fee on the bill in order to reduce the fiscal note and to pass the bill out of the Assembly.

Mrs. Cegavske inquired if she could be given a summary of the issues affecting the bill. She wondered if the bill was a consumer friendly piece of legislation.

She thought the state would be paying for the employees who would be offering the service.

Mr. Stevens remarked that oversight would be needed to ensure that insurance companies who entered into those contracts were financially sound. He thought that the additional costs alluded to by the Insurance Division were related to such oversight.

Mrs. Cegavske wondered if the problem was attributed to the companies with which retailers were contracting to provide extended warranties. She did not understand the specific intent of the bill.

Mrs. Chowning then commented that the amount requested in the bill was to be reduced.

Amy Hill, representing the Retail Association of Nevada, clarified that the bill treated extended warranties, not manufacturer’s warranties. An extended warranty was a service offered by the department store or a third party. She indicated that problems arose when the company offering third party extended warranty went out of business or went bankrupt.

She articulated that the retail community was attempting to rectify this problem themselves by endorsing A.B. 673. The bill attempted to protect the consumer by ensuring that companies offering extended warranties did not become financially insolvent.

Mrs. Cegavske then asked if a third party could offer extended warranty services in a department store. She asked if the Insurance Division would then investigate and regulate the industry. In other words, when shopping for an extended warranty, would the consumer receive a seal of approval from the state of Nevada if the company had been approved.

Ms. Hill responded that the bill intended to increase consumer confidence when purchasing a service warranty contract. Those companies would be regulated by the state of Nevada through the Division of Insurance and certain methods of recourse would be in place should something go awry.

She added that several amendments (Exhibit G) had been distributed for the committee’s perusal. The first amendment changed Section 15 of the bill to add the words "as applicable." The second amendment was directed at Section 10, subsection (e), where the purchase price of a good was changed from $350 to $250.

Next, the most substantive amendment to the bill changed the initial registration fee to $1000 from $500. She felt this increase would provide the funding necessary to start the process in the Division of Insurance. She related that other states, who had experience in the area, had reported that 20 to 100 people usually registered for this service. Thus, she anticipated that the amendment would raise $50,000 in the first year, which was more than sufficient to support one position at the Division of Insurance.

The fourth amendment adjusted the bill’s language, whereas the fifth proposed amendment to the bill stipulated the price of the service contract was not required to be pre-printed on the contract. Ms. Hill indicated that this was at times negotiated with the purchaser at the time of purchase. In other words the purchase price would be provided on the contract, however it did not need to be pre-printed.

Next, she addressed the sixth proposed amendment to the bill, which was also a technical adjustment to the bill’s language. Amendment number 7 addressed the issue of the cancellation of the service contract warranty where it provided that no contract could be cancelled which was in effect for at least 70 days unless one of the following grounds were met:

Next, Ms. Hill addressed an amendment that had been submitted by the Nevada Franchise Auto Dealer’s Association (Exhibit H). The amendment proposed that a service contract, which was directly offered by a vehicle dealer or a vehicle manufacturer, did not fall under the regulations of this bill. However, if a third party service contract vendor who was not affiliated with the vehicle dealer was chosen, the contract would then fall under the provision of A.B. 673.

Mr. Beers commented that A.B. 673 had been voted out of the Assembly Committee on Commerce and Labor on the last day that bills could be voted out of committee. He was still concerned that the provisions of Section 13 seemed to be designed by large companies to put the smaller companies out of business.

Sam McMullen, representing the Retail Association of Nevada, replied that A.B. 673 was a bill that had been put together by the National Association of Insurance Commissioners (NAIC). He explained that the theory behind Section 13 was that a service contract vendor should have at least 40 percent of the premium which they had been paid set in reserve as an a amount that would be sufficient to meet repayment needs and that the number had been a rate set by the NAIC. Alternatively, he explained that a vendor could qualify if they had a net worth of over $100 million.

Mr. Beers clarified that if a vendor had a capitalization of over $100 million, the vendor would not have to adhere to the other onerous requirements.

Mr. McMullen replied affirmatively. Also, he stated that the reserve account could be set up in different ways. It could be covered through securities, an irrevocable letter of credit, cash, or any other form proscribed by the commissioner. The theory behind this requirement was that if a company pledged to stand for all costs and for all repairs, there needed to be some certainty that the company would comply with the obligation, which they had contracted for. He then assured Mr. Beers that the regulation was not as draconian as he feared. The requirement was a national standard that had been negotiated by experts in the field.

Mr. Beers asked if the bill was related to the debacle with Crazy Eddies East Coast Electronics. He wondered if similar problems had occurred in Nevada.

Mr. McMullen replied that he did not believe that there were any cases of a dealer in Nevada defaulting on their obligation to perform a service contract. However, even smaller companies could be affected by financial difficulties and the consumer needed to be protected. A.B. 673 intended to provide minimum requirements for the placement of a secure reserve to meet contractual obligations.

In regard to the amendment promulgated by the franchised auto-dealers, Mrs. Cegavske was concerned that the service contracts, which they provided, could fluctuate. Dealers could raise or lower the fee charged to the consumer. Therefore, she wondered if auto-dealers charge any fee on maintenance contracts and could they fluctuate that fee.

Mr. McMullen explained that a consumer purchased a service contract at the time the item or product was purchased. The consumer would pay the contract price at the time of purchase and would have a schedule set for future payments. He added that service contract charges could vary according to the dealer and the time the product was purchased. Referring to Section 17, subsection <e>, he read "the purchase price must be determined pursuant to a schedule of fees established by the provider." This applied to goods in a certain price range. This meant that a schedule was filed to prevent extreme fluctuations in fees charged or manipulations in the price of service maintenance contracts.

Ms. Guinchigliani wondered why the amendments were not brought to the Assembly Committee on Commerce and Labor. She felt that they should have been discussed in that committee or that the committee members should be made aware of the probable changes to the bill.

Mr. Beers then commented that the amendments had been prepared in response to questions from Commerce and Labor committee members

Chairman Arberry added that when the bill was re-referred to the Assembly Committee on Ways and Means, he had asked Mr. McMullen to request necessary technical adjustments before the bill was passed to the Senate.

Mr. McMullen remarked that the amendments were driven by discussion with members of both committees.

Mrs. Chowning went back to the amendment proposed by the auto dealers and she stated that she did not think the amendment was necessary because on page 2, Section 10, of the bill read "provisions of this title do not apply to a warranty, a maintenance agreement, or a service contract by a public utility." She thought that auto-dealers primarily performed the latter functions and were thus excluded from the provisions of the bill.

Mr. McMullen clarified that the warranty was an obligation without additional costs to repair the item for a certain period of time. If for separate consideration, one purchased additional coverage, the contract being entered into was a service contract. A.B. 673 regulated service contracts not base warranties. He added that warranties were already amply regulated so that they did not need to be included under the provisions of the bill. Furthermore, as Federal law already existed to regulate dealers and manufacturers, the bill only intended to regulate third party vendors.

Next, Jim Jeppson, representing the Division of Insurance, addressed the fiscal note, which was attached to the bill. He related that DIR had worked closely with Mr. McMullen and his clients to craft the bill. Regardless, he was concerned that there would be a significant impact on DIR.

The bill introduced a new area of regulation for DIR. He pointed out that on page 3, line 5, the bill established regulatory oversight for those warranties for which separate consideration was made. This included extended warranties, service agreements that were sold throughout the state presently. For instance, when appliances, motor vehicles, or electronic components were purchased, the purchaser was offered a service contract. As a result of the bill, those products would then be regulated.

Mr. Jeppson indicated that hundreds of companies would soon be registering with the Commissioner of the DIR to offer service agreements. He anticipated that the number of companies registering could reach the highest amount exhibited in the state of Virginia, where 186 had registered. He noted that Oregon presently had 90 companies registered to provide extended service contracts. Those companies would have to file registration agreements with the state and would have to provide financial statements proving their net worth, as well as surety bonds and contractual liability insurance policies. All of those companies would then be reviewed by DIR and approved for registration.

Next, Mr. Jeppson said that DIR would have to review the service contracts offered by the companies to determine if the contracts included the components mandated by the bill. Contracts needed to be clear, to include the statutory provisions, and not mislead the consumer in any way.

He added that DIR would also have to address consumer complaints in that area. For example, even though DIR regulated one-third of the market place for health insurance, 100 percent of the consumer population called DIR with consumer complaints. DIR assisted people with Medicaid problems, Champus problems, and Medicare problems. Thus, if a consumer called DIR with a complaint concerning a warranty or service agreement problem, DIR would have to provide assistance.

As a consequence of those added responsibilities, Mr. Jeppson articulated that the fiscal note requested one full-time position in the Properties Casualty Section. He anticipated that the position would handle all of the registration and oversight of the companies providing service contracts. The position would also review the contracts that were submitted for sale in the state.

Additionally, DIR requested two full-time positions for consumer assistance. This was requested in anticipation of a high volume of consumer complaints. Although, he could not predict the volume precisely, he was certain that the department needed assistance in that area.

Chairman Arberry asked if the fees paid by the companies would support the full-time oversight position, requested by DIR.

Mr. McMullen replied that based on the estimate that 40 companies would apply, the Retail Association of Nevada agreed to double the fee proposed in the bill. He thought the fees collected would be able to accommodate the one-full time position.

Chairman Arberry stated that the one-position was sufficient until such a time when Mr. McMullen could return to the committee and report that the workload had generated the justification for additional positions. Thus, he asked if DIR could live with only one position.

Mr. Jeppson replied that DIR wanted to effectively regulate the market, if they were given that responsibility. He then related that the industry had been concerned about delays in the registration process. He believed that the one full-time oversight position would accommodate the registration and review of the products. He was concerned however that the department’s need in the area of consumer assistance was not going to be met. He then stated that DIR could return in future and report workload estimates or performance indicators.

Chairman Arberry remarked that the committee was not trying to short change DIR, rather provide support for positions that were absolutely necessary. He preferred to provide support for the one full-time position, until DIR could provide more valid justification for their need for additional positions.

Next, Mr. Marvel asked how DIR dealt with consumer complaints currently. Mr. Jeppson replied that if the department felt a consumer had been defrauded they were referred to the District Attorney’s Office and the Consumer Affairs Division.

Mr. Beers also asked how many complaints DIR received regarding extended service contracts.

Mr. Jeppson answered that since DIR did not track that information, he could not provide an accurate figure.

Mrs. Chowning thought that the Division of Consumer affairs should relate to the committee how many complaints were usually received. Also, she asked if the contract renewal fee was also set at $1,000, as it was not listed in the amendment.

Chairman Arberry next called attention to bills that needed committee introductions.

ASSEMBLYMAN PARKS MOVED FOR COMMITTEE INTRODUCTION.

ASSEMBLYWOMAN CHOWNING SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY.

ASSEMBLYMAN MARVEL MOVED FOR COMMITTEE INTRODUCTION.

ASSEMBLYMAN BEERS SECONDED THE MOTION.

THE MOTION PASSED UNANIMOUSLY.

Mr. Stevens next addressed a bill that was needed because of the manner in which subcommittees had closed budgets.

As no other business was presented before the committee, the meeting was adjourned at 2:00 p.m.

RESPECTFULLY SUBMITTED:

Janine Toth,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry, Jr., Chairman

DATE: