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 8:40 a.m., on Thursday, February 19, 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 Joseph M. Neal, Jr.

Senator Lawrence E. Jacobsen

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Mrs. Vonne S. Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia de Braga

Ms. Chris Giunchigliani

Mr. David E. Goldwater

STAFF MEMBERS PRESENT:

Mary A. Matheus, Local Government Budget Analyst

Millard Clark, Committee Secretary

Marlene Lockard, Director, Department of Information Technology

John P. (Perry) Comeaux, Director, Department of Administration

Jeanne Greene, Acting Director, Department of Personnel

Judy Holt, Administrative Services Officer, Department of Personnel

DEPARTMENT OF INFORMATION TECHNOLOGY

DoIT Director’s Office – Budget Page DOIT-1 (Volume 1)

Budget Account 721-1373

Marlene Lockard, Director, Department of Information Technology, introduced herself and distributed a four-page organizational chart that shows the current organization with the proposed personnel changes (Exhibit C). Ms. Lockard also passed out Exhibit D, which illustrates the change process. Exhibit D shows the Department of Information Technology (DoIT) change process, where DoIT was, where it is now, and what will be achieved over the next biennium.

Ms. Lockard stated that she is requesting two new positions for the director’s office, budget account 721-1373. One of the positions was approved during the December 1998 Interim Finance Committee meeting. The other position is an Account Clerk III that is essential to support the DoIT Fiscal and Support Services section. A funding study was completed during the past year resulting in a number of important recommendations, including changing the billing structure within DoIT. As DoIT has grown, the fiscal section has not kept pace. The Fiscal and Support Services section is very important because DoIT must interface with all state agencies and departments to ensure that billings are processed timely, Ms. Lockard stated.

Ms. Lockard noted the Account Clerk II position was included in the enhancement portion of budget account 721-1373 as well as a request for additional training funds requested for the Contract Administration Unit of DoIT. DoIT has worked very hard to develop expertise within the Contract Administration Unit, specifically, she mentioned, in the areas of technology projects, requests for proposals (RFPs), and procurement practices. DoIT now has a team of professionals in place that provides a needed and necessary service to all of state government to assist in the development of RFPs. DoIT has implemented fundamental changes needed to eliminate many of the contract problems experienced in the past involving agreements with vendors. It is important for the Contract Administration Unit to stay abreast of the new contracting developments and methodologies as they relate to technology procurement, Ms. Lockard stated. These training funds will be used for that purpose, she said.

Ms. Lockard noted the replacement equipment included in the enhancement portion of the budget is for the normal cycle of personal computer (PC) replacement for DoIT. She said the budget includes a request to upgrade a person who has been in the contract administration office from its inception. The position has supervisory responsibility and provides contract administration assistance to all of state government, and it needs to be upgraded, Ms. Lockard declared. She said the budget request also includes transferring the Chief of Systems and Programming from the Planning and Programming Division and the Chief of Facility Management from the computing division to the director’s budget. This transfer is an offshoot of one of the recommendations from the funding study. The funding study made a number of recommendations, one of which was to transfer both deputies within DoIT into the director’s budget. It was also recommended the Communication and Computing Division’s budget be split into two additional budgets.

Senator O’Donnell asked about the funding changes included in the budget request. Ms. Lockard said the funding study recommended the transfer of certain positions within DoIT that were discussed earlier. The study also identified segments of DoIT that should be on a cost allocation basis. The Contract Administration Unit and the Planning and Programming Division were both identified during the funding study to be on a cost allocation basis.

Ms. Lockard said the planning section of DoIT helps virtually all of state government and it was determined this section should use a cost allocation methodology to charge for its services. She stated the DoIT budget request reflects a decrease resulting from the funding study recommendation to eliminate the old billing structure. The facility fee for service charges was billed directly to some segments of state government while other bills were sent to the systems programming side of DoIT, overhead charges were added to the bill, and then the bills were sent to state agencies. DoIT will now bill all charges directly to the agencies. Agencies will be charged for each hour of programming and computing services provided.

Senator O'Donnell asked whether DoIT has considered using the old billing system in parallel with the new billing system. Ms. Lockard replied that DoIT has built the billing rate structure based on the historical billings to state government. The state Budget Division is working with DoIT fiscal staff to establish the rates that will be implemented July 1, 1999. The rates will be reviewed annually and if needed adjustments will be made each. The old system would create a bill one month and the next month a credit might be issued to adjust the original bill. It is anticipated this change in billing systems will help stabilize the agency budgets because the new billing will reflect a direct fee for services used. It will not matter that individual agency usage varies each month; the agency will only be billed for its actual usage, Ms. Lockard explained.

Mrs. Chowning asked how the agencies will be affected. She noted the agency budgets being heard currently include the amounts historically paid; DOIT’s billing change is not built into the agency budgets. Ms. Lockard replied that the DoIT fiscal office and the state Budget Division are meeting to finalize the analysis of this change and will meet with Legislative Counsel Bureau staff February 22, 1999, to distribute within the Governor’s recommended budget the appropriate amounts to the various budget accounts. Mrs. Chowning asked when the impact of this change will be known. Ms. Lockard said the meeting to finalize the analysis of the change will be February 22, 1999, and depending on what develops during that meeting a firm date to distribute the information will be established. Senator O'Donnell agreed with Mrs. Chowning that a definitive date is needed and asked Ms. Lockard to identify the impact of the change by February 26, 1999.

Ms. Giunchigliani asked what information was used to identify the $2 million reserve included in the budget for each year of the biennium. John P. (Perry) Comeaux, Director, Department of Administration, replied the $2 million reserve included in the budget for each year of the biennium was his best estimate of the additional cost to General Fund agencies that was necessary for this budget. Mr. Comeaux said it will not be known for certain what the actual amount needed will be until the new funding study is complete, which will occur the following week. Ms. Giunchigliani asked what the estimate was tied to. Mr. Comeaux replied the estimate was tied to the total funding required to support the DoIT budget and the Budget Division’s estimate of the General Fund’s share of that cost.

Ms. Giunchigliani inquired whether General Fund agencies are paying more than the non-general fund agencies. Mr. Comeaux said he does not know. He said that until the factors are included in the funding formula it will not be known for sure what the cost to the various agencies will be. It was believed the $2 million included in the budget request is the amount necessary to cover the additional cost for the General Fund agencies. Ms. Giunchigliani asked whether the new funding structure will save the state money or cost more money. Mr. Comeaux replied the new funding structure will not save the state money and the DoIT budget would drive the cost. The new funding scheme is simply a much better distribution of that cost, he said, and there is no way of knowing whether General Fund agencies will pay a larger share of the DoIT cost than they paid in the past. If the cost to the agencies changes, it will be because of their actual usage of DoIT services.

Ms. Giunchigliani asked how the usage of DoIT services by state agencies would be tracked, noting the charges seem to driven by the DoIT budget. Mr. Comeaux replied that the way DoIT has been traditionally funded is similar to how an internal service fund works: the amount of the assessment is determined by the services received and the assessment rate is designed to cover the cost of providing the service. He said the budget of DoIT is driving the amount of the charge but the services provided drives the distribution of the charge. Ms. Giunchigliani wondered what the response would be if the agencies were asked whether they felt they were getting more service as a result of the new funding methodology. Mr. Comeaux replied they probably would not say they are receiving more services. The agencies will not get any additional services unless their requirements for services have increased, but they will be paying their fair share of the cost for services actually received. The funding methodology used for DoIT did not consistently and accurately distribute the cost to the agencies that were receiving the services, Mr. Comeaux stated.

Ms. Lockard said the funding study was never intended to reduce the amount budgeted or funded for DoIT. The funding study was requested and implemented because there was an inadequate billing structure being used. She predicted the majority of state agencies will be pleased with the implementation of the funding study recommendations once the onetime adjustments are made to each agency budget. The new funding structure will stabilize their billing from DoIT, she continued. She noted that some agencies have supported services which were being received by other state agencies that never obtained any appropriation or funding for DoIT services. That is why the cost allocation now includes the contract administration and planning sections of DoIT, Ms. Lockard said, adding that the work of these sections should be distributed to all state agencies. Further, the fee for service from the facility and the data networks should be charged as a direct fee for service based on the agency usage.

Ms. Giunchigliani said it appears the funding study was prepared in a short time period, approximately four weeks. Ms. Lockard replied the study began last April or May and continued throughout the summer and fall to gather the information from historical billing data. Ms. Giunchigliani asked whether the Legislative Counsel Bureau staff have a copy of the results of the funding study. Ms. Lockard replied they do. Ms. Giunchigliani asked what weaknesses of DoIT were identified in the study. Ms. Lockard said the point of the funding study was to bill fairly the agencies for their actual usage of DoIT. Ms. Giunchigliani noted that if the study did not attempt to identify potential savings in DoIT, the new billing methodology would continue to bill too much money to the user agencies. Ms. Lockard replied that potential savings would be identified through a different kind of study, not a funding study.

Senator O'Donnell agreed the funding study was not designed to identify potential savings but to ensure that each agency using DoIT is properly and equitably charged for the services received. The results of the new billing methodology should have no impact on the total revenue received by DoIT, he said. Ms. Lockard agreed and said one of the offshoots of the funding study was the elimination of the assessment charged when a facility fee bill was sent to the systems programming section of DoIT, overhead charges were added to the bill, and then the bill was sent to the user agency.

Ms. Lockard said another important recommendation resulting from the funding study, which will not be implemented during the Fiscal Year (FY) 2000-2001 biennium because of the state’s financial situation, was the depreciation of DoIT’s capital equipment. Because the capital equipment has never been depreciated, every time the equipment has needed to be upgraded DoIT has had to request legislative approval for substantial new appropriations to fund the expenses. If DoIT could depreciate its equipment, the depreciation expense charged each year would go into an equipment replacement fund that would be used to keep the equipment current. As a result, DoIT would not need to request legislative approval for the upgrading or replacement of its equipment each session.

Ms. Giunchigliani stated the funding study was implemented in approximately four weeks. She noted the Legislature is now being asked to put $4 million in a reserve fund that could be used in other budgets for a plan that is not yet completed. She said that because some of the DoIT needs cannot be satisfied due to the state’s current financial situation, and the uncertainty of the amount of money that needs to be included in the various state agency budgets, the $4 million should not be approved. This would allow DoIT more time to identify the amounts that should be included in the various agency budget accounts and to properly evaluate the new billing methodology. If necessary DoIT could then go to the Interim Finance Committee (IFC) for the needed funding or have it built into the budget for the next biennium after it is properly planned and evaluated.

Senator O'Donnell explained that the reserve was to be used for agencies which do not have enough budgeted or have nothing to pay for DoIT services. Ms. Lockard added that the cost allocation would include charges for the contract administration and the planning function. If the agency needs programming or facility services that are not anticipated and has no money for these services in its budget, it will be necessary to request legislative or IFC approval for funding to pay for the services. The cost allocation charges proposed are for DoIT’s planning and contract administration services.

Ms. Lockard said DoIT will come back after the meeting between DoIT fiscal staff and state Budget Division staff to present the implementation schedule and identify what the impact will be to the various state agency budget accounts.

Mr. Beers noted that what is being referred to as depreciation is what he refers to as a reserve. He said money will be saved to be spent on capital expenditures in the future. He asked whether the $2 million was an allocation of one department’s expense to another. Every time a non-DoIT department shows a DoIT technology expense, DoIT shows technology revenue; the net effect of the activity has no bearing on the income or expenses to the state, he stated. This is only an allocation of activity across other funds. Mr. Beers said if there is $4 million of reserve for the biennium outside of DoIT, there should be $4 million of revenue inside DoIT. Mr. Comeaux replied the reason the $4 million is in the reserve for the biennium is so the accounting will balance. Mr. Beers observed that the total of all non-DoIT agencies’ DoIT allocations is $4 million short of the total DoIT revenue shown in the budget. Mr. Comeaux said the amount was probably more than $4 million but the $4 million was his best estimate of what the General Fund cost would be, so that is the amount in the budget. It will be known next week what adjustments to non-general fund budgets are necessary, he said.

Mr. Beers asked whether someone is making sure all of the expenses outside of DoIT equal the DoIT revenue. Mr. Comeaux replied Mr. Beers was correct. Mr. Beers asked whether more federal dollars will be received by the state through the change in allocation. He noted that those programs funded through federal dollars will receive more federal dollars as a result of the allocation change. Mr. Beers asked whether any analysis has been done to identify the potential increase of federal money received by the state as a result of the additional cost allocation charges. Mr. Comeaux replied the change in receipt of federal money will not be known until the numbers are included in the cost allocation formula, and that will not happen until next week. He stated the funding study was not intended to maximize federal revenue, it was done to distribute the cost equitably.

Mr. Beers noted there seems to be an assumption that DoIT has been charging agencies incorrectly or disproportionately to their actual use of the DoIT services. He asked whether that has been occurring. Ms. Lockard replied that has been occurring; some agencies have carried an unfair burden for other agencies. Senator O'Donnell noted that soon after Ms. Lockard assumed her responsibilities as director of DoIT, she requested a change in the cost allocation because she realized it was not working properly. Mr. Beers asked whether anyone is going to examine whether or not reallocating the past year’s charges would generate additional revenue from the federal government. Ms. Lockard said she needs to talk to the consultants who prepared the funding study. They spent considerable time on the project looking through historical data, and they may have some thoughts about the change in federal revenue, she said.

Senator O'Donnell asked how the Year 2000 project is progressing. He asked whether the DoIT budget request included the necessary funding to resolve the Year 2000 project successfully and whether any money was included in the budget request as a contingency for unresolved problems in the first year of the biennium. Ms. Lockard responded DoIT did include money in the budget request to cover potential problems in its original proposal. The Governor has included in his priorities money for Year 2000 contingencies. If there is any additional money, the Year 2000 contingency request is near the top of the Governor’s list, Ms. Lockard continued. DoIT believes it is very close to completing the Year 2000 project. There is currently approximately $3 million that has not yet been expended for the Year 2000 appropriation. That includes both federal and state dollars. DoIT has examined the testing portion of the Year 2000 project and advanced the model to identify how much state and federal funding will be needed to complete the project. DoIT believes the General Fund dollars will be very close if the projections remain accurate, Ms. Lockard stated.

Mrs. Chowning asked for a list of "mission critical" projects that had been completed to better understand the types of projects included on the mission-critical list. Ms. Lockard replied the list of mission-critical projects has been submitted to the Legislative Counsel Bureau (LCB) staff but offered to send a copy directly to Mrs. Chowning. Mrs. Chowning stated it appears there is no Year 2000 funding in the budget request for programming efforts that may become necessary in FY 2000 and beyond. She asked, "If problems do occur, how will they be funded?" Ms. Lockard replied these projects are included in the Year 2000 contingency fund request that is currently on the Governor’s priority list. The Governor knows some contingency funds may be needed during FY 2001 and he has listed these funds as a priority, she said.

Senator O'Donnell asked about employee retention. He noted that DoIT lost an average of about one person each month from the Nevada Operations Multi Automated Data Systems (NOMADS) project between July 1998 and December 1998. Ms. Lockard replied the number was actually closer to an average of 1.2 to 1.5 people per month lost from the NOMADS project. Senator O'Donnell noted that 52 positions changed during this same time period. The senator asked why the changes occurred. Ms. Lockard replied there are a number of factors that impact personnel retention. DoIT and other governmental and private business are experiencing competition for technology expertise, she explained. It is a highly competitive field, especially for Common Business Oriented Language (COBOL) programmers; these programmers are in very high demand.

Ms. Lockard further explained there are a number of people who retire from state service one day and return the next day as contract programmers working for one of the consulting firms at more than triple their state salary. She said DoIT has prepared a personnel retention and recruitment plan that addresses the problems and identifies different alternatives that could be used to resolve the problem. Ms. Lockard said that within both the private and public sectors, organizations are implementing a bonus-type structure. She stated, "A bonus is available as a signing bonus to bring people into the organization, a skill bonus if you possess a mission-critical skill, and a bonus if you stay until completion of a project." Noting that the personnel initiative has been distributed to the LCB staff, Ms. Lockard said the initiative is an important first step towards addressing some of the retention issues DoIT has experienced. Other state governments have implemented initiatives similar to this one and they have been successful, she said.

Mrs. Chowning asked whether the retention bonuses were built into the current budget request. Ms. Lockard said DoIT has been informed there may be some statutory problems with treating one class of state employees differently than other classes of state employees. DoIT has requested an opinion from the Office of the Attorney General to see whether there are any statutory impediments. DoIT felt that if there are, the Legislature will be asked to address the statutory concerns. Mrs. Chowning asked when the opinion will be received. She noted that while DoIT has a plan, there is no budget request to implement it. Ms. Lockard was unsure when the opinion would be received but said the funding for the bonuses was not included in the current budget request.

Mrs. Chowning asked whether offering such bonuses is "a future plan." Ms. Lockard replied that it is. She said there is a proposal to use a work-study program with the university system and an advanced-degree program from the university system that could be used to attract some of the technology students into DoIT. One of the most important things in the DoIT budget request is a request for increased training, Ms. Lockard stated. This is essential for DoIT to bring its employees current and keep them current. The best incentive to retain information technology professionals is to assure them they will be provided with training that will keep their skills current. Training is a very important component of staff retention, sometimes even more important than salary, Ms. Lockard emphasized. Mrs. Chowning asked whether the training component is built into the current budget request. Ms. Lockard replied it is.

Senator O'Donnell asked at what salary level the programmers are being hired. Ms. Lockard replied that on the average the programmers are hired at an accelerated or higher-than-entry-level rate when the budget allows it. The average programmer starts at approximately $48,000 to $50,000 a year. Senator O'Donnell asked at what rate the senior systems analysts are hired. Ms. Lockard said they are started at close to the same rate as programmers. DoIT has identified areas of critical recruitment. Those areas are the NOMADS programming staff and the system programmers at the facility. They include the most critical deficiency classes and the most difficult to recruit personnel classes in DoIT, Ms. Lockard stated.

Senator O'Donnell asked what the rationale was for hiring Information Technology Consultants through the Master Service Agreement (MSA) rather than staff programmers. Ms. Lockard said the current workload fully utilizes the staff programmers. If an additional request is received for service there is no choice but to utilize the MSA option for contract help. As the projects are completed and staff is available to be reassigned to the new requests for service, they will be reassigned, she said. The DoIT goal is to use staff programmers to accommodate the ongoing daily needs of state government and use the MSA contract staff for unanticipated and peak workload. Senator O'Donnell asked how much the MSAs are earning while working on the NOMADS project. Ms. Lockard replied they earn an average of approximately $65 an hour. The IBM (International Business Machines) contract costs approximately $100 an hour.

Senator O'Donnell remarked that DoIT pays approximately $10,000 a month for a contractor but cannot hire permanent staff at $50,000 to $60,000 a year. Ms. Lockard replied DoIT is restricted to working within the approved budget and with the authorized staff. DoIT does not have approved positions that could be filled to eliminate the need for the contract positions, she pointed out.

Senator O'Donnell asked whether, if the Legislature were to approve staff positions for DoIT rather than authorize the contract money, DoIT would hire the staff. Ms. Lockard said DoIT could not sustain the contract help for long periods at $100 an hour. Senator O'Donnell said that DoIT is paying $100 an hour, or approximately $100,000 to $120,000 a year, for contract positions with state tax dollars. He maintained that DoIT could hire quality people for about $60,000 a year, or about $12,000 a year more than DoIT is paying currently, as unclassified employees and save $40,000 to $60,000 a year of taxpayers’ dollars for each contract position being utilized. Ms. Lockard said the recruitment, competitive nature, and salary structure for DoIT are major concerns. She said DoIT has 18 vacancies; there is ongoing recruitment, and DoIT would prefer to hire staff rather than use the contract positions, whenever possible. If the staff positions cannot be filled there is no recourse other than using the contract positions to get the job done, she stated.

Senator O'Donnell discerned that DoIT is willing to spend $120,000 a year for personnel who are working for contractors and actually being paid substantially less than the $120,000 a year. He referenced a letter from the state Department of Personnel which noted that the cost of the average contract for Project Genesis is between $8,000 and $10,000 a month. When the people working in the contract position were asked, they said they were not earning anything near the $8,000 to $10,000 a month. The difference between what the contract employee earns and what the state pays the contractor goes to the contractor. The contractor advertises for contract employees in very much the same way as DoIT does to hire its employees. Senator O’Donnell said the problem is that the DoIT salary is just a little below the salary being offered by the contractors. If the DoIT salary is increased, DoIT could hire the contract employees as state employees and avoid a lot of the problems it currently has with the contract employees, the senator maintained.

Ms. Lockard replied that DoIT has worked very hard to solve the contract-versus-staff-position problem in the personnel retention and recruitment proposal that was submitted. Some aspects of the proposal could be implemented this year; some will have to wait for future legislative sessions. DoIT believes the problems are known and has solid recommendations about how to resolve the problems, Ms. Lockard said.

Senator O'Donnell asked that Ms. Lockard share the solutions with this committee. Ms. Lockard referenced her testimony above indicating that DoIT has developed the bonus initiative program, which she said is the cornerstone of the DoIT personnel initiative. She said DoIT has also identified areas to improve the personnel and recruitment problem. Some of the improvements can be implemented during the current biennium and some will have to be implemented over a period of time. A major piece of the personnel initiative is the training component. The training component is included in the current budget request and is absolutely critical, Ms. Lockard stressed. The training component is a major incentive for new employees, she said. Senator O'Donnell asked how much money is included in the current budget request for training. Ms. Lockard replied the DoIT budget request includes $326,072 for FY 2000 and $298,186 for FY 2001 for training. She said this is a 58 percent increase for the first year of the biennium and a 45 percent increase for the second year. Senator O'Donnell asked whether the new programmers are being hired as classified employees or as unclassified employees. Ms. Lockard said all of the programmers are being hired as classified employees.

Senator O'Donnell asked why the programmers are being hired as classified employees rather than as unclassified employees. Ms. Lockard said one other recommendation of the DoIT personnel study was to conduct a study to review the classification status of technology personnel within the state to answer many questions, including whether or not they should be classified or unclassified employees. Senator O'Donnell stated he believes the technology personnel employees should be unclassified.

Jeanne Greene, Acting Director, Department of Personnel, replied that in response to the senator’s question, only the Legislature has the authority to designate positions as unclassified; all other positions are in the classified service. In the past the Legislature has not designated computer programmers as being in the unclassified service. Senator O'Donnell noted the Legislature can change the classification of these employees. Ms. Greene replied the Legislature can.

Senator O'Donnell asked what the DoIT response was to changing the computer programmers from classified service to unclassified. Ms. Lockard replied there would be some very good benefits to the state should that occur, if the incentives, bonuses, and increased compensation are retained in the declassification of the computer programmers. If the technology employees are changed to unclassified service today and no other adjustments are made, DoIT will lose the remaining technology employees en masse, Ms. Lockard predicted. Senator O'Donnell agreed. He said the salaries need to be increased and the employees should be in the unclassified service to retain the employees.

Mr. Comeaux said the DoIT budget request included a variety of proposals designed to address the recruitment and retention problem. The training, signing, and retention bonuses and the salary increases were all included in the budgets submitted by DoIT. It was estimated a 10 percent across-the-board increase would cost approximately $4.7 million over the biennium and the state just could not fund that increase, Mr. Comeaux stated. Senator O'Donnell said that $4.7 million would be money well spent. One of the most important aspects of any business or government is computerization, he stated. When the business is computerized it runs more efficiently and money is saved. The senator said the $4.7 million should be reconsidered because if the information technology people are not paid enough to retain them, the state will be in trouble in a very short time.

Mrs. Chowning agreed with the incentives proposed by DoIT and said the state should compensate the employees rather than pay contractors from out-of-state. That would also help the Nevada economy, she added.

Mr. Beers asked to what extent DoIT is relying on Common Business Oriented Language (COBOL) for the NOMADS project. Ms. Lockard replied COBOL was used for the NOMADS project. She said part of the problem with the NOMADS project is it also was developed in a language called Cross System Product (CSP), which is being phased out by IBM and within the next year will be an obsolete language. One of the staff-retention problems of the NOMADS project is that programmers want to work in the new languages using new technology, Ms. Lockard continued. The programmers are attracted to some of the new development taking place within the state. They want to use new skills and not be mired in old languages and technology.

Mr. Beers said he searched the Internet for California and Nevada job listings for programmers. There were 2,897 programmer positions listed, only 285 of which were for COBOL programmers. Mr. Beers stated the NOMADS problems extend beyond just the CSP language because COBOL is basically a dead language as well. He noted that neither the university nor the community colleges offer classes in COBOL because there is no demand for the language. Mr. Beers observed the university and community colleges are offering courses in the newer languages. He noted the closer an individual is to his or her education, the more effective the person will be. He stated that if DoIT is doing the bulk of the NOMADS programming in COBOL, it will not be possible to get anyone who has received any college training in COBOL in the last 30 years. Mr. Beers said using COBOL might be as significant a problem in the recruitment and retention area for the DoIT NOMADS project as the pay scale is.

Ms. Lockard agreed with Mr. Beers’ comment and said DoIT does have programmers assigned to the NOMADS project who have COBOL experience and have been with DoIT for a number of years. She said the problem is, these programmers do not want to work on the NOMADS project. That is why the retention bonus for staying on a project until its completion would be beneficial to DoIT. Ms. Lockard said the majority of the state system is currently using COBOL and is supported by programmers with COBOL experience. Senator O’Donnell noted the new Project Genesis is written in COBOL.

Senator O'Donnell said funds for NOMADS were allocated in the last legislative session for an R25 computer, which was requested by DoIT. He noted the current budget request includes approximately $6 million to migrate to an R36 computer. He said the reason given as justification for the R25 computer during the last legislative session was the need to migrate the NOMADS project to the R25 computer because of degradation and bottlenecks in the system prior to the R25 computer. Senator O'Donnell said it was his understanding that the Welfare Division was refusing to move the NOMADS project to the R25 computer. Ms. Lockard replied this information was not correct. She clarified that during the last legislative session DoIT did not have a proposal for the R25 computer in its budget request. DoIT requested funding to upgrade its equipment and during the legislative session saw the capacity crisis growing. DoIT managers felt that if they were allowed to manage the two-year appropriation properly, the department would be able to move to migrating to the R25 computer. DoIT returned to the Interim Finance Committee with the request for approval, which was granted, to acquire the R25 computer. It was part of the DoIT overall plan to migrate the NOMADS project to the R25 computer.

Ms. Lockard further explained that after assessing the various projects the determination was made to keep NOMADS on the ES9000 computer. This was not a result of anyone’s refusal to be migrated to the R25 computer, Ms. Lockard stated. There were issues about the timing of when to migrate the NOMADS project to the R25 computer. The migration would have occurred at a very critical project development time, so the decision was made to reevaluate the plan. It was then decided to keep the NOMADS project on the ES9000 computer.

Senator O'Donnell asked whether NOMADS will be migrated to the R36 computer if the $6 million for the R36 computer requested in the current budget request is approved. Ms. Lockard replied the NOMADS project will eventually be migrated to the R36 computer. The DoIT long-range plan is to retire the ES9000 computer. When the ES9000 computer is retired the NOMADS project will move to either the R25 or the R36 computer. Senator O'Donnell asked which other agencies and projects will remain on the ES9000 computer with the NOMADS project. Ms. Lockard said DoIT is trying to pull together the Department of Human Resources group and keep them together. The Project Genesis will be migrated from the ES9000 to the R25 computer, she said. The capacity problems of the ES9000 computer are affecting the performance of the entire mission-critical applications. DoIT is working aggressively to try to get the major programs moved from the ES9000 computer, Ms. Lockard stated.

Senator O'Donnell asked why the $6 million is being requested to purchase the additional R36 computer if the NOMADS project has not been moved off the ES9000 computer even though DoIT already has the R25 computer. He noted that DoIT has not yet obtained the necessary cooperation and approval to move the NOMADS project from the ES9000 computer. The senator stated the clock speeds of the R25 and the R36 computers are the same and even though the R36 computer could perform true multitasking, the through-put would not be substantially improved. Ms. Lockard replied the long-range goal of DoIT is to migrate to the Complementary Metal Oxide Semiconductor (CMOS)/Sysplex technology, which will allow an enterprise-server environment to be established within DoIT where the server can function alone or in connection with other servers. DoIT feels there are tremendous advantages to this type of configuration to state government for overall support of the servers, Ms. Lockard said. Senator O'Donnell stated there is also tremendous cost for this type of configuration.

Senator O'Donnell asked whether the deputy district attorney in Douglas County is happy with the NOMADS project. Ms. Lockard replied the district attorney in Douglas County is one of the most cooperative individuals she has ever had the pleasure of working with. He has worked with DoIT, the Welfare Division, and the NOMADS project in a very positive way. The district attorney volunteered his office to be the pilot to roll out the first phase of the NOMADS project. By virtue of being the pilot, Douglas County has gone through a number of different issues and problems with the system. This has provided a great service to the rest of the district attorneys within the state for implementing the various stages of the NOMADS project, Ms. Lockard said. Senator O'Donnell rephrased his question and asked for a yes or no answer. He asked, "Is the deputy district attorney happy, yes or no, with the NOMADS rollout?" Ms. Lockard replied the answer was no, she did not think he was happy with the NOMADS project at all; rather she thought the project has been a nightmare for him. She stated the deputy district attorney has been a trouper in working with DoIT in trying to get through all of the issues.

Senator O'Donnell asked how much federal funding is included in the current $6.5 million budget request. Ms. Lockard replied the $6.5 million is for the biennium and the amount includes not just the hardware; it includes the tape system and other needed equipment purchases for the facility. Senator O'Donnell said what irritated him was that "we can’t keep the staff but yet we can buy bigger boxes that do better things." Ms. Lockard said she would like to provide Senator O'Donnell with a copy of the department’s capacity plan. The single most critical priority for DoIT is the infrastructure and replacement equipment for the facility because "without it we crash and burn," she stated. DoIT has $160 million worth of projects in development at the present time, and if the infrastructure is not kept in place to properly support those projects, DoIT "will crash and burn," she warned. Ms. Lockard said she could bring people in from the Department of Motor Vehicles and Public Safety (DMV&PS), the NOMADS project, the Unified Nevada Information Technology for Youth (UNITY), the state Budget Division, and a trail of other people who will confirm the response time is horrendous. In some cases it takes over an hour to sign on to the system, she noted, adding that these are performance issues, and DoIT cannot operate under these conditions.

Senator O'Donnell said Ms. Lockard has discussed these issues with him in the past and the issues will not change until DoIT pushes the computers into the various departments. Ms. Lockard replied she has independent data which identifies that 70 percent of the organizations are going back to a centralized mainframe to save money. She said a distributive system is very expensive. Senator O'Donnell replied, "At least you can access a distributive system and use it." He said his point was that until DoIT distributes those computers into the field there will be continued bottlenecks because the department is doing the processing of the data, not just storing the data on a centralized mainframe. Senator O'Donnell said the state had financial needs that cannot be satisfied because of the shortage of funds, yet DoIT "keeps talking about more and bigger computers." He said DoIT is being looked at very critically this year because a lot of money is being spent but many projects are still not complete.

Ms. Giunchigliani asked whether the cost allocation plan must be approved by the federal government because of the NOMADS project and whether there has been any indication the feds would accept the cost allocation plan. Ms. Lockard said she would investigate and get an answer back to Ms. Giunchigliani. Ms. Giunchigliani then asked Ms. Lockard to provide the detail on the equipment in the $6.5 million equipment request and the cost of each item included in the request. Ms. Lockard said she would provide that information.

Ms. Lockard said the state has implemented several client server applications and the state’s computer system is currently a distributed system. She said it is a misconception to think that all systems are on the mainframe and all are being developed with only one technology solution. She noted the UNITY project is on a client server and the integrated financial system (IFS) is on a client server configuration. Ms. Lockard said that what DoIT is recommending is the best technology solution for the problem. She said DoIT does not enter into projects with a preconceived notion of what the best solution will be and has demonstrated and implemented other configurations. Ms. Lockard said that in the first 3 years she was with DoIT she did not see the types of performance and capacity complaints she has seen during the past 6 or 7 months. Once the migration and the full facility plan are completed the facility operations will return to the excellent competency levels enjoyed in the past, she declared.

Senator O'Donnell said he appreciates that Ms. Lockard is concerned about the capacity issue, but the Legislature hears the same story every session. The Legislature hears that DoIT is at capacity and can go no further without a bigger box and more disk space and so on, he stated. He said what really "raised a red flag" was when he heard the NOMADS project was not going onto the R25 computer, the new computer system for which the Legislature allocated funds for DoIT to purchase for the NOMADS project. Now, he continued, DoIT wants to purchase an additional computer, the R36 computer, and the NOMADS project has still not left the ES9000 computer. Ms. Lockard responded it is important to understand that the last Legislature approved an IFS, another phase of the UNITY system, a major development for the DMV&PS, and numerous other projects. DoIT has 26 projects currently under way within the state totaling over $160 million. The department must have the infrastructure to support what has been approved, Ms. Lockard declared.

Senator O'Donnell stated that DoIT should give the R25 computer to DMV&PS and let that agency have its own computer. Ms. Lockard said she would like the opportunity to present a detailed capacity plan for the Legislature to review that identifies what equipment and infrastructure are currently available, where they are located, and what the future anticipated needs are. DoIT has developed that capacity plan and has provided copies of the plan to LCB staff, she stated.

Senator Neal asked Ms. Lockard to explain the large charts on display in the committee room. Ms. Lockard said the first chart identifies what the state’s Silvernet infrastructure looked like during the last legislative session when DoIT presented the various proposals to enhance the network infrastructure for the state. The next two charts reflect what has been implemented during the interim period and the needed enhancements and support to carry the necessary links between state government and county seats within the state. The last chart reflects what is contained in the proposed budget and what is needed to complete some of the loops and put in place what DoIT feels is the necessary infrastructure to support the ever-increasing demands for more bandwidth and higher capability within departments and agencies for video, audio, and other services. As DoIT advances and tries to accommodate the services that state agencies are going to be requiring, it is very important to have the proper infrastructure in place to support the requests, Ms. Lockard stressed. Issues like the communications link, which allows agencies to communicate with each other as well as local governments, are important components for the overall operation of DoIT, she stated. She added that as part of the overall communication link, DoIT has the responsibility to provide the "safety backbone" for the state.

Senator O'Donnell asked Ms. Lockard to explain why DoIT is recommending that both the Chief of Systems and Programming and the Chief of Facilities Management positions be transferred to the director’s budget account. Ms. Lockard said the transfers were recommended by the funding study. The recommendation was to move the two deputy positions into the director’s office so that costs may be more accurately allocated and the funding sources more easily managed.

Senator O'Donnell asked for more information about the 25 new positions being requested. Ms. Lockard referred to Exhibit C and said five of the positions were already approved by the IFC, in December 1998. Senator O'Donnell asked whether the five positions have been filled. Ms. Lockard replied three offers of employment for the Office of the Secretary of State programmers will be sent before the end of the week. The accountant position and the position for the Division of Industrial Relations (DIR) have been filled. Senator O'Donnell noted DoIT has 18 positions that are not currently filled but is requesting 25 additional positions. He asked whether DoIT would be able to fill all of these positions during the next biennium. Ms. Lockard replied that DoIT is doing everything possible to fill the positions. She said DoIT feels it is important "to have the positions as state employees." If the positions were not requested there would be no approved positions available to fill during the next biennium. Ms. Lockard said those included in the balance of vacant positions are four network technician positions and six programming positions for the UNITY project. The other positions include communication specialists for the microwave positions to migrate from analog to digital technology and a telecommunications position to administer the new PBX (private branch exchange) telephone system that is being implemented within state government.

Mrs. Chowning asked why only 41 percent of the contracts had been completed on schedule while the projection was to have 95 percent completed on schedule. She said it now appears that because significantly fewer contracts than projected were completed on schedule, future goals were lowered to reflect the less-than-adequate results of the past. Mrs. Chowning noted the projected caseload was also increasing.

Ms. Lockard responded DoIT has accurately counted and reported the activity that has occurred in the Contract Administration Unit. The 41 percent number includes requests for proposals (RFPs) that were withdrawn. When that occurs, the contracts are not completed on the originally anticipated schedule. If those contracts were removed from the overall performance indicators there would be a dramatic change, Ms. Lockard stated, noting that for those contracts that go to completion, DoIT’s performance is very good. She said that perhaps DoIT should be reporting the performance indicators to the Legislature differently or identifying the performance indicators for the contracts that actually go to completion. Ms. Lockard said the information on contracts that go to completion is available and would be provided. Mrs. Chowning said all of the accurate information should be submitted by February 26, 1999.

Ms. Giunchigliani asked what impact the proposal to privatize Employers Insurance Company of Nevada (EICON) would have on DoIT. Ms. Lockard replied that Employers Insurance Company of Nevada has a schedule to migrate off of the state services for a period of time. During the last legislative session the EICON migration away from state services was discussed but the budget numbers reflected the agency staying with state services. The current budget request for the next biennium includes EICON’s migration off of the DoIT services. Ms. Giunchigliani asked what the dollar amount of the loss was and how it was made up. Ms. Lockard replied she would research that and submit the information as soon as possible.

DEPARTMENT OF PERSONNEL

Personnel – Budget Page PERSONNEL-1 (Volume 1)

Budget Account 717-1363

Jeanne Greene, Acting Director, Department of Personnel, introduced herself and then outlined the major highlights of the budget request.

Senator O'Donnell asked about the new payroll program. Ms. Greene replied there was a payroll portion of the IFS that is new. Senator O'Donnell asked how the payroll portion is working. Ms. Greene said Judy Holt, Administrative Services Officer, Department of Personnel, is the team leader for the human resources portion of the payroll program. Personnel planned to run the first live payroll April 2, 1999, and the testing results have been good, Ms. Greene said.

Senator O'Donnell noted it took 8 hours to run the state payroll test and the test originally took 30 hours to run. Ms. Greene replied that was correct and Personnel was satisfied with the results of the testing. Judy Holt, Administrative Services Officer, Department of Personnel, introduced herself and said the payroll cycle now takes approximately 6 hours to run on the mainframe from the time data is received. Senator O'Donnell asked whether that was an acceptable time and remarked it seems like that is a long time to run the payroll. Ms. Holt replied the state has a big payroll. She said that is how long it has been taking.

Senator O'Donnell asked how many new positions were included in the current budget request. Ms. Greene replied that four new positions are being requested. Two of the requested positions will replace contract employees and will actually result in cost savings to the state. Two additional positions are requested to support the new payroll system; one will be a permanent position, the other will be temporary and will sunset in two years. Senator O'Donnell asked how it would save the state money if the two positions were hired to replace the contract positions and how much the contract currently costs the state. Ms. Greene said that a cost analysis was prepared which identified there would be a savings of approximately $18,000 through hiring the positions as classified employees. She said the two positions to support the new payroll system are data entry positions for the records and payroll sections.

Mr. Beers asked whether the contract employees are from DoIT. Ms. Greene replied they are. Mr. Beers asked whether they are state employees working for DoIT. Ms. Greene said the contract was between DoIT and the contract employees; the Department of Personnel then entered into an agreement with DoIT to pay the individuals. Mr. Beers asked whether these two positions would be working for DoIT if they were approved. Ms. Greene said the contract employees are not currently state employees. She said the cost savings would occur through making these positions classified state positions, with the employees working for the Department of Personnel.

Ms. Giunchigliani asked about the occupational study prepared by the Department of Personnel. She asked how many of the public health medicine and nursing positions were allocated for the prisons. Ms. Greene said she did not have that information. Ms. Giunchigliani requested that Ms. Greene provide the information. She noted that Bob Bayer, Director, Department of Prisons, stated he had written a letter to the Department of Personnel to request a classification change for the correctional officers, and she asked whether this change has been made. Ms. Greene replied it has not been done and noted the last classification study of the correctional officers was July 1, 1991. Ms. Giunchigliani asked whether the Department of Personnel has received the request from Mr. Bayer. Ms. Greene said no, not that she was aware of. Ms. Giunchigliani asked Ms. Greene to check to see whether the Department of Personnel has received the request.

Mrs. Chowning asked about the coordination between the IFS and payroll processing. She asked whether the planning had been done well enough, how the new payroll system will affect the Department of Personnel’s efficiency, whether there is enough equipment, and whether all the ancillary costs have been included in the current budget request. She noted there were problems involving callback and standby pay during the last legislative session and asked whether the new payroll system would resolve these problems. Ms. Holt answered that a lot of progress has been made in that area during the past two years through implementing system edits in the old system to identify misreporting of the standby and callback information. She said the new system is going to be very tuned in to that problem and would be a great improvement over the old payroll system.

Mrs. Chowning asked, "Which agencies pay, how much is allocated for equipment, and is there enough support for the new system?" Ms. Holt replied that internally the Department of Personnel is fine; there is money allocated for the personal computers and those costs are built into budgets of the other agencies that will be involved with the new payroll system. Mrs. Chowning asked whether the Budget Division can confirm that. If not, she said, then more information is needed. Mr. Comeaux said the Budget Division conducted a survey in preparation for preparing the budget to identify the equipment and other items needed by the various agencies that would be needed by the agencies to fully utilize the IFS. Those costs are included in the onetime appropriation that has been submitted to the Legislature to complete the development. The ongoing costs for IFS are included in the individual agency budgets. Mrs. Chowning asked whether a breakout was available that identifies how much of the onetime appropriation each agency gets. Mr. Comeaux replied yes, it even identifies the number of computers. If the breakout is not detailed enough the Budget Division will provide any additional detail requested, he said.

Senator O'Donnell inquired about the $250,000 for American Management Systems Inc. He asked, "Is that a contract for the postmanagement of the payroll system?" Ms. Holt replied the Department of Personnel feels there will be a need for continued assistance, for at least the first six months, from the vendor who has helped build the system. The Department of Personnel has yet to build the security structure for the payroll system, she noted. She said there will be 1,000 or more employees in the various agencies who will have access to the payroll system, and it is critical to set up a system security administration for level-of-authority electronic approval. American Management Systems Inc. has a lot of knowledge that the Department of Personnel has not yet acquired, Ms. Holt stated. Senator O'Donnell asked whether the Department of Personnel would have people working side by side with the vendor to learn the systems, if cross training is intended. Ms. Holt said it was envisioned that American Management Systems Inc. staff would sit with Department of Personnel staff full-time for the first three months for training and then on an as-needed basis thereafter.

Senator O'Donnell asked what the Department of Personnel means when it says the computers are not Year 2000-compatible. He asked, "Is it the software or the hardware that is not compatible?" Ms. Holt said the computers were the old 486 machines and the DoIT personal computer local area network (LAN) support person said that to make the internal clocks go beyond the year 2000, the Department of Personnel could either upgrade the computers or replace them. The DoIT recommendation was to replace them. Senator O'Donnell asked how much it would cost to upgrade the computers. Ms. Holt said she did not have a cost for the upgrade, but the DoIT recommendation was that it would not be worth upgrading the computers. Mr. Beers stated the upgrade cost varies and it is not possible to put a hard number on the cost. "Sometimes you can save money by upgrading and sometimes it costs more to upgrade. The upgraded computer never functions quite as well as a new computer," he remarked. He said his company recommends to their clients that they replace rather than upgrade the computers.

Mrs. Chowning requested that the Department of Personnel provide a priority listing for the replacement or upgrading of its equipment.

Senator O’Donnell adjourned the meeting at 10:30 a.m.

RESPECTFULLY SUBMITTED:

Millard Clark

Committee Secretary

APPROVED BY:

Senator William R. O’Donnell, Chairman

DATE:

Assemblywoman Vonne S. Chowning, Chairman

DATE: