The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:10 a.m., on Monday, February 22, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bernice Mathews

COMMITTEE MEMBERS ABSENT:

Senator Bob Coffin (Excused)

STAFF MEMBERS PRESENT:

Patricia Hampton, Committee Secretary

OTHERS PRESENT:

Senator Jacobsen stated he would like the committee to consider a resolution to create an interim corrections committee. He said it is apparent the second-most important problem in the state is prisons and corrections. He remarked there never seems to be enough time for committee members to tour these facilities. Senator Raggio inquired whether this would be an interim committee or an ongoing committee. Senator Jacobsen answered it would be an interim committee.

Senator Raggio opened the hearing on Senate Bill (S.B.) 159.

John P. Comeaux, Director, Department of Administration, said this bill is a request for an appropriation of $97,840 from the General Fund to restore the balance in the emergency account to approximately $400,000. He explained the emergency account was established to allow very specific types of emergencies to be handled during the interim. He said the State Board of Examiners controls access to the emergency fund. He pointed out the statute is very specific about the type of emergencies that apply, basically life and death situations.

Senator Raggio asked what types of things the fund would be used for. Mr. Comeaux explained that when the National Guard is called out for search and rescue or there is a flood, this account is used to reimburse the Guard for the cost that is incurred. He said the Governor would be the person to call out the National Guard.

Senator Raggio asked whether there is anything out of the ordinary in this account and whether the fiscal staff has reviewed the expenditures. Dan Miles, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau (LCB), replied staff has reviewed the account.

Mr. Comeaux pointed out there are sufficient funds in the account, so it is not necessary to process this bill now. He said the bill needing to be processed now, which will come over from the Assembly, concerns the Stale Claims Account.

Senator Neal inquired why the fund balance needs to be $400,000. Mr. Comeaux answered the level has been kept at this amount for some time. He pointed out less than $100,000 was spent from the account in the last biennium. He explained it does vary, however, from biennium to biennium. Mr. Comeaux stated there needs to be enough money to take care of anything that would come up during the interim.

Senator Raggio closed the hearing on S.B. 159 and opened the hearing on S.B. 15.

Senator Raggio said the Legislative Committee on Education recommends this bill. He explained the bill creates an advisory committee to oversee the mandated proficiency test taken by 11^th graders. He stressed this is a "high stakes" test because in order to receive a standard diploma, pupils must pass this test by the end of the 12^th grade. He noted a student has five opportunities to pass the test.

Senator Raggio stated this bill calls for the Governor and the Legislature to make appointments to the advisory committee. He explained the Governor would appoint five members, four of whom would be school district employees who oversee the administration of the state test in their school district. He said no more than two of the four representatives may be from one school district. One would have to represent a school district from a county with a population of less than 100,000 to accommodate the rural school districts, he said. Senator Raggio stated the Governor would also appoint a representative from the University and Community College System of Nevada (UCCSN) who would be nominated by the UCCSN Board of Regents. He said this individual would be knowledgeable and experienced in accessing pupils. He noted that in the past, assessment was within the purview of the university community.

Senator Raggio said the remaining four members of the advisory committee would be appointed by the majority leader of the Senate and the speaker of the Assembly. He explained each would appoint a parent of a pupil enrolled in a public school within the state, and a representative of private business or industry. He stressed the Legislative Committee on Education determined early on that it was necessary and appropriate to include parents and business community representatives, as well as educators, if anything meaningful was to be done about education reform.

Senator Raggio said members of the advisory committee would not be paid, but they would be eligible for the usual per diem allowance and travel expenses that state employees receive. He pointed out the reason for the appropriation of $30,000 is to cover these expenses. He said the State Department of Education would be required to provide the administrative support to the advisory committee. He stated the committee would meet at least four times a year, with one meeting to occur before the high school proficiency examination is administered in the schools. He said established duties are to review test questions, review the data used by the State Board of Education to establish passing scores, and review the percentage of pupils that pass or fail. Other duties would be reviewing of the cost of the testing program and determining whether the examination adequately measures pupils’ knowledge of the test content and performance standards established by the Council to Establish Academic Standards for Public Schools.

Senator Raggio pointed out the advisory committee is required, under the bill, to report quarterly to the State Board of Education and to report annually to the Legislative Committee on Education regarding committee activities. He said that to the extent necessary to maintain security of test materials, the advisory committee is exempt from the open meeting law. He said the State Board of Education, the department, and the superintendent are compelled, only to the extent necessary to maintain test security, to provide the advisory committee with the information needed to carry out the work of the committee.

Senator Raggio said this bill also contains enhanced funding for the proficiency examination in the amount of $384,825 in Fiscal Year (FY) 2000 and $371,648 in FY 2001. He stated these amounts, which supplement the base-level testing budget recommended in the Governor’s budget, are based on an alternative budget enhancement requested by the State Department of Education but not recommended by the Governor. He noted the department estimated this amount would be necessary to continue to administer the exam; however, the language of the bill is broad enough to allow the hiring of an outside contractor to handle the proficiency test.

Senator Raggio said the testimony received by the Legislative Committee on Education over 10 meetings indicated test development efforts have not included the key participants. The State Department of Education has involved teachers and school administrators in selecting and writing test items, he said. Senator Raggio stated the Legislative Committee on Education agreed that statewide assessments were an important component for educational accountability and more participation was needed from sectors that currently have no impact in the area of testing.

Senator Raggio said the advisory committee also agreed the testing process needs a more organized system involving input from representatives outside the State Department of Education. He explained that due to the number of questions that arose last interim regarding testing, the Legislative Committee on Education directed its staff to meet with school district testing directors, State Department of Education staff, and others to discuss the testing problems. He named some of the concerns associated with the high school proficiency exam, such as the lack of practice test materials, test security problems, procedures and legal defensibility of the test, delays in implementing tests, and the format of score reports. Senator Raggio said that as a result, the committee believed the testing program would benefit greatly by adding parents and business representatives to the education committee.

Keith Rheault, Deputy Superintendent for Instructional, Research and Evaluative Services, State Department of Education, testified he is in support of S.B. 15 (Exhibit C). He said it is clear that groups such as the proposed advisory committee can provide valuable assistance to the department. He stated the department would request, at a minimum, that consideration be given to using part of the funds appropriated for contracting clerical support for the committee. He said the department provided a fiscal note to this bill that totaled $22,500 a year. Dr. Rheault pointed out $5,000 of this request would be used to contract for clerical support each year.

Dr. Rheault said the department is in full support of the supplemental funding. Senator Raggio asked whether the amount of funding had been reviewed. Dr. Rheault answered that if the funding recommended in this bill is added to the $154,000 in the Governor’s budget, there would be sufficient funding to contract for testing services. He added the department would like to have the flexibility of either contracting out or administering testing in-house.

Senator Raggio asked fiscal staff to confer with Dr. Rheault and the budget office to analyze available funding to determine how the funds can best be used to get the most effect and to address all aspects of remedial programs, testing and assessment components of the Nevada Education Reform Act (NERA), teacher training, and performance standards.

Dr. Rheault said the State Department of Education will be meeting with the education coalition today and two of the items under discussion will be to see whether teacher professional development and remedial funding can be consolidated.

Senator Raggio said the Governor has indicated the appropriation he recommended for remediation was meant to be available for all aspects of student testing and new performance standards.

Dr. Rheault stated he found clerical support very valuable in working with the Council to Establish Academic Standards for Public Schools and the Commission on Educational Technology. He said funding for clerical support to type minutes and get out notices to committee members is lacking in this bill. He testified that administration can be easily handled with current staff.

Senator Raggio requested fiscal staff to review the fiscal note.

Senator Neal inquired about the duties of the State Board of Education and why the board cannot make the appointments to the advisory committee. Dr. Rheault explained he sees this proposed committee as an advisory to the board. He said the committee would have more time to review information in detail and make recommendations to the board. He stated that as he reads the bill, the advisory committee would not remove any duties from the board as far as approving "cut scores" for the test and approving the test itself. The board would still have the official regulatory functions, he said.

Senator Neal declared that when he read the bill, he was at a loss as to what is being attempted by having the advisory committee. Dr. Rheault responded his personal opinion is that the involvement of more individuals would remove the appearance the State Department of Education is trying to hide something and is not sharing information such as practice tests, test questions and which areas the test covers. He said with the "high stakes" exams and the raising of the passing scores, questions come up about the sharing of this information. He stated the establishment of this committee would broaden knowledge of the test and the test is a good, reliable test, measuring what is intended to be measured.

Senator Neal said he understands a student can fall short on the exam in reading or math. He stated that most likely students have difficulty when asked questions in reading that deal with logic. He asked whether the advisory committee would be looking to correct the test. Dr. Rheault answered the committee would be able to review reading and math test questions. He said part of the requirement for graduation is also a performance-based writing exam. He explained there is a group composed of teachers and practitioners writing the test questions. He said there is a "bias review committee" to review the writing and reading questions. Dr. Rheault pointed out there are three groups reviewing the reading portion of the test prior to final selection of the questions.

Senator Neal said that over the last 10 years no conclusion has been reached as to what needs to be done about the proficiency test. He stated he understands the math questions follow standard rules, but language is different. He reiterated that if language is in a math logic question, students can have a difficult time. He questioned whether the advisory group can deal with this type of question. Dr. Rheault answered the committee can advise and make recommendations, but the committee cannot change the question.

Senator Raggio stated the proficiency examination is already a matter of law and is geared, on a timetable, to standards which have already been adopted by the state. He stressed that the fact is, students must now pass this proficiency examination and are given five attempts to pass it. He explained this bill is a response to some of Senator Neal’s concerns but does not change the fact the State Board of Education approves and prescribes the examination. Senator Raggio said this bill will create the advisory committee, with all of the attendant responsibilities and duties, to provide information "in an oversight fashion." He said the committee will report not only to the State Board of Education but also to the Legislative Committee on Education, so the effort to make sure education reform is on track can be continued. He stated Senator Neal’s questions point to the necessity of having the additional oversight intended by the proposed advisory committee.

Dr. Rheault pointed out students have done much better in reading than in the math portions of the new test just administered. He said scores were within the required "cut score" of 72 percent. He stated that Nevada students have been performing much better in reading than in mathematics.

Senator Jacobsen said that in the rural school districts some of the students do not seem to realize, until the last two weeks of school, that they are not graduating. He stated parents are upset and do not seem to know why the student is not graduating. Dr. Rheault explained that currently students take the test for the first time in the fall of the junior year and if the student fails the test, he or she can get remediation over the remainder of the school year. He said students failing the first test get additional chances to pass in the fall, and in February and April of the senior year. Dr. Rheault stated that results from the April testing would not be available until the middle of May and a student can test for the fifth time approximately one week after school is out. He said some adjustment would have to be made if testing were offered five times before the student is due to graduate, but tests cannot be given too close together.

Senator Raggio stated proficiency testing is not new, but the test is now geared to the higher standard. He said that by the time the student has failed four times, the student and the parent should be aware there is a problem. He stated the larger danger is to give a student a diploma indicating the student has mastered the course of study and have the diploma be meaningless.

Dr. Rheault added that in some cases, it is not the proficiency test keeping the student from graduating. It can be the failure to pass a course in the spring semester and being a half credit short of the credits required to graduate.

Debbie Cahill, Lobbyist, Nevada State Education Association, spoke in opposition to S.B. 15. She said there is no objection to the creation of an advisory committee, but the main concern is that while testing directors and administrators are represented on the committee, teachers are not specifically named as being eligible for appointment to the committee. She stressed the association would like to assure that teachers would have the opportunity to provide input to the committee, especially since one of the areas to be dealt with is the manner in which examinations are administered.

Senator Raggio asked whether the only opposition is that teachers are not specified as being eligible for appointment. Ms. Cahill replied yes. Senator Raggio inquired whether the current language in the bill excludes teachers. Ms. Cahill answered it could, if all of the Governor’s appointees happen to be testing directors or administrators. She said that if the language provided for teachers on the committee the education association would not be in opposition to the bill.

Steve Williams, School Planner, Governmental Affairs Representative, Washoe County School District, provided testimony on behalf of Dottie Merrill, Testing Coordinator, Washoe County School District, in support of S.B. 15 (Exhibit D). He stated the school district sees much merit and no drawbacks to the creation of an advisory committee to oversee the high school proficiency exam. He said such a committee would make the examination program more accountable and more forward-looking in generating exam content items, scores, and the other fundamentals of assessment.

Mr. Williams maintained the committee could provide valuable feedback to the Legislature regarding the costs of administering the examination program. He said the committee could minimize many existing problems by providing more focused direction for the High School Proficiency Examination program as it presently exists, and as it must evolve in the future as an assessment of higher standards for Nevada’s high school graduates.

Martha Tittle, Lobbyist, Clark County School District, spoke in support of S.B. 15. She said the establishment of an advisory committee as described in this bill is highly desirable. She stated the bill would provide for improved credibility and communication on the proficiency testing program by including parents and community and business leaders on the committee.

Senator Raggio closed the hearing on S.B. 15 and opened the hearing on S.B. 158.

Marc Ratner, Executive Director, Nevada Athletic Commission, stated the commission is asking for a supplemental appropriation to the budget to pay for the two Mike Tyson hearings held regarding Mr. Tyson’s relicensure. He said the cost was a total of $18,500. He commented the commission did not have the legal right to make Mr. Tyson pay for the hearing. He pointed out there is a current bill draft requesting the right to charge back the cost of an applicant’s relicensing hearing. Mr. Ratner said the current budget did not provide the necessary funds. He explained the hearings had to be done with a "pool television" and that is what cost so much. The commission had to rent Cashman Field Center for the first hearing and Clark County Governmental Services building for the second hearing.

Senator Raggio asked whether fiscal staff has reviewed the expenditures. Dan Miles, Fiscal Analyst, LCB, replied yes. Senator Raggio inquired whether the funding is needed at this time. Mr. Ratner responded the appropriation needs to be made for the current budget year. Senator Raggio inquired whether there are any other problems in the budget through FY 1999. Mr. Rather answered no. Senator Raggio asked whether any other extraordinary expenses are expected this fiscal year. Mr. Ratner replied no.

Senator Mathews inquired whether additional monies will be needed for the next hearing. Luther Mack of Reno, a member of the Nevada Athletic Commission, concurred with Mr. Ratner that no additional funding will be required for Tyson hearings in FY 1999.

Senator Jacobsen asked what the hearings accomplished. Mr. Ratner replied there were more than 135 accredited media people at the hearing representing all manner of media. He said there were 20 satellite trucks and there was no question it was a "media circus." He noted there were approximately 300 people in attendance at each hearing. Senator Jacobsen inquired whether there was permission from the State Board of Examiners to hold the meetings. Mr. Ratner answered he talked to as many people as he could in advance of the hearings because the commission knew there were insufficient funds to hold the hearings unless additional funding were to become available. He pointed out the commission will run out of funds this fiscal year without the additional funding.

Senator Raggio stated that perhaps the authority to charge for the cost of relicensure should be included in this bill. Mr. Ratner replied the funds are needed by the end of March 1999. Senator Raggio said that if it is appropriate, the bill should be amended to provide the requested authority. He requested fiscal staff to confer with the Legal Division to see whether it would be appropriate to include a provision in this bill whereby, in the future, the Nevada Athletic Commission can recover the costs of hearings of this kind.

Senator Raggio closed the hearing on S.B. 158.

State Controller – Budget Page ELECTED-70 (Volume 1)

Budget Account 101-1130

Kathy Augustine, State Controller, handed out a copy of the current budget request for the controller’s office (Exhibit E). She said the two main items in the budget are continued funding for the Integrated Financial System (IFS), which was approved in the last legislative session, and the request for an office in Las Vegas. She explained the first phase of the IFS became operational on January 4, 1999, with a minimal general ledger which allows for only present business functions. She said this was done to mitigate the Year 2000 (Y2K) problem. She stated the next phase will develop the increased functionality in all agencies and should be completed by July 1, 1999.

Ms. Augustine said the controller’s office will have the responsibility to train agencies in processing and reporting their financial transactions. Additionally, there will be an implementation analysis that will assist agencies in evaluating their business processes to ensure the agencies are operating as efficiently as is practical with the new system.

Ms. Augustine pointed out the state controller’s office is the only constitutional office without a presence in Clark County. She said that with the implementation of the new IFS, there will be an increase in the accounting transactions originating from the Las Vegas area. She stated there will be 400 sites to coordinate for the IFS training of all agencies in the state.

Ken West, Chief Deputy Controller, Office of the Controller, explained that positions not included in the Governor’s budget are noted on the organization chart shown on page 5 of Exhibit E. He stated the assurance auditor function would most likely be taken care of by the consolidation of the payroll centers under the controller’s office, as noted in the Governor’s State of the State address. He said the position of Las Vegas administrator was eliminated in the Governor’s budget, as was a federal report accountant position.

Senator Raggio asked how much funding was requested for a Las Vegas office. Ms. Augustine answered the salary cost was approximately $45,000. Mr. West added the total cost requested in the budget was $55,267 in FY 2000 and $56,304 in FY 2001. He said that in addition to salary, this amount would cover office rental, supplies, and equipment.

Senator Raggio stated the question is, If the controller’s office has functioned in the past without a Las Vegas office, why, in this time of fiscal limitations, is it essential to consider a Las Vegas office in this biennium? Ms. Augustine responded there is no place in Clark County to provide IFS training to state agencies. She said that in the future the plan is to issue vendor checks from the Las Vegas office.

Senator Raggio asked whether the controller can operate effectively if the Las Vegas office is not approved this biennium. Ms. Augustine responded there would be greater transportation costs and possibly consideration would be given to renting training space. She added the Governor has indicated that if the Economic Forum has a more encouraging forecast at the May meeting, the Las Vegas list would be at the top of the list of priorities to be restored to the budget.

Mr. West called attention to the pages from the Governor’s budget, pages 6-9 (Exhibit E). He expressed agreement with the recommendations of the Governor.

Senator Raggio asked about the positions being requested for reclassification and what the justification is for the reclassifications. He also inquired whether the reclassifications have been submitted to the Department of Personnel. Ms. Augustine answered she had the same question and Don Hataway, Deputy Director, Budget Division, Department of Administration, told her that submission to the Department of Personnel would be done after the budget was approved. Mr. West indicated the reclassifications for several positions have been submitted to Personnel. He said the primary positions to be reclassified are a programmer position reclassified to Database Administrator, an Accountant Technician II to an Accountant Technician III, and an Accounting Clerk I to Accounting Clerk III.

Senator Raggio inquired about enhancement 850 (E-850) requesting five new positions and substantial training and operating expense. He asked what impact the IFS will have on the controller’s office and why the five new positions are required. Mr. West answered the IFS uses a new technology. He said positions were requested for programmers to help implement the IFS, for quality assurance and for day-to-day processing, and a position was also requested in vendor services. He stated agencies will have to do more than what is currently being done. Mr. West pointed out the controller’s office will need to provide additional assistance to agencies because of the increase in accounting and grant oversight being performed by the agencies.

Mr. West said an Information Specialist II is needed to provide functions that are currently being contracted for through the project. He stated the controller’s office has been running a system 24 hours a day but the office was only manned during the day. He said the setup of the new IFS will probably require an operator during the graveyard shift. He said the controller’s office is just now finding out what the changes in office procedures will need to be. Mr. West noted there have been many hours of overtime during January and February 1999 on the implementation of the system in the controller’s office alone.

Mr. West said the IFS is being implemented in such a way as to not interfere with an agency’s way of processing documents and transactions. He stated there is a data collection system so agencies can get their transactions keyed or their documents unloaded as they have in the past. He pointed out there is a lot of paper associated with this system and as the IFS is implemented and functionality is increased, the agencies will be responsible for financial transaction entry. He said this will eliminate the paper usage. He said the time involved in handling, storing, and transporting paper and in waiting on decisions will be reduced, thereby decreasing the turnaround time for an agency to have a check issued after implementing a payment voucher. Mr. West said the controller’s office acts as an IFS consultant to the agencies.

Mr. West said there are three positions in this budget to implement the IFS. Senator Raggio asked whether there are currently vacancies in the office. Mr. West answered there is one vacancy and that position will not be continued under the Governor’s recommendation. Senator Raggio inquired whether, with the new system, the existing personnel are capable and qualified to fill the responsibilities of these positions or whether they will have to be retrained.

Mr. West replied there is currently training on the IFS for individuals in the office. He said the system is procedural and an advanced degree is not required; however, many current employees do have advanced degrees. He stated the anticipation is that a person in the database administrator position will only stay two years and then go to employment elsewhere, so there will be a need to provide ongoing training for this position. Senator Raggio asked why, if data entry is to be shifted to the other agencies, there is a need to provide for that function in the controller’s office at the same level. Mr. West answered the office will be responsible for reviewing accounts receivable for the agencies, gathering data, and providing additional functions.

Ms. Augustine said the keypunch operator positions are being eliminated. She stated these employees could be retained for clerical services. She said there is currently only one secretary to serve a staff of 35. She called attention to funding for training in the budget. Senator Raggio asked whether the training will be done in office. Ms. Augustine responded most of the training will occur out of the office. She said some classes will be held in Reno and several employees will be sent to classes in San Francisco.

Senator Raggio asked whether details on the cost of training have been submitted to the budget office. Ms. Augustine answered yes.

Senator Raggio asked how complete the IFS will be with the requested infusion of approximately $17 million. Ms. Augustine replied it will take 4 years for the system to be fully implemented. Senator Raggio asked how much funding will be required. Mr. Comeaux interjected The Executive Budget includes a request for an additional $16.2 million, $10.5 million from the General Fund and $5.6 million from the Highway Fund. He said development of the IFS will be completed if that amount is appropriated. He stated there may still be some "fine tuning" to be done, but that amount of funding would complete the development as currently outlined.

Senator Raggio inquired about the 4 years to complete implementation. Mr. Comeaux answered that to fully implement the system with all of the state agencies will take some time. Senator Raggio asked what cost is involved. Mr. Comeaux explained that the equipment the agencies will need is included in the onetime appropriation. He said the additional cost will be the training costs. Senator Raggio asked whether there will be a request for the same kind of funding in the next 4 years as is currently being requested. Mr. Comeaux answered no.

Senator Rawson said that historically there has been a sense the Office of the State Treasurer and the Executive Branch have not always known how much funding is available for investments. He inquired about communication among the various offices. He said there are obviously reports showing information on how much money there is in the state. He asked what the controller’s policy is regarding this type of information. Ms. Augustine pointed out the treasurer last year invested over $19 billion. She said one problem discussed with the Governor is that there were no reconciliation statements more current than June 30, 1998.

Ms. Augustine stated her office has sent a request to all state agencies asking that all bank accounts be reconciled as of December 31, 1998. She said the agencies have been given a deadline of February 26, 1999. She noted some agencies have already responded. She said that with the IFS, the amount of money for investment will be more readily available. Senator Rawson inquired whether the reconciliations should be performed monthly. Ms. Augustine answered that in the past, reconciliations have been performed at the end of the fiscal year but agreed they should be done monthly. Senator Rawson asked whether there needs to be a change in the law to accomplish what needs to be done.

Mr. West explained that in the past, one of the problems with the old accounting system was the bank reconciliation system. He said the treasurer’s office would reconcile with the bank and the treasurer’s books, and the controller’s office was reconciling with the treasurer. He stated that with the new IFS, the bank reconciliation system is being designed for the controller’s books to reconcile with the bank, "as it always should have." He said the controller’s office has the responsibility of watching "cash per fund" and the treasurer’s office has the responsibility for the cash in the bank, and because of time lags there is not necessarily a correlation between the two. He stated the treasurer’s responsibilities are much more difficult.

Mr. West stated the deputy treasurer consulted with him last week to determine the amount of cash available for the remainder of this year and next year from the book entries and histories. He said this will be difficult. He explained the treasurer’s office always invests more than what is indicated on the books because of the delayed clearing of checks. Senator Rawson pointed out significant interest dollars can be lost if an effort is not made to "stay on top of" the situation. Mr. West said the investment forecast of cash available by the treasurer’s office for investment purposes is difficult to forecast. Senator Rawson stressed the finance committee needs to know if the committee’s help is needed. Ms. Augustine said any assistance in getting the agencies to reconcile the bank statements on a more timely basis would be appreciated.

Senator O’Donnell said he is concerned about the new computer the IFS is operating on. He asked whether there have been any degradation problems. Mr. West replied that implementation has gone smoothly. He said the system came on-line January 4, 1999, as it was supposed to and checks are being processed with only minor problems. He said he is not pleased with response and report generation, but the system is in the process of development. He explained that response time of the data warehouse is currently being improved. Senator O’Donnell asked whether the office is on the ES9000 computer. Mr. West replied, "No, they are on the IBM machine."

Ms. Augustine noted the biggest problem with the system is that some check stock had to be replaced because it was not compatible with the system. She said payroll should be on the system by April 1.

Senator Jacobsen said that as the chairman of the audit subcommittee he was informed there is $150 million in accounts receivable. He stated that Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau, indicated $50 million may never be collected. He said either another agency needs to be created or this responsibility needs to be assigned to one of the constitutional officers. He asked whether the controller’s office could handle this assignment. Ms. Augustine answered this function is among the responsibilities of her office. She said she has already spoken with some of the agencies that have very large accounts receivable. She pointed out the Nevada Department of Transportation is one of those. She said the controller’s office was not receiving word on the accounts as it should be so the attorney general’s office could be contacted to initiate collection. She stated she is trying to communicate with the agencies to let them know the controller’s office is available to assist with the agencies’ collection endeavors.

Ms. Augustine pointed out the attorney general has a bill regarding the collection of debts over $3,500. She said she thinks it should be $1,000. Senator Jacobsen said the audit subcommittee needs to find out what the accounts receivable are in each agency.

Senator Neal asked about the number of documents keyed into the financial system during FY 1998. He noted the cost was 49 cents a document. He asked when the agencies will key in their documents. Mr. West said it will take 4 years for all agencies to be on the new system. He pointed out the number of documents keyed in per person in the controller’s office will decrease because there will be positions added and the controller’s office will receive fewer documents to key in. He said that when an agency puts information into the system the document used will not be called a document, it will be known as a transaction. There will not be a paper document transmitted and stored.

Senator Neal noted the cost of keying in the documents is about $110,000. Ms. Augustine said the salary, plus benefits for the three keypunch employees, is calculated into the number of documents processed to arrive at the figure of 49 cents a document. Senator Neal asked whether this is the correct method of arriving at this figure. Mr. West answered it gives a consistent measure.

Senator Neal said that when one looks at the budget it seems the number of employees has not been reduced. Ms. Augustine affirmed that is the case. She reiterated the employees would be used in the office for other clerical functions.

Senator Neal asked what generally acceptable accounting principles (GAAP) means to the controller’s office. Mr. West explained the GAAP are a set of rules followed in accounting for the expenditures recorded and revenues recognized in a given fiscal year, what the liabilities are, how loans are accounted for and so forth. Senator Neal inquired whether this requires an office outside of the location where documents are keyed in and whether an auditor would be required. Mr. West replied there is not an auditor in the office, but accountants do have some audit capacities at the agencies to make sure the controller’s office receives the information needed to report the fiscal condition of the state. He said there is an independent audit of the state’s financial statements which is contracted through the LCB. Senator Neal said he noticed there is a request for a Payroll Assurance Auditor II and the request was not included in the Governor’s budget.

Ms. Augustine stated the controller’s office is responsible for payroll, and since there was no oversight of the payroll system an auditor was requested. She pointed out the Governor’s plan is to consolidate the payroll systems within the controller’s office. She said if the payroll system’s responsibilities are located in-house, there will no longer be a need for an auditor.

Office of the State Treasurer – Budget Page ELECTED-79 (Volume I)

Budget Account 101-1080

Brian Krolicki, State Treasurer, called attention to an award received last year by the treasurer’s office from the Nevada Taxpayers Association called the "Good Government Award." He pointed out this achievement was possible because of the efforts of the entire office staff.

Mr. Krolicki said the treasurer’s office has responsibility for overseeing, on a daily basis, over $2 billion in investments. He noted the general portfolio had earnings last fiscal year of $68 million and the local government investment pool generated approximately $21 million. He said $25 billion in cash management flowed through the state treasury in FY 1998 and debt management amounted to over $2 billion in long-term liabilities on the state’s balance sheet. He said that in FY 1998 the treasurer’s office directly administered the issuance of $378 million in new debt. Mr. Krolicki stated he is a member of the State Board of Finance, chaired by the Governor, and the chief deputy treasurer is secretary to the board. He said the administration of and recommendations to the board are generated from the treasurer’s office since the board’s secretary is in the treasurer’s office.

Mr. Krolicki said the budget is modest and austere, recognizing the condition of state finances. He stated no new positions or significant upgrades are being requested, with one exception. He pointed out $80,000 is requested for a software upgrade to the system which controls and monitors the investment portfolios for the state. He said it has been approved by the Department of Information Technology (DoIT) and the Governor’s Office. He explained the upgrade will allow for a Microsoft Windows capacity and interfacing with other systems, including the banks. He pointed out different interest rate environments can be modeled to help with making decisions when to invest. He said there is also a cash flow module that can be put with the upgrade which in today’s financial environment is especially crucial.

Mr. Krolicki stated that data will always be the challenge in cash management, but by having the cash flow module, "things can be done that were unable to be done in the past." He said he can accept the Governor’s recommendations on all budget items.

Senator Raggio inquired whether any changes are anticipated in investment policies. Mr. Krolicki answered the investment policy follows statutory requirements. He said legislation has been requested that relates to different kinds of investments, but for the most part he believes the current policy is good, makes sense, and is conservative "as it should be."

Senator Raggio asked whether Mr. Krolicki is familiar with the projections of the Economic Forum on investment income. He pointed out they are lower than in previous years and inquired whether there are any changes forthcoming on the level of investment income. Mr. Krolicki answered he believes the projections are sound, based on past experience. He said it is better to be conservative. He added another factor is what will be in the General Fund to be invested, to get the projected yields.

Senator Raggio asked what cooperative efforts are in place between state agencies to make sure there is not a problem with payroll. Mr. Krolicki replied there needs to be "incredible cooperation" between the treasurer’s, controller’s, and Governor’s offices. He pointed out that from his standpoint there is sufficient cash to cover any obligation the state has incurred. He said the problems occasionally arise in regard to "where the different funds are." He stated the controller’s office looks "more from the accounting side" at what is available in certain funds as opposed to the actual cash available. He emphasized the need to make sure there is enough cash available when major payments are due. He said this is reviewed daily. He added the requested software will assist this effort.

Senator Raggio asked whether the two offices can work together to make sure no situations of funds shortage occur. Mr. Krolicki assured the committee everything possible is being done to make things work.

Treasurer Higher Education Tuition Administration – Page ELECTED-83 (Volume 1) Budget Account 101-1081

Senator Raggio asked about the status of this account. Mr. Krolicki answered this program has been an unqualified success. He said the first enrollment period was finished late last year and approximately 2,800 children were enrolled. He stated there is most likely more cash on hand than originally anticipated. He said that for those on payment plans, the first payment was due February 15, 1999, and there is currently $2.5 million in the trust fund. The expectation is there will be $5.8 million in the fund by June 30. Mr. Krolicki pointed out the Legislature granted a $1.2 million loan from the General Fund to begin this program. He said that in FY 1998, $201,000 was reverted and the expectation is that on June 30, 1999, $150,000 will revert to the General Fund. He noted the trust fund will then have an $850,000 liability to the state. He called attention to a $25,000 payment to the General Fund shown in this budget.

Mr. Krolicki stated there needs to be $40 million in the trust fund to achieve self-sufficiency. He said that with the current enrollment alone, by 2001 there should be approximately $23 million in the fund. He said the program will sunset in 2001, as required by statute, unless renewed by the Legislature.

Senator Raggio asked how information about the program is being disseminated. Mr. Krolicki said the goal had been to have 3,000 enrollees because of the financial need to provide a critical mass in the trust fund to be able to start paying for certain things. He said there are 200 fewer enrollees than originally hoped for, but there is more money because more people chose the lump-sum prepayment option. He said an advertising agency has been retained through a competitive bid process and pamphlets, posters, television, and radio have been used to advertise. He stated a number of speeches have been given to a variety of audiences.

David Clapsaddle, Executive Director, Nevada Prepaid College Tuition Program, Office of the State Treasurer, testified the next enrollment period will be this fall and is expected to be as successful as the enrollment just completed. Mr. Krolicki added that one of the problems with the first enrollment period was that it occurred during the elections and there was a great deal of competition for radio and television advertising time.

Senator Raggio asked whether there is any legal liability for the program. Mr. Krolicki called attention to a similar program in New Jersey where someone has claimed to have some intellectual property and patenting on prepaid college tuitions. He said this has been talked about and litigated for many years throughout the United States. He stated other programs are being sued by the same individual for patent violation. He said this is the reason attorneys and counsel were hired to provide the program with the maximum protection should the case go forward. Mr. Krolicki stated arguments are currently being heard in the U.S. Supreme Court and a decision is anticipated in April. Mr. Clapsaddle stated a negative impact in Nevada is not anticipated.

Senator Raggio inquired who is representing Nevada. Mr. Clapsaddle replied the state is being represented by the attorney general’s office, as well as a contracted attorney who is expert in patent law. Senator Raggio asked whether this type of lawsuit has been successful elsewhere. Mr. Krolicki said this is the only suit to be filed.

Senator Raggio asked why a similar program failed in Wyoming. Mr. Clapsaddle said there was lack of interest in Wyoming. He stated this is very unusual and Wyoming is the only state he is aware of where this has occurred. Mr. Krolicki pointed out there needs to be an agency in charge of this program and such was not the case in Wyoming.

Senator Rawson asked about the loan from the General Fund and the amount that has been reverted. He wanted to know what the money was spent on. Mr. Krolicki responded most of the money was spent for professional outside services and to provide three employees for the program. He pointed out advertising and printing made up a large portion of the expenditures.

Senator Rawson referred to the Allodial Title Act passed last legislative session. He said regulations have not been developed and the act has not been implemented. He asked what needs to be done to get it started. Mr. Krolicki recalled allodial title was passed to provide an exemption on future property tax liabilities for individuals enrolling in the prepaid tuition program. He said that to determine how much someone has to pay in his or her lifetime to exempt these obligations is something that takes money to have someone do the actuarial work. A position needs to be dedicated exclusively to this program. Mr. Krolicki stated that although the legislation for the program was passed in 1997, funding was not provided for a position. He said allodial title funding is not part of the treasurer’s budget. Mr. Krolicki encouraged the Legislature to create funding for this program. He said his office will gladly implement the program, but resources are needed to pursue it.

Senator Rawson said the program has been established, but he has no figures indicating what funding is needed for implementation. John E. Adkins, Chief Deputy Treasurer, Office of the State Treasurer, testified that preliminary estimates to implement the program are approximately $600,000 for the first year and $400,000 the second year. He said the experience with the prepaid tuition helped in estimating the cost that will primarily be associated with professional services. He offered to provide a list of items so they could be verified and discussed. Senator Rawson inquired whether this will be a loan or a grant. Mr. Adkins responded he thinks it should be a loan so taxpayers do not bear the expense of the program. He pointed out seed money is needed to start the program but the capability is there to pay it back. Mr. Krolicki added those purchasing allodial title should be the ones paying for it.

Senator Rawson noted the prepaid tuition program was successful because it was marketed and the treasurer was excited about the program. He asked whether there will be someone in the treasurer’s office who will take the same interest in the allodial title program and "make it happen." Mr. Krolicki assured that if given this responsibility his office will promote the program to the best of its ability.

Municipal Bond Bank Revenue – Budget Page ELECTED-89 (Volume 1)

Budget Account 745-1086

Municipal Bond Bank Debt Service – Budget Page ELECTED-90 (Volume I)

Budget Account 395-1087

Mr. Krolicki stated the bond interest redemption fund, municipal bond bank revenue, and debt service budgets are self-evident. He said these are obligations that have been incurred by state or local governments. Senator Raggio asked whether there is anything unusual about the budgets this legislative session. Mr. Krolicki replied no.

Senator Raggio closed the hearing on the treasurer’s budget. He then provided a summary of S.B. 46 and S.B. 47.

Senator Raggio said this bill is a result of recommendations of the Legislative Committee on Education. He stated S.B. 46 would require a school district to pay a 5 percent salary increment to any teacher holding a certification issued by the National Board for Professional Teaching Standards. He pointed out the bill specifies the salary increase must be given in addition to any other salary increase to which the teacher may be entitled, and as long as the teacher maintains the certification, the salary increment would be paid. He said the school district would also be required to include in its annual report of revenue and expenditures the number of teachers receiving the increase. He noted the bill would become effective on July 1, 1999.

Senator Raggio explained the bill was recommended on the basis of testimony that indicated the National Board for Professional Teaching Standards provided a rigorous process to certify highly accomplished teachers. He said this is an independent, nonprofit, nonpartisan board whose mission is to establish high rigorous standards for what accomplished teachers should know and be able to teach. The standards were developed by committees of teachers and other experts and were reviewed extensively, both internally and during public comment periods, before being adopted by the board. The board operates a national voluntary system to assess and certify teachers who meet the standards.

Senator Raggio said that in recent years the certification has been recognized as a method of producing high-quality master-level teachers. He stated the certification is particularly pertinent in light of efforts to improve the quality and standards of education in Nevada. He called attention to an announcement by President Clinton, through the U.S. Secretary of Education, for a plan to license and continue licensure and enhancement of teacher’s capabilities. He said that while there may not be agreement with all of the implementation proposals, the goal is desirable.

Senator Raggio stated the education committee learned that a number of states have enacted legislation designed to encourage teachers to become board-certified, and different incentives for teachers have been utilized. He said the education committee felt board certification allows teachers to achieve distinction as professionals do in other fields, by meeting rigorous standards of performance. He pointed out that until recently the knowledge, skills, and accomplishments that add up to teaching excellence had not been defined. He said teachers seeking board certification complete a demanding demonstration of their knowledge and skills that takes about a year to complete.

Senator Raggio noted that candidates complete portfolios that include samples of students’ work, videotapes of lessons, and reflective commentary about the progress and problems in helping children learn. He explained this all takes place in the classroom and focuses on good teaching and student learning. The certification candidates take a set of essay examinations demonstrating their knowledge of academic content. Senator Raggio said trained assessors’ scrutinize the candidates’ work and apply standards-based criteria to the review process. He stressed the certification is an incentive to get more teachers into the category of high performance.

Senator Raggio stated that of the 1,836 teachers certified, none are in Nevada. No candidates from Nevada have registered in the program. This bill would encourage teachers to pursue this type of certification. The senator recalled testimony emphasizing that good teaching matters, especially for disadvantaged children.

Senator Raggio said the national board believes it can make a difference in how communities view teachers and how teachers view themselves, and how they go about strengthening practice throughout their career.

Senator Raggio asked for public comment on S.B. 46 and S.B. 47. He said S.B. 47 is the appropriation of $20,000 to the State Department of Education to reimburse up to $2,000 of the cost incurred by a teacher gaining certification by the National Board for Professional Teaching Standards. He said teachers wishing to obtain reimbursement file a statement of intent with their school district at least a year prior to anticipated certification.

Debbie Cahill stated that NSEA is in support of S.B. 47 and is very excited that Nevada will be taking this step to create incentives for teachers to move forward in the area of national certification and provide much-needed financial support. She said the cost for certification can be somewhat prohibitive.

Ms. Cahill endorsed the concept of S.B. 46 to recognize the achievement of teachers receiving certification; however, the 5 percent salary increment may be low. She said that while 5 percent is an incentive, 10 percent would be twice the incentive for teachers to move forward in the area of certification. She stated that the reason there is concern about the 5 percent is that in Los Angeles, when recent contracts were negotiated an incentive of 15 percent was included for teachers with national certification. She said other states have given incentives higher than 5 percent. She stressed that if the state is looking to create an incentive, recognize teachers, and also try to recruit teachers from other states, it must be competitive. She requested the incentive be increased to 10 percent. She said that if there is not an inclination to increase the incentive, this issue could be handled through negotiations. Ms. Cahill pointed out a benchmark could be created by making the language permissive, saying "a school district may add a minimum of 5 percent," which would set a minimum but would open the door to negotiations to increase that amount.

Senator Raggio said the problem with making the language permissive is that it could create a situation where the state’s school districts are competing with one another for hiring or retaining teachers.

Dr. Rheault spoke in support of S.B. 47 (Exhibit F). He provided copies of a brochure describing the national board certification process (Exhibit G). He said several national publications in the past year have criticized Nevada teacher standards because of the lack of any incentives for teachers within the state to seek certification. He stated it is important for states to provide an incentive for all teachers who meet the rigorous requirements of the certification process. Dr. Rheault said there may be a federal grant in the amount of $10,000 a year to assist Nevada teachers with the cost of certification. He stated Nevada needs to apply for the grant. He added that no more than half of the cost can be covered with federal dollars, which would be $1,000.

Dr. Rheault said he has contacted personnel in Clark County to organize a group to generate interest and perhaps have some applications by the fall of 1999.

Senator Raggio called attention to some differences among the states in the incentives. He said some states have onetime bonuses, but this bill would envision the incentive continuing as long as certification is maintained.

Concluding, Dr. Rheault said the Commission on Professional Standards has acted to provide incentives for certification. He stated the commission recently modified regulations to include national board-certified teachers in the reciprocity agreement, giving full reciprocity to teachers from any state if the teacher has a national certification. He said national certification is good for 10 years and if a teacher can show proof of a valid national certificate, the department will issue a 10-year teaching license. He pointed out that the work an individual has to submit to receive national certification can be used for license renewal credits. He stated only 44 percent of teachers trying for national certification actually receive a certificate.

Senator O’Donnell asked what would happen if a teacher is "topped out" on the salary schedule. Senator Raggio replied the incentive is an add-on to the salary that continues as long as certification is maintained. Senator O’Donnell stated he would have to excuse himself from any action on this bill because his wife is a teacher.

Senator Jacobsen stated this is a great program, but he does not see anything in the bill providing decertification for cause. Dr. Rheault pointed out the certificate has to be renewed every 10 years. Senator Jacobsen inquired whether the certificate would be posted in the classroom. D. Rheault responded it would seem the teacher would want to have the certificate posted.

Senator Raggio closed the hearings on S.B. 46 and S.B. 47.

Senator Raggio stated Senator Rawson, cochairman of the Joint Subcommittee on Human Resources K/12, made the suggestion for a meeting in Las Vegas, either the first or second week of March, to tour Department of Human Resources facilities. Senator Rawson said the Assembly members of the joint subcommittee are going to visit a number of facilities in southern Nevada and asked whether the finance committee would like to participate in those visits. Senator Raggio and Senator Jacobsen said they would be interested in participating on either weekend.

Senator Raggio called attention to a list of revisions to The Executive Budget (Exhibit H). He asked whether this represents an increase to the General Fund of approximately $540,000 in FY 2000 and $580,000 in FY 2001. Mr. Comeaux replied yes. Senator Raggio said the revisions will be considered when the respective budgets are reviewed.

Senator Raggio requested staff to order the amendment to S.B. 158 if appropriate, and if not the bill will be processed as written.

The meeting was adjourned at 10:20 a.m.

RESPECTFULLY SUBMITTED:

Patricia Hampton,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: