The Committee on Ways and Means was called to order at 7:40 a.m., on Friday, May 21, 1999. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

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

Ms. Sheila Leslie

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

Mr. Robert Price

COMMITTEE MEMBERS ABSENT:

Ms. Jan Evans, Vice Chair (Excused)

STAFF MEMBERS PRESENT:

Brent Adams, the presiding Judge in Department Six of the Second Judicial District Court, explained S.B. 514 would allow judges to take a reduced amount of retirement and designate that amount for life for the judge’s spouse, as was the law in nearly every state. Most judges had assumed that was the law in Nevada, as well.

Peter Breen, the presiding Judge in Department Seven of the Second Judicial District Court, said the Public Employees Retirement System (PERS) had the provision proposed in S.B. 514.

Norm Robison, Senior District Court Judge, said S.B. 514 was to make judicial benefits the same as PERS benefits. When a judge died, his or her surviving spouse received $2,000 per month only if the spouse had not remarried and was at least 60 years old. A judge’s widow would receive nothing if she were under age 60. The bill cost the state nothing; it merely allowed a judge who was retiring under the judicial plan to take the reduced amount and allow the spouse to be provided benefits for life, which was an option to PERS members.

With no further questions or comments, Chairman Arberry declared the hearing on S.B. 514 closed.

Judge Robison explained S.B. 245 would also align judicial benefits with PERS benefits. The bill did not fix the problem of PERS being funded and the judicial retirement fund not being funded, but it tried to make the benefits and conditions the same for both systems. If a judge who retired under the judicial retirement fund was called back to active duty, after 1 year of senior status, the judge would be entitled to a raise according to statute. A PERS retiree would not be eligible for that. S.B. 245 allowed the PERS retiree to receive the same benefit as the judicial retirement fund retiree. Few judges would be affected by the bill.

Michael Gibbons, District Judge in Douglas County, said he was present on behalf of the District Judges Association in support of S.B. 245. The bill was important because it helped Nevada’s senior judges. A retired judge could be called back to service by the Supreme Court to serve as a senior judge. Senior Judges had provided a very important service, particularly in Clark County, to keep cases moving through the system in a timely manner.

Mr. Perkins asked whether, if that should be done for judges, should it done for all public employees. Judge Robison said current statute provided that if a judge retired under the judicial retirement fund, he or she was entitled to earn credit toward the full amount of retirement if called back to active duty. Under PERS, that was not the case. Once a person was out of the system, one could not go back into the system without withdrawing from it. PERS had overlooked judges and had its own rules for how much a retiree could work. Because a retired judge already had experience and skills and would not need a staff, there was a saving to taxpayers.

Mr. Perkins said there were retired police officers, firefighters, teachers, and other public employees with expertise that could be used, and the provisions of S.B. 245 were not available to them. He did not want to create a system that appeared to have special situations for judges and not other retired public employees. Judge Robison replied that had already been created with Chapters 2 and 3 of the Judicial Retirement Fund. S.B. 245 tried to make the benefits the same for judges who retired under PERS. He agreed with Mr. Perkins that other retired public employees should receive the same benefit, but that was not the purpose of the bill.

Judge Adams said the first step was to treat retirees who did the same job the same under both the Judicial Retirement Fund and PERS. Most judges reached the bench somewhere in mid-career and those who had not been state employees would use the Judicial Retirement Fund. Those who were not under PERS did not have the option of deciding whether their surviving spouse would have a retirement income. Being a Senior Judge increased one’s base income under the Judicial Retirement Fund, but not under PERS, even though the retirees were performing the same job. The problem with not allowing PERS judges to serve as Senior Judges was the state would lose the benefit of having experienced judges. For example, Judge Robison served on a complicated construction case in Las Vegas and was able to apply his expertise to the case with no overhead and try the extremely complex case in 3 weeks. That was a tremendous service to the state, particularly in urban districts. If the state wanted the benefit of that service at a very small cost (the bill’s fiscal impact was approximately $6,000), then the state ought to treat Senior Judges in PERS the same as Senior Judges in the Judicial Retirement System.

Mr. Perkins said Senior Judges were an extremely valuable resource to the state, but said PERS was an actuarially sound fund, with the benefits based upon the return and contributions to the fund. The Judicial Retirement Fund, however, was "a bottomless pit" because it was funded from the General Fund. He looked forward to the support of judges in the future to create a PERS system for judges. In addition, there was a sharing of the contribution in PERS, but not in the Judicial Retirement Fund, which was paid by the state.

Judge Adams agreed there should be one judicial retirement system for all judges in the state. He said it appeared to some the judges non-contribution for retirement was special treatment. A judge’s work was no nobler than other professions, but one needed to be realistic about the nature of their profession. When he became a judge 10 years ago, his income was halved. If he lived for the next 15 years, he would never recover what he was earning in a private practice. One small benefit of being a judge was the retirement system. No attorney who went into public service should expect to make anything close to private practice salaries. The problem was not that judges earned too little, it was that lawyers earned too much. If he went back into private practice he could double or triple his income, but he did not for the same reason all judges did not, the value and gratifying rewards of public service. If the state wanted quality judges and wanted good lawyers who would be giving up half or more of their income, the current system was not encouraging. It was not excessive for the state to fund their retirement or provide a surviving spouse more than $2,000 per month.

Judge Robison said when judges went to fully paid retirement, they gave up a pay raise to do that.

Mr. Marvel asked if there was a cap on what recalled judges could earn. Judge Robison replied there used to be a cap under Supreme Court rule, but there was not currently a cap. It depended on how much the Supreme Court wanted a judge to work.

With no further questions or comments Chairman Arberry declared the hearing on S.B. 245 closed.

Mr. Ghiggeri explained A.B. 687 was recommended by the Prison Subcommittee in its review of the Department of Prison (DOP) budget. The bill attempted to align the statute with the DOP’s current practice for inmates housed in the restitution center who were returned to a DOP facility for a rule infraction. The bill would allow DOP to continue to be reimbursed from the Inmate Welfare/Offender Store Fund for room and board costs for those offenders who were returned to the institution for cause. DOP had been doing that since 1996 or 1997. There was currently approximately $5,000 per year built into the DOP budget as revenue from that source.

With no further questions or comments, Chairman Arberry declared the hearing on A.B. 687 closed.

Chairman Arberry said the committee would be closing Higher Education and University budgets and read from a prepared statement:

• The subcommittee approved $5.5 million in state funds made available in Budget Amendment 111 to be directed entirely toward growth in the number of new students.

• The subcommittee approved the Governor recommendation for $8 million in additional funding over the biennium to fund instruction for students.

• The subcommittee restored the previous methodology for calculating vacancy savings, which resulted in saving $3.6 million over the biennium. The subcommittee directed that the $3.6 million in savings be utilized to provide for growth in student enrollments.

• The subcommittee reprojected student revenues to agree with the revised enrollment projections and directed the additional student fee revenues totaling $4.8 million over the biennium to address growth.

• As a result of the financing alternatives previously discussed, the subcommittee did not pursue the 1 percent increase to the student registration fees and non-resident tuition.

• Adjusted base budget—correct estate tax funding for the Student Incentive Grant program in the amount of $6,391 over the biennium to agree with the closing action of the Department of Education.

• Adjusted base budget—restore a federal grant for laboratory testing services at the State Health Lab and provide a corresponding reduction to the General Fund by $197,390 over the biennium.

• Adjusted base budget—correct the faculty position count for the Boyd School of Law by 6.53 positions to account for the legal research and writing program within the existing expenditure authority recommended by the Governor.

• M-100—correct inflationary costs for a total of $53,948 over the biennium.

• M-201—correct the new space formula calculations at UNLV, CCSN, Western Nevada Community College (WNCC), and Great Basin College (GBC) as recommended by Budget Amendment 111 in the amount of a $1.8 million reduction to state funds over the biennium.

• M-201—include $300,000 over the biennium to fund a portion of the estimated costs for the Modular Student Services building at UNLV, which was approved by the regents’ after The Executive Budget was finalized.

• M-300—correct fringe benefit adjustments and occupational salary increases for a total of $104,764 over the biennium.

• E-125—include the non-General Fund revenues for the proposed dental school in the amount of $7.5 million over the biennium.

Mrs. Chowning asked for an explanation of the disparity in funding between northern and southern UCCSN schools. Mr. Stevens said those figures could be found on the chart shown in Exhibit C, "University and Community College System Comparison of Projected FTE Enrollment."

Ms. Giunchigliani asked for the percentage increase in the Higher Education Budget. Chairman Arberry said he would provide that information to her at a later date. Ms. Giunchigliani said she thought there had been a lot of inferences that the subcommittee had not treated Higher Education appropriately, but she felt Higher Education had been treated "over-appropriately." Referring to E-125, she stated Senator Raymond Rawson had testified that the item regarding the Chancellor’s office had been deleted and asked for a confirmation of that. Mr. Stevens explained the item that Senator Rawson discussed before the Senate Finance Committee was to add positions to the Chancellor’s office, related to health care policy issues, and was not included in the closing currently before the committee. However, authorized dollars, not appropriated dollars (not state dollars), were included in the closing, which could flow into a dental school, should it be approved by the legislature. Those would be Medicaid dollars that had been identified and would come out of the Medicaid budget into that area. Ms. Giunchigliani asked if those dollars would necessarily go to fund staff positions. Mr. Stevens said he had seen nothing specifically identifying those funds for anything other than dental services.

Ms. Giunchigliani said there were so many waivers that needed to be approved before Medicaid funding could be used for that, so she was concerned about dedicating funding when the committee was not sure whether it would be approved. She asked if there was a possibility of approving the funding on receipt of the waiver and have it report back for actual allocation. Mr. Stevens said E-125 would provide the non-General Fund authorized dollars as authority within a budget account and if those monies flowed and the waiver was received, they could be used for that purpose. As he understood, until the waiver was granted, the Medicaid dollars could not be used for that purpose. The authority would be there if everything was done in order for the Health Care Financing Administration (HCFA) to approve the plan, but if HCFA did not approve the plan, it was authority that could not be used.

Ms Giunchigliani said as she understood, the non-General Fund revenue was not bonding money for construction, but was simply Medicaid dollars that would roll through for the delivery of dental service. Mr. Stevens said that was correct and he thought Senator Rawson had proposed that some of those dollars, or similar dollars, would ultimately be Medicaid dollars. He thought Senator Rawson envisioned taking the Medicaid dollars to a Health Maintenance Organization (HMO) and flow them back to provide services. Within that, some of those dollars could potentially be used for a revenue bond. Potentially, some of those dollars could be, if authority was granted to issue a revenue bond (which was a separate piece of legislation) or included in the Capital Improvement Program, which had not been approved by the CIP subcommittee. There would have to be authority for that revenue bond, but ultimately, after the monies were flowed through, he thought Senator Rawson was proposing that the revenues, after going through a few procedures, would potentially be used to retire the debt on a revenue bond.

Ms. Giunchigliani asked how it could be insured that the $7.5 million included in E-125 would not go unused while services were needed. Mr. Stevens said, as he understood, the dental services would be provided in the same way they were currently being provided: on a fee-for-service basis out of the Medicaid budget. If the appropriate approvals were received then the money could be flowed through an HMO, which could provide the services. Until the approvals from HCFA were granted or they went through HMOs, the money could not be utilized.

Mr. Perkins said he thought Senator Rawson had proposed the $7.5 million in authorization in the event he "went through all the hoops," because if the authorization was not there, the dental school could not be completed. The money would not be sitting unused, but would be available.

Ms. Giunchigliani asked if the authorization was a line item that would be granted by the IFC upon receipt of the waiver. Mr. Stevens said the action would authorize those dollars within a separate budget account within the university system so IFC approval would not be required.

Mrs. Chowning said she received a call from a dentist in her district who was concerned that his existing Medicaid patients would be required to go to the proposed facility. Mr. Stevens replied no, Medicaid patients would not be required to change dentists in the short term, but the long-term plan was to utilize the dental school to provide the majority of, if not all, Medicaid dental services. Mrs. Chowning asked when that would be known for sure and voiced opposition to that provision.

Chairman Arberry said he did not think it was fair for Mr. Stevens to have to defend Senator Rawson’s proposed legislation and informed the committee members that questions regarding the dental school should be addressed to Senator Rawson, as it was his project.

Chairman Arberry said the committee would be closing the Distributive School Account (DSA) and asked Mr. Stevens to review the account. Mr. Stevens said he would review the summary of changes to revenues and adjustments to expenditures and explain the subcommittee’s recommendations for the DSA and Class-size Reduction Trust Fund.

There had been a number of changes in the revenue projections within the DSA, including a total of 75 cents in property tax revenue for school funding, the adjustments in motor vehicle privilege tax, the local school support tax (which was 2.25 percent sales tax), and some smaller adjustments to the annual slot tax, the federal mineral land lease, and the sales tax on out-of-state sales. Those changes totaled an additional $16.4 million in FY 1999-2000 and almost $17 million in FY 2000-2001. The subcommittee utilized those dollars to approve additional expenditures within the DSA and other education areas.

There were a number of technical-type adjustments that needed to be made and were approved by the subcommittee, which totaled $69,366 in FY 1999-2000 and $144,868 in FY 2000-2001. The net revenue available to the committee for additional expenditures was $16.4 million in FY 1999-2000 and $16.8 million in FY 2000-2001.

Mr. Stevens explained the list of approved additions in expenditures, as shown in the closing sheets. The first four items were school improvement dollars, totaling $8 million in estate tax funding in each year of the biennium, and were recommended by the Governor and approved by the subcommittee as follows.

• $3.3 million in each year for remedial programs for low-achieving students.

• $3.5 million in each year for professional development of teachers to teach new, higher academic standards.

• $300,000 in each year to develop and implement new standards-based exams for grades 3 and 5.

• $900,000 in each year to contract with a testing firm to improve high-school proficiency examination.

Other items taken into account within the DSA or in related education programs included:

• $1 million in each year for approved programs for remediation for pupils at risk of failing held before/after school, summer, or between session.

• $2 million in each year for Phase III of the Statewide Management of Automated Record Transfer (SMART).

• $500,000 in FY 1999-2000 for the statewide reference database license for public school libraries.

• $500,000 in each year for software maintenance contracts.

• $1.3 million in FY 1999-2000 and $1.4 million in FY 2000-2001 to bring remaining schools up to one computer per classroom or equivalent.

• $400,000 in each year to complete the satellite down-link project begun in 1997 in the remaining schools.

• $1 million in each year for state-funded School-to-Careers program, which had been scaled down.

• $500,000 in each year for early childhood education programs, also scaled down.

• A one-time advance of $3,072,750 in FY 1999-2000 to convert school districts from estimated to actual basis for revenue from net proceeds.

• $2.2 million in FY 1999-2000 and $2.3 million in FY 2000-2001 to remove vacancy savings budgeted in the DSA.

• 3 percent per year added for inflation of textbooks, library books, instructional supplies, and instructional software.

• 2 percent per year added for inflation of utilities.

• 2 percent per year added for inflation of pupil transportation.

• $144,065 in FY 1999-2000 and $146,945 in FY 2000-2001 for five special education units for gifted and talented students.

The additions to the DSA and education-related programs totaled $14.9 million in FY 1999-2000 and $14 million in FY 2000-2001. Mr. Stevens noted the closing sheets included a detailed breakdown of inflation costs and a line-item detail of the DSA.

Ms. Giunchigliani asked whether the funding for approved remedial programs for low-achieving pupils would allow dollars to be used for the bill (of the 1997 Legislative Session) requiring middle-school students to have criteria before graduating to high school. Mr. Stevens said he believed it would allow for that, but would get back to her with the information. Several of the schools covered by the bill were now off the list. Ms. Giunchigliani stated focus was continually on schools that needed improvement or high school proficiency, but there was a huge group than needed to be served. Remediation ought not to be focused on those two areas.

Ms. Giunchigliani expressed dismay over the five special education units for gifted and talented students because gifted and talented students were not defined as special education students under the federal law. It was her understanding that much-needed special education funding units were already being diverted to gifted and talented programs. Mr. Stevens said a number of units were for gifted and talented programs, but could not recall how many, though the majority went toward special education. Ms. Giunchigliani said special education needs were not currently fully-funded and special education units should not be diverted to a program that did not qualify under the Individuals with Disabilities Act (IDEA) because it was not considered a disability group. She hoped if that change could not be made in the current session, it would be pursued over the interim because there were waiting lists for special education classes.

Mr. Beers asked why, instead of budgeting for inflation in utilities, were schools not being budgeted decreases. He thought as large users of electricity, in the new deregulated environment, schools should be able to negotiate bulk purchases of power, thereby saving money. Mr. Stevens said it was difficult to estimate what the saving would be and further, the bill may not pass.

Mr. Parks said the committee had questioned the decrease in the motor vehicle privilege tax and asked if the issue had been resolved, as someone was going to find out whether the projected decrease was valid. In addition, he noted the DSA revenues totaled more than the approved expenditures and asked what was being done with the unappropriated balance. Mr. Stevens said the difference would be net General Fund savings and would be utilized for some other purpose. In response to the first question, Mr. Stevens said fiscal staff initially had much larger numbers than that and found that the Department of Motor Vehicles had been behind, particularly in mail-in registrations, and staff thought that might have some impact on why it was so slow. The closing sheets used the Budget Division’s revised estimate, which was about a 12 percent increase over the biennium. The original Governor’s recommendation was an increase of about 15 percent in each year of the biennium. The estimate had been decreased, but not nearly as much as fiscal staff had initially thought it should be decreased because some of that may be due to the backlog and would pick up over time. The Budget Division estimated reductions of approximately $3 million in each year of the biennium, and fiscal staff thought that was appropriate.

Don Hataway, Deputy Director of the Budget Division, said Mr. Stevens was correct. Since 1988, the annual growth in motor vehicle privilege tax had averaged 12.02 percent and the Budget Division had pegged the Governor’s recommendation at 15 percent, on the basis of what had occurred over the previous few years. However, the Budget Division had brought it back down to a 12 percent average rate, which was reflected by the reduction of $3 million.

Mrs. Chowning said there was a growing need for English as a Second Language (ESL) instruction, but could not find where that was addressed in the DSA. She asked for that information to be provided to her at a later date. Chairman Arberry assured her ESL instruction was addressed in the budget, but he could not recall specifically where, so staff would provide that information.

Ms. Giunchigliani asked if the committee could request a letter of intent to begin tracking how many special education funding units were being diverted to gifted and talented programs. Chairman Arberry said that would be acceptable.

Ms. Giunchigliani asked if the committee could bring up what had been brought up by her and Senator Rawson the previous day and reopen the budget to use the same dollar amount but switch the waiver for the disabled to the one that the disabled had requested. When the joint subcommittee closed the budget, she thought the waiver had been misunderstood and she thought there was support from the committee to reopen the budget and reverse the "choices waiver." Chairman Arberry said he did not want to reopen the budget and said he would speak with her on the issue after the meeting.

Mrs. Chowning asked whether the subcommittee had closed the class-size reduction budget the same as in the past or whether it had been allowed more flexibility. Mr. Stevens said the topic had been long-debated by the subcommittee. He explained the special education units were originally recommended to be rolled into the average basic support guarantee figure. The subcommittee recommended that the unit funding be retained and not be rolled into the average basic support guarantee figure, so the current method of funding special education would be retained. There would be a unit and a cost per unit distributed in the same fashion as they were currently distributed. For the class-size reduction, the Governor had also recommended that money be rolled into the average basis support guarantee within the DSA. The subcommittee recommended that the class-size reduction budget be eliminated, but that a separate line-item be included in the DSA, identifying the funding for the class-size reduction program. The subcommittee also recommended that a separate bill be authorized each session that outlined the amount of money provided for the class-size reduction program and no flexibility would be allowed for the use of those monies. In the 1997 Legislative Session, flexibility had been granted for using part of the third grade dollars for things such as reading recovery programs.

Ms. Giunchigliani said the requirement of legislation would allow that budget to be opened and changed every session. She asked why a bill was needed if it was already the law. Mr. Hataway said there was no proposal to change the current 15 to 1 ratio requirement. There had always been a separate piece of legislation to authorize the revenues and outline how the money should be spent, but there was no proposed change to the ratios currently in statute. He noted the subcommittee had authorized the pilot project for Elko, which would have a 22 to 1 ratio in grades 1 through 5 to eliminate team teaching.

Mr. Stevens said there had been a class-size reduction funding bill every session, since it began. The bill did not modify the statutory reference; it only provided the funding and the transitional language that was needed each session.

There being no further business to come before the committee, Chairman Arberry recessed the meeting at 10:40 a.m.

RESPECTFULLY

SUBMITTED:

Christina Alfonso,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE: