The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Friday, April 23, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Crystal M Lesbo, Committee Policy Analyst

Beverly Willis, Committee Secretary

OTHERS PRESENT:

Drennan A. Clark, Major General, The Adjutant General of Nevada, Office of the Military, stated that he had served as chairman of the Governor’s Commission on Workplace Safety and Community Protection that investigated the explosion that occurred on January 7, 1998 at the Sierra Chemical Plant in Washoe County. General Clark testified that the commission, as a result of the investigation, made 29 recommendations, which 15 were adopted via gubernatorial executive order, and the remaining 14 were introduced as bills during this legislative session, with A.B. 110 as one of them.

General Clark commented that A.B. 110 would outlaw any piecework for employees handling or manufacturing explosives, and only allow hourly wages. General Clark explained that piecework payment usually results in workers working too fast and not using safety precautions, and added this bill does not apply to the mining or transportation industries because of their already stringent federal and state regulations. General Clark distributed the report generated from the Governor’s Commission on Workplace Safety and Community Protection (Exhibit C) to the members of the committee.

Senator Rhoads asked General Clark where in A.B. 110 does it refer to the mining industry being exempt from these regulations. General Clark replied that this exemption is not included in the bill because the mining industry already has stringent federal and state regulations they have to follow to handle explosives. Crystal M Lesbo, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, pointed out that A.B. 110 does omit mining from the regulation set forth in the bill.

Senator Carlton asked why ammunition for small arms and black powder are exempt from this bill. General Clark responded that these are exempt because they are already manufactured, and do not want to involve the sporting good stores selling powder for reloading ammunition at home.

Chairman Townsend asked why not any job that includes a high degree of risk similar to explosives be included in not allowing any type of piecework, and only allowing hourly pay. General Clark replied that he agrees, and thinks there are other jobs that could benefit from not allowing piecework, such as toxic-waste workers.

Chairman Townsend stated that the committee would not take any action on A.B. 110 until other dangerous industries are investigated for inclusion in this bill.

Ray E. Bacon, Lobbyist, Nevada Manufacturers Association, stated that he supports this bill with transportation being omitted, and recommends the word "transportation" on line 5, page 1, be replaced with "on-site." Chairman Townsend asked Mr. Bacon to clarify what "on-site" would mean. Mr. Bacon replied that as soon as a common carrier leaves private property it is covered by the U.S. Department of Transportation (DOT) regulations.

Chairman Townsend asked Daryl E. Capurro, Lobbyist, Managing Director, Nevada Motor Transport Association, regardless of what type of road or highway a common carrier would fall under the jurisdiction of the U.S. DOT regulations. Mr. Capurro replied that this is true, but another concern is the drivers are not paid by the hour, and has concern that the drivers will have to be paid by the hour.

C. Joseph Guild, Lobbyist, Union Pacific Railroad, voiced his concern, also with the railroad workers being paid by the hour.

Jan Gilbert, Lobbyist, Northern Nevada Coordinator, Progressive Leadership Alliance of Nevada, commented that the other five bills that were derived from the Governor’s Commission on Workplace Safety and Community Protection are a package and it is important that all of the bills are passed.

John F. Wiles, Division Counsel, Division of Industrial Relations, Department of Business ad Industry, suggested that the wording in A.B. 110 be consistent with A.B. 112.

Mr. Capurro commented that the language in A.B. 112 should comply with the language outlined above, and A.B. 112 does not deal with compensation paid to employees of trucking or rail companies. Chairman Townsend commented that he would look into having the language in the bills relating to this subject all contain that same consistent language.

Chairman Townsend closed the hearing on A.B. 110 and opened the hearing on A.B. 111.

General Clark commented that A.B. 111 would require a written safety program, as well as supplying foreign language copies of the safety program for all explosive manufacturing and handling industries, and added that A.B. 111 also does not include the mining or transportation industries.

Senator O’Connell asked what kinds of safety programs the companies involved in the explosives industries currently have. Mr. Wiles replied that, in general, most employers currently have a multilingual work force and A.B. 111 attempts to address this issue. Mr. Bacon explained that A.B. 111 requires all employers in the explosives industries to require safety instruction regardless of the number of employees, and in a language the employee can understand.

David L. Going, District Manager, Compliance Unit, Occupational Safety and Health Enforcement Section, Division of Industrial Relations, Department of Business and Industry, stated that A.B. 111 was meant to cover the voids in past occupational safety laws that did not require multilingual safety programs, as well as exemptions for small companies.

Senator O’Connell asked if the Sierra Chemical Company had any prior record with the Division of Industrial Relations for having a safety program. Mr. Wiles replied that the employer did have a safety program at a location other than where the explosion took place.

Mr. Going pointed out that the safety programs are only reviewed during a routine inspection and are not submitted to the Division of Industrial Relations for approval. Senator O’Connell noted that she thought employers were required to write a safety program and submit it to the Division of Industrial Relations for approval if they employed 10 or more employees. Mr. Going replied that employers are not required to submit them to the Division of Industrial Relations, but only required showing them during an inspection of their facility.

Senator O’Connell asked Mr. Going if they had a process where they check each employer during a specific period of time. Mr. Going replied that the Division of Industrial Relations attempts to inspect every high-hazard employer every 2 to 3 years, and low-hazard employers are not inspected routinely.

Chairman Townsend pointed out that A.B. 111 not only addresses the issue of mandating a written safety program for employers having fewer than 10 employees, but asked if the issue of the frequency of inspections for high-hazard employers was raised in the Governor’s Commission on Workplace Safety and Community Protection. General Clark replied that the Sierra Chemical Company had not been inspected for over 5 years prior to the explosion at their facility, and the Governor’s Commission on Workplace Safety and Community Protection suggested that these high-hazard facilities be inspected twice per year.

Chairman Townsend asked if this suggestion would be put in statute or in regulation form. Mr. Wiles replied that A.B. 112 provides for an annual inspection of these facilities.

Mr. Bacon added that these inspections would be jointly handled by the Occupational Safety and Health Administration (OSHA), Nevada Division of Environmental Protection, local fire marshals and local law enforcement.

Danny Evans, Chief Administrative Officer, Occupational Safety and Health Enforcement Section, Division of Industrial Relations, Department of Business and Industry, testified that the Occupational Safety and Health Enforcement Section has been inspecting approximately 6 or 7 high-risk facilities every 6 months, as well as an annual certification.

Chairman Townsend closed the hearing on A.B. 111 and opened the hearing on A.B. 253.

Chairman Townsend commented that A.B. 253 was heard in another bill, but will process this bill through the committee as a normal bill. The chairman added that the entire committee supports this bill.

Chairman Townsend closed the hearing on A.B. 253 and opened the hearing on Senate Bill (S.B.) 37, as well as opening comment on the proposed Amendment No. 720 (Exhibit D. Original is on file in the Research Library.) to S.B. 37.

Chairman Townsend commented that there are some technical problems with proposed Amendment No. 720 (Exhibit D).

Lenard T. Ormsby, General Counsel, Employers Insurance Company of Nevada, commented that he believes this amendment has been drafted as intended. Mr. Ormsby commented that the language in section 129, subsection 2, paragraph (b) subparagraph (2), contains Nevada Revised Statutes 616B.176, which states:

Mr. Ormsby asserted that the language in Amendment No. 720 states the system owns the real property, and added that when he first reviewed the amendment he was also confused. Mr. Ormsby continued by saying the state must transfer the title to the properties owned by the system back to the system by January 1, consistent with NRS 616B.176.

Senator Amodei questioned what properties are being discussed. Mr. Ormsby stated that they are primarily office buildings, and added he will get a list of the properties to the chairman.

Senator Amodei queried the rationale behind ownership of the building instead of leasing the building from the state. Mr. Ormsby replied that the system owns the property at 515 E. Musser St. in Carson City, and the title to the property was quitclaimed to the state and will be quitclaimed back to the new company (Mutual Insurance Company). Senator Amodei stated that he believes this building is part of the capital complex and added he does not think they should be giving away a capital complex asset.

Senator O’Connell stated that this building does not belong to the state nor the system, but the policyholders, and asked Mr. Ormsby if this property will go back on the property tax rolls because the system will be a private insurance company. Mr. Ormsby replied that on January 1, 2000 the tax-exempt status they currently have will be expired, and all assets will be held in trust.

Senator O’Connell queried if the assets that the system currently has will be transferred to the debt that the system has acquired in order to make up the $800 million for reinsurance. Mr. Ormsby replied that the system would expend approximately $800 million to retire approximately $2 billion that the system has. Senator O’Connell asked if the assets would be a part of the reinsurance transfer, specifically to the real property. Mr. Ormsby replied that they will not, and the system is currently converting equities to cash to consummate the reinsurance transaction. Senator O’Connell expressed that her concern is with the state providing an unequal playing field for workers’ compensation insurance in giving the system, which will be private, property that has been paid for by the policyholder. Mr. Ormsby commented that the policyholders that stay with the system, after January 1, 2000, would hold a mutual interest in the assets held by the system.

Senator Schneider asked if the properties held by the system were paid for by the policyholders or out of the General Fund. Mr. Ormsby replied since 1913 the system has not received any General Fund money, and receives all of its money from the policyholders.

Senator Amodei remarked that S.B. 37 uses language referring to the "system," and after January 1, 2000, the "system" will no longer be an entity, and added that he thinks Mr. Ormsby wants the benefits of being both a part of the state; holding onto real property, and being a private company. Mr. Ormsby responded that S.B. 37 acknowledges the current status of the system, with the rights of a state agency, and on January 1, 2000 the Mutual Insurance Company will become the successor of the interests of the system with no state agency status.

Scott Scherer, General Counsel, Governor’s Office, pointed out that the state constitution requires any money paid into the workers’ compensation fund may not be used for any other purpose. Mr. Scherer continued by saying that if the real property in question was left with the State of Nevada, the state could not use these buildings because of this fact.

Ms. Lesbo described the changes that were made from proposed Amendment No. 708 (Exhibit E. Original is on file in the Research Library.) to the new proposed Amendment No. 720 (Exhibit D).

Samuel P. McMullen, Lobbyist, Las Vegas Chamber of Commerce; Retail Association of Nevada; Nevada Self-Insurers Association; Barrick Goldstrike Mines, Inc., inquired on the timing and the process this bill will follow. Senator O’Connell commented that the committee would, "Leave the Governor’s [Kenny Guinn] bill as is. So that there would not be anything that might be controversial in the Governor’s bill, and then the changes that will be presented to the committee after they have decided, that this is a go, would be talked about to be put into other bills."

Chairman Townsend presented a proposed amendment to S.B. 37 that would amend proposed Amendment No. 720 (Exhibit F), and would allow the Governor to appoint an advisory committee consisting of policyholders of the state industrial insurance system to draft the by-laws for the newly established mutual insurance company.

Mr. McMullen stated, for the record, that people need to understand that the by-laws explained in Exhibit F include the process in determining the first board of directors for the Mutual Insurance Company. Mr. Ormsby clarified that he thinks Mr. McMullen’s concern is the by-laws adopted by the Governor-appointed advisory committee will address how to elect the board of directors for the Mutual Insurance Company, as well as the specific criteria for becoming a member.

David L. Howard, Lobbyist, Greater Reno-Sparks Chamber of Commerce, asserted that he had seen a different draft of Exhibit F that gave the Governor specific direction to appoint a diverse group of people to the advisory committee. He continued by saying the criteria included people from small, medium and large business, different industries, and different geographical locations in the state and Exhibit F does not include these, and he would like to see these provision included. Chairman Townsend noted that he drafted Exhibit F with the current language to give the Governor the choice to appoint anyone he chooses from the policyholder base.

Mr. Scherer and Senator O’Connell both agreed that a date should be added that would require these by-laws to be completed before January 1, 2000. Mr. Ormsby called attention to the fact that this date does not need to be added because this is one of the conditions that need to be met before the Governor can approve the transfer. Mr. Scherer added that the mutual interest holders in the Mutual Insurance Company, after January 1, 2000, will be able to change the by-laws set forth by the advisory committee.

Mr. Ormsby emphasized that Amendment No. 720 would reduce the number of employees that will be laid off and create greater opportunities for the employees that remain with the company. Mr. Ormsby added that also this amendment will allow the company to expand to other areas of insurance, as well as granting the company the real property to which it is entitled. Mr. Ormsby concluded by saying he believes this amendment satisfies all of the Governor’s three goals: eliminate the old debt through the reinsurance transaction, eliminate any future debt, and provide a safety net for employees.

Robert J. Gagnier, Lobbyist, State of Nevada Employees Association, commented that proposed Amendment No. 720 does not diminish the concerns of the State of Nevada Employees Association because of, "the constitutional question of Article 9, section 2." Mr. Gagnier pointed out that he has concerns with S.B. 37 and proposed Amendment No. 720. Mr. Gagnier explained this is because it can also affect the Public Employees’ Retirement System (PERS) because the trust funds for both PERS and workers’ compensation are included in the same section of the constitution that S.B. 37 will affect. Mr. Gagnier stated that if the money from workers’ compensation can be turned over to a private company, then the same thing can be done with PERS, and added he is still opposed to the amendment.

Senator Schneider asked if this could actually happen. Mr. Scherer replied that the purpose of the trust funds being created for PERS and workers’ compensation was to prevent the money from being raided for General Fund purposes, and the money will still be used for workers’ compensation benefits. Mr. Scherer added that theoretically PERS could be taken into a private company, but would still have to only pay retirement benefits.

Mr. Ormsby stated that he understood that Article 9, section 2 of the Nevada Constitution states ". . . any successor organization to the State Industrial Insurance System shall continue to hold in trust any money paid to the system for the purpose of providing compensation for industrial accidents and occupational diseases . . ."

Senator Amodei asked what would happen with the trust money and the real property assets if S.B. 37 passes and the Mutual Insurance Company goes under. Mr. Ormsby replied that section 18 of S.B. 37 gives authorization to the insurance commissioner to initiate a receiver action and take possession of the assets and return them to the state treasury for the benefit of the injured workers. Mr. Scherer added that if the newly privatized company goes under the taxpayers would still be left to bail out the company, but we would have the same scenario if it remained a state entity.

Danny L. Thompson, Lobbyist, American Federation of Labor/Congress of Industrial Organizations, asserted that he has two concerns with S.B. 37, "the first is the existing employees of the system, and the second is what Mr. Scherer just explained . . . ." Mr. Thompson noted that he does not think enough question have been answered about the proposal to privatize the workers’ compensation system to go forward, because benefits and rates will be affected adversely to bail out the system. Mr. Thompson pointed out that he is adamantly opposed to this bill.

Chairman Townsend asked for a motion to amend and do pass S.B. 37 with proposed Amendment No. 720 (Exhibit D), and the proposed amendment allowing for an advisory committee (Exhibit F).

Chairman Townsend opened the hearing on A.B. 470, and proposed the first year of the three-way system has established rates, and starting with the second year have an open rating system, as discussed previously.

Mr. Ormsby noted that he had explained previously the reasons behind the administered pricing and transitioning of rates over a 4-year period to open competitive rates. Mr. Ormsby explained that the State Industrial Insurance System (SIIS) believed when Assembly Bill 609 of the Sixty-ninth Session passed that a period of time was needed to avoid confusion for both the policyholders and SIIS.

Mr. Ormsby iterated that if the administered pricing is not removed after 1 year, and the system remains a monoline entity (only workers’ compensation) the system would be at a competitive disadvantage. Chairman Townsend clarified that the committee nor anyone else in the Legislature is out to get the system, and does not want the system to be at a disadvantage.

Chairman Townsend asked if an amendment to A.B. 470 that would eliminate the administered rates after 1 year only if the system became a multiline entity would be fair, otherwise the law would stay the same. Mr. Ormsby replied that this is a public policy issue, and stated the impact on the system will be the same. Chairman Townsend stated he would have an amendment drafted that will deal with these issues allowing no disadvantage to the system, as well as allowing a competitive marketplace.

Mr. McMullen stated that he had handed out a proposed amendment to A.B. 470 (Exhibit G) that was approved by the sponsors of the bill.

With no further business before the committee, the chairman adjourned the meeting at 10:30 a.m.

RESPECTFULLY SUBMITTED:

Scott Corbett,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: