The Committee on Ways and Means was called to order at 9:45 a.m., on Thursday, May 13, 1999. Richard Perkins, Acting Chair, 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. Richard Perkins, Acting Chair

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

COMMITTEE MEMBERS ABSENT:

Mr. Morse Arberry Jr., Chairman (Excused)

Ms. Jan Evans, Vice Chair (Excused)

Mr. Bob Price (Excused)

STAFF MEMBERS PRESENT:

Mark Stevens, Fiscal Analyst

Gary Ghiggeri, Deputy Fiscal Analyst

Cynthia M. Cendagorta, Committee Secretary

Pam Wilcox, Administrator, Division of State Lands, advised the committee that the intent of the legislation was to change what had been a line item in the division’s budget into a revolving fund. The division had a variety of needs, which had traditionally been funded as line items in its budget. According to Ms. Wilcox, land management problems did not respect fiscal years, and the division needed a method to utilize funds over fiscal years. Further, she noted there would be no fiscal impact because the $20,000 appropriation proposed by the bill was included as $10,000 for each fiscal year in The Executive Budget.

Mr. Marvel asked if any unused balance reverted. Ms. Wilcox indicated it had in the past.

With no further business to come before the committee the hearing on S.B. 508 was closed.

Bill Hale, Chief Executive Officer, University Medical Center of Southern Nevada (UMC), explained the history of Disproportionate Hospital Share (DHS) payments. The program began in 1991 and originally provided taxes and county allocations which were utilized to match federal dollars for providing DHS payments to hospitals that provided an unusual amount of uncompensated care. Mr. Hales stated in 1995 there was much abuse occurring throughout the United States where those funds were used for roads rather than health care. New federal legislation was enacted which restricted how the monies could be spent by individual states. He noted the state had to prove to the government what the actual uncompensated cost of care by individual hospitals was, in order to obtain federal matching dollars. Using intergovernmental transfers from its counties, Nevada represented to the federal government what the costs were for uncompensated care in hospitals. Mr. Hale explained the way the formula worked at present was the state kept approximately $15 million of the total, which was a net of $37 million. The counties, through various allocations, received the remainder of the money. According to Mr. Hale, the intent of the federal legislation was to reimburse hospitals for unusual uncompensated costs, and not to supplement Medicaid programs for individual states. UMC was suggesting that a new allocation program be developed, which would move the majority of the monies to the hospitals that provided a disproportionate amount of care to indigents.

Mr. Hale advised that UMC realized there was a budget crisis at the state level and, therefore, suggested an amendment to A.B. 69, changing the effective date to July 2001.

Mr. Marvel asked if the impact of the bill would have to be included in the next budget process. Mark Stevens, Fiscal Analyst, Legislative Counsel Bureau (LCB), indicated it would, and the General Fund would be impacted in the amount of approximately $15 million per fiscal year.

Mr. Dini asked where the system had failed causing such legislation to be initiated. Mr. Hale explained hospitals that provided indigent care needed more and more recognition that they provided such care. For example, he continued, many rural hospitals were failing due to the quantity of indigent care they provided. It was interesting to note that while the United States was experiencing the highest prosperity period to date, the number of uninsured persons continued to grow. Mr. Hale felt the state needed to prepare for uninsured persons who would need health and hospital care in the future.

Charlotte Crawford, Director, Department of Human Resources, stated she would give a simplified overview of the DHS and intergovernmental transfer program. The two issues were separate but did interact. She referred to Exhibit C, stating under the Medicaid program, states could pay hospitals an amount that differed from the rate paid for medical services, in order to compensate for the DHS for indigents or Medicaid recipients. The DHS program was started in Nevada in 1988, and cost slightly over $1 million. The DHS vehicle presented an opportunity, because it had no restrictions regarding the amount the state could reimburse hospitals. At the same time, explained Ms. Crawford, the Medicaid program allowed the use of taxation and donations to raise revenues other than General Fund dollars to finance its Medicaid programs. The two sources became intertwined in Nevada in the early 1990s. According to Ms. Crawford, states paid hospitals a dollar amount through DHS payments, and then brought in revenue from hospitals and local entities that paid money back to the state. In 1991 a provider tax was instituted that raised revenue placed in hospital tax accounts, which was then called the intergovernmental transfer account. Those monies were, in turn, used to pay for medical services, matched by the Federal Government and returned to the state. Ms. Crawford indicated each provider was held harmless and guaranteed a return of at least the amount they put in, or more. In the early 1990s the federal government restricted provider taxes, indicating they must be broad based and real taxes in the provider class. Ms. Crawford advised that Nevada’s tax would not have met those requirements; however, what the Federal Government did not restrict when they restricted taxes and donations, were intergovernmental transfers, to ensure that Medicaid programs could legitimately accept transfers from governmental entities.

Ms. Crawford indicated the state brought in $53 million in intergovernmental transfers from hospitals each year. The state paid out $74 million in DHS payments to hospitals as compensation for indigent and Medicaid care. Further, noted Ms. Crawford, the figure was capped at the federal level, and the state could not pay more than $74 million. That came about as a result of a budget act where the Federal Government limited high disproportionate states. Nevada was the only high DHS state that did not have its limit reduced. Ms. Crawford explained states were allowed to, and could provide DHS payments, however, it was not mandated. The program benefited both the hospitals and state Medicaid programs. After deducting the $53 million transfer from the $74 million paid in DHS payments, the hospitals netted $21 million. The state netted $16 million and the Federal Government lost $37 million via its contribution. Ms. Crawford commented the reason most states turned to the program was because the Medicaid program expanded dramatically in the early 1990s, and costs rose due to changes in federal law requiring expansion of the program. She noted states experienced great difficulty with the level of growth in Medicaid and the federally mandated expansion. Congress was also aware that they implemented a basically unfunded mandate on states, which had a dramatic impact. Ms. Crawford referred to Exhibit C and said it would illustrate what the program entailed. The $16 million benefit the state would lose was built into the Medicaid budget, and the intergovernmental transfer budget was set up and reserved. She noted those funds could only be expended to support Medicaid and Nevada Check-Up Program costs.

Janice Wright, Director, Division of Health Care Financing and Policy (HCF&P), referred to Exhibit D and said the bill made changes to the intergovernmental transfer program, which was referred to as the IGT program. A.B. 69 limited the amount of the net benefit received from the IGT by the state, reducing it from $15.7 million to $3.6 million. Ms. Wright stated of the $12.1 million difference, over $11 million would go directly to UMC. She commented that the federal DHS program and the state IGT program were intertwined with respect to the flow of dollars. Because the state did not have $36.8 million in additional General Fund monies available, Nevada chose to participate in the DHS program in 1988. The legislature approved the IGT program as a mechanism for creating the state match for the DHS program. She noted the revenues were received from public hospitals and from Elko and Washoe Counties. From those revenues, explained Ms. Wright, payments were made to the hospital DHS program of $36.8 million and $200,000 to cover the cost of administering the program. The difference in the IGT account between the payments received and those paid out was called the "state benefit."

Ms. Crawford conveyed the program was able to generate $73.6 million, which would go to the hospitals. From that amount, the hospitals and counties made a payment of $52.7 million. The hospital benefit was $20.9 million, which they kept. Ms. Crawford referred to Exhibit C to better explain the flow of monies. The total amount of funding was $31.4 million, which helped to provide payment for the Medicaid and Nevada Check-up programs.

Ms. Wright advised the bill would reduce the state benefit from $15.7 to $3.6 million dollars. If the state were to have that amount matched with federal dollars, it would have $7.2 million rather than $31.4 million, which was a loss of $24.2 million in Medicaid and Nevada Check-Up funding. That would cause The Executive Budget over the next biennium to have a void of $24.2 million at the expense of those two programs. According to Ms. Wright, one of the recommendations made was that a study be conducted during the interim and results provided to the legislature regarding the flow of funds. There was language that specifically directed the Department of Human Resources to study the issue and to look at those hospitals not participating in the DHS program. Ms. Wright noted the study would be reported to the legislature no later than July 1, 2000, and would review the issue of uncompensated cost, along with the revenues and expenses pulled into the program.

Mr. Marvel asked what the study would cost. Ms. Wright reported there was no fiscal note regarding the study, and the department would make the resources available.

Mr. Goldwater commented the issue was a difficult one to understand and work with. He referred to Exhibit C and Exhibit D for clarification of the issue. What the issue "boiled" down to, was the fact the state was soliciting money for disproportionate share hospitals. The bill was intended to compensate hospitals through the "juggling" and "magic" of budgeting, and he noted it would not affect the 1999-2001 biennium’s budget. Mr. Goldwater noted the goal was to compensate hospitals the way they should be compensated. He noted there were those who would probably propose their facility deserved part of that DHS payment, and added they probably did, because under the guise of disproportionate share some facilities served a disproportionate share of Medicaid eligibles.

Mr. Dini disclosed for a plan that was supposed to help the rural hospitals, it really would not do too much for those facilities. He added the bill would not offer much in the way of relief to the South Lyon Medical Center, because 37 cents on the tax roll was being expended to support that hospital. Mr. Goldwater said he felt the bill was not intended as a "bail out" for the rural hospitals, but rather was an effort to honestly state if a hospital was serving a disproportionate share of individuals, it should receive the benefit.

Mitch Mitchell, President and CEO of Sunrise Hospital and Medical Center and Sunrise Children’s Hospital, presented the following testimony:

• Private hospitals generally rely on Medicare disproportionate share, Medicaid, and Medicaid disproportionate share payments to fund services for low-income patients.

• By contrast, public hospitals, while generally relying on these same sources of funding, often receive funds with which to care for the uninsured from local (city, state, or county) government sources.

• As a result of this difference in funding sources, public hospitals generally have more financial resources with which to provide care to low income patients than do private."

Mr. Mitchell asked where the fairness was in the DHS program, given the change in care providers, and the migration of indigent patients from the traditional care setting to various hospitals in the community. He added there had been some misrepresentation of payments for hospital care. All hospitals were required to provide emergency care services to whoever came to the hospital, regardless of their ability to pay. That was federal and state law. In addition, hospitals did not discharge patients if they had no money or if their insurance payments ran out. Mr. Mitchell indicated more hospitals were providing care to indigents than they used to. Therefore, he felt public compensation needed to be distributed to those hospitals providing the care. Sunrise provided care to a wide range of income levels due to the quality of care it gave Nevada residents. The hospital had also taken on the role of a public hospital in the sense that it had numerous partnerships with the state on state initiatives, such as the Baby Your Baby program. Mr. Mitchell said A.B. 69 raised the question of DHS funding, which was an appropriate question. He also felt the issue needed to be taken one step further and the state needed to look at the entire program of funding and make attempts to appropriately compensate those hospitals providing the care.

Mr. Mitchell said Sunrise was the second largest provider of Medicaid services in Nevada, and yet the hospital was not a participant in the DHS program. Given the complexity of the program, he felt it was probably too late to correct the funding and allocation errors, so he would instead support the interim study that was already alluded to. He encouraged the committee not to pass the bill, but instead support the interim committee.

Mr. Marvel asked how much the hospitals suffered in losses every year. Mr. Mitchell said in 1998, $5.6 million was the total state charity care assessment. Mr. Goldwater wondered if Sunrise was even counted in the equation for DHS, which was to the hospital’s disadvantage.

Mr. Marvel asked how many private hospitals there were in the state. Mr. Mitchell said there were eight hospitals with over 100 beds that were private, and one hospital that was public. He pointed out in 1997 it was determined over $115 million of charity care was provided in southern Nevada, and nearly 55 percent of that was provided by private hospitals.

Fred Hillerby, Washoe Medical Center (WMC), said the numbers UMC had put together looked good for WMC, however the state’s numbers did not look so good. The purpose of the additional funding was for disproportionate share hospitals, and he thought anything the state could do to wean the state Medicaid program off those dollars was a worthwhile effort. He felt the study was also worthwhile and should not scare the state away in terms of a commitment to the study.

With no further testimony the hearing on A.B. 69 was closed. Vice Chair Perkins announced the committee would consider possible action on the following bills:

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Mr. Hettrick advised the committee when he went to testify on the bill regarding vending machine money, the Senate had passed the bill out the previous day. The bill split the money and gave half to the employees in the prison system. Mr. Hettrick said he thought the committee needed to take a position on what it was going to do since the budget was already closed. That money was taken away from Services to the Blind, and he felt it should be returned if it was not going into the Inmate Store Fund. Mr. Perkins advised Mr. Hettrick that he felt the issue could be worked out between the two committees.

Ms. Giunchigliani reported the Department of Prisons budget was primarily driven by the projected number of inmates to be housed by the department. The Executive Budget provided funding for an average of 9,946 inmates. In March, the National Commission on Crime and Delinquency (NCCD) reprojected the number of inmates, which resulted in no change in the projected male population, but did reduce the female population. NCCD listed a number of factors that contributed to the reprojection of the female population. First, the number of new court commitments was projected to grow by an average of 5.3 percent per year in the future, which was the average annual increase reported between 1991 through 1998. Second, the parole grant rates were assumed to remain at the 1998 levels which, for women, was 61 percent. Third, violator return rates for females were assumed to return to 1997 levels, while future new commitments were assumed to look like 1998 commitments.

Ms. Giunchigliani added while no revised inmate population projections were provided for male inmates, the actual average inmate population for April 1999 was approximately 362 inmates below the average projected for that month. The Nevada Department of Prisons (NDOP) needed to monitor that, because if the trend continued, funding provided for staff and operating costs to facilitate operations in excess of emergency capacity should be reserved by NDOP and not utilized for other purposes.

The recommended closings as presented mirrored, with one exemption, the plan for FY 1999-2001 as provided by the representatives of the Governor’s Office and NDOP at the subcommittee meeting on April 28, 1999. The noted exception was the housing of more female inmates at the Jean Conservation Camp and fewer at the Southern Nevada Women’s Correctional Facility.

Ms. Giunchigliani indicated that in terms of the Director’s Office, approximately $454,000 per year was saved in General Fund dollars by increasing the budgeted level of revenue received from the Federal Government for housing illegal aliens to the level of funding received in FY 1999. Approximately $387,099 was deleted from the account for costs associated with training and information services for the Cold Creek State Prison. Those costs would be funded via separate legislation. Funding in the amount of $2 million was recommended for deletion from the account in FY 2000, due to a reduction in the projected growth of the female population. However, approximately $631,000 in additional General Fund support was recommended in the budget for the Southern Nevada Women’s Correctional Facility in FY 2000. That was due to revised female inmate projections, which indicated an average of 41 additional inmates would be housed in that facility in FY 2000, instead of being housed out-of-state.

The Sewage Treatment Plant Operator would not be hired in January 2000 as planned but would be delayed to August 2000. Also, approximately $48,000 in additional funding was recommended for Year 2000 problems that had recently been identified by the Department, and an additional $78,000 per year recommended for physicals for employees of the Ely State Prison and the Ely Conservation Camp. In conclusion, savings were included in the telephone line/toll area in the account as a result of adjusting the costs for payment by non-General Fund sources.

Ms. Giunchigliani reported that statewide medical care within NDOP was not recommended for privatization; however, the continued privatization of medical care for inmates housed in the Ely area was recommended. One-shot funding of approximately $557,000 for equipment and $30,000 for start-up supplies for the Cold Creek State Prison (CCSP) was deleted from the budget and recommended for funding via separate legislation. The delay in the opening of CCSP would result in a salary savings of nearly $67,000 in FY 2000 and $81,000 in FY 2001, for the 17 new medical positions for the facility.

Ms. Giunchigliani stated reduction of the medical inflation factor would result in a savings of approximately $260,000 in FY 2000 and $271,000 in FY 2001. The inflation factor was reduced to 4.2 percent per year since outside medical costs and prescription drug costs for FY 1999-2001 were based on estimated expenditures for FY 1999. Also, increased costs for the Ely medical contract required additional General Fund support of nearly $373,000 in FY 2000 and $260,000 in FY 2001. Ms. Giunchigliani advised the new medical contract for medical services in the Ely area would remove the "cap" which, over the long run, would save General Fund dollars.

In addition, funding in the amount of $1.2 million in FY 2000 and $1.3 million in FY 2001 was included as payment from inmates and/or the Inmate Welfare Fund for co-pay on AB 389 related costs.

The facility housed an average of 605 inmates in 1998, and The Executive Budget provided for housing an average of 552 inmates in 2000 and no inmates in 2001. SNCC was planned in The Executive Budget for closure beginning in June of 2000. All but two positions were recommended for transfer to the CCSP. Two maintenance staff persons would remain at SNCC to perform upkeep and maintenance duties. Funding of approximately $587,000 was recommended in The Executive Budget in 2001 for maintenance of SNCC during closure.

The closing recommendations by the subcommittee for the account provided for housing an average of 605 inmates in FY 2000 and 102 inmates in FY 2001. The closure of SNCC was delayed until the end of August 2000, due to anticipated delays in the construction of CCSP. Similar to the recommendation contained in The Executive Budget, two maintenance positions would remain at the facility to perform upkeep during the time the facility was closed. Additional General Fund support of approximately $522,000 was recommended in FY 2000 and $1.2 million in FY 2001.

The Governor, in his "State of the State" message to the 1999 Legislature, proposed leasing SNCC when it became vacant. No revenue was included in The Executive Budget from the leasing of that facility. Similarly, the recommended closings for the account did not include revenue from the lease of the facility. The director of NDOP had provided letters of interest from three for-profit companies that had expressed an interest in leasing SNCC. Additionally, the director had advised that at least one federal agency had verbally expressed interest. As part of the recommended closing, the subcommittee was recommending legislation be processed to facilitate the leasing of the facility.

The recommended closings for the account were based on NDOP’s Biennium Model 99-10, which estimated an average of 503 inmates in FY 2000 and 505 inmates in FY 2001 would be housed at the facility. That compared to 501 inmates in FY 2000 and 492 in FY 2001 as recommended in The Executive Budget. The most notable adjustment to the account was reflected for utility costs. Approximately $208,000 in FY 2000 and $211,000 in FY 2001 was recommended for addition to the budget in the closings.

The Executive Budget provided funding to expand the facility by 250 beds over the 1999-01 biennium. The budget, as provided to the Legislature in January 1999, included funding to house an average of 500 inmates in FY 2000 and an average of 644 in FY 2001. The proposed 250-bed expansion of the facility was withdrawn by the NDOP as a result of the revised population projections, and a change in assumptions from 34 percent minimum to 47 percent minimum- security inmates. The 47 percent minimum-security assumption was consistent with testimony provided to the 1997 Legislature.

The recommended closing adjustments for the account were based on the NDOP’s Biennium Model 99-10 for FY 2000. For FY 2001, the closing adjustments reflected housing only medium and close custody inmates at the facility with minimum security inmates housed at the Silver Springs and Jean Conservation Camps.

The facility housed an average of 1,274 inmates in FY 1998 and The Executive Budget provided funding to house an average of 1,333 in FY 2000 and 1,216 in FY 2001. That envisioned, the facility would operate 184 beds over "emergency capacity" from December 1999, (40 over) and January 2000, through May 2000 (144 over) and August 2000 (40 over). The recommended budget closing provides for housing an average of 1,342 inmates in FY 2000 and 1,285 inmates in FY 2001. The closings also provided additional funding to hire the 24 correctional officers necessary to staff units 1 through 3 when the inmate population at the facility exceeded the limit set in the Stickney Consent Agreement. The Executive Budget provided funding for the staff from December 1999 through May 2000. The closing recommended funding to be provided in November 1999 (provides 2 months of training) and continued the funding through August 2000, which was three months longer than recommended in The Executive Budget. The extension of the positions to August 2000 was necessitated due to delay of the estimated completion of CCSP from May to sometime after June 23, 2000. In addition to the 24 Correctional Officers, funding was also provided for an additional caseworker. The change in the start and the extension of the positions resulted in additional salary costs of $141,000 in FY 2000 and $161,000 in FY 2001. Since NDOP was running under the projected inmate population, the subcommittee recommended NDOP not utilize the funding until required as the result of inmate population growth. Consideration should be given to placing the funding in a "reserve category."

The closing also recommended the transfer of the funding for the repairs to the locking system in Unit 7, from the budget account to a Capital Improvement Project (CIP). The NDOP estimated the cost of the project at $325,190. The State Public Works Board provided an estimate on January 30, 1999, of $423,907 which included inflationary increases of $39,318 and inspection, plan checking and contingency funding of $59,589.

The facility housed an average of 868 inmates in FY 1998 and The Executive Budget provided funding to house an average of 931 inmates in FY 2000 and 694 inmates in FY 2001. That envisioned, the facility would operate 211 beds over emergency capacity for all of the FY 2000. The Executive Budget provided funding for four positions to enable the facility to operate above emergency capacity. Also recommended in The Executive Budget was the closure of 224 beds at the facility for 2 months to facilitate the completion of a 1995 CIP (M-27) to replace the sewer, water, steam and electrical lines in the "Sagebrush Area" basement of the main building of the facility. The funding for the project was slated for reversion on June 30, 1999, which requires legislation to extend, and possibly augment the funding to complete the project.

The recommended closings would provide for housing an average of 937 inmates in FY 2000 and an average of 730 inmates in FY 2001. The facility would operate 211 beds above emergency capacity for all of FY 2000, as well as July and August of FY 2001. The extended operation above emergency capacity was necessitated due to anticipated delays in completing CCSP. The extension of four positions to facilitate operating the facility above emergency capacity resulted in additional personnel/payroll costs of approximately $12,000 in FY 2000 and $27,000 in FY 2001. The recommended closing also envisioned eliminating 224 beds for a 2-month period to facilitate the completion of the 1995 CIP to replace the sewer, water, steam and electrical lines in the "Sagebrush Area" basement of the main building of the facility.

Funding was reduced in the account for utilities by approximately $161,000 in FY 2000 and $196,000 in FY 2001. Utility funding for the Warm Springs Correctional Center was increased by approximately $208,000 in FY 2000 and $211,000 in FY 2001; which resulted in a net increase of approximately $48,000 in FY 2000 and approximately $15,000 in FY 2001.

The facility housed an average of 1,518 inmates in FY year 1998 and The Executive Budget provided funding to house an average of 1,481 inmates in FY 2000 and an average of 1,368 inmates in FY 2001. The Executive Budget planned on the facility operating with 60 beds above emergency capacity from June 1999 through August 2000. Also recommended in The Executive Budget was the transfer of the intake function and bakery from the institution to the CCSP in June 2000.

The recommended closings provided for housing an average of 1,465 inmates in FY 2000 and 1,421 inmates in FY 2001. The closings also planned for the operation of the facility with 60 beds over emergency capacity for the period May 2000 through August 2000. Finally, the intake function and the bakery functions were transferred to CCSP effective September 2000. Included in the intake function transfer were a Correctional Lieutenant, a Senior Correctional Officer and two Correctional Officers. The bakery function transfer included the transfer of a Correctional Baker.

The recommended closings incorporate "Budget Amendment #2," which provided for a 5 percent salary differential for all custody personnel employed at the facility. That cost, estimated at $570,537 in FY 2000 and $582,356 in FY 2001, was displayed in E-189. The pay increase was provided to address recruiting and retention of correctional personnel.

The Executive Budget provided for housing an average of 988 inmates in FY 2000 and 973 in FY 2001. The current housing plan provided for an average of 996 inmates in FY 2000 and 998 inmates in FY 2001. An average of 1,030 inmates were housed at the facility in FY 1998.

The adjusted base for the facility included $35,500 per year for increased power costs for operating the "sewage aerators" that were installed as CIP 95-M42 ($11,895). Mt. Wheeler Power would provide the estimated cost of the power usage of those aerators, then NDOP should report the actual cost information for the operation of those aerators to the Fiscal Division on a quarterly basis.

A total of 337 custody, maintenance, and administrative positions were recommended in The Executive Budget to provide for the operation of the new Cold Creek State Prison (CCSP). One hundred and forty two of the positions were recommended as transfers from the Southern Nevada Correctional Center, which was recommended for closure upon the opening of CCSP. Additionally, five positions were recommended for transfer from the Southern Desert Correctional Center for the bakery and Southern Regional Intake Function. A total of 190 new positions were also recommended in The Executive Budget. Funding was also included in The Executive Budget for start-up and ongoing equipment needs of the new facility; $1,329,382 for equipment and furnishings and $174,690 for start-up supplies. Also, Budget Amendment #1 requested additional funding for equipment of approximately $405,000.

Funding, as recommended in The Executive Budget, was predicated on opening phase I of the facility in June 2000, with the second phase becoming operational in August 2000. The average inmate population was estimated at 64 in FY 2000 and 1,753 in FY 2001. The Executive Budget planned to operate 1,008 beds in phase I, and 882 beds in phase II.

The NDOP’s biennial plan, as revised on April 23, 1999, provides for opening both phases on September 1, 2000. Similar to what was recommended in The Executive Budget, 1,008 beds would be available in phase I and 882 would be available in phase II.

The recommendations for closing the budget were based on the NDOP’s revised biennial plan, which provides for housing no inmates in FY 2000 and an average of 1,583 in FY 2001. The NDOP’s current plan provides for operating the facility 152 beds over emergency capacity in the month of June 2001, with the second half of Unit 8 becoming operational in May 2002.

The closing recommendations provided for General Fund savings of approximately $3.3 million in FY 2000 and $1.6 million in FY 2001. Approximately $1.9 million of the savings in FY 2000 would be included in one-shot legislation for equipment and furnishings and for start-up supplies. Additionally, approximately $521,000 in FY 2000 and $1.2 million in FY 2001, was required to keep Southern Nevada Correctional Center operational pending the completion of the facility.

The Executive Budget in decision unit E-125, included the elimination of the existing Warden, Administrative Services Officer, Storekeeper, Facility Supervisor, and Management Assistant II. The narrative in The Executive Budget stated, "this decision unit provides for the elimination of base positions and associated support costs, M-100 and M-300 decision units to correspond to the elimination and transfer of positions from the Southern Nevada Correctional Center." Budget Amendment #114 was provided on April 28, 1999, requesting the positions be added back to the recommended budget. The estimated cost of that was $260,248 in FY 2000 and $42,114 in FY 2001. The Budget Amendment was not recommended in the closing.

The facility housed an average of 996 inmates in FY 1998 and The Executive Budget provided funding to house an average of 1,550 inmates in FY 2000 and an average of 1,341 in FY 2001. The Executive Budget planned on the facility operating 210 beds over emergency capacity from July 1999 through August 2000. Funding was recommended in The Executive Budget to employ an additional caseworker during a portion of the time period the facility operated over emergency capacity. Budget adjustment number 7 was submitted by the Governor to provide a $6 "remote area differential" payment to all employees at the facility to address recruitment and retention of employees. The estimated cost of the adjustment was $354,816 in both years of the 1999-01 biennium.

The recommended closings provide for housing an average of 1,563 inmates in FY 2000 and 1,394 inmates in FY 2001. Similar to The Executive Budget, these closings also included funding to operate 210 beds over emergency capacity for the period July 1999 through August 2000. The closings also provided additional funding to continue to employ the caseworker through August 2000. The closings also included funding to provide a 5 percent salary differential to all custody personnel of the facility at an estimated cost of $437,265 in FY 2000 and $451,460 in FY 2001. The recommendation was consistent with the recommendation made in the budget for the Ely State Prison. The subcommittee did not approve the payment of the $6 "remote area differential" payment to all employees.

As recommended by The Executive Budget, decision unit M-200 provided for an Administrative Service Officer III to fulfill the duties of Chief of Inmate Services. The position would address the operating issues as well as oversee inmate banking, 16 inmate store operations, 4 coffee shops, accounting duties for the restitution centers, law libraries, inmate recreation activities and the literacy program. A Computer Network Specialist was also recommended in The Executive Budget to provide network and hardware support for 66 terminals and 44 printers statewide. Authority was also recommended to provide contract support and necessary upgrades for the AS/400 operating system and a communication network to support store and coffee shop operations at the Cold Creek State Prison. In addition to the recommendations included in The Executive Budget, the closing recommendations included the addition of a Storekeeper II to assist in the operation of the inmate store and coffee shop at the CCSP.

The Executive Budget recommended an increase in the markup of all goods sold through the store. Currently, all items were marked up at 24 percent above cost. Increases in authorized revenues reflected an increase in the markup to 28 percent in FY 2000 and 32 percent in FY 2001. The estimated additional revenue reflected in the closing sheets was approximately $387,000 in FY 2000 and $859,000 in FY 2001. In order to isolate those expenditures relating to the store operation, The Executive Budget recommended the transfer of positions to the Inmate Welfare Account that were not directly involved in the operation of the inmate store. Those positions included seven Program Assistants who supported the operation of the law libraries and four Academic Teachers, one Management Assistant and one Education Consultant Coordinator who supported the Literacy Program. In addition, expenditure authority levels, which reflected transfers for inmate gate money, medical co-payments and cremations were also recommended for transfer to the Inmate Welfare Account.

Additional transfers were recommended by the subcommittee in the amounts of $293,081 in FY 2000, and $285,860 in FY 2001 to the Inmate Welfare Account to facilitate repayment to the General Fund for medical related costs. Recent estimates provided by the NDOP indicated approximately $214,000 in FY 1996 costs, $946,000 in FY 1997 costs and $339,000 in FY 1998 were owed to the General Fund. Provisions were made in the Inmate Welfare Account to facilitate repayment of the 1996 costs over a three-year period, repayment of the 1997 costs over a 6-year period and repayment of the 1998 costs over a 2-year period. As indicated, those were recent estimates provided by the NDOP which, based on further review, may be adjusted.

The Executive Budget, in a base adjustment, had combined all Law Library operations into a single category. The budget closing, as recommended by the Subcommittee, returned the costs of Law Library operations to individual categories to facilitate tracking of operational costs. The committee would note the costs of operating the Law Libraries as the various facilities differ.

The Executive Budget recommended in decision unit M-200, additional materials, supplies and labor for each of the shops and administration based on an estimated sales increase in production activity of 20 percent per year. As presented in The Executive Budget, that reflected an increase in sales from approximately $3.4 million in FY 1998, to $4.8 million in FY 2000 and $5.7 million in FY 2001. Increased revenues for room and board payments by inmates had not been included in The Executive Budget. An increase in sales activity at that level should generate additional inmate employment and, therefore, increased room and board payments with corresponding decreases in General Fund need.

The subcommittee recommended increasing M-200 for estimated increased revenue from the production of license plates as funded in the Department of Motor Vehicles’ budget; which translated into approximately $55,000 in FY 2000 and $74,000 in FY 2001. Additionally, based on the anticipated re-issuance of license plates, the subcommittee was recommending additional revenue in E-175 of approximately $496,000 in FY 2001. The subcommittee was also recommending the additional revenue be accounted separately and reserved separately from the revenue received from the normal issuance of license plates.

Ms. Giunchigliani said with the committee’s approval, the recommendation could be made to close the budget with staff recommendations including technical changes. Ms. Giunchigliani advised the state would not have had to deal with the closing of SNCC if CCSP phase I had opened in time. Penalties needed to be in place in the construction contract to ensure that delays did not continue to happen. The subcommittee also requested that NDOP continue to track and monitor medical costs, with reports provided to the Fiscal Division. Also, when leasing SNCC, the subcommittee requests preference be given to other governmental agencies that expressed a desire to lease the facility. An additional letter of intent should be sent to NDOP with instructions not to expend any of the funding provided to operate above emergency capacity, if not required for that purpose.

Continuing her discussion of letters of intent, Ms. Giunchigliani stated another letter should be sent to NDOP to reserve and provide separate accounting for license plate revenue that would be received as a result of re-issuing license plates. A one-time revenue of approximately $496,000 was estimated in FY 2001 and a similar amount in FY 2002. Funding was deposited in the Prison Industry Budget. Additionally, a letter of intent should be sent to NDOP to aggressively explore staffing and scheduling plans to aid in recruitment and retention of staff at the Ely State Prison and the Lovelock State Prison. Lastly, there was a letter to NDOP to address "post-parole"/"pre-release" housing of inmates. It was desired that those agencies provide a viable plan for consideration by the 2001 Legislature.

Ms. Giunchigliani said additional legislation might be needed for the following:

Ms. Giunchigliani said the subcommittee would also like to request that State Personnel Department conduct a compensation study of Correctional Officers over the FY 1999-2001 interim, with the results included in the Governor’s Budget for FY 2001-2003

Mr. Marvel asked if there was language included to address privatization. Ms. Giunchigliani said it was discussed and the subcommittee closed that way to direct that the Appropriations Act contain that language specifying they were not to privatize medical services based on the closings.

Mr. Parks said the state had seen where privately operated prisons had re-categorized their inmates making them minimum security when they were actually high security. Ms. Giunchigliani said that was why NRS 212 would be researched thoroughly.

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With no further business to come before the committee the hearing was adjourned at 11:45 a.m.

RESPECTFULLY SUBMITTED:

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Cynthia M. Cendagorta

Committee Secretary

APPROVED BY:

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Richard Perkins, Acting Chair

DATE:______________________________