The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:05 a.m., on Monday, February 8, 1999, in Room 2134 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 William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Bernice Mathews

STAFF MEMBERS PRESENT:

Jean Laird, Committee Secretary

OTHERS PRESENT:

Senator Raggio asked whether there were any requests to introduce bill drafts. There were none.

Frankie Sue Del Papa, Attorney General, said the Office of the Attorney General represents, with very few exceptions, all the executive departments of state government, including over 200 agencies, boards and commissions. She said the attorney general’s office has criminal jurisdiction over a variety of offenses. She listed, in particular, crimes committed by state employees in the course and scope of their employment, crimes committed by state prisoners, and white collar crimes. She said that over the last eight years, the Legislature has given the attorney general’s office a great deal of jurisdiction over fraud prevention. She noted the Office of the Attorney General is the sole prosecutor for Medicaid fraud, workers’ compensation fraud, insurance fraud (for which there will be an expansion requested through a separate bill), telemarketing fraud, and securities fraud. She added that her office is also the primary prosecutor of consumer fraud and unemployment insurance fraud. She indicated that her office provides technical and legal assistance to all 17 district attorneys. The office also serves as the death penalty case coordinator and handles a great deal of death penalty cases.

Ms. Del Papa informed the committee the Office of Attorney General is divided into the following "divisions": the Administration, Litigation, Human Resources, Gaming, Civil, Transportation/Public Safety and Investigations Divisions; the Bureau of Consumer Protection; Information Services; and the Reno and Las Vegas offices.

Ms. Del Papa stated the Private Investigator’s Licensing Board is also part of the attorney general’s office. The attorney general’s office also serves as the extradition coordinator and tort claims coordinator for Nevada. Ms. Del Papa said the office also acts as the advocate for missing and exploited children. She added that the state prosecutors’ advisory council is located in the attorney general’s office.

Ms. Del Papa asked the committee to consider providing some sort of additional flexibility among these budgets, given the budget crisis and given what has happened to the budget request submitted to the Governor’s Office by her office. She explained that it is very hard when an agency is asked to sacrifice by offering funds for reversion. She added it would be very helpful and more beneficial to the state if the attorney general’s office had flexibility between budgets and categories since there are peaks and valleys in the number of cases. She said if the Governor’s request for additional flexibility within his budget is granted, it would be helpful if she were also granted additional flexibility.

Ms. Del Papa referenced the statistics provided in Exhibit C, "Office of the Attorney General Proposed FY00-FY01 Budget." She said the attorney general’s office has been extraordinarily busy and emphasized that over 13,000 cases were opened and closed during the biennium. She said this represents a 77 percent increase in the number of cases handled over the last biennium. She added that Fiscal Year (FY) 1998 ended with 6,100 cases pending.

Ms. Del Papa said judgments totaling over $13 million were awarded to the state and her office defended the state against claims of over $52 million.

Ms. Del Papa alerted the committee to an anticipated bill requesting the Legislature to remove the cap on the state’s liability. Senator Raggio asked for her opinion on that measure. She said she is not in favor of it, particularly given the financial crisis the state is currently facing. She added it would have a tremendous fiscal impact on the state and on county and local entities. Senator Raggio asked whether the state frequently waives the cap. Ms. Del Papa answered that the state does not voluntarily waive the cap. She added that, obviously, each case is considered on an individual basis, depending on the facts and circumstances. She said that sometimes when cases are presented to the State Board of Examiners there is an opportunity to exceed the cap because of the facts of a particular case.

Inquiring further, Senator Raggio asked whether the cap is $50,000. Ms. Del Papa answered that it is. Senator Raggio asked when that cap was set. The attorney general said she did not recall. Senator Raggio said he thought it was about 20 years ago. He then asked her whether there is any validity to the argument that the value of $50,000 was a lot different 20 years ago than today and that the state should be liable for more. He noted these are not his positions, he was just asking the questions. Ms. Del Papa indicated she would rather make her presentation on this issue at the time the bill is being considered, when she has the supporting documentation with her. She said she just mentioned it in terms of what the state actually defended against.

Ms. Del Papa stated that over $24 million in judgments and amounts owed to the state were collected. She added that deputy attorneys general who represent the Department of Taxation make substantial portions of the collections. She noted her office had asked for additional tax deputies, which were not recommended in The Executive Budget. She indicated each tax deputy results in approximately $2 million in additional revenue.

Ms. Del Papa said judgments against the state and amounts paid on claims total approximately $6.5 million. She said the judgments against the state consist primarily of tax refunds and some tort claims.

Ms. Del Papa summarized by saying that this fiscal analysis points to how busy the office has been and the substantial things at risk.

Ms. Del Papa named the 12 budgets of the Office of the Attorney General, which are listed on the agenda (Exhibit A). She then referenced Exhibit D, "Office of the Attorney General Federal Grant Programs." She said this document is a recap of the federal grant programs that are run through the Office of the Attorney General. She noted the first page is a recap of the Nevada Violence Against Women grants, which are for the federal domestic violence programs. The listed grants, totaling over $6 million, have either been received or are expected to be received.

Ms. Del Papa stated the second page shows that the attorney general’s office teamed with the University of Nevada, Reno, and received a 3-year award of $450,000 from the Robert Wood Johnson Foundation. She added this is to provide for continuation of the Death with Dignity and Caring Task Force. She said this money comes through the Office of the Attorney General and is passed on to the Department of Health Ecology and the Sanford Center for the Aging at the University of Nevada, Reno. She pointed out the State Criminal Alien Assistance Programs have totaled nearly $7.5 million. Ms. Del Papa noted the agency received a federal Food and Drug Administration (FDA) grant for the tobacco investigations. She added that the major programs right now are being funded through federal money, except for a small amount of state money remaining in the budget.

Ms. Del Papa stated the Medicaid Fraud Control Unit has generated nearly $5 million since 1991.

The attorney general summarized that the grants handled by the Office of the Attorney General over the last few years total $19 million. She added this is one of the reasons the office has asked for assistance in the administration of those grant programs.

Senator Mathews asked whether there are administrative costs that could be charged to the grants. Ms. Del Papa said the amount available is usually restricted to 5 percent. She said her office applies for the maximum because there is a lot of paperwork involved, particularly with the Violence Against Women Act grants. She added there is also a great deal of follow-up and investigation.

Senator Rawson noted that, in the Attorney General Administration Fund, budget account 101-1030, the work program for FY 1999 is approximately 10 percent below the actual for FY 1998. He also noted the recommended amount for FY 2000 is a 12 percent increase and for FY 2001 there is a 4 percent decrease. He asked whether this creates reason for concern. Don Hataway, Deputy Director, Budget Division, Department of Administration, pointed out that the difference between the actual and the work program is the federal funds. He said a grant award had not yet been received for the $2 million alien assistance fund when the budgets were prepared. He explained that the grant award has since been received and if that amount were added into the work program year, both years would be about the same. Ms. Del Papa noted that is basically a pass-through grant to the Department of Prisons and the Office of the Attorney General does the paperwork.

Senator Rawson referred to Ms. Del Papa’s request for budget flexibility and said he understands that request. He asked whether, because of the budget crisis, there are particular areas of the budget where her agency has been particularly hurt or which are particularly risky for the state. Ms. Del Papa said the Governor recommended less of her request than she would have preferred. She said her office also requested position upgrades and additional positions. She noted, regarding flexibility, for instance, the tax deputies more than pay for themselves. She said the fact that the tax deputies were not recommended greatly impacts state revenue. She added the tax cases are growing increasingly complex, there are larger amounts at issue, and the deputies can handle fewer cases at the same time.

Ms. Del Papa said, regarding upgrades, the agency’s proposal in this budget included upgrades for some support staff, some information services staff, and some deputies attorney general. She said that, particularly in Las Vegas, it is difficult to recruit legal secretaries, computer services positions, and the deputies attorney general, because the state salaries are not competitive. She said all state agencies, including the attorney general’s office, are experiencing recruiting and retention problems in certain areas and she hopes there is some consideration of this issue by the Legislature. She indicated she understands there is a budget crisis, but added that the answer may be in providing agencies the flexibility to deal with these issues internally. She noted that she had asked for a number of attorney positions to be upgraded and that she is particularly concerned with retaining experienced litigation attorneys and providing additional on-site supervision.

OFFICE OF THE ATTORNEY GENERAL

The Attorney General Admin Fund – Budget Page ELECTED-24 (Volume 1)

Budget Account 101-1030

Ms. Del Papa said the cost allocation of this budget is 63 percent General Fund, 33 percent agency charges, 3 percent boards and commissions, and 1 percent district court assessments. Senator Raggio pointed out The Executive Budget recommends the receipt of assessments from state agencies totaling $5.7 million each year of the biennium. He also pointed out that legislative staff identified, in the various state agency budgets, only $4.7 million to be transferred. Mr. Hataway explained how this part of the budget was constructed. He said the attorney general’s office provided a specific percentage breakdown for each position based on how it was funded through the four major sources. He explained the final recommended allocation will not be known until David M. Griffith and Associates completes the Attorney General Cost Allocation Plan. He indicated the report is expected within a week or two. He said that when it is received the Budget Division will prepare a recommendation regarding the adjustments. Senator Raggio noted the Legislative Letter of Intent issued, following the 1997 Legislative Session, regarding the tracking of actual cost allocation revenue during the 1997-1999 biennium. He suggested that Mr. Hataway refer to that Letter of Intent.

Senator Raggio said one of the biggest issues the committee has had over time in reviewing the attorney general’s budget is that the number of positions has grown at a substantially higher rate than new positions across the state budget as a whole. He said if the positions recommended in the budget are approved, the number of positions will have increased over 71 percent since FY 1990, which is almost twice the growth rate of new positions for the state as a whole. He acknowledged that there have been new duties added to the attorney general’s office but said that even taking those into consideration the growth is still at a higher rate than for the state as a whole. He said the committee would need to take a careful look at new positions, even those recommended in The Executive Budget. He asked Attorney General Del Papa to prioritize the new positions in the budget, particularly in light of the fiscal limitations the Legislature is facing.

Ms. Del Papa said the number of positions in the attorney general’s office has not grown at a substantially higher rate than has the population of the state. Senator Raggio said he was not referring to the growth rate of the state population. He was referring to the growth rate of new positions in the state budget as a whole. Ms. Del Papa said the attorney general’s office is in a slightly different circumstance than many other agencies. She said her office is unable to stop an entity from suing the State of Nevada. She said she must have resources to respond to the litigation. She added that a lot of the challenges this agency faces as a legal office track substantially close to the infrastructure challenges and the growth experienced, primarily in Clark County, but also in other parts of the state.

The attorney general said the Office of the Attorney General did not initiate many of the new duties added in the past. She named the workers’ compensation fraud program and the other fraud prevention programs as examples. She noted there has been a substantial increase in the fraud prevention efforts. She indicated there might be additional new programs requested by other entities during this legislative session. Ms. Del Papa said she appreciates the budget situation the state is in. But the reality, she mentioned, is that a lot of the new programs given to the Office of the Attorney General were programs that other entities saw a need for and it was decided the attorney general’s office was the best place to house them. Ms. Del Papa added the attorney general’s office has certainly done its share to help with the public protection agenda. She called attention to the attorney general administration budget (101-1030, budget page ELECTED-24), where she said the attorney general’s support staff ratios are really high. She said only one new management assistant has been recommended and it is in the budget for Carson City, but she will have to put it in Las Vegas, given the internal ratios. She acknowledged she has the flexibility to do that.

Ms. Del Papa said her office requested additional support for the Transportation Services Authority (TSA), Department of Business and Industry. She said that agency is engaged in heavy-duty litigation and is requesting a lot of legal services that her office simply cannot provide.

Ms. Del Papa said that in the human resources area there are new federal programs. There has been and continues to be a lot of growth in that area, but the agency request was cut by the budget office.

Ms. Del Papa said the attorney general’s office had asked for a senior deputy for appellate functions. She added that at the level of litigation which has evolved over the last 8 to 10 years, these cases have become increasingly complex and lengthy.

Ms. Del Papa said the Governor did not recommend the contracts deputy that her office requested. She said that over the last several years her office participated with the Department of Administration in a total review of the contracts process, and that area is becoming increasingly complex.

Ms. Del Papa reiterated the attorney general’s office had requested additional deputies for Taxation, but the Governor did not recommend anything in that area.

Senator Raggio said that, as an example, if the two new computer positions are approved, the attorney general’s office would have 1 computer position for every 70 devices. He added that the Department of Information Technology (DoIT) currently has a ratio of one position for every 300 devices. He predicted this Legislature will be giving very careful attention to requests for new positions and reclassifications, particularly when the state is in a situation of holding the line generally and the Governor has not proposed salary increases for state employees. He suggested the attorney general revisit her structure to see whether there can be some reassignment of duties or other solutions to workload situations. Senator Raggio also suggested Ms. Del Papa prioritize all requests. He said the subcommittee members would rather have her recommendations before they go into detail. He noted the committee would be making the same suggestion to all departments and elected officials.

Ms. Del Papa said she would do that. She added she has already met with her upper management staff about this and they constantly assess and prioritize. She noted state salaries are out of whack, creating severe recruiting and retention problems. She said the state is competitive in the first 10-year cycle, but beyond that it is not. She reiterated that the litigation faced by the state is more complex than ever and she emphasized that she needs to be able to retain staff with experience in these areas.

Senator Raggio agreed that what the attorney general is saying is valid, but also said the problem is that there are limited revenues and the Legislature must adhere to the revenue projections of the Economic Forum. He acknowledged that Clark County pays higher salaries for attorney positions and noted that Clark County’s revenue stream is different from what it is in the rest of the state. He said the state is not able to match those salaries without doing a disservice to the rest of the budget. The senator reiterated he would prefer that the attorney general make recommendations, rather than have the subcommittee making decisions arbitrarily. He said it is an invitation for the attorney general to revisit the situation and determine what alternatives might accommodate the situation during this biennium. He said there are limits on what can be done and that is what the Governor faced in preparing The Executive Budget.

Ms. Del Papa said she has already gone through that process at the Governor’s level. Senator Raggio responded that now it has to be done for the legislative process. Ms. Del Papa said the Governor’s recommendation is already reflective of a "bare bones" budget for the Office of the Attorney General.

Gene Etcheverry, Chief Financial Officer, Office of the Attorney General, pointed out that the following requests were not recommended in The Executive Budget: E-175 Improved work Environment, E-250 Consumer Treatment, and E-275 Business and Government Environment.

The Attorney General asked for the Committee’s consideration of decision unit E-250, Consumer Treatment. Senator Raggio pointed out that The Executive Budget does not include information on decision units not recommended. Mr. Hataway added that all decision units not recommended for funding are rolled into E-999, Unfunded Decision Units.

Ms. Del Papa said she would provide an explanation of what was requested in E-250 to give an example of what is not recommended in The Executive Budget. She said that, for example, the deputy attorney general for the Real Estate Division and the Division of Financial Institutions, Department of Business and Industry, was not recommended. She added that anyone who lives in Clark County in particular knows what has happened with reference to financial institutions and real estate in that area. She said activity in this area has been really hectic. She stated there would be proposals to this Legislature, which her office will support, for reform in the mortgage industry and in other areas. Ms. Del Papa said there are a lot of needs that have not been met. She said the deputy attorney general who handles open meeting law (in addition to other assignments) had to be pulled off open meeting law towards the end of the year because there were so many bond closings through the Real Estate Division and the Division of Financial Institutions.

Ms. Del Papa noted this type of need supports her request for additional flexibility. She said there are a lot of holes "we all know are here." She added there are many requests that have been well supported by the customer agencies with case numbers and descriptions of complexity.

Senator Raggio said if there are any unfunded decision units the attorney general deems essential, she is invited to make her case for them before the Senate Finance and Assembly Ways and Means Joint Subcommittee on General Government. Ms. Del Papa noted her appreciation and reiterated her concern regarding the deputy attorney general for the Department of Taxation and the revenue loss to the state if the positions are not approved.

Senator Jacobsen said that during the last session the Legislature asked the Office of the Attorney General for performance indicators. He said he has yet to see them. He added they are the guideline for determining efficiencies. He also said he would like to see the agency requests that are not included in The Executive Budget, which will assist the committee to determine where the majority of the problems are. The senator also wanted to know whether there is adequate space to house the staff. He said that many times this issue is not addressed until it becomes an emergency to find work space.

Ms. Del Papa said her office has submitted a great deal of backup material to the Budget Division and to the Fiscal Analysis Division of the Legislative Counsel Bureau (LCB). She said she has not gone through all of it today as she saw it as a repeat of information already provided. She added the data already provided includes comparisons of workloads. She noted that it is difficult for a law office to predict who might sue the state. Ms. Del Papa said the attorney general’s office can identify vulnerabilities, but it may not be in the best interest of the state to have that conversation. She said this office is constantly looking for ways to deliver better legal services at less cost and still protect the state. She named their efforts regarding sexual harassment as an example. Those efforts included developing policy and providing training. She said the attorney general’s office sends a lot of quarterly reports to LCB, and her office has a rule to be very responsive when legislators request information.

The attorney general said she wished to respond to Senator Jacobsen’s comment about office space. She said that when she became attorney general, there were attorney general staff situated in 14 different offices. She said she has tried to make her office function more like a regular law office. She added there are fewer deputies attorney general out in the field than there once were, but space in the Las Vegas attorney general’s office is totally maximized. Ms. Del Papa said her office is on the waiting list for space as other state offices move out of the complex. She noted the state has acquired the first judicial courthouse and it is eventually planned that this building will be part of the attorney general’s office complex. She opined the state needs to look at acquiring or building a state office in Reno, considering the rent being paid and the many locations of state staff. She also advised that in Las Vegas the building planning should be done in phases.

Senator Rawson asked whether the Office of the Attorney General is exempt from or works separately from the Department of Information Technology (DoIT). Ms. Del Papa said the attorney general’s office has maintained its own technical staff, in large part because there is a sensitive nature to a lot of the work in this office. She said her office has, however, cooperated and collaborated with DoIT. She noted the attorney general’s office has been trying to develop a case tracking system, but, regrettably, has not been successful. She added her office expected to acquire the software from the State of Texas but has not had the funding to go forward with it and the whole system crashed. She said 190 computers were requested and the Governor recommended 100 of the 190. Ms. Del Papa said that when she became attorney general eight years ago, there were six computers in the entire Office of the Attorney General. She added there was no Westlaw (a legal research database) hookup and noted that it is malpractice not to have a Westlaw hookup. She said the whole legal profession is changing rapidly. She noted that business on the Internet is doubling every 100 days. Ms. Del Papa said her office has put a heavy emphasis on the high-tech crime unit. She informed the committee the average bank robbery nets $2,500 and the average high-tech crime starts at $50,000. She said the difficulty in recruiting technical staff, especially in Clark County, has created problems. Again, Ms. Del Papa said, flexibility across the budgets for the Office of the Attorney General is needed to maximize resources.

Senator Rawson said there were a number of positions approved by the 1997 Legislature for which the attorney general is requesting reclassification in decision unit E-805, Major Reclassifications. He asked whether these reclassifications had been processed through the Department of Personnel or whether instead the attorney general’s office works independently of that agency. Ms. Del Papa said these classification requests have gone through the Department of Personnel. Mr. Hataway said the Legislature authorized two unclassified computer forensic positions, but the salary level makes it difficult to recruit. He added that in decision unit E-805, Major Reclassifications, there is a request to transfer those two positions to the classified series.

Senator Neal said that at one time he held the notion the attorney general should be appointed (rather than elected). He added that listening to the attorney general talk about her budget and the restraints her office is under dispels that notion. He asked how her office was doing in terms of employing and keeping attorneys with specialties in the law. Ms. Del Papa said the attorney general’s office is fairly competitive in the first 6- to 8-year range, but not in long-term retention. She informed the committee every employee of the General Counsel Office of the University of Nevada is a former deputy attorney general. She added there is a real inequity in the comparison of salaries in her office with those in the university system. She said her office has also lost a number of deputies attorney general from its consumer protection area to the utility industry. Ms. Del Papa noted the attorney general’s office faces some real challenges because the state salaries are not competitive. She emphasized there are some things only the state can do, because the attorney general’s office is the interface with the federal government and with other states.

Ms. Del Papa said there will be a bill draft (not the attorney general’s proposal) which proposes to have the attorney general’s office provide services to the State Board of Contractors. She said there was a proposal two sessions ago for staff to be given to the Office of the Attorney General to pursue the unlicensed contractors. She said that for whatever reason that proposal was not approved. She noted the challenge in Clark County regarding the situation with contractors is clear to everyone. Ms. Del papa said this is only the tip of the iceberg in that problem area. She said she needs flexibility in specialty areas and particularly in litigation, where the risk to the state is high.

Special Fund – Budget Page ELECTED-31 (Volume I)

Budget Account 101-1031

Ms. Del Papa said the recommended base in the Special Fund budget is equivalent to the FY 1998 budget less the reversions. She said the attorney general’s office had requested an additional $21,286 but, given the budget situation, will try to live with the recommended amount. Senator Raggio asked whether the "attorney general reimbursement" revenue not recommended to continue in the next biennium is the money Nevada forfeited from the nuclear waste storage project. Mr. Hataway said that is where it used to come from. Senator Raggio asked whether it is correct that Nevada would probably not receive reimbursement in that area. Ms. Del Papa said there is no reimbursement she is aware of. She added that this budget relates to suits unknown at the time of budget preparation.

Attorney General Insurance Fraud – Budget Page ELECTED-32 (Volume I)

Budget Account 101-3806

Ms. Del Papa said one of the priorities in the Office of the Attorney General has been, and will continue to be, insurance fraud prevention. She said her office has faced many challenges in that area. She added the attorney general’s office worked closely with a number of individuals, including the late Senator Regan, and has had meetings with the industry. She said the insurance industry is expected to propose a mechanism to fund enhancements for the insurance fraud prevention. She noted the funding is not in The Executive Budget. Senator Raggio asked how the enhancements would be funded. Ms. Del Papa answered they would be funded through an additional assessment the industry has agreed to.

Senator Raggio said the 1997 Legislature authorized two new positions and asked whether they are still justified. Ms. Del Papa said they absolutely are. She stated that the number of staged-accident rings present real challenges, especially in the southern part of the state. She added most of the insurance fraud staff of the attorney general’s office are based there. She indicated her office is currently working on several major matters in a cooperative effort, some with the Federal Bureau of Investigation (FBI) and some with other law enforcement entities. Ms. Del Papa said the attorney general’s office has employed prevention measures by working with the industry from the day someone files an application for license. She reminded everyone that insurance fraud is a crime for which everyone pays. She said the industry itself has recognized the efforts of the Office of the Attorney General.

Senator Raggio said the committee would hold off any further discussion until that proposal for funding enhancements is received.

AG Medicaid Fraud – Budget Page ELECTED-35 (Volume I)

Budget Account 101-1037

Attorney General Del Papa said the Medicaid fraud budget is funded with 75 percent federal funds and 25 percent state matching funds. She said most of the requested increases for this unit are not included in The Executive Budget, although, on appeal to the Governor, two positions were added back in. Referring again to Exhibit D, "Office of the Attorney General Federal Grant Programs," she noted that since 1992 Nevada has received nearly $5 million in federal funds for the Medicaid Fraud Unit. She said that the first 3 years this unit was in existence there was a 90 percent federal, 10 percent state matching formula. She added it is now a 75 percent federal, 25 percent state matching formula. Ms. Del Papa emphasized this unit is important to the state, particularly when the state’s total Medicaid expenditures are considered. She noted the Medicaid fraud unit has had some very high-profile cases and fines totaling over $1 million that have come back to the state. She added that the efforts of this unit have been recognized nationally.

Senator Raggio noted the Governor has recommended a reduction in the General Fund appropriation. Mr. Hataway explained that the budget takes into consideration the level of recoveries the agency has been able to accomplish in the last few years. He said recoveries have substantially increased and the agency is to be commended. He added that in the past the budget was supported by 25 percent state funds. However, Mr. Hataway said, 15 percent of that was from recovered funds and 10 percent was General Fund. He said that because of the increased level of collections, the budget office increased the amount reflected in The Executive Budget for recoveries. He pointed out the Budget Division is recommending the agency be authorized to receive an advance from the General Fund, if necessary, to meet cash flow requirements. He added that, obviously, recoveries are not collected on a uniform basis over the 12 months. Mr. Hataway said the Budget Division is also recommending continuing the process of balancing forward the General Fund appropriation remaining from the first year of the biennium to the second year. Senator Raggio asked the attorney general whether she anticipates this to be a problem. Ms. Del Papa replied no. Mr. Hataway noted that in FY 1998, the unit’s recoveries were $285,035. He said a 3-year average was used to estimate recoveries for the next biennium and this process resulted in an estimate of $230,000 for each year. He noted that in FY 1998 the agency reverted all the General Fund appropriation and is projected to do the same in FY 1999. He reiterated the agency does need the advance for cash flow purposes.

Senator Raggio asked Ms. Del Papa to discuss the activities of the Medicaid Fraud Unit. She said this unit is charged with investigating and prosecuting Medicaid fraud. She stated the unit’s cases could involve any type of provider, such as a pharmacy, a hospital, or a durable goods supplier. Ms. Del Papa said the unit is also charged with investigating and prosecuting financial and physical patient abuse. She said the unit has been very active with the Elder Abuse Task Force and added it has had success in prosecuting some of the elder abuse cases, even getting criminal convictions. She noted this unit often handles high-profile cases, which can be paper-intensive and time-consuming. Ms. Del Papa concluded by saying this is a very active unit on all fronts that is dedicated to investigating Medicaid fraud and patient abuse.

Senator Raggio referred to the quarterly reports furnished by the Office of the Attorney General. He said they indicate the unit did not prosecute any criminal cases during FY 1998 and had no active civil cases at the end of the fiscal year. He said it also shows the unit had 43 pending investigations at the end of FY 1998 and yet the report indicates no litigation activity. Ms. Del Papa said that information must be incorrect. Senator Raggio said this was her report and suggested she might want to look at it. He alerted her the subcommittee will have questions on the quarterly report. Ms. Del Papa replied she did not have a copy of the report with her and suggested the senator might have misread the report. Senator Raggio noted the report shows zeros at the bottom.

Senator Raggio said the committee needs a better understanding of what the unit is doing, because the report does not indicate the work levels discussed at this hearing by Ms. Del Papa. He noted he was reading from the June 30, 1998, report. Ms. Del Papa answered that if the LCB Fiscal Analysis Division staff have questions, it would be more efficient if they called her. Senator Raggio said he has this information because he asked LCB staff for a copy of the report. Ms. Del Papa responded that her office supplies a great deal of information and seldom hears anything back from LCB staff. She said it would be more helpful if someone would just call her office so her staff can explain it, rather than taking up time in this venue today.

Senator Raggio said the subcommittee will also have questions about the minimal recoveries reported. He said the report indicated 80 percent of the recoveries were to reimburse the unit for investigative and attorney costs, and the unit only recovered $6,300 in fines and penalties and $60,000 in restitution during FY 1998. He added these are legitimate questions and explanations are necessary and appropriate. Senator Raggio said the report may be a distortion, but it does not indicate the high level of activity and recovery presented in testimony today. Ms. Del Papa responded she would provide that explanation. She noted there is no guarantee as to which fiscal year "something is going to fall in." She added there have been some very high-profile cases, but some will not be resolved until next September. She added that takes them into another fiscal year. Senator Raggio said that all the committee can go by is the information it has and invited the attorney general to submit whatever else she feels is appropriate for better understanding.

Senator Rawson reminded the attorney general this is a part-time Legislature. He said the legislators do not have the luxury to call ahead to review issues. He said this is not confrontational, but only a request to answer questions. Ms. Del Papa said she was not trying to be confrontational, but noted they have been down this path in the past. She said it is her understanding that LCB fiscal staff are here year-around and said her office would provide any information requested throughout the biennium. She said she will provide a history from the beginning 8 years ago. Senator Raggio said that information might be important for the subcommittee. Senator Rawson noted the quarterly report indicates $348,476 recovered in fines and penalties, but most of that was reimbursement for investigative and attorney costs. He asked whether the recoveries are reflected in The Executive Budget and whether there are transactions that go on beyond these budget accounts. Mr. Hataway said the only recoveries reflected in this budget are the recoveries that support the expenses in this budget. He said the remaining recoveries are reflected in revenue in the Medicaid budget for Medicaid expenditures.

Senator Raggio said one of the reasons for these questions was that in FY 1996 the unit recovered $323,000 in Medicaid reimbursement, yet the report for FY 1999 shows $145,000. He stated, "The committee is just trying to understand." He said the attorney general has pointed out that it varies from quarter to quarter, but the Legislature must justify the amount and positions to be authorized based on what the unit is doing. He added that is the reason the quarterly report was requested. Ms. Del Papa said there might be recoveries which go to federal Medicaid that are not reflected. Senator Raggio said that if there is information not included in the report, then her staff should change the report so the Legislature will know what the recoveries have been. He invited Ms. Del Papa to augment the report. Ms. Del Papa said that LCB staff has already had opportunity to critique it, but that anything requested by the committee will be provided. Senator Raggio said the committee wants to give the attorney general a full opportunity, as is given anyone else who comes before the committee, to respond and to present any additional information she determines appropriate. He added there are 15 weeks left before the end of the session, so there is ample time to do that.

Ms. Del Papa alerted the committee to the Senior Citizens Protection Act of 1998, which is a federal act. She said it will expand the jurisdiction of the Medicaid Fraud Unit to allow the investigation and prosecution of abuse and neglect cases that occur in board and care facilities, even if that facility does not receive Medicaid funds. She said that in the past the unit has been restricted to investigation of Medicaid facilities. Senator Raggio asked who currently investigates providers when Medicaid is not received. Ms. Del Papa said it is done at the local level. She added the attorney general’s office has lobbied at the federal level for additional flexibility, and it is a good thing in terms of use of resources. Senator Raggio asked whether there will be additional federal funding for the expanded investigation limits now that the act authorizes the expansion. Ms. Del Papa said she believes it is built into The Executive Budget. Mr. Hataway said the federal funding will be at the same 75 percent/25 percent funding ratio as in the regular budget.

Attorney General-Workers’ Comp Fraud – Budget Page ELECTED-39 (Volume I)

Budget Account 101-1033

The attorney general said this budget was recommended as requested. She said that 5 years ago the Legislature gave the responsibility of investigation and prosecution of workers’ compensation fraud to the Office of the Attorney General. She said this unit is modeled after the Medicaid Fraud Unit. She added it is based primarily in Reno and Las Vegas, although it does have small components in Elko and Carson City. Ms. Del Papa said this unit is very active and has worked at the front end in terms of prevention, and it has worked closely with the industry. She said it has been a successful unit. She added that the unit is preparing for the transition to Employer’s Insurance Corporation of Nevada in July 1999, as is everyone else, but she added that no new positions were requested and none are recommended.

Senator Rawson noted the Medicaid Fraud Unit is basically concerned with health care providers who are fraudulently billing and developing inappropriate practices. He asked whether the Workers’ Compensation Fraud Unit is concerned with the same issues or with workers who are perpetrating fraud. Ms. Del Papa said this unit is concerned with employees who might be double dipping (that is, who are collecting benefits and who are also working). She added this unit is also concerned with employers who are not paying premiums at all or are not paying for the right number of employees. She said the Workers’ Compensation Fraud Unit also conducts employer training, trying to be as responsive as possible. Senator Rawson said that frequently workers who thought they were covered will contact him, and it turns out the employer has not covered them. He stated this leaves the employee essentially without insurance for injuries. He added the employee could pursue private litigation, but most employees do not know how or do not have the resources.

Continuing, Senator Rawson asked whether there is some way to help workers in this situation and recover the costs from the businesses. He added that it seems the state should better protect people in this situation. Ms. Del Papa said her office has a "1-800" number, they work with other entities as much as possible, and they conduct public education programs. Senator Rawson said that once a worker has been injured in a situation where the employer has paid no premiums, the person is told there is nothing the state can do for him or her. He asked whether additional laws are needed to protect the worker. Ms. Del Papa said she would have Kevin Higgins, who is the chief of this unit, provide a briefing for the committee.

Senator Neal asked whether, with workers’ compensation becoming private, the attorney general would still have the same responsibilities. Ms. Del Papa said the attorney general’s office has been preparing for three-way insurance for some time. She said the office has just begun to look at the privatization issue internally. She added there might be statutory changes required but said she would like to have Kevin Higgins prepare an executive summary of the impact. She indicated there would still be a need for the fraud unit.

AG Office of Consumer Protection – Budget Page ELECTED-43 (Volume 1)

Budget Account 330-1038

Senator Raggio said that at the last session the Legislature combined the following units into this particular budget: the Utility Consumers’ Advocate Unit, the Telemarketing and Consumer Fraud Unit, and the Antitrust and Securities Unit. He asked the attorney general to describe how that is working. Ms. Del Papa replied the Bureau of Consumer Protection (BCP) is an extremely busy unit. She said the attorney general’s office did the consolidation and reorganization within its own office because of changes anticipated on various fronts. She stated that investigative staff are able to combine telemarketing matters, securities matters, and antitrust matters into one investigation. She added it has proved very successful. There have been a number of "slamming, cramming" cases. Ms. Del Papa indicated auto repair fraud continues to be an area of interest to consumers. She added there is a very high volume of contacts from the public with reference to this unit.

Senator Raggio asked who heads this unit. Ms. Del Papa answered that Frederick Schmidt, Chief Deputy Attorney General, heads this bureau. She added Mr. Schmidt has held the consumer advocate position for utilities, but in addition he is now helping to oversee this very active unit. She said resources are primarily located in Las Vegas and with this consolidation she has been able to place a couple of people in Reno.

Responding to Senator Raggio’s inquiry whether Mr. Schmidt is present at this hearing, Ms. Del Papa said he is not because he is currently engaged in a case. Senator Raggio indicated the committee wished to hear specifically how this combination is functioning and what the results have been. He noted the committee was unable to learn much from the performance indicators. He said the committee needs to evaluate the result of combining these units and indicated it will be addressed at the joint subcommittee hearings. Ms. Del Papa said she can represent to the committee that the results have been very successful and said her staff will provide the results by category.

Ms. Del Papa said her office had requested additional staff for antitrust and deceptive trade investigations that are not in The Executive Budget.

Senator Raggio asked Mr. Hataway whether the budget office is recommending the utility consumer’s advocate unit be funded through a reduction in reserve. Mr. Hataway said there is a spend-down in the amount of the reserve to meet the expenditure obligations. Senator Raggio asked whether that includes an increase in the assessment on revenues of regulated utilities (mil assessment). Mr. Hataway said the attorney general recommended an increase in the mil assessment to keep the reserve at a higher level and the budget office saw no need to change that recommendation. Senator Raggio pointed out the reserve goes down to $92,000 at the end of the biennium and asked whether that includes the increase of the mil assessment. Mr. Hataway said it does. Senator Raggio asked whether a change in the funding mechanism for the utility consumer’s advocate budget is recommended. Mr. Hataway said this funding mechanism is consistent with how it has worked in the past. He added the General Fund-supported transfers that were made last session to create this division are supported by the General Fund again in The Executive Budget.

Senator Raggio asked whether equipment for a position in the utility consumer advocate unit could be charged off the same way the position is. He noted there is a personal computer in the budget and asked what funding source is recommended for the computer. Mr. Hataway said that equipment is directly tied to the mil assessment-funded portion of the budget.

Ms. Del Papa called attention to performance indicators for this budget and said that in FY 1998 direct savings to utility consumers were $16 million and negotiated savings were $12 million. Senator Raggio indicated this information is interesting but fairly generic, and since this is a new effort and new authorization, he requested more information on how the program is operating.

Fred Schmidt, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, arrived later in the hearing. He provided additional testimony regarding the budget for the Bureau of Consumer Protection. He referenced the handout "State of Nevada, Office of Attorney General, Bureau of Consumer Protection." (Exhibit E) He said it shows the structure and positions, where they are, and who is working where and for whom. He said it includes a mission statement, a strategic plan for each of the units, and a narrative summary of the accomplishments in the 15 months since the unit was set up. It also includes summaries of "the dollars," which he said he is very proud of. He voiced surprise that the collections, restitution, and consumer saving data are not part of the performance indicators.

Mr. Schmidt said the unit has generated more General Fund money than it cost in its first year. He noted that when the possibility of creating this combined unit was first discussed, he had suggested that combining it this way would enable the attorney general’s office to increase collections because the units had never brought in more than a few hundred thousand dollars before. The fact is, he said, the unit has generated more than $1 million now, even though on an annual basis the General Fund cost is only about $750,000 to $800,000.

Mr. Schmidt alerted the committee to the recommendation to transfer securities staff from the attorney general administration budget to this budget to consolidate staff assigned to securities and financial fraud and for additional efficiency. This transfer increases the General Fund amount to about $1 million. He said that after the committee has had a chance to review the exhibit he would be happy to answer any additional questions.

Mr. Schmidt said that in addition to offsetting the General Fund costs, the savings to utility customers, as is indicated in the performance indicators, are still being achieved at the same levels of significance as in prior years. He said that, surprisingly, the regulated-rate cases are continuing and three major ones are expected in the next few months. He said he was hoping that aspect of the business would decrease, and still hopes it will decrease in the future. But it has not waned over the last 2 years. In fact, Mr. Schmidt said, in several major cases over $16 million has been saved. He pointed out that is a pretty good "bang for the buck." He said he strives for a ratio of 10 to 1 in terms of savings.

Mr. Schmidt called attention to page 14 of Exhibit E. He said there is a breakdown of General Fund collections and of restitution amounts, which are not highlighted in the performance indicators. Nearly $5 million in restitution has been generated since October 1, 1997, when the unit was first started as a result of legislation passed in the last legislative session. He said the antitrust unit has actually brought in its first return, although the agency had testified it would take several years for that unit to generate any return. He noted the first settlement was a case involving Toys R Us and the state has received a collection from that. Mr. Schmidt said there is a NASDAQ (National Association of Security Dealers Automated Quotations) settlement on the table that will generate a huge amount of restitution for investors from Nevada who invested in the NASDAQ stock market. He said he expects to report by the next session how that antitrust group is doing. He added that he was fortunate to recruit a very experienced attorney from the U.S. Department of Justice who, even though Nevada does not pay as much, was attracted by the Western lifestyle where he had grown up.

Mr. Schmidt said the consolidation of the utility unit and the Bureau of Consumer Protection with the fraud group has proven to be a money-maker for the state while continuing to do the things the utility advocacy has done.

Mr. Schmidt referenced Assembly Bill (A.B.) 366 of the Sixty-ninth Session.

Mr. Schmidt called attention to page 15 of Exhibit E, which summarized the telecommunications function added by A.B. 366 of the Sixty-ninth Session. He said his office has developed a database soon to be on the attorney general’s web site, hopefully by the end of the next quarter. Currently it is in hard copy. Mr. Schmidt said if he could get the clerical support time to enter the data base, it would be online and available on a broader basis. He noted that his office has toured 18 different rural communities in Nevada in 9 or 10 different counties. Last week, he continued, the bureau announced a settlement with Nevada Bell and the public utilities commission (PUC) staff in which Nevada Bell agreed to spend $4.3 million to help upgrade the telecommunications infrastructure in 10 of Nevada’s rural counties. Mr. Schmidt stated that was a direct result of the Bureau of Consumer Protection and the work they did in just the first year of operation.

Senator O'Donnell said the mortgage industry was hit rather hard with the Harley Harmon case. He said he was on the committee that tried to discern whether it was the local district attorney or the attorney general’s office that had jurisdiction. He added it seemed there were incongruent opinions regarding who would investigate or prosecute the case. He asked whether there is a definitive road to take. The senator also asked whether the attorney general is considering incorporating this function into the bureau.

Mr. Schmidt replied there is a common misperception about the Bureau of Consumer Protection and what it can do. He explained that to the extent there are deceptive trade practices or antitrust violations, under chapter 598 of the Nevada Revised Statutes (NRS), the bureau can take action. He said the bureau is beginning to do that very aggressively with the revised bureau the Legislature created. But where the regulation of a particular industry, financial or other entity, is set up by the Nevada Legislature to be regulated by a regulatory agency, the bureau does not have jurisdiction. There is a provision in chapter 598 of the NRS that says if an action is taken or sanctioned by an administrator of a regulatory agency, that removes jurisdiction from applying the Unfair and Deceptive Trade Practices Act. Therefore the bureau did not have jurisdiction regarding that particular case.

Ms. Del Papa reiterated that over the last eight years there has been significant expansion in the attorney general’s office in fraud prevention. But it has been in these very specific areas, where it was necessary to revise the NRS and provide dedicated positions for the administration of those areas. Ms. Del Papa said the attorney general’s office handled the civil end of the Harley Harmon mortgage case. She indicated there was a lot of press with reference to that case, some of which unfairly criticized the attorney general’s office and the Division of Financial Institutions, because it is a very complex "paper case." The initial hearing was held on that case within a very short time after the attorney general’s office was made aware of it. The deputy attorney general who represents that division helped draft the financial institutions bill that will be considered along with several other measures. Ms. Del Papa stressed that her office has been very supportive.

Ms. Del Papa reminded the committee one of the positions her agency requested that is not in the budget was intended to support the Real Estate Division and the Division of Financial Institutions. Because of what is happening in the southern part of the state, compounded with the high growth rate, additional legal help is needed in this area. Ms. Del Papa said there certainly needs to be reform with reference to that industry.

Senator O'Donnell stated that with the advent of the Internet there are increasing numbers of providers of "e-commerce," which allows for the purchase of an item by entering a credit card number on line. Often the item is never delivered. The Senator asked whether the attorney general’s office, in this particular telecommunications database, would be delving into e-commerce fraud. Mr. Schmidt replied this particular database is only intended, as the statute laid out, to create a database of just telecommunications equipment and services available. He said this database is not intended at this point to get into the Internet. He added the question of prosecuting or pursuing such activities is an issue for which the attorney general has proposed a bill this session (which is commonly referred to as the high-tech crime bill). He said Kevin Higgins and consumer protection staff have been working on this proposal for over a year with other law enforcement officials to develop new statutory guidelines to deal with issues related to the Internet.

Mr. Schmidt commented this is a timely question and the attorney general’s office has been working on it. He added that things happen so fast on the Internet that it is very difficult for prosecutors to keep up with it. He said the first example of the utility consumer’s advocate unit’s need to focus on deceptive trade was when an entity advertised on the Internet to sell competitive electric services, even though the market has not yet been formally opened. A multi-state group was organized and an action was filed in Pennsylvania and California to shut down that operation. Mr. Schmidt said this company was "scamming" people into investing money into a new industry where they thought there were business opportunities. In reality it has not even opened up yet, he noted.

Ms. Del Papa said this issue would be the subject of a separate, specific piece of legislation. She added her office has worked with colleagues across the country. The National Association of Attorneys General and the U.S. Department of Justice have a great deal of interest in the subject of high-tech crime. The solution will require a national effort, given the level of activity and the "offshore" nature of it. Ms. Del Papa said Nevada must be proactive on the front end in terms of public education, providing consumer tips on what to look for, such as the new auction houses appearing on the Internet. An example she read about recently was the offering of a Roberto Clemente baseball being sold through an Internet auction house. Roberto Clemente died in 1972 and the baseball was manufactured in 1978.

Senator Rawson referenced page 14 of Exhibit E, "State of Nevada, Office of Attorney General, Bureau of Consumer Protection," which includes a chart of restitution, collections, and savings amounts on behalf of consumers. He expressed concern that so little has been reported in the area of telemarketing. He said this is such a huge business and there is apparently so much crime and asked why the amounts are so low. Mr. Schmidt responded there were several convictions and several people were sentenced in FY 1998, but no fines were collected or restitution received. He said in one instance the defendant was essentially "judgment-proof" (had no resources) and in other instances the attorney general’s office sought and obtained sentencing instead of financial return.

Senator Rawson said these criminals are sharp people who protect themselves, then the state essentially slaps their hands and they continue their practices. He said the criminals keep files on the senior population and if they are successful in hitting the senior once, they tend to come back and hit the person again. He stated that if more law is needed to deal with this, then the Legislature needs to know. Mr. Schmidt responded by saying what the agency needs is more resources. He said there are only a few of investigators in this unit. He reminded the committee the attorney general requested another attorney investigator, but it was not recommended in the budget, primarily because the funding is General Fund. Senator Rawson said that in a tough year the state has to prioritize. He opined that senior citizens lose more to telemarketing than they do to utility companies. He said that although utility companies are an important and popular issue, the state should not say, because it is a tough year, it will let this other problem go for a couple more years.

Mr. Schmidt called attention to the reported amounts for deceptive trade, which is similar to telemarketing. He said these are crimes committed primarily against people who can least afford it, such as persons with low income and senior citizens. He pointed out the recovery, restitution, and collections for deceptive trade are substantial. In fact the amount on this report for the last 15 months is more than the amounts for the entire history of the telemarketing and deceptive trade unit in its first six years of existence. Although the telemarketing cases in FY 1998 were not high, they will be in this fiscal year. Mr. Schmidt said a nationwide sting occurred in December 1998; arrests were made and substantial evidence was obtained. This operation is expected to lead to recoveries against a telemarketing firm in the Las Vegas area. The numbers in FY 1999 will be much higher. Mr. Schmidt pointed out this chart should be read considering the first two rows together in terms of the activities funded from the General Fund.

Mr. Schmidt addressed Senator Raggio’s earlier question about the mil assessment and the reserve. He said the mil assessment has not been increased. It is still at .65 and has not been increased in the 10.5 years he has been consumer advocate. He said he hopes not to raise it, although statutorily he can raise it to .75. The reason the budget was built based on .75 mil assessment was that the PUC did not project an increase in revenue in the utilities sector amounts and the PUC budget is based on flat revenue. He explained that, rather than dispute whether that projected scenario would actually occur, he also built his budget assuming flat revenue. Mr. Schmidt said revenue growth might depend on whether new competitive suppliers come into the marketplace. To date there have been healthy growth levels.

Mr. Schmidt said that in a worst-case scenario (which is how the budget was developed) the attorney general’s office would still be able to fund the existing level of activities under the current mil assessment. He said that could diminish the reserve, but he does not think it will happen because income is already up in the first half of this fiscal year. He noted there is a $150,000 increase in the reserve, so the $97,000 reserve balance showing in the budget is not realistic. He informed the committee, however, that he is planning to come before the Interim Finance Committee (IFC) next month, because of unexpected rate cases that are going to occur within the next two months involving three of the state’s largest utilities. Mr. Schmidt said the amount of resources in the budget for this year is strained and his office needs to use some of the reserve to make sure those cases can be covered for the remainder of this fiscal year.

Council for Prosecuting Attorneys – Budget Page ELECTED-65 (Volume 1)

Budget Account 101-1041

The attorney general informed the committee there are no General Fund dollars recommended for this budget. Mike McCormick, Executive Director, Advisory Council for Prosecuting Attorneys, Office of the Attorney General, told the committee this is a fairly new program authorized at the last legislative session. He said he accepted this job June 4, 1998, and since then this program has received more than $100,000 in grants. He added there are nine classes scheduled for training of prosecutors in 1999 and by all standards the program is very successful.

Mr. McCormick indicated disagreement with the statement in The Executive Budget that the appropriation to fund this budget was a one-time appropriation. He added there were certain other provisions in the bill which were one-time appropriations, but these positions were to stand on their merit. He said there was also a misunderstanding on the part of the budget office that grants can be used to pay for salaries. He clarified that the grants cannot be used for salaries. Senator Raggio asked whether the personnel expenses are around $80,000. Mr. McCormick said that was correct.

Senator Raggio asked what type of grants the program has received. Mr. McCormick answered the council received a $72,000 Violence Against Women Act (VAWA) grant, which he said is very important. He said it is the first time in Nevada there has been a collaborative effort between Peace Officers Standards and Training (P.O.S.T.), Administrative Office of the Courts (AOC), and the prosecuting attorneys. He said there would be a statewide manual and statewide training for all three entities. He stated the program is receiving grants from the National Highway Traffic Safety Administration and there are several other smaller VAWA grants. Senator Raggio asked whether any of those grants allow for administration costs. Mr. McCormick said they do not; in fact, most of them require a state match and Mr. McCormick’s salary is designated as the state match.

Senator Raggio asked Mr. Hataway whether the budget office is aware of the state match requirement. Mr. Hataway said every grant stands on its own merit, some allowing a certain percentage for administrative costs and others being specific to the program. He agreed that if the grant source Mr. McCormick is working in does not allow administrative expenses, then that is an issue. Senator Raggio asked Mr. McCormick what would be the minimal amount of funding needed from the state to maintain the council. Mr. McCormick responded that, with the $10,000 reversion, $125,000 would be needed from the General Fund for the biennium. Mr. Hataway said there was a fund created and the money received into that account does not revert to the General Fund, including the $200,000 appropriation. Senator Raggio asked where that appropriation went. Mr. Hataway answered that it came directly into this budget. He explained the budget does not show the carryover to FY 2000 and beyond because the amount was not known at the time the budget was prepared. He said the budget office anticipated that at least 50 percent would be carried forward. Consequently, a substantial portion of the $125,000 Mr. McCormick said he would need could be provided from the funds carried forward.

Mr. McCormick averred that is not correct. He explained that to keep the program operating, the costs of his position (the equivalent of a regular Deputy Attorney General, not a senior or chief deputy) with no support staff and free rent is $104,000 a year. He reiterated $125,000 would be needed over the biennium. He said that is taking the carryforward into account because it is costing about $8,000 a month. Senator Raggio asked what the carryover amount would be. Mr. McCormick said it would be about $82,000. Senator Raggio asked Mr. McCormick to compile a one-page summary of the funding requirements and to provide it to LCB staff and to Mr. Hataway.

Mr. McCormick continued by informing the committee all the district attorneys’ offices have participated in this program. He said the council also had statewide support from the city attorneys, the sheriffs, and the police chiefs. He said this position has long been needed and he would hate to see it disappear. Senator Raggio asked him to describe the past accomplishments of the program and the envisioned continuing program. Mr. McCormick referenced Exhibit F, "Advisory Council for Prosecuting Attorneys 1999 Training Schedule." He said it shows nine scheduled classes covering everything from prosecuting the violent juvenile to violence against women. He said the classes cover the training needs critical to the municipal, county, and state prosecutors.

Mr. McCormick said his office is in the process of applying for a grant to link up all prosecutors’ offices within the state in a secure Internet situation. This would help in communications regarding changes in the law and regarding particular cases. Senator Raggio asked whether the people who are appointed as deputies in the city attorney and district attorney offices participate on a regular basis. Mr. McCormick answered that they do and the deputy attorneys general also participate. He concluded by stating he would appreciate the committee’s consideration on this budget.

Ms. Del Papa said Mr. McCormick has worked extremely hard on this program and has done a tremendous job in the time he has been with the agency. She said that in conversations with Governor Guinn the Governor has indicated his support for this program. She said her office would continue to work with the budget office, taking into consideration the cash flow problem, to resolve any issues. Senator Raggio suggested that, if there are funding sources which will help, Ms. Del Papa should so inform the committee.

AG Crime Prevention – Budget Page ELECTED-49 (Volume 1)

Budget Account 101-1036

Ms. Del Papa pointed out this is a status quo budget. She stated that over the biennium the Missing Children’s Clearinghouse and Crime Prevention Unit has been very active. She said this unit deals with missing and exploited children, parental abductions, and runaways and is associated with the National Center for Missing and Exploited Children. She described a computer program that allows a child’s image, when the child is reported missing, to be entered into a national database through the Internet. Resources are based in Clark County. The attorney general’s office had asked for expansion to the north to allow better coverage there, but due to budget limitations The Executive Budget does not include expansion.

Senator Raggio asked whether the performance indicators on budget page ELECTED-49 are correct that 350 children were recovered or located in FY 1998. Ms. Del Papa said that sounded correct to her and that she knew the number was more than 300. She added that an additional report with more current data has been provided to LCB.

Senator Jacobsen asked whether there are privacy prohibitions attached to the information about the individual involved. Ms. Del Papa said that, although some information-sharing is essential for the program to work, the National Crime Information Center (NCIC) is what gains a person entry to the database.

Ms. Del Papa said this unit, in addition to working closely with law enforcement and other entities, also conducts an aggressive public education program. The staff works with the schools and holds the "missing children day" during which they teach parents the types of information to have available in case their child becomes missing. Ms. Del Papa said they deal with a lot of parental abductions, among other things. This unit is very computer-literate. Nevada was the first state in the country to have a fundraiser for the national missing children clearinghouse, which was at COMDEX in Las Vegas. A lot of computer companies have been very supportive of this cause. A number of people are very supportive of these efforts at the national level and appreciative of what a limited staff has been able to do here in Nevada. Ms. Del Papa said the problem is that the resources are so limited there is only a presence in Las Vegas and there is not a lot of coverage in other parts of the state. She said she had hoped to expand the budget to allow for better coverage in the north, but it is just not possible, given the budget constraints.

Attorney General Tort Claim Fund – Budget Page ELECTED-52 (Volume 1)

Budget Account 715-1348

Ms. Del Papa said this is the fund established for payment of claims that are the obligation of the state, pursuant to statute. Claims against the state include automobile accidents, an injury occurring on state premises or highways, or damages caused by civil rights violations claims. The budget is recommended as requested by the Office of the Attorney General.

Jon Hansen, Tort Claims Administrator, Litigation Division, Office of the Attorney General, described tort claims against the state. The state’s claims fall basically into three areas: (1) automobile accidents, in which Nevada’s experience has been quite steady; (2) the "premises sorts" of liabilities, where people are injured on state properties; and (3) civil rights.

Mr. Hansen noted the question was asked earlier whether the state waives the liability cap. He said in the eight years he has been in this capacity the state has never waived its tort liability cap. He explained that the tort liability cap, however, does not apply to actions brought under federal law in federal court, which would be civil rights violations, sexual harassment, and "that sort of thing."

Mr. Hansen indicated the budget office reduced the agency-requested amount (which was based on actuarial projection) by about $600,000. He said the best index of how well the state is doing would be the automobile liability rates, which are projected at $117 per unit for the next two years. The state has about 5,454 units. He added the $117 unit rate compares favorably with personal rates, which would be in the $400 to $1,000 range depending on whether a person lives in the northern or the southern part of the state. He said that of the $3.7 million insurance premium revenue, less than 10 percent is overhead. The remaining 90 percent is for claims. Mr. Hansen said that according to a survey done two years ago by the attorney general’s office, this compares with an industry average 36 percent overhead for private insurance companies to administer similar programs.

AG Extradition Coordinator – Budget Page ELECTED-56 (Volume 1)

Budget Account 101-1002

Ms. Del Papa explained to the committee that the Uniform Extradition Act requires the governor of each state to have any person returned who is charged in another state, has fled, and is subsequently apprehended. She said this office oversees this program. Beverly Saucedo, Extradition Coordinator, a long-time employee of the Office of the Attorney General, oversees this program. Ms. Saucedo has worked with county and law enforcement personnel at every level. She has provided training and has instituted accountability. Ms. Del Papa said Ms. Saucedo has done an excellent job of keeping costs down in this program.

Ms. Del Papa alerted the committee to the request for funding to print training manuals and publications. She said it is a very small amount of money, but it is not recommended in the budget. Ms. Del Papa recommended the Legislature fund that request because the more the state can do to help train local jurisdictions which tap into this fund, the better off the state is going to be in terms of keeping the overall expenditures down.

Senator O'Donnell asked Ms. Del Papa to describe the training. Ms. Del Papa said that Ms. Saucedo brings together local-level personnel for training. She gives them ideas on how they can keep their costs down and provides information on any changes in the processes.

Mr. Hataway informed the committee the budget recommends the extradition coordinator be authorized to use the General Fund appropriation in both years of the biennium. He recommended this be continued for flexibility, even though it has been a number of years since this budget required support from the reserve for statutory contingency.

Ms. Saucedo explained the training programs she coordinates help the local entities keep costs down. She said she also works with the district attorneys and their support staffs, who prepare the paperwork to be sent to the other state involved in the extradition, to eliminate errors and assure time is not lost. She noted the training also covers international extradition. She added that she serves as coordinator with the U.S. Department of Justice for all Nevada district attorneys. Ms. Saucedo also provides training for the process to get a person out of a prison in another state under the Interstate Agreement on Detainer. She added that her office just received CLE (continuing legal education) certification, so any attorney attending earns five credits.

Senator O'Donnell asked whether the attorneys pay for the courses. Ms. Saucedo answered that her office supplies the course at no cost to the participants. She said that, because of turnover, many of the participants are from within the Office of the Attorney General. She added that her office also trains judges and their clerks, as well as agents from the sheriffs’ offices.

Ms. Saucedo noted her office collects restitution and pointed out the amounts collected are larger than ever before. Senator O'Donnell asked whether the collections are more than the costs of the agency. Ms. Saucedo answered they are not. She said that in FY 1998 there were about $500,000 in expenses to return fugitives to Nevada and about $83,000 were collected. She stated her office is establishing a system, which allows the office to collect from people after they have been discharged from probation and are looking into tapping some of the prison inmate accounts.

Senator Jacobsen asked whether the extradition coordinator gives presentations for P.O.S.T. since P.O.S.T. caters to all law enforcement in Nevada. Ms. Saucedo said this has not been done, but agreed it was a good idea. Senator Jacobsen said the rural offices often do not have the training capabilities, and the more knowledge they can acquire at the lower levels, the better off they are. Ms. Saucedo mentioned that all training courses are offered to the local sheriffs’ offices. She said that Thursday, for example, her office is traveling to Tonopah as a result of a request of the Nye County Sheriff’s Office and the district attorney’s office. She added that the new district attorney from Mineral County and his deputy are expected to attend. The smaller counties are all coming to Tonopah. Next month, she said, training will be conducted in Clark County and any small counties in the area will be participating. She indicated there will also be training in Carson City soon after that.

AG Private Investigators Licensing Board – Budget Page ELECTED-60 (Volume 1)

Budget Account 330-1032

The attorney general said this budget is totally non-general fund; it is funded by the persons regulated by the board. She said this budget is recommended as requested. She added that Carol Hanna, Executive Director, Private Investigators’ Licensing board, Office of the Attorney General, is a long-time employee and has an outstanding reputation statewide for being responsive to the industry and yet at the same time taking care of the state's needs.

Ms. Del Papa noted the budget recommends eliminating expenditures for participating in the Attorney General Cost Allocation Plan. The Governor is recommending that the board pay for its legal services by the hour in the same manner as most other professional licensing boards, which receive legal services from the Office of the Attorney General.

Senator O'Donnell asked Ms. Hanna whether she is comfortable with the budget. She answered that she is. Senator O'Donnell asked whether she can reduce it a little more. She responded she has already cut it quite a bit.

AG Victims of Domestic Violence – Budget Page ELECTED 68 (Volume 1)

Budget Account 101-1042

Ms. Del Papa pointed out an error in The Executive Budget on page ELECTED-68 in the base. She said the Ombudsman position is indicated at .51 FTE (full-time equivalency) but should be .75 FTE. She said there is federal grant funding available for this position. Mr. Hataway said that when the budgets were prepared the position was .51 FTE. However, at the last IFC meeting that position was increased to .75 FTE. Senator Raggio asked whether the recommendation is to continue the position at .75 FTE through the next two years. Mr. Hataway said that it is, but the budget office will work with LCB staff to determine for certain that all the necessary grant revenues are there to support it.

Ms. Del Papa continued, saying the Batterer’s Treatment Certification Committee and the Domestic Violence Ombudsman are responsible for standardizing and overseeing the treatment of domestic violence offenders and assisting in the statewide coordination of domestic violence services. She said it is a very important function and again referenced Exhibit D, "Office of the Attorney General Federal Grant Programs." She reiterated the VAWA grants received or pending total over $6 million. She said this money addresses what she thinks is a public health epidemic. Ms. Del Papa asserted that, if anything, there should be a greater emphasis at the state level for domestic violence prevention. She said her office has used the federal resources to help break the cycle of domestic violence in Nevada.

Senator Raggio asked why the domestic violence grant funds are not in The Executive Budget. Mr. Hataway said there is another budget account not included in The Executive Budget (101-1040, Domestic Violence), which is a pass-through account to local entities, such as courts, law enforcement agencies, and committees on domestic violence. This budget account, which is included in The Executive Budget (101-1042, AG, Victims of Domestic Violence), covers the administrative part only.

Ms. Del Papa said under the federal law that provides for the VAWA grants, 25 percent is required to be spent on law enforcement, 25 percent on prosecution, 25 percent on victims’ advocacy, and 25 percent is discretionary. In Nevada the 25 percent discretionary category is combined with the victims advocacy program. Ms. Del Papa alerted the committee that Congress will be considering some changes among those categories, but they will not be significant.

Ms. Del Papa said projects have been funded throughout the state. She said her office receives requests for over $3 million when there is $1 million in grant money available, and the decision-making process is difficult.

Senator Raggio asked whether the ombudsman position is funded with federal grants. Ms. Del Papa said that it is. Senator Raggio asked the attorney general to work with LCB staff to combine this budget with the "pass-through" budget and include the federal grants in the picture to allow a more complete perspective. He said the committee agrees this is a very important program and the committee members would like more information available. He remarked it would not work to anyone’s disadvantage to represent the pass-through funds in The Executive Budget and it would be helpful to have the two budget accounts combined.

The Chairman adjourned the meeting at 10:33 a.m.

Jean Laird,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: