The Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman William R. O’Donnell, at 8:00 a.m., on Wednesday, February 17, 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.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William R. O’Donnell, Chairman

Senator Lawrence E. Jacobsen

Senator Joseph M. Neal, Jr.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Mrs. Vonne Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia deBraga

Ms. Christina R. Giunchigliani

Mr. David E. Goldwater

STAFF MEMBERS PRESENT:

Judy Jacobs, Committee Secretary

OTHERS PRESENT:

Brian Krolicki, State Treasurer, Office of the State Treasurer

Tracy Raxter, Chief, Administrative Services Division, Department of Administration

Charles L. Horsey III, Acting Director, Department of Business and Industry

John P. Comeaux, Director, Department of Administration, testified the division has a variety of responsibilities, chief of which is to prepare The Executive Budget for the Governor. Additionally, he said, the division provides support and oversight to the various agencies in the management of their budgets and it provides a planning function for the executive branch. He explained the division employs the services of an economist to prepare revenue forecasts used, along with many others, by the Economic Forum. The Economic Forum, in turn, uses that data to make revenue forecasts upon which The Executive Budget is based.

Mr. Comeaux noted the division also provides staff support to the State Board of Examiners, and it runs the state clearinghouse that distributes information from the federal government to state agencies.

Mr. Comeaux declared the budget before the committee primarily provides maintenance for the division, with 28 existing positions. The budget makes a recommendation under decision unit 900 in enhancements (E-900) that the personnel function for the department, currently housed in the Administrative Services Division, be transferred as is to the Budget Division. He offered support for the plan under the belief personnel services should be in the same account as the Director of the Department of Administration. He pointed out the transfer can be found on page ADMIN-4 of The Executive Budget. He noted the transfer applies to two positions.

Mr. Comeaux stated the budget contains nothing unusual except for enhancement decision unit E-710 which calls for the replacement of equipment. He said a request is being made to replace a fax machine purchased in 1993, and 14 personal computers, 10 of which were also purchased in 1993. He explained none of the computers to be replaced are Year 2000 (Y2K) compliant, although it would be possible to upgrade four of them. He noted those four have had problems with memory. He said the remainder of the budget is routine, including cost allocation for Administrative Services.

Senator Jacobsen said he noticed accounts receivable have gotten out of hand for some agencies that are charged with collecting funds. He requested that the Budget Division come forward with a suggestion to resolve the problem in a meeting to be held the next day. He wondered whether use of a collection agency should be considered, and whether collections should be included as part of the budget. Mr. Comeaux responded he had discussed the matter before a joint audit subcommittee the previous week. He reported a proposal to add to the State Administrative Manual is being prepared to present to the State Board of Examiners at the March meeting. He stated that proposal will directly address one of the recommendations made by the auditor to provide a minimum set of requirements for the recognition, recording, management, and collection of accounts receivable by all state agencies.

Mr. Comeuax said the Office of the Attorney General is working with a bill drafter on legislation to provide a basic set of collection methods for agencies that do not have those tools addressed by their statutes. He explained the bill will provide penalties and a procedure that can be followed for collections, by turning accounts over either to the attorney general or to a private collection agency. He added there are a number of other recommendations that will require more work prior to being implemented, such as coordinating collection activities among the various executive branch agencies. He noted that will be very difficult because the information systems are not compatible with one another, thus requiring manual input. As upgrades are made, he said, the coordination requirement must be kept in mind to ensure the systems are compatible with one another.

Ms. Giunchigliani requested that a revised 10-year plan be provided to the committee regarding the integrated financial system (IFS) now that the Nevada Department of Transportation (NDOT) is part of it. She asked whether any projections have been made that will have an impact on the budget. Mr. Comeaux responded an update was submitted just prior to the beginning of the legislative session. Ms. Giunchigliani stated she would like to see some cost estimates, which she did not believe were included in the update.

Mr. Comeaux offered the opinion the IFS project has been very successful, with most of the problems coming about as a result of the attempt to perform 3 years’ worth of work in 18 months. He insisted major goals have been achieved, and since the new statewide accounting system went into production on January 5, 1999, it is now being used to process all state payment claims. He reported the NDOT accounting system also commenced on January 5, although it is having some problems related primarily to federal payments.

Mr. Comeaux commented utilization of the personnel/payroll portion of the system was postponed until April 2 to allow more time for testing. He reported a full-scale test was performed last week for 17,000 employees and the system worked fine. He said the NDOT portion of the system will be tested during the coming week, and the consultant is very optimistic that it will be successful.

Mr. Comeaux noted the original IFS estimate did not include NDOT. However, he said, the onetime appropriation requested to complete the entire project over the next biennium, including NDOT, should result in a lower total cost. He pointed out anything left over will revert to the General Fund. He stated the total cost had originally been estimated at $50 million, but the final cost will be closer to $45 million.

Ms. Giunchigliani observed there will be a significant increase in the new Statewide Cost Allocation Plan (SWCAP) and asked how that will affect client services in budgets that are funded with federal funds. Voicing the assumption she meant the recovery of IFS costs, Mr. Comeaux said SWCAP was designed to recover costs for the General Fund that are attributable to the operations of federally funded agencies. He explained the division has "tweaked" or made minor modifications to programs that were capped to prevent them from eating into services. Ms. Giunchigliani wanted to know whether a big change can be anticipated. Mr. Comeaux said no, there probably will be a recovery from federal programs worth $8 million or $10 million out of the total cost of IFS.

Ms. Giunchigliani asked whether any of the agencies can be qualified for exemption from recovery. Admitting that is possible, Mr. Comeaux cautioned the federal government tends to be very sensitive about ensuring that distributions of costs are equitable.

Senator O’Donnell wanted clarification. Mr. Comeaux responded that when the Budget Division prepares the Statewide Cost Allocation Plan, it is designed primarily to recover from the federal government its share of costs of certain government services. He explained if it is determined the results of the plan may have an adverse effect on a federal program that had its funding capped, and if recovering the cost of a general government function from that program would reduce the services provided by the program, then the Budget Division has been known to "tweak" that and not collect all possible reimbursement from the program.

Senator Jacobsen asked whether there is adequate space for the employees of the Budget Division. He said he understands why the staff provides some services but does not understand why the Advisory Commission on Sentencing should be the responsibility of the Budget Division. Mr. Comeaux pointed out the budget includes an account entitled Miscellaneous which is used for budgets that do not fit in anywhere else, and the Department of Administration is the agency of oversight for agencies that do not readily fit anywhere else. He stated that until the staff grows, the division has adequate space.

Mrs. Chowning pointed out that a measure passed during the last legislative session requires that a Technology Improvement Project and Investment Justification (TIPIJ) for all technology projects and investments of more than $25,000 be submitted to and approved by the Department of Information Technology (DoIT). She wondered whether the division had complied for the IFS Project, and she requested a copy of the approved TIPIJ document. Mr. Comeaux responded that a business plan for the IFS was submitted but said he would have to check whether approval was received from DoIT. He asserted the intention was to follow requirements but acknowledged that because the program is ongoing, there is a possibility approval was not received from DoIT.

Senator O’Donnell asked whether problems have been encountered regarding the run times of the integrated financial system. Mr. Comeaux acknowledged there have been serious problems with run times for the payroll portion, which is why the division postponed addressing the system. He voiced understanding the run times are now satisfactory, although he surmised there still may be some problems. He reported the consultant is 90 percent confident the system will work properly by April 2.

Senator O’Donnell asked whether implementation of the IFS is progressing satisfactorily. Brian Krolicki, State Treasurer, Office of the State Treasurer, pointed out there are always challenges with a new program, but said the goal appears to be in sight.

Training and Controls – Budget Page ADMIN-6 (Volume 1)

Budget Account 101-1342

Mr. Comeaux introduced Becky Moody, Chief, Administrative Services Division, Department of Administration, who he said is in charge of the Office of Financial Management, Training, and Controls. Ms. Moody testified the mission of her office is to provide training and technical assistance to state agencies to enable them to strengthen and evaluate their own internal control systems. She said the program continuously evolves in order to keep pace with changing financial-management issues and the needs of state agencies, which she noted are reflected in the performance indicators.

Ms. Moody distributed a 5-page exhibit (Exhibit C) illustrating the agencies’ implementation of recommendations made by the Office of Financial Management, Training and Controls. She said a 1-year period was established as a reasonable time frame in which to allow agencies to implement a minimum of 75 percent of the recommendations.

According to Ms. Moody, 54 percent of the agencies reached projections made by the office in Fiscal Year (FY) 1997, but only 37 percent reached the projected level of implementation in FY 1998. Therefore, she said, estimates for FY 1999, FY 2000, and FY 2001 are based on that reasonable expectation of 37 percent implementation.

Ms. Moody drew attention to a graph on the first page of Exhibit C, saying the figures are cumulative, and she explained it compares the agency implementation statutes to the percent of the total Executive Budget as of January 31, 1999. She noted 60 percent of the agencies have reached the projected level since inception when the first reports were issued in February 1996.

Mrs. Chowning pointed to performance indicator 7 and asked whether there is concern because the indicator shows 37 percent of the agencies complied although it had been projected 54 percent would comply. She asked whether plans have been made for training to enable more agencies to comply with the recommendations. Ms. Moody responded, "I’m quite comfortable with the 37 percent." She said 54 percent was the first year in which any data was available. She explained it is necessary to study the degree of existing documentation in an agency, and she asserted that varies tremendously from one agency to another. She said one agency may have no documentation, while another may have ample documentation requiring only "minor tweaking." She stated the time frame can vary tremendously. Ms. Moody pointed out the size of the agency as well as the level of accounting expertise and the size of the programs in the agencies also come into play.

Ms. Moody stated her office provides ongoing guidance. She pointed out the level of assistance depicted on the fourth page of the exhibit indicates over 80 agencies have received help from her office, and her office continues to seek ways to add additional guidance. In addition to the training session, she said, the office holds one-on-one meetings with fiscal staff or administrators, and it sends out letters and sample forms. She said she drafted language for the State Administrative Manual that was approved by the State Board of Examiners, also found in the exhibit. She explained the language specifies time frames within which agencies must submit procedures.

Ms. Moody stated the only significant item in the budget is decision unit E-710, found on page ADMIN-8, to provide funding for replacement equipment. She said her budget requested two additional positions, one for a management analyst to assist in tracking agency implementations, and one for another auditor to provide more effective guidance and response to agency requests. She noted the director supports those requests although the revenue projections were not sufficient to fund her requests.

Ms. Moody acknowledged that realistically none of her requests will change the operational issues faced by the agency, nor the turnover in management. She noted the graph shows that only 9 percent of the agencies which fall within the 0 to 24 percent implementation range, which is only 2 percent of The Executive Budget. She asserted the changes to the State Administrative Manual provides an excellent step in the right direction.

Senator O’Donnell asked whether the office is in compliance with changes recommended by the legislative auditor. Ms. Moody responded the audit made four recommendations for the internal control reporting process. She said the first recommendation suggested requiring the director of the Department of Administration to report to the Legislature every 2 years regarding the status of internal controls. She reported the Legislative Commission Audit Subcommittee sponsored a bill which is being handled by Gary Crews, Legislative Auditor. She noted the corrective action plan is due out by March 15, 1999.

Dept of Administration – Hearings Division – Budget Page ADMIN-109 (Volume 1)

Budget Account 101-1015

Bryan A. Nix, Senior Appeals Officer, Hearings Division, Department of Administration, provided a brief overview for new committee members and distributed a statistical report (Exhibit D. Original is on file in the Research Library.). He explained the graphs indicate basic information.

Mr. Nix said the division is responsible for hearing and deciding workers’ compensation appeals. He described the process of appeals.

Mr. Nix pointed out the first chart in Exhibit D shows growth being experienced by the division. As an example, he noted there were 12,541 requests in 1998 for hearings, and the next chart indicates 8,027 of those requests came from Las Vegas and 4,514 from Carson City. He noted one of the charts gives an idea who are requesting hearings, with 90 percent coming before his agency. He stated there are five officers in Las Vegas, and two officers in Carson City who conduct the hearings.

Mr. Nix said there were 2,903 appeals in Las Vegas and 1,739 in Carson City as a result of hearing officer decisions. He suggested that means the hearing officer in Las Vegas resolved 5,000 appeals at the hearing officer level, typically within 3 weeks of the time the dispute arose. He called that a significant number. He arrived at the number by subtracting the number of appeals, 2,902, from the number of hearing requests filed in Las Vegas, 8,027.

Mr. Nix drew attention to the second to last page in the exhibit showing the number of appeals to the district court ascribed to each appeals officer. He noted 287 appeals were filed in response to appeals officer decisions.

Senator Neal wondered whether the two appeals officers whose decisions were appealed most often to the district court are still employed. Mr. Nix responded they are, explaining it often is difficult to gauge the quality of the appeals officer based upon the frequency of appeals. He pointed out some of the appeals officers handle very complex cases with controversial decisions, and it is not unusual for a party to seek further review of such cases. He suggested it is unfair to judge the appeals officer by the number of appeals in one year.

Mr. Nix noted the transcript costs for appeals that go up to the district court are charged to the agency. He said the costs amounted to approximately $30,000 for 287 appeals.

Mr. Nix indicated a suggestion has been made to create another panel of appeals using three appeals officer. He noted every case that is sent to the appeals panel will involve some cost. He said a bill is pending that will have an impact on the budget, but the fiscal note has not been prepared yet.

Mr. Nix stated the budget includes just one enhancement under decision unit E-720 in a request for a small photocopier for the reception desk. He pointed out the budget is essentially the same as last session without the enhancements which were included at that time. He distributed a revised budget page ADMIN-109 (Exhibit E).

Referring to the performance indicators in Exhibit E, Ms. Giunchigliani inquired what the final resolution was of the appeals that had been scheduled. Mr. Nix replied performance indicator 11 shows the number of appeals that were rendered in a timely manner, within 30 days of the hearing date. Ms. Giunchigliani wanted to know how many were not rendered in a timely manner. Mr. Nix was unable to give her an exact figure but agreed to provide the number later. He pointed out the legislative audit conducted last session revealed there was a great improvement in the times decisions were rendered by both appeals and hearings officers.

Ms. Giunchigliani noted that although the number of hearing officer decisions rendered within the established time was 69 percent, the division forecasts that 95 percent will be timely in the future. Mr. Nix responded, "We’re optimistic." He explained not only was there a turnover in staff last year, but also there were major changes in the computer programs being used. Both issues were instrumental in causing a major downtime during the training process. He also admitted one employee, who left the agency, had hidden away a large number of cases. He asserted the division will be able to live up to the projections.

Mrs. Chowning voiced concern over what impact the implementation of the three-way (3-Way) workers’ compensation system will have on the division and she noted no maintenance or enhancement increases are included in the budget to address the change. She invited comment. Mr. Nix responded he felt it would be speculative to request additional funds based on whether there will be an increase in the number of cases received.

Mr. Nix pointed out caseloads reached a peak in 1993, and since then the number of cases has dropped and leveled out. He acknowledged there has been a lot of discussion regarding 3-Way and whether it may mean there will be more appeals or more denials from private insurers than were encountered under the former State Industrial Insurance System or self-insured employers. He reiterated that is an unknown causing a great deal of concern. He said his biggest is concern is whether the division will have the ability to keep up with which insurers are insuring whom, and whether the division will be able to provide adequate notice of hearings. Right now, he said, it is easy to determine who the insurers are. He indicated that with the prospect of 200 private insurance companies selling coverage to thousands of employers, with the ability to drop or change insurers during the course of a claim, there is concern whether proper notice of hearings can be given. He pointed out a decision may not be effective if proper notice has not been made. He opined the reserve will be adequate to handle any increase as a result of 3-Way, but failing that, he said, the division would return to the Interim Finance Committee for additional positions.

Victims of Crime – Budget Page ADMIN-115 (Volume 1)

Budget Account 287-4895

Mr. Nix indicated he acts as the coordinator of the Victims of Crime program. He drew attention to charts in a statistical report (Exhibit F. Original is on file in the Research Library.) he distributed to the committee members. He noted the first two charts show revenue sources for the program which are generated from filing fees, court assessments, and fines, and how much was received from each source during the first 6 months of FY 1999.

Mr. Nix noted the third chart depicts the growth in the program. He stated the chart is a bit deceiving because there have been no major peaks since the base was established in 1993. Average awards per victim are depicted on the fourth graph, and Mr. Nix said the average so far this year is approximately $2,600 per eligible victim of crime. The following charts, he said, show the number of applications received during the past 6 months, the number of claims approved or denied, and the types of crimes for which applications have been received. The final chart, he said, indicates the recipients of the payments, such as hospitals, ambulance services, physical therapy, and so forth.

Mr. Nix explained the Victims of Crime program provides compensation and medical assistance to people who were injured as innocent victims of crime and who have no other resources with which to pay those expenses.

Mr. Nix reminded committee members a bill was approved during the previous session which qualified Nevada to receive federal Victims of Crime funds. He noted Nevada was the last state to accept federal funds, and the budget anticipates the program will receive approximately $890,000 from federal funds based upon a percentage of the amount paid out to victims during prior years. He stated that last year the program paid out approximately $2.2 million to victims, and the state received about 40 percent of that amount from the federal program.

Mr. Nix warned there is one problem with the legislation, and a bill draft has been submitted to correct the error. He stated it will be necessary to repeal section 217.220(d) of the Nevada Revised Statutes (NRS). He explained the provision allows the state to deny payments to nonresidents in the event there are insufficient federal funds to cover the payments. He said federal guidelines do not allow states to discriminate based upon the availability of federal funds, so Nevada should change the law to ensure the state conforms with those guidelines and does not discriminate against nonresident victims. He acknowledged the state delayed participation in the federal program due to concern with that requirement. He said recent research indicates the federal funds that become available should exceed the volume of claims. He assured the committee close track will be kept over the next biennium in order to report expenditures for nonresident victims versus receipts of federal funding.

Mr. Nix stated federal funds are addressed in the budget on page ADMIN-117 under decision unit 200 showing estimated resources and expenditures of $890,000. He noted the enhancement for decision unit E-125 on budget page ADMIN-118 will provide for the requested photocopier and expanded office space for the Reno office.

Regarding the federal funds in decision unit M-200, Mr. Nix noted the state is allowed to spend up to 5 percent for administrative expenses. He said a request is being made for $28,000 for computer equipment since no one except one of the compensation officers in the Victims of Crime program has computers. He stated the goal is to tie those employees into a network with the Hearings Division and to automate the processing of claims.

Senator O’Donnell asked why more space is needed in Reno. Mr. Nix replied the compensation officers were in a very unsecured building where many of the files had to be stacked in hallways. He explained a more secure environment was warranted. He said a compensation officer has already moved into the new space which provides a room for the officer, a room for interviews, a room for the clerical staff, and a waiting room with a secured door leading into the waiting room.

Senator O’Donnell asked who is responsible for the program. Mr. Nix responded the program falls under the purview of the State Board of Examiners, and Mr. Comeaux is the clerk of the State Board of Examiners. Mr. Nix explained that when an appeal is denied the claimant can file an appeal through the Hearings Division and ultimately through the State Board of Examiners. He acknowledged the agency does not go through the normal regulatory process in adopting regulations; rather, the regulations are procedures that are adopted by the board.

Mrs. Chowning noted 1,796 claims were received in 1998, according to the performance indicators. She wondered how many have actually been processed, and of those how many were processed within 60 days. Mr. Nix expressed the belief all the claims were processed within 60 days, since they are either denied or approved. He said the compensation officers are required to perform basic investigative procedures. They must meet with victims, they must determine their eligibility such as whether they have any insurance or other resources, and they must collect police reports to determine that a crime did in fact occur. Mrs. Chowning suggested Mr. Nix add that information to the performance indicators.

Senator Neal noted the reserve indicates $785,000 in FY 1998-1999, the program requested $371,000 for FY 1999-2000 and $623,000 for FY 2000-2001, and the Governor recommended $199,000 for FY 1999-2000 and $118,000 for FY 2000-2001. He wanted to know why there was such a wide difference between the program requests and the Governor’s proposal. Tracy Raxter, Chief, Administrative Services Division, Department of Administration, explained the Governor recommends increasing the payments to victims by $200,000.

Senator Neal requested elaboration. Mr. Raxter clarified that when the Governor’s budget was prepared, the victims’ payments were based upon the funds available. He said the statues require the State Board of Examiners to make a determination at quarterly meetings whether claims will be paid at 100 percent based upon the funds available, or whether the claims will be paid at a lesser percent. He said the budget preparation was based upon an estimation of court assessments coming into the budget, and when the Budget Division finalized The Executive Budget the court assessment was adjusted. That affected the reserve and the victims’ payments category.

Senator Neal asked for an explanation of the balance-forward figures set forth on budget page ADMIN-115 under the resources category of the base budget. He noted a large disparity between the agency request and the Governor’s proposal. Mr. Raxter responded the difference is due to the total revenue projected for the account. He said the budget office estimated the agency request for court assessments at $1.3 million for the first year, and the Governor recommends $843,000. He stated, "That is where the main difference is. We requested a certain level."

Mr. Raxter reminded the committee that 5 years ago an adjustment was made to the method of distribution of court assessment revenues, and the Victims of Crime percentage of that was adjusted downward. He pointed out that results in less funding coming into the budget.

Senator Neal suggested, "Either the Governor is taking your money, or you don’t know how to put the budget together." Senator O’Donnell interjected, "It’s a timing problem." Mr. Raxter responded it is not a matter of not being in agreement with the Governor’s recommendation; rather it is a matter of the level of the request by the agency according to the amount of revenue coming in to pay victims.

Mr. Nix noted the first chart in the handout (Exhibit F) indicates the various program revenue sources, and he pointed out the court assessments declined. He made the point the figures fluctuate from year to year, and estimates are made based upon projections in the various funding sources. He voiced the understanding the difference in the budget is based on a difference in projections.

Senator Neal asked whether Mr. Nix meant that now it is believed the $1.4 million projected will not be forthcoming. Mr. Nix responded it is possible the projections for the budget were made several months ago, and the information may have been more current when the Governor reviewed and made his recommendations on the budget.

Senator Neal asked whether the agency figures would be different today from those that were available when the budget was first considered. Mr. Raxter agreed that would be part of the answer, because the final figures for FY 1998 were not available at the time the budget request was originally made. He suggested part of the difference may be due to the proposal to reallocate the court assessment, which is not reflected in The Executive Budget.

Mr. Nix interjected that for the past 5 years the Victims of Crime program has paid all claims at 100 percent, and there has been no necessity to reduce that percentage paid because revenues exceeded expenditures. He claimed no victim will be deprived of any benefit as a result of the figures in the reserve category.

Senator Neal inquired whether the resources figure for 1998 is a true figure. Mr. Nix replied the figures are reflected accurately. Senator Neal asked whether the final 1998 figures will be brought back to the committee for review. Mr. Raxter replied The Executive Budget already reflects the actual 1998 figure.

Mrs. Chowning voiced concern that victims may not receive full compensation due to the fluctuating receipts from court assessments. She noted the budget for the Department of Motor Vehicles and Public Safety is constructed on revenues from court collections, and that budget is in trouble due to the amount of funds not being received. She asked whether the increase of approximately $150,000 over the biennium will be sufficient and whether the revenue source will be steady. Mr. Nix replied he is satisfied there will be adequate revenues to meet expenditures, especially with federal funds coming in. He explained the program is structured so that if revenues do not meet demand, the percentage being paid on claims can be adjusted. He said in that event the State Board of Examiners could change the percentage from 100 percent to a lower percentage in order to stay within the budget.

Mrs. Chowning questioned the recommendation for a $500 increase in the fund to promote the Victims of Crime program. Mr. Nix replied the program participates in a Nevada Victims of Crime week by hosting an ice cream social for various providers and people in social services. He said brochures are printed and handed out from a booth. He attributed the increase to a plan to become more aggressive in disseminating information about the program.

DEPARTMENT OF BUSINESS AND INDUSTRY

Manufactured Housing Division – Budget Page B & I-18 (Volume 2)

Budget Account 271-3814

Charles L. Horsey III, Acting Director, Department of Business and Industry, noted the budgets for the Department of Business and Industry will be presented over several days.

Renee Diamond, Administrator, Manufactured Housing Division, Department of Business and Industry, pointed out the agency is self-funded and receives no revenues from the General Fund. She stated the Manufactured Housing account currently has 14 full-time employees and a request is being made for 3 more positions. She acknowledged the Interim Finance Committee (IFC) approved a position for consumer complaint resolution and the individual started on the previous day, February 16, 1999.

According to Ms. Diamond, two of the other positions are being requested to handle what she sees as a problem. She pointed out the performance indicators show licensing officers handle many license examinations and the issuing of licenses. She asserted the process is becoming continually more complicated since applicants must be checked through the Federal Bureau of Investigation (FBI) and Las Vegas law enforcement agencies. She said the requested support position will be used for licensing and for consumer complaint investigations. Ms. Diamond explained the position will input data, check backgrounds, and assist where currently there is no support. She opined it is bad policy to use higher-paid licensing and code-compliance people to perform clerical duties.

Senator O’Donnell noticed funds are being taken from the balance forward reserve to fund a new position. He asked what will happen next year, and whether the revenue projections will cover that position in the future. Ms. Diamond replied the revenues appear to be consistent and growing slightly. She said a zoning bill is pending that might increase fee revenues. She added the licensing and code compliance officers generate fees. She asserted it is justified to relieve the officers of the necessity of inputting data when they could be generating fees that might be as high as $1,500, and she explained that adding the new position should not have a major impact on the reserve. She pointed out the reserve falls within the limit set by the audit performed in 1993-1995. She said the current reserve is $744,978, and it fluctuates.

Senator O’Donnell noted 77 percent of the complaints were resolved. He asked whether the two positions will alleviate the workload to help resolve the other 23 percent. Ms. Diamond answered the position approved by IFC should help with that problem, and the requested support position will be able to intake cases, set up case files, and perform other clerical duties.

Ms. Diamond pointed out that consumer complaints may be carried over from one calendar period to another. Noting it is impossible to achieve 100 percent due to the time factor, she said her goal is to achieve a complaint resolution level of 90 percent.

Ms. Diamond said the second requested position will be assigned to the titling program. She reported only two people are presently performing title changes for the entire state. She said title changes are necessary not only when someone buys a home, but also when a home is sold or moved, when a trust is set up, when names are changed on the title, or when someone dies. She admitted there is a huge backlog because only two positions are dedicated to titling. She said a support person will perform intakes and imaging and return documents since approximately 40 percent of all title-change documents require some changes in the document. The support person will help screen those documents, leaving the two positions handling titles free to perform their services. She opined that will raise the titling revenue because there is a fee for obtaining a title.

Senator O’Donnell inquired about the audit position recommended in decision unit E-250. Ms. Diamond responded the audit position will be based in Carson City but will travel throughout the state. She explained there have been many incomplete and invalid trust accounts found at dealers throughout the state. She noted the invalid trust accounts were discovered accidentally during the investigation of consumer complaints. She said that sometimes the consumer complaint involves factors related to money as well as factors related to construction problems. She voiced her opinion that dealers need more education, but added it is important to keep track of trust accounts. Therefore, she said, the request includes funding for travel, a car, and laptop computers. She opined the person for the position should have some auditing experience. She pointed out the division currently has no auditor and auditing functions are performed by others who have had relatively little auditing experience.

Ms. Diamond claimed the employment of an auditor would send a message to the industry that it will be monitored.

Senator Neal requested an organizational chart, whereupon Ms. Diamond provided copies (Exhibit G).

Mrs. Chowning noted a 10 percent increase in revenue is projected for FY 1998-1999, but no increase is projected for the remainder of the biennium. She asked why. Ms. Diamond replied the agency felt there would be a onetime increase in the number of homes sold if the zoning issue is approved, and therefore the revenue should increase. She reminded the committee there is a title fee and an inspection fee for every home sold. She acknowledged there is no way to make projections either by market standards or by past experience beyond that, so the agency used a 10 percent figure for the first half of the biennium.

Mrs. Chowning asked what will happen in the second year of the biennium if the projections for the first year of the biennium fail to materialize. Ms. Diamond replied the reserve is substantial. She explained it is nearly impossible to predict market factors, because at times interest rates change on loans, while at other times a general downturn in the economy deters buyers. She reiterated the increase is based upon current market factors and the possibility of inaccurate projections. She stated that is the reason why the agency prefers the reserve at the level proposed.

Mrs. Chowning pointed out the budget does not include support equipment for the compliance investigator position already approved. She wanted to know whether the equipment has already been supplied, or whether a request will be made for it later. Ms. Diamond responded there is equipment requested in another area of the budget, but it is to replace some "antiquated" equipment. She acknowledged no equipment was requested when the agency made its request to IFC for the position because there appeared to be enough equipment on hand. She explained the position does not have to access titles or other information on the network, and she believed the office had sufficient equipment to outfit the position.

Mrs. Chowning wanted to know how many positions are involved in the issuance of licenses. Mrs. Diamond answered only one person issues licenses, and there are two people who use the computer to create titles, although there are others involved in the titling process. She explained there is one support position at the counter which would be increased with the new position, and there is a supervisor of the department who handles all real property notices for those who convert personal property to real property.

Mrs. Chowning inquired whether the person who would fill the auditor position would be on stand-by, or whether projections have been made for a specific number of audits. Ms. Diamond responded no projections have been made for a specific number of audits. However, she said, the agency did estimate the number of miles to be traveled as a basis for the request for in-state travel. She said, "How it would be done is, technically, I would just take a random sampling of dealers and start this person out." She suggested that would provide experience as to how long an audit could take, which she estimated at from 1 to 3 days.

Mrs. Chowning stated she would like an inventory of existing equipment, including the age and the memory capacity of the computer equipment. Ms. Diamond responded the request for replacement equipment includes two typewriters purchased in 1985 and four personal computers purchased in 1990.

Saying it appears to be very expensive, Mrs. Chowning asked that additional information regarding decision unit E-720 be provided later.

B&I, Mobile Home Lot Rent Subsidy – Budget Page B & I-24 (Volume 2)

Budget Account 630-3842

Ms. Diamond stated the number of recipients of subsidies fluctuates since many move out of the state or pass away, and they are required by law to notify the agency of each change. She indicated the formula was adjusted in 1997 to provide a certain percentage of support to recipients on an equal bases instead of as a dollar amount. She explained that led to more recipients entering the program, and although 400 were projected for 1998, there were actually 418 recipients. She noted a bill is pending which could impact the account. The bill would raise the income-level ceiling and the dollar amounts given, and will prohibit using food stamps as income. If the bill passes, she said, more people will qualify for the program, resulting in larger expenditures.

Ms. Diamond stated the agency has extended its outreach efforts into mobile home communities and other areas, both to individuals and through park managers.

Ms. Diamond added the budget request includes replacement of two 1993 computers and some office furniture. She reported the agency often purchases furniture from Prison Industries.

Senator O’Donnell noted an increase in approved applications listed in the performance indicators but with no increase in the number of subsidy payments. He questioned the reason. Ms. Diamond responded the total dollar amount to distribute per space is set by statute, so it does not change. She said the fluctuating amount relates to the number of recipients, and they receive a percentage of their rent based upon the amount of rent they pay.

Senator O’Donnell asked whether the amount distributed to each recipient will be lowered if the total sum available remains static while the number of applicants grows. Ms. Diamond replied distributions per recipient will not be lowered because the agency would tap the reserve, and the next step would be to ask the park owners to raise the subsidy. Failing that, she said, the agency would return to the Legislature to report the new formula had emptied the fund.

Senator O’Donnell wondered whether any applicants may be disenfranchised. Ms. Diamond responded legislative approval is required for such a step.

B&I, Mobile Home Parks – Budget Page B & I-27 (Volume 2)

Budget Account 271-3843

According to Ms. Diamond, the agency would like to transfer one position from budget account 630-3843 to budget account 630-3814. She admitted the request should have been made in 1998, but since the legislative session was about to begin she felt it was important to come before the committee to explain her reasoning for the transfer. She explained that until 1995 the agency transferred $35,000 from budget account 630-3814 to 630-3843 to help support the position. Now, she said, the position is more dedicated to the activities covered by budget account 630-3814. She noted the transfer will not impact the fees.

Senator O’Donnell asked whether the person will be performing the same job. Ms. Diamond replied the person has already been doing the same job, and because she has cross-trained her employees the change will give a better reflection of the job being done by the position. She said that in 1995 the Budget Division suggested the $35,000 should be transferred.

Senator O’Donnell asked what the source of the $35,000 is. Ms. Diamond said it comes from the reserve, and the person works under the Mobile Home Parks budget, the funds for which are established by fees paid by mobile home park owners. She noted the position presently is part-time and the fund is finite.

Senator O’Donnell requested that the staff investigate the matter to ensure the funds from certain budgets are being used to pay those individuals. He asked why the staff person is funded through the General Fund but is working on "consumer complaints," which is a program that is supposed to be funded by landlords. Ms. Diamond responded there never has been sufficient funding available in budget account 271-3843 to support all the positions. She explained positions from other programs have been shared, and often the problems cross budgets and are not clearly drawn. She insisted the transfer will simply put the position into the budget from which it should be paid.

Mrs. Chowning noted that if the $5-per-lot fee had been collected for every lot in the state it would have increased the revenue for this account. She wondered why those fees have not been collected. Ms. Diamond replied the agency has statutory authority to fine the park owners and to go to court to collect fees, and that authority is used. She pointed out the fee is paid only for spaces that are already rented. She explained that a number of the spaces are filled with homes owned by the park, and according to the statute those spaces are not subject to the fee because the landlord-tenant program does not apply to renters of homes, only to renters of spaces. Mrs. Chowning suggested the information regarding the budget may be misleading, and she requested that it be clarified.

Consumer Affairs Division – Budget Page B & I-33 (Volume 2)

Budget Account 101-3811

Patricia Jarman-Manning, Commissioner, Consumer Affairs Division, Department of Business and Industry, described the duties of the division and declared no new positions or programs are being requested. She said that because there are 24 full-time employees, the division has been able to collect an additional $900,000 on bonds held in reserve, 22 new companies have been registered and bonded, and over 3,500 public service announcements have been made statewide to teach consumers how to be more knowledgeable about the marketplace.

Ms. Jarman-Manning reported two minor items are being requested. She said a request is being made for additional funds for court reporting under decision unit M-200. She stated all hearings by the division are subject to judicial review, and based upon activity in FY 1998 the funding is justified. Another request, she said, is for funds for software under decision unit E-175.

Mrs. Chowning asked why the mediation services program has not gone forward. She noted the division previously had been allocated $26,000 but now requests just $3,500 in each year of the biennium. She wondered whether $3,500 will be sufficient to continue the mediation services program, and whether the $9,500 that will not be expended this biennium could be used for consumer education.

Ms. Jarman-Manning responded the complaint system is driven by the marketplace, so most complaints revolve around the latest "hot" issue. As an example she cited telemarketing, around which there has been much controversy. She said that in cooperation with the attorney general’s office, the division has become the most aggressive state in the nation in dealing with telemarketing, with the most stringent time served for telemarketing violations, up to 15 years.

Ms. Jarman-Manning noted there were many problems relating to automotive repair that came to a head during 1995-1997, and those are being resolved through cooperative efforts with the industry throughout the state.

Ms. Jarman-Manning explained the mediation services program was slow in the beginning, and though the funds were allocated for July 1,1997, the division was unable to fill the position until December. She said the investigator hired actually did not begin to perform his duties fully until March 1998, so in essence the program has only been operative for about a year. She noted that during that year there have been approximately 50 cases that have fallen within the criteria of mediation, and there has been a success rate of 49 percent. She admitted the division probably does not need as much funding as was allocated for mediation services, but she agreed the remainder of the funding could be used for public education.

Ms. Jarman-Manning said a new problem her division is facing is Internet fraud, which is increasing. She acknowledged there is no way to stop Internet fraud except to educate consumers, and for that reason additional funding will be used for that purpose. She agreed the $9,500 could be put to advantage for public education. Mrs. Chowning requested the $9,500 be considered for educational purposes as part of the budget closing.

In reference to the performance indicators, Senator Neal asked how many complaints have not been closed. Ms. Jarman-Manning answered 5,046 complaints were closed during FY 1998. Senator Neal asked whether those were 5,046 out of 7,509. Ms. Jarman-Manning said the projection of 7,509 was based upon previous years. She indicated that during the present year to date, approximately 3,600 have been opened.

Mr. Horsey interjected that because of the performance and the ability of the Consumer Affairs Division to get the message out to the public, the department intends to use that type of outreach and public exposure for other divisions within the department.

Division of Financial Institutions – Budget Page B & I-60 (Volume 2)

Budget Account 101-3835

L. Scott Walshaw, Commissioner, Division of Financial Institutions, Department of Business and Industry, gave an overview of the Division of Financial Institutions, explaining that in 1985 and 1987 legislation was passed that created an opportunity for the division to become self-funded. He said the division is still carried as a General Fund agency, but in effect it operates on a loan from the General Fund for which repayment is required by statute by the end of each fiscal year from fees collected. He stated the method has worked very successfully over the years.

Ms. Walshaw noted one change being requested in the budget is the incorporation under decision unit M-200 Demographics/Caseload Changes. He said four examiner positions under Demographics/Caseload Changes are being requested in each year of the biennium, for a total of eight new positions. He indicated additions to computer equipment, in-state travel, and other operating expenses associated with the positions are also being requested.

Mr. Walshaw stated an agreement was reached with the Governor’s Office that the hiring of the positions will be phased in so there will be less of a cash-flow impact on the General Fund. He said all eight positions should be on board by the end of the biennium, assuming the workload justifies hiring them. He pointed out there have been as many as six vacant examiner positions over the years, with the funding having been reverted to the General Fund, and with the industry only paying for the filled positions. He noted the division is fully staffed at the moment.

Senator O’Donnell asked whether the eight new positions may enable the division to avert some of the problems experienced in the past. Mr. Walshaw replied the new positions will assist indirectly, although he said the examiners did their jobs and found problems that have recently been publicized. He explained recent problems were not attributable to an insufficient number of examiners. He anticipates a need to hire at least two positions at the beginning of the biennium, since the caseload in Las Vegas indicates a need for at least two examiners. He noted if two positions are hired at the beginning of the biennium, the division should be back on an even keel, depending upon the future.

Mr. Walshaw pointed out there are ongoing changes in the banking industry, with a series of acquisitions and mergers, followed by a round of new bank charters, which are continuing. He noted the division must keep abreast of the changes, and the new positions will assist the division in that task. He declared the division has been fortunate in its ability to fill the positions with very qualified people who have not needed as much training as usually is required. He said a number of positions were filled with former Federal Deposit Insurance Corporation (FDIC) examiners and former examiners from other states who moved into the Las Vegas area.

Senator O’Donnell asked whether any problems can be anticipated with the ability to assess fees to pay off the General Fund loan. Mr. Walshaw said no, that the three major components consist of licensing fees, examination fees levied against nondepository institutions, and an assessment based on total assets levied on all depositors. He noted the depository institutions make up the major portion of the workload and pay two-thirds of the overall assessment.

Senator Neal drew attention to expenditures depicted on the last page of the budget account. He wondered why there is such a large increase in the Information Technology and Training line items. Mr. Walshaw responded those will support the new positions. He said $22,800 under the Information Technology category corresponds to the need to equip the examiners with laptop computers and other computer equipment.

Senator Neal questioned the increase in In-State Travel from $19,000 to $34,000 and $41,000 as recommended by the Governor. Mr. Walshaw indicated those figures also reflect the impact of adding eight new positions.

Senator Neal asked whether the division must travel out-of-state to perform audits. Mr. Walshaw responded those figures are included under the investigative account, budget account 101-3805. Senator O’Donnell interjected both the Senate Committee on Finance and Assembly Committee on Ways and Means determined it would not be necessary to make a further review of budget account 101-3805, Financial Institutions and Investigations, and it was placed on the consent calendar. Mr. Walshaw commented that budget was created in 1985 and it does not use General Fund appropriations; it is funded by application fees as required by statute in a revolving account which carries forward from year to year. He said the account is used in part to defray the cost of out-of-state travel associated with examinations and special investigations. As an example, he reported there is a bank chartered and headquartered in Nevada, but its administrative offices are in San Francisco, and it has branches in Nevada, California, and New York. He said the examinations of that bank are actually performed in California.

Senator Neal wanted to know how much is held in that account. Mr. Walshaw said there is a set amount for spending in the account, and if it is exceeded the division must obtain authority from the Interim Finance Committee to transfer funds from the account’s reserve.

Senator Jacobsen asked what kinds of complaints are received. Mr. Walshaw said they are varied, although recently there have been a number of inquiries regarding mortgage companies. He acknowledged there are a disproportionate number of complaints or inquiries regarding collection agencies, which is the nature of that "confrontational" business.

Mrs. Chowning disclosed she is a Nevada real estate licensee. She said as such she is often faced at closing with buyers who have been informed of one thing in the lender’s office but which turns out to be different at the closing of the deal. She wondered whether there is any way to protect buyers regarding lenders’ information in a manner similar to the real estate disclosure requirements. She called it "disheartening" to buyers to find at the last moment that the terms of the loan are different from what they were led to believe.

Mr. Walshaw pointed out there are a variety of federal laws that deal with the issue, up to and including the Real Estate Settlement Procedures Act, which requires that certain disclosures be made at the beginning of the transaction based upon reasonable estimates of closing costs. Mrs. Chowning agreed the costs are subject to disclosure, but she asserted the terms of the loan are not subject to the same requirements. She pointed out the terms, such as whether the loan will be variable or become all due and payable upon a certain event, are not always told to the buyer, or they change at the last moment. Mr. Walshaw suggested that concern might be well addressed during hearings on mortgage company bills.

Mr. Walshaw mentioned that during preliminary discussions of the budget, inquiries were made regarding performance indicators. He stated that due to a death in the family he has not been able to prepare those indicators, but he said there are changes to be made, which should make them more definitive. He stated the first will include the actual number of existing licensees during any given quarterly period to correspond to projected examinations and man-hours.

According to Mr. Walshaw another performance indicator will change the complaint-inquiry section to coincide with the complaint-tracking system being implemented. He noted that last year a senior examiner was designated as the consumer compliance officer who will coordinate all responses to complaints received. He stated one of the new examiner positions being requested for Reno will become the consumer compliance officer’s subordinate to handle complaints in the northern Nevada area. He said the proposal is to change the manner in which items are listed to show the complaint received, its status, and its ultimate disposition.

Finally, Mr. Walshaw said, the division was asked to show outcomes as a result of examinations. He stated, "We cannot do that as it applies to depository institutions for a variety of reasons." He added he has been told by the legislative auditors that they are not allowed to review the exam reports because at that point the report would become part of their work papers and thus public record. Mr. Walshaw said there is an agreement with various federal regulatory agencies that states the division is not to disclose that information, and if asked to disclose the information, the division is required to immediately contact the Federal Deposit Insurance Corporation (FDIC) which will intervene on behalf of the division. He acknowledged the information is shared with the FDIC and with the licensee.

Mr. Walshaw suggested an outcome indicator could show the number of actual formal actions taken against nondepository institutions. He explained that if a fine is imposed or formal action such as suspension or revocation of a license is taken as a result of an exam or a complaint investigation, that could be shown in an outcome indicator column to correspond to the various nondepository examinations.

Division of Unclaimed Property – Budget Page B & I-13

Budget Account 101-3815

Mr. Horsey testified there currently is no administrator for the Division of Unclaimed Property, although he anticipates one will be named shortly. He introduced Sherry Apodaca, Program Officer I, Division of Unclaimed Property, Department of Business and Industry, who is running the office pending the appointment of a new administrator. Mr. Horsey also introduced Bill Maier, Administrative Services Officer, Carson City Office, Department of Business and Industry, who Mr. Horsey stated is intimately familiar with the budget.

Mr. Maier summarized the budget requests, saying the primary responsibility of the division is to return abandoned property to rightful owners. He noted the account receives an appropriation from the General Fund to pay for rent, the Administrator’s salary, and the Program Officer’s salary, while all other operating costs are funded through a transfer from the abandoned property trust fund. He added that any remaining balance in the trust fund after payment of costs over a base amount of $100,500 is reverted back to the General Fund. He noted that last fiscal year nearly $7 million was reverted back to the General Fund.

According to Mr. Maier, the largest request in the budget for future years was for $14,000 to convert current paper files dating back to the 1980s to a CD-ROM format as depicted in decision unit E-125. He commented the division is unique in that the owners never lose their right to claim against the value of their property, so it is critical for the agency to maintain historical files. He added decision unit E-275 requests funds in both years of the biennium for additional audits and travel to out-of-state conferences, and E-720 requests a new notebook computer for the administrator to use during public presentations.

Senator Neal asked what the current balance is in the unclaimed property trust fund. Ms. Apodaca responded there is over $3 million in the fund. She explained at the end of each fiscal year those funds are reverted back to the General Fund, and then the fund starts anew in each new fiscal year.

Senator Neal wanted to know whether the division has had success in returning funds to owners. Ms. Apodaca replied the division has met with success as outlined in the performance indicator showing 1,628 claims were paid during fiscal year 1998, with $1,321,758 being paid out.

Mr. Maier interjected the division has had great success with Internet access as shown in the new indicator. He explained there is a complete database that the general public can access to search for records and funds.

Senator Neal asked where the funds are commonly found. Ms. Apodaca said the unclaimed money comes from financial institutions and other businesses, such as utilities or casinos or anywhere there may be unclaimed wages or deposits. Mr. Horsey noted many people work for businesses which some years back held the paycheck for the first week until the person left employment. He pointed out many of those people forget about that first paycheck. He added many people forget deposits made out to utilities, or they forget savings accounts. He noted he signs perhaps 100 documents each week ranging from savings accounts to stock certificates to any number of assets people forget they have.

Senator Jacobsen recalled there had been a bill to turn the agency over to the Office of the State Treasurer. He invited comment. Mr. Horsey recollected there have been such proposals for the past two legislative sessions. He acknowledged the division has not formulated an opinion on the proposal yet, nor decided whether the consumers of the state will be better served under the treasurer’s office or

under the current arrangement. He expressed hope a conclusion will be reached by the time the bill is heard.

Senator Neal asked whether funds from casinos or utilities or other places are identified as to their source. Ms. Apodaca replied that when remittances from various businesses are deposited, a specific ledger number is used to delineate the source of the fund. Senator Neal explained he asked the question because he has a bill to use some of those funds from utilities for indigent people who cannot pay their utility bills.

Mr. Beers asked what percentage of successful returns of lost property have come about through newspaper advertising or through the Internet site. Ms. Apodaca responded that recently the Internet has been very successful, and a segment on the television show Dateline brought increased activity on the Internet. She reported the division has been receiving approximately 100 e-mails each day requesting claim forms.

Mr. Beers noted the advertising budget has increased significantly from 1997 to 1998. He wondered whether statutory changes are necessary to provide the flexibility to minimize reliance on newspaper advertising. He noted much of the information provided by staff indicates the increase in the budget is attributable to there being more names to list and more unclaimed property to list. He suggested a smaller article with larger type might by more effective if it refers to a web site.

Ms. Apodaca responded there are many people who do not have access to the Internet. Mr. Beers pointed out the Legislature is attempting to provide more Internet access through school sites and libraries.

Ms. Apodaca acknowledged the statute does require newspaper advertising. She explained there are two remittance dates, which are November 1 and May 1, for which the division is required to place newspaper advertising. She said advertising is usually placed in March and April after the November remittance, and again in August and September after the May remittance.

Ms. Giunchigliani asked in which Las Vegas newspapers the division places advertisements. Ms. Apodaca replied advertising is placed statewide in newspapers including the Humboldt Sun, Reno Gazette-Journal, Ely Daily Times, Elko Daily Free Press, Battle Mountain Bugle, and Las Vegas Review-Journal. Ms. Giunchigliani wondered why no advertising was placed in El Mundo, the Asian Times and the Sentinel Voice, which she opined would be inexpensive.

In response to a comment from Ms. Giunchigliani, Mr. Horsey recalled that testimony 15 years ago indicated the return of unclaimed property might be handled one time, and once all the banks and casinos were canvassed the necessity for the agency might cease. He pointed out nearly $7 million went into the General Fund last year from unclaimed property.

RESPECTFULLY SUBMITTED:

Judy Jacobs,

Committee Secretary

APPROVED BY:

Senator William R. O’Donnell, Chairman

DATE:

Assemblywoman Vonne Chowning, Chairman

DATE: