The Joint Subcommittee on Public Safety/Natural Resources/Transportation of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman Lawrence E. Jacobsen, at 8:10 a.m., on Thursday, March 11, 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 Lawrence E. Jacobsen, Chairman

Senator William R. O’Donnell

Senator Joseph M. Neal Jr.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Ms. Chris Giunchigliani, Chairman

Mrs. Vonne S. Chowning

Mr. John W. Marvel

Mr. Richard D. Perkins

Mr. Bob Price

STAFF MEMBERS PRESENT:

Jean Laird, Committee Secretary

OTHERS PRESENT:

Colorado River Commission – Budget Page CRC-1 (Volume 3)

Budget Account 296-4490

George Caan, Director, Colorado River Commission (CRC), testified this budget for CRC reflects important activities to preserve and enhance benefits from the Colorado River. He said CRC is a state agency charged with preserving and protecting water, power and environmental resources provided to Nevada from the Colorado River. He stated a board of seven members governs the agency. The Governor appoints four, including the chairman. The Board of Directors of the Southern Nevada Water Authority (SNWA) appoints three. Mr. Caan said the cooperative nature of the board membership is reflected in many activities currently provided jointly with SNWA to preserve and protect benefits from the river. He explained customers whom CRC directly serves fund the agency, which receives no state tax funds. He said CRC serves 12 power customers in southern Nevada, including the basic industries in Henderson, Overton Power District, Valley Electric Association, Lincoln County, Boulder City, the SNWA, and the Nevada Power Company.

Mr. Caan said CRC is basically organized in four different areas. The first is water resource management, whose purpose is to protect and ensure delivery of the water supply from the river. Mr. Caan noted Nevada is allocated 300,000 acre feet of Colorado River water. He indicated another purpose of the CRC is to look for additional water resources by working with other states throughout the Colorado River basin.

Mr. Caan stated Nevada benefits greatly from hydropower generated from the Colorado River dams from Glen Canyon to Hoover Dam to Parker-Davis projects. Nevada receives about 20 percent of the federal hydropower from the lower projects and is the fifth largest customer of the Western Area Power Administration (WAPA), which is the federal agency that markets hydropower from the river.

Mr. Caan said CRC is also involved in construction of power facilities. CRC has completed phase I of construction for the power delivery project designed and built to serve the new pumping facilities being constructed by the SNWA. The agency is actively engaged in procuring power supplies. Mr. Caan said CRC expects to be procuring up to 300 megawatts of power supplies over the next 5 years to support the pumping loads that will bring water through the new treatment facilities into the valley.

Regarding environmental management, Mr. Caan said the dams on the river have provided great storage for water and hydropower but have also affected the critical habitat in the lower basin. He explained it is important to preserve that habitat as well as to preserve the ability of Nevada’s citizens to acquire the water and power resources. Nevada (through CRC), other states, and the federal government are working together to develop a 50-year program to restore critical habitat in the lower basin to protect threatened and endangered species. Mr. Caan added this is critical for future ability to maintain the river and power operations Nevada currently relies on.

Mr. Caan said The Executive Budget preserves the activities to defend Nevada’s interests in all these areas. He added it also continues to improve the organizational efficiency that, as director, he has tried to achieve so Nevada can continue to preserve these important benefits. He said the philosophy of the CRC has been and will continue to be having a fairly small competent staff organized effectively, acquiring technical expertise through consulting firms.

Mr. Caan pointed out the budget proposes moving three senior positions from classified to unclassified service. He explained this is in line with his intention, stated earlier, to improve organizational efficiency.

Mr. Caan said the out-of-state travel request is significant. The reason is that the river flows 1,400 miles through seven states throughout the Southwest, and to preserve and protect Nevada’s interest in the river it is absolutely necessary for CRC to be present at the variety of meetings concerning water, power, and environmental resources. Nevada has the smallest allocation of water resources from the Colorado River and must work with the other states to preserve that allocation, Mr. Caan emphasized.

Assemblyman John W. Marvel asked how deregulation would affect CRC. Mr. Caan referred to Assembly Bill (A.B.) 366 of the Sixty-ninth Session.

Mr. Caan said section 50 of the bill applied to CRC. It provided that CRC could continue to serve existing customers and could continue to serve the pumping loads of SNWA. It also provided that for CRC to serve anyone else, it would appear before the Public Utilities Commission of Nevada (PUC) for a license. He said deregulation is establishing a competitive environment to access resources and CRC is able to take advantage of that. Current legislation only allows CRC to provide for its current base of customers, unless it goes before the Public Utilities Commission of Nevada for a license.

Mr. Marvel asked whether CRC has the capacity for increased production of power. Mr. Caan responded CRC does have the capacity to acquire power. He explained CRC owns no power generation itself but has entitlements to power generation from Hoover and Parker-Davis. CRC does not construct or have equity interest in power generation but does have latent capacity to bring more energy to Nevada. In fact, Mr. Caan said, diversity plus volume equals value in this procurement. The more power CRC brings online, the better deals CRC can get. CRC has more than a dozen power providers under contract, allowing CRC to contract for supplemental resources. Mr. Caan noted all the hydropower is fully allocated. CRC provides supplemental energy to existing customers and goes to market for power for the SNWA.

Douglas Beatty, Chief Accountant, Colorado River Commission, informed the committee CRC receives no tax funds or General Fund allocations. He said an administrative charge on the sale of power and an indirect charge on the sale of water support the commission. He explained there are some minor miscellaneous revenues from small sales of water to small water users and a small amount of interest income. CRC also receives revenue from the sale of CRC land in Laughlin, but that has been flat for a few years. Mr. Beatty noted no revenues from land sales are projected in this budget right now.

Mr. Beatty referenced Exhibit C, "CRC Organizational Chart," which shows the five departments. He said each department of CRC was asked for input into the budget when it was being developed, particularly for travel cost projections. Travel is important considering the forums in which CRC operates, he noted.

Mr. Caan described the budget process for CRC. He said that once senior staff review the department requests and the director approves them, a draft budget is sent to all the customers mentioned previously by Mr. Caan. The customers review the budgets and the budgets are discussed at the regular monthly customer meetings. When a budget is agreed upon, it is presented to the commission in draft form. At least one month is allowed for public comment, after which the commission adopts a budget. The budget is then forwarded to the state budget office. Mr. Caan reiterated the CRC budget is thoroughly reviewed by customers prior to being submitted to the state.

Senator Neal referenced the out-of-state and in-state travel. He noted the total was $48,000 last year and asked what kind of travel this represents. Mr. Caan replied there are meetings of the Western State Water Council, the Nevada Water Resources Association, other committees and subcommittees dealing with river operations, dam operations, the Army Corps of Engineers, and flood control. There are meetings dealing with storage of the river from Glen Canyon down through Hoover Dam and Lake Mead, which provide a balanced allocation of water. There are technical issues that must be addressed on a regular basis. There are political issues that involve dealings with the United States Congress, the Nevada Legislature, and various states’ governors on how to develop water in the West. He added there are continual conflicts among the federal, state, and local governments on water issues.

Senator Neal asked for the average number of meetings outside the state in a year. Mr. Beatty said someone is in travel status about three times a week. He said on the "water side of the house," CRC is part of the seven basin states. He testified CRC meets a lot with states in the lower basin, which include California, Nevada, and Arizona. It does not meet as often with the upper-basin states, which are Wyoming and Utah, but staff do have to go to that region sometimes. Generally, Mr. Beatty said, CRC meets at least once and sometimes twice a month with the lower-basin states, rotating from state to state. Some of the committees involving the lower-basin states have subcommittee technical groups which meet once or twice a month also.

Senator Neal asked the agency to identify the positions on the organizational chart that travel. Mr. Caan said he himself travels out of state two or three times a week, usually to Phoenix. He explained Phoenix is the headquarters of WAPA, which deals with all the hydropower issues. Mr. Caan said the CRC division water chief and staff also travel. The environmental programs manager, who is responsible for all environmental work, travels frequently on issues regarding the Colorado River Basin Salinity Control Forum, which is a treaty with Mexico. The managers of the environmental programs, water resources, and hydropower operations work on the power delivery project, including the facilities and operation. Mr. Caan said these managers must deal with the WAPA, which owns the complement to the transformers CRC is constructing. He said interconnection agreements must be negotiated and transmission planning must occur. The senior staff attend, but because CRC is such a small organization, it is necessary to rely on the people who work for senior staff to participate in a variety of the subcommittees.

Senator Neal asked whether WAPA has an office in southern Nevada. Mr. Caan responded it does not. He said the Desert/Southwest region is headquartered in Phoenix and there are Rocky Mountain regional offices in Colorado and in Montana. He noted the Bureau of Reclamation has an office in Boulder City, but WAPA does not. Mr. Beatty explained WAPA formerly had an office in Boulder City.

Senator Jacobsen called for discussion of the power delivery plant. Mr. Beatty said the power delivery plant is nearing completion. He added the budget recommends using an existing enterprise fund for financial recordkeeping. The fund would be used to record the purchase and sale of electric power and transmission, account for bonds sold to construct the power system, and record expenses related to operations and maintenance of the system components.

Senator Jacobsen voiced concern regarding future water and power supply and he indicated planning for the future is important. He said the committee wants to be sure CRC is seeking additional water and power rights. Mr. Caan responded the reason CRC is constructing this power delivery project is to ensure the reliability of the delivery of water already allocated to Nevada. He added the project is meant to enhance the reliability and to provide access for the SNWA to the entire western energy interconnection. He said this method provides the most affordable power supplies. The SNWA needed to be sure it had sufficient transmission capacity and access to energy supplies. Mr. Caan noted half the cost of water is the energy to supply it.

Mr. Caan stated CRC will continue to construct facilities. It has completed the major substations and a joint project with Nevada Power Company is now under way. This joint project is to construct 26 miles of a 230 KV (kilowatt voltage) transmission line to serve the water authority and to provide more import capability for southern Nevada. Mr. Caan testified this saves the state bonding money by building joint transmission towers with each of the two parties placing conductors on those towers. Both parties benefit from the collaboration.

Senator Jacobsen asked whether the CRC has a film showing the actual structures. Mr. Caan said he did not but would put together a photo montage.

Senator Neal asked what is happening in terms of securing additional water from the Colorado River. In response, Mr. Caan referenced the Arizona Water Bank, which is a creation of the Arizona State Legislature. He said the Arizona Water Bank allows Arizona to bank water from the river for future acquisition when Arizona does not need its full allocation. It also provides for other states, including Nevada and California, to bank unused water allocations and later draw out the water. CRC has a positive working relationship with Arizona and Arizona is supportive of Nevada’s interests, Mr. Caan said.

Mr. Caan informed the committee CRC is planning to develop a formal agreement with Arizona to bank water as an interim solution to future needs. He said that in order for states to complete the water banking agreement, the U.S. Secretary of the Interior must issue rules. To draw "banked" water out of Lake Mead in the future, Nevada must have a specific guarantee. Mr. Caan said the rules are still "sitting on someone’s desk" at the Bureau of Reclamation. CRC is hopeful the rules will come out in the near future and is still working towards that end. Mr. Caan testified the proposal is a good one which CRC has supported for many years. He reiterated that it provides an interim solution to extend the ability to deliver water.

Regarding the more distant future, Mr. Caan said CRC is looking at opportunities for water marketing, water leasing, and interstate transactions that overcome the institutional barriers presented by laws from the early 1900s. He said CRC is optimistic that with a patient and supportive approach, Nevada will arrive at solutions to get the water needed. For now the Arizona Water Bank is CRC’s major focus.

Senator Neal said the SNWA claims it returns about 40 percent of the flow it takes from Lake Mead and asked whether that is correct. Mr. Caan said that is correct, although he would need to check the exact percent. He explained those return flows allow Nevada to divert additional water from Lake Mead.

Senator Neal asked how feasible it would be to add the surface water from the rain as a credit for southern Nevada. Mr. Caan said that while the question is a good one, he doubts it is feasible to acquire additional water resources from Lake Mead that are already fully apportioned. There are only 7.5 million acre feet allowed to be divided among the states. He said getting more water out of the lake involves discussion with six other states and would be difficult, although not impossible. Senator Neal asked whether anyone is talking to the Secretary of the Interior about this possibility. Mr. Caan responded he has no personal knowledge of such conversations.

Senator Jacobsen asked for a summary of the Arizona Water Bank. Mr. Caan said he first needed to give a background on how the water is divided among the states. The lower basin (Arizona, California, and Nevada) has entitlement to 7.5 million acre feet of water. California’s entitlement is 4.4 million acre feet. Arizona’s entitlement is 2.8 million acre feet. Nevada’s entitlement is 0.3 million acre feet. Mr. Caan explained that California, which now uses 5.2 million acre feet, exceeds its allocation, but other states have used less than their full entitlement, including Nevada.

Continuing, Mr. Caan explained that according to the law of the river governing how water is divided and used, if a state does not use its apportionment, other states can use it until that state needs it. California has been using what Nevada and Arizona have not been using. However, the Southwest is growing and CRC expects Nevada and Arizona to begin using their full entitlements. To prepare, he explained, Arizona developed the Arizona Water Bank, which will store water in underground aquifers that can later be pumped out for the irrigation districts. In summary, Mr. Caan said, it is a bank to store water for later use.

Mr. Caan informed the committee the bank also created an opportunity for Nevada to bank water. Nevada would bank water in Arizona’s aquifer bank, but when needed, instead of pumping the water back to Nevada, Nevada would just take from Lake Mead that same amount of water. Nevada would pay Arizona to bank and withdraw the water. Mr. Caan explained there would be no pipeline from Arizona to Nevada to pipe water, as some people have thought.

Mr. Caan pointed out the water bank is an example of states working together cooperatively. He said this is an example of the kind of things that could be done in the future.

Senator Jacobsen referenced the proposed salary increases in the CRC budget. He said they appear to be somewhat high considering Nevada is faced with not being able to provide any raises for state employees. Mr. Caan asked whether Senator Jacobsen was referring to the positions CRC proposes to move from classified service to unclassified service. He said the philosophy of the commission, which he supports, is to have a small organization of well-paid staff, using consultants where needed. This keeps the organization fairly lean and flat. There are only 24 positions, 2 of which are deputies attorney general that do not report to CRC. Mr. Caan said CRC is a small organization with a large mission and his experience tells him to keep it small and keep it focused. He said he also desires to maintain equity among the senior positions, since he relies on them to conduct the business and to act on his behalf in the various forums that have been discussed here today.

Mr. Caan explained the organizational plan is to have three key positions: the division head for water, the division head for power, and the division head for administrative services.

Mr. Caan said the position of division head for water was originally developed because CRC was the operator of the Southern Nevada Water System prior to the transfer legislation that occurred. At that time this position was the chief engineer. CRC is no longer the operator of the system but is the lead state agency negotiating for water resources. That prompted the change in the nature of the position and a change in the salary to assure the best talent for the important issues.

Regarding power operations, Mr. Caan said CRC is not just involved in hydropower operations but also in major power delivery projects such as delivering power to the new pumping systems. He noted this new role requires a different level of expertise. That senior-level position is currently vacant and CRC has not been able to fill it. He added that he stopped trying to fill it after two or three attempts. He explained this department of CRC is now operating as two independent divisions with the help of a consultant. The plan for the future is to consolidate those positions into one lead position. That is the reason for CRC’s proposal for the position of division head for power delivery.

Mr. Caan said he also relies equally on the other senior position for Finance and Administration and all three of the positions have the same level of responsibility in the different areas of work.

Senator Jacobsen asked for discussion on the move of the CRC office from the Grant Sawyer State Office Building. Mr. Beatty replied the move is not going to happen. He said CRC had earlier been notified it would be required to move out of the building to allow for expansion of another, larger agency. He said that is apparently no longer planned and there is no need for the CRC space, so it will not be necessary to move.

Senator Jacobsen asked for comment on the Fort Mojave Development Fund, including the acreage for sale and CRC’s ultimate plans. Mr. Beatty responded there are about 9,000 acres of the initial allocation remaining in the Fort Mojave Transfer Area, which is near Laughlin. He said it is desert land and has no water, except for a small section that borders the river. He added it is on the other side of the road, away from the river, and is not really prime land for development. Mr. Beatty explained growth in Laughlin has been fairly flat for four or five years. There have been only a few inquiries on some of the properties. He pointed out a modest funding increase is proposed in this budget to work with the local Laughlin officials to better market the land.

Senator Jacobsen noted that when he travels through Laughlin, it appears to him that land is at a premium. Mr. Beatty replied there is prime property on the river on which a private party planned to build a casino, but it unfortunately went into bankruptcy and CRC has that property back. He said Paine-Webber owned the adjacent property for a long time and attempted to market both properties together. Although Paine-Webber was doing an excellent job of actively marketing and trying to find a buyer, even they failed and abandoned the effort. He noted that since it is beautiful property CRC does not plan to "give it away" and can hold on to it as long as necessary for a good selling price.

Senator Neal asked how much land is under CRC’s disposal. Mr. Beatty responded CRC just has the 9,000 acres in Fort Mojave previously discussed. He said CRC transferred the El Dorado Valley property to Boulder City several years ago. He explained CRC was only given responsibility for El Dorado Valley and Fort Mojave and all that is left is Fort Mojave. Senator Neal asked whether CRC anticipates being in the land business again. Mr. Beatty replied it does not, unless the Legislature directs the agency to be.

Senator Jacobsen asked whether there is currently a surplus amount of power in the West. Mr. Caan replied that at times during the year there is, particularly when the runoff occurs in the early spring. During the hot summer season the power market is tight and prices are high. There is very little new capacity for power generation coming on-line immediately, but there is a significant amount under construction for the future. Mr. Caan said there is a new power plant being constructed outside Boulder City and there are a number of new power plants being constructed in the Southwest. He said this new construction would hopefully alleviate some of the price volatility experienced during the summer. Mr. Caan summarized by saying that in general, at times during the year there is a lot of power and it is cheap, but when the demand is high and the supply is low, that is when there is the most price volatility.

Senator Jacobsen asked whether CRC experiences any problems with the Office of the State Treasurer with any of the funds. Mr. Beatty responded there have been absolutely no problems.

Senator Neal asked whether CRC is considered a public power entity. Mr. Caan replied CRC is on the borderline of being a public power entity. He said CRC does all the things that look like public power but does not "own generation," although that is not necessary to be a public power entity. CRC considers itself the public power entity for federal hydropower, public power consumers, and large power consumers, such as the new system SNWA is constructing. CRC is the only utility provider for the industries in Henderson but provides only a portion of the energy for the other utilities. CRC is a mix of several different things, including power aggregator, distribution company, and a utility.

Senator Neal asked what CRC’s relationship is to the Valley and Overton Power District. Mr. Caan said approximately 30 or 40 percent of power resources the Valley and Overton Power District provides to its community comes from federal hydropower. The power district contracts with CRC to provide that power. CRC purchases power from the federal government and sells it to the various rural cooperatives to make up a portion of their power supplies.

Senator Neal asked whether that is essentially where CRC gets its money to operate. Mr. Caan said CRC gets its money from all kilowatt-hours sold to all the customers already mentioned. He said there is an administrative charge added to each kilowatt-hour to cover operation costs. Senator Neal asked the cost per kilowatt-hour. Mr. Beatty responded that $.00144 is added to each kilowatt-hour to cover administrative costs. Mr. Caan said CRC is a small organization and will stay that way. The administrative charge is generated from a budget reviewed and approved by CRC customers, so the customers know and can assess what CRC does. CRC keeps the administrative charge as low as possible.

Mr. Caan said CRC must also be in the forefront of protecting these resources because the resources are extremely beneficial to these communities. CRC is representative of the State of Nevada in negotiations and protects its customer’s interests. That is what the customers pay for in addition to the operation.

Senator Neal asked whether CRC sells any power to Nevada Power. Mr. Caan replied Nevada Power is CRC’s largest customer for Hoover Dam power. Senator Neal asked what the cost is to Nevada Power per kilowatt-hour. Mr. Caan said he does not know precisely, but it is under $.02. Senator Neal said his power bill has been "pretty high" lately. Mr. Caan said it is not the fault of CRC. In fact, he said, the efforts of CRC keep it lower than it would otherwise be. Nevada Power gains a direct benefit from the hydropower, not just from the cost of the power, which is actually calculated according to a Public Utilities Commission of Nevada rate case.

Senator Neal pointed out his questions are not a criticism of CRC because he thinks they are providing a good service, particularly for the rural cooperatives. He added the rural areas would be hard-pressed to acquire that power if CRC did not stand as purchasing agent for them. Mr. Beatty noted CRC is a substantial portion of rural Nevada’s electric resource. Conversely, CRC provides only 3 to 5 percent of Nevada Power’s electricity. He noted Nevada Power’s other suppliers push that price up, not CRC.

DEPARTMENT OF MOTOR VEHICLES AND PUBLIC SAFETY

John Drew, Acting Director, Department of Motor Vehicles and Public Safety, said Donna West and other motor vehicle staff will continue the presentation on the budgets that pertain to Project Genesis and the reorganization or realignment that was discussed during the last budget hearing.

DMV, Project Genesis – Budget Page DMV-80 (Volume 3)

Budget Account 201-4739

Donna C. West, Project Manager, Project Genesis, Department of Motor Vehicles and Public Safety, reminded the committee this budget account was created last legislative session to enable the department to track costs related to Genesis. She said the project budget currently funds the 7 core team positions, the 13 information systems (IS) positions, and associated costs. She added that all the funding is from the Highway Fund.

Ms. West said the Genesis budget, unlike the other department budgets, does not have performance indicators. However, she explained, the department uses a comprehensive work plan to track the progress of the Genesis project. The department produces monthly status reports written against the project plan and measures progress. She said that through work with the Interim Finance Committee (IFC) subcommittee, the department set out benchmarks, or "go/no go" decision points, around key activities for development of software, procurement of hardware, and implementation of the application and organizational changes.

Ms. West explained The Executive Budget recommends continuation of Project Genesis through the next biennium. She said the budget includes out-of-state travel for one project team member to attend workshops and conferences of the American Association of Motor Vehicle Administrators (AAMVA). She noted the Project Genesis team has worked closely with AAMVA during the life of the project. During phase I, the team visited three states to determine what worked on the other states’ reengineering efforts and large-scale technology projects. She said the Project Genesis team took advantage of what other states learned.

Ms. West indicated the team worked closely with AAMVA during phase II, consulting with them on technology standards for such things as bar codes and magnetic strip readers. She said the team also worked with AAMVA members, such as AAMVANET (American Association of Motor Vehicle Administrators Network) and member jurisdictions, to review hardware, software, network architecture, implementation plans, and data conversion plans.

Ms. West explained the budget also recommends in-state travel for two members of the core team to travel from Las Vegas to Carson City to continue project management and testing for the remainder of phase II and the beginning of phase III, during which enabling technology will be added.

Ms. West stated this decision unit includes reserve funds for reclassifications of positions to implement the organizational realignment discussed at the previous hearing. She said that when the department originally calculated the projected cost with the IFC subcommittee, it estimated the cost at between $500,000 and $750,000. She noted those estimates were based on proposed classifications and assumptions employees would be paid at the higher employer-employee paid retirement plan and that employees would be at the top pay step.

Ms. West explained that as the DMV&PS worked with the state Department of Personnel, DMV&PS clearly defined the classification costs. She said that in working with the budget office during budget preparation, the department reduced the estimate to $200,000 in Fiscal Year (FY) 2000 and $210,000 in FY 2001. She remarked work with the Department of Personnel has continued and the department has identified employees for the new roles in the proposed organization. As work continues, the department is able to refine and reduce cost estimates for the organizational realignment.

Ms. West explained this decision unit transfers 6 of the information services positions from the Project Genesis budget to the department’s automation budget. She said this is due to the change in the staff’s role from development of the new application to maintenance and improvement of the Genesis application after implementation.

Senator Jacobsen noted the committee is having difficulties because the information provided by the department to the subcommittee does not coincide with information provided by the department to legislative staff. He noted the committee has placed emphasis on performance indicators and is expecting to see measures of results. He indicated a chart which represents anticipated milestones and completion dates would also be helpful. Ms. West said the department would provide the project work plan for phase B and phase C as the project moves toward implementation. She noted it would be information similar to what has been provided to the IFC subcommittee. Senator Jacobsen requested the department to include at the bottom of the chart what the goal is and when it becomes operational. Ms. West responded those dates are on the charts already prepared.

Assemblywoman Chris Giunchigliani asked whether the department is in the process of reworking its budget. Ms. West indicated the department is. Ms. Giunchigliani suggested to the committee there is no purpose in this hearing if the budget is going to be reworked. If there is a reworked budget, none of the information from this hearing will be pertinent and the committee will have to redo everything.

Senator O'Donnell pointed out there are questions outside the budget that could be addressed. He noted examples would be the department’s proceedings in the programming functions, how the department is dealing with the Department of Information Technology (DoIT), and whether the department is proceeding on time with Project Genesis.

Ms. Giunchigliani agreed and indicated the committee needs to hear from the department whether the fact that deliverables were late and the additional problems in automation caused the need to rework the budget.

Ms. West explained the reason the department is making changes right now is the evolution of the process towards realignment. She said that back in August 1998 the department submitted a budget to the budget office that included decision modules to implement transfers. She noted the transfer modules were based on the best information available at that time. Ms. West commented that since August 1998 the department has been able to identify the four administrators and the administrators have reviewed the organization to determine where personnel should be located in the realigned organization. She said those ideas differ slightly from what was submitted in August 1998 but the bottom line of the budget will not change. Ms. West stated the only budget number that is still being refined is the actual cost of the realignment.

Ms. Giunchigliani asked whether people have been told, "This is the job you will be getting under the reorganization." Ms. West replied employees have been informed what role each would play if the proposed organization were approved. In working through the process with the Department of Personnel, DMV&PS included in the announcements for new positions that they are contingent on the Legislature’s approving the reorganization. She said the reason the department did that is twofold. One is to allow the department to have an organization ready on July 1, 1999, if it is approved. The other is to properly identify individuals for training programs necessary to implement the Genesis system.

Ms. Giunchigliani said the chairman of the IFC subcommittee, former Assemblyman Jack Close, was clear that until this Legislature determines the realignment, the department was not to make commitments to people about positions. Ms. West said that is not the understanding she had. She said the understanding she had from the September 22, 1998, subcommittee meeting was the department could proceed with the process of identifying staff. She emphasized no one is guaranteed a position, because the organization has not been approved.

Ms. West reiterated the necessity for staff to understand their potential role in the new organization for the department to have the organization ready, if it is approved. Ms. Giunchigliani said her recollection is that Mr. Close stated he "cautioned with a series of implementation dates coming up that the department should not go out and advertise a large number of positions until approval has been given." She asked whether the department has advertised. Ms. West responded the department has not advertised outside the agency but has done internal recruitment for 4 administrators and 14 managers.

Ms. Giunchigliani suggested the committee proceed with a select number of questions regarding automation. She asked when the department plans to have the revised budget completed. Ms. West said it would be completed in the following week. Ms. Giunchigliani said the legislative fiscal staff would still have time to interpret it and the committee would have to reconvene on this budget. She proposed that the committee select a few questions to cover at this time and postpone reviewing the entire budget. She noted Senator O'Donnell had brought up pertinent questions the committee should consider. She remarked she had other things to do more worthwhile than sitting through an entire budget hearing only to do it again in 2 weeks.

Senator Jacobsen said this subject is so voluminous the committee should garner as much information as possible today. He pointed out the committee is almost "flying blind" regarding this budget and the reorganization. He requested the department develop a chart with administrators’ and managers’ names, regions and responsibilities. Ms. West referenced the proposed organizational charts (Exhibit D.) that show the four new divisions proposed and identify who would be placed in each position if the organization were approved. She said the charts should provide an impression of the functionality in each division.

Ms. West further explained it is the intention of the department to again present certain parts of the Microsoft Power Point presentation from the last hearing, so everyone has a common understanding of the four divisions being proposed. Senator Jacobsen asked whether that would be the department’s final proposal. Ms. West said there would be some retooling resulting from the process the department is working through with the budget office. Senator Jacobsen asked Ms. West to identify the employee names as she itemized the positions on the organizational chart. Ms. West said the department could at least indicate the employees identified to become the 4 administrators and the 14 managers.

Senator Jacobsen asked the committee members whether they wanted to continue to ask questions regarding this budget. Senator O'Donnell suggested the committee proceed on a limited basis. Ms. Giunchigliani suggested the committee address the issues brought up earlier by Senator O’Donnell. Senator Jacobsen indicated the committee would proceed until those issues were covered or until it became necessary to adjourn for floor session.

Senator O'Donnell said he would like to talk about the interface between DoIT and Project Genesis. He asked whether there are any problems in coordinating DoIT’s computer system with the department’s programming, and whether DoIT is delaying the project in any way. He asked whether the conversion to the R25 system is completed. In summary, he asked for an overall status report.

Ms. West responded the department has been working closely with DoIT. She added DoIT is aware of the programs and software the department will be using and DoIT has been installing those as necessary. She said the department recently moved from the ES9000 computer to the R25 computer. She noted the move was made without negative impact to the project. It occurred during a weekend when no one was on-site doing coding or programming and there were no problems. She mentioned there have been some performance issues on and off with DoIT, but there has been good response whenever there is a performance issue. Two professional staff from DoIT attend Project Genesis weekly status and implementation meetings and those issues are discussed. Ms. West added the department has been tracking the problems through the issue log.

Senator O'Donnell asked how long it currently takes to compile a program. Ms. West responded on average it takes seconds, but there are times when it takes more than an hour. She noted she had not had opportunity to review a report with that information since the conversion to the R25. She pointed out the department has been provided with initiators that give the department direct access, which has sped things up. She reiterated the department has on and off had problems with "compiles" and had delays because of "looping."

Senator O'Donnell asked whether the department would meet the scheduled March 29, 1999, date for the first pilot project. Ms. West said the pilot project, which is occupational and business licensing, is currently on track. User-acceptance testing has been in process for about 2 weeks and the department is still set to implement the pilot on March 29, 1999.

Senator O'Donnell asked whether Ms. West is comfortable with the conversion to the R25. Ms. West responded the hardware conversion went smoothly and added the department is still waiting for a schedule of what is going to happen next. She explained there is an operating system change and the software is going to change. She said the department is more concerned about the timing and impact of those changes. Ms. West said the department is working with DoIT to get DoIT’s time schedule and is evaluating what the impacts will be.

Ms. West reminded the committee the department set money aside for any additional work caused by the change in the operating system software. Senator O'Donnell asked whether the R25 mainframe was purchased with an operating system. Ms. West said it was, but it is necessary to upgrade to a more recent version of the R25 operating system. Senator O'Donnell asked whose choice that was. Ms. West believed it was decided through DoIT. Senator O'Donnell asked whether DMV&PS had input into that decision. Ms. West responded both departments talked about the changes and how those changes would impact the project. She noted, however, it is DoIT’s system and DoIT has made the decisions, working closely with the department. She said DoIT has also kept the department informed when the upgrade would be installed and what DoIT believed the impacts would be to help the department prepare.

Upon request, Senator O'Donnell explained to the committee the R25 is the new computer purchased to upgrade the ES9000. He said this is a bone of contention because the requested R36 computer is in addition to the R25. He said the R36 computer was supposed to replace the ES9000 but he had learned the Nevada Operations Multi Automated Data Systems (NOMADS) needs to be run on the ES9000. He pointed out there will now be three mainframe computers Nevada is paying for rather than just two. The senator asserted the state’s philosophy should be to push the computing power out to the field and out to the agencies to do their own processing. He explained there is major response-time degradation because there are so many users and terminals on a giant mainframe and critical links that are breaking down because communication lines are failing. He said these problems are occurring throughout the state.

Ms. Giunchigliani asked whether Project Genesis is on time and within budget. Ms. West said that at this point the project is on schedule and within budget.

Ms. Giunchigliani said she had information that deliverables had not been on time and there had been some severe problems with them. She asked whether Project Genesis staff involve the Information Management Bureau (IMB) at all. Ms. West responded IMB reviews all technical deliverables related to the project. Ms. Giunchigliani asked whether IMB approves deliverables. Ms. West replied IMB provides comments through the IS staff related to the project and those comments are included in the response the department sends to the consulting firm, Deloitte and Touche. Ms. Giunchigliani noted that is a two-step process and asked which group has more expertise. Ms. West replied the IS staff brought on board in the Project Genesis budget account work on the project every day. She said the IS staff are there for the purpose of knowledge transfer and they work closely with the consulting firm and the programmers. She added the IS staff have the most current information on what is happening on the project and where the project is heading.

Ms. Giunchigliani asked whether IS must accept IMB’s recommendations if the bureau points out problems and suggests changes on the technical side. Ms. West responded all recommendations are accepted from IMB. However, she explained, some staff in IMB do not know all the components of the new system. IS staff hired for Project Genesis were hired because they have more programming knowledge and background related to the system the department is developing. The IMB staff are more familiar with the current environment.

Ms. Giunchigliani asked what role the IMB staff will have when the "reorganization of the reorganization" of Project Genesis is finalized, if ever. Ms. West responded the IMB staff have been involved in installing the hardware and reviewing deliverables and are involved now. Ms. Giunchigliani asked whether IMB staff are involved in the weekly meetings. Ms. West said IMB staff are involved in the weekly status and implementation meetings. She noted that as members of IMB have time available, they are working on Project Genesis with IS staff and Deloitte and Touche to facilitate their knowledge transfer. This is necessary so when the project is implemented in August 1999, IMB staff, as well as Project Genesis IS staff, will know the new environment.

Ms. Giunchigliani asked how many deliverables have been totally rejected or modified. Ms. West said every deliverable has been returned with comments for modification. In most cases there are two or three versions before it is approved. Ms. Giunchigliani said it was her understanding IMB made over 100 recommended changes to one deliverable and none were accepted. Ms. West said she was unaware of any deliverable with that many comments from any one group of users. She noted sometimes there were multiple questions and Deloitte and Touche typically provided an appendix of responses to those questions. She added that sometimes issues were identified and not resolved at the time the deliverable was finalized and those are worked on as the department progresses through the project schedule.

Ms. Giunchigliani said she would pursue this more at a later time and indicated she had information she believed to be more accurate than testimony provided at this hearing.

Ms. Giunchigliani asked how the project is staying on time if the deliverables have that many changes. Ms. West said the work of the project continues, even while the deliverables are under review. She said the department holds meetings as necessary, sometimes once or twice a week, focusing on a deliverable to exchange comments and feedback. She reiterated that simply because a deliverable is not fine-tuned does not mean there is anything significantly wrong with it. Sometimes it is fine-tuning, clarification of a resource, or confusion among staff that needs to be cleared up. Ms. West said the department continues to exchange review documents, meet, work on the deliverables, and work on the project.

Ms. Giunchigliani asked whether the department has ever had to accept any deliverables by default because it did not complete the review in a timely manner. Ms. West said that to her knowledge she has never signed off on a deliverable in a "default mode." She added the department continues to work on deliverables until it is satisfied with them.

Senator Jacobsen asked whether the sign-off includes both the department and the contractor. Ms. West responded the contractor signs it, the deputy director of the department signs, and she herself signs it.

Senator Neal said that as far as developing the system goes, he looks at it from the standpoint of being able to store information and retrieve that information to various work stations within the department, work with it, and then send back updated information. He asked whether he had heard correctly that the Project Genesis is on schedule. Ms. West said he had. Senator Neal asked when the system will be completed. Ms. West said the complete system is scheduled to be in production on August 2, 1999.

Senator Neal asked whether, as the process goes along, the department is trying to eliminate problems that develop to make sure the system works smoothly. Ms. West said that is correct and the department is currently in the process of acceptance testing. She explained the team develops test scenarios for each transaction, then the user employees go through the test scenarios to find areas where the processing is not working smoothly. Those problem areas are reported to the programmers, who fix the problem and return the deliverable to be tested again to determine whether that "bug" has been fixed.

Ms. West reiterated that is what the department is doing now. The next step is to "go into pilot," which is putting transactions performed on the existing system through the new system to make sure the results are the same. She said the first pilot will be the occupational and business licensing piece, which will be put it into production in six offices.

Senator Neal asked the department’s relationship with DoIT. Ms. West said DoIT provides oversight for the project, works with the department on technical issues, is the service provider, and has the R25 computer. Senator Neal asked whether the information the department will be using is stored under the control of DoIT. Ms. West said that is correct. Senator Neal asked who makes the decision when something is wrong. He noted that since the department will be inputting, storing, and retrieving the information, the department must make the judgment regarding what is correct in terms of how the system is operating. Ms. West said the department certainly could identify when there are problems with the system and can determine whether it is a problem in the department’s area of responsibility or in DoIT’s area of responsibility. She said an example would be the issue Senator O'Donnell brought up. If the department is not able to compile something, the department would have to talk to DoIT.

Senator Neal asked whether programmers who correct problems are DoIT staff or DMV&PS staff. Ms. West said that at this time the programmers are contract programmers from Deloitte and Touche. Senator Neal asked whether those programmers talk over the issues with DoIT. Ms. West said they would if it involved something for which DoIT is responsible. If it involved programs or screens only DMV&PS uses, it would be within the department’s control.

Senator Neal said his understanding is the department does not have a particular problem now but is in the stage of testing and correcting. Ms. West said the department is testing the application, but in order to write programs and compile data, the contract programmers must send that information to the hardware at the DoIT facility. She said the department has sometimes run into performance issues when attempting to work on the DoIT hardware. Senator Neal asked what type of problems the department runs into. Ms. West said the department encounters what is called a queue, or a waiting time. Senator Neal asked whether the department is waiting to get information or the machine is not responding. Ms. West said the department is waiting for its turn on the machine to be able to do what it needs to do. She said the wait is usually 30 seconds, but sometimes it is an hour or more. Senator Neal asked whether DoIT has a priority system in place and whether the delay is because DoIT is working on other things or bringing in other groups. Ms. West said she believes DoIT has a lot of things going on. She stated DoIT has given the department priority whenever it has raised the issue and has given the department what are called expediters for direct access. But, she added, this situation is true for all agencies, all of which are competing for space on the same computer. Senator Neal asked whether DoIT would be the central storage point for information. Ms. West said it would be.

Senator Neal asked for confirmation the department will be able to meet the August implementation date, even with the time delays. Ms. West said she believes it will still be on schedule. She said if the department continues to encounter delays in development related to performance from DoIT, there could be delays in implementation. Ms. West said it might help to clarify she is talking about development files, not production data, that department staff are using in the offices.

Senator O'Donnell pointed out that because of the way DoIT operates, DMV&PS shares the R25 computer with a number of other agencies. If another agency has a batch run or other huge demand on the available computer time, the throughput to DMV&PS is slowed down and DMV&PS has absolutely no "say-so." DMV&PS makes complaints to DoIT, then DoIT changes the priorities in the computer so DMV&PS is given more access and then DoIT must give someone else less access. Then that agency complains, then other agencies complain, and soon there is a $6 million request for another R36 computer because there is just not enough "clock." Senator O'Donnell pointed out not all DMV&PS users are on the computer. Some are preparing applications and writing code for those applications outside the mainframe system. Once the system is implemented and all the users are on it, the clock speed is "parceled up" among all those users. "That is when there will be the real degradation," the senator remarked.

Ms. Giunchigliani asked whether the Project Genesis budget reflects the new cost allocation presented at the budget hearing for DoIT. Ms. West said the budget is based on the department’s best knowledge at the time the budget was submitted to the budget office, but she said she believes DoIT has proposed new formulas that are being considered by the budget office.

Carol English, Budget Analyst, Budget Division, Department of Administration, said the Budget Division is fine-tuning the DoIT cost allocation that will affect all budgets across the state. She noted the Budget Division is close to completing the allocations. Ms. Giunchigliani said that 2 weeks ago at the DoIT hearing the committee was told it would be ready by the next Friday, which has come and gone. John P. Comeaux, Director, Department of Administration, said the cost allocation is completed and he believes a copy has been delivered to Legislative Counsel Bureau (LCB) fiscal staff for review. He said he thought it was delivered no later than Monday of this week and noted it came out about as expected.

Ms. Giunchigliani said when the revised DMV&PS budget is submitted to LCB staff, the revised organizational chart should be submitted with it and the two documents should correspond with one another. She specifically noted the position counts should agree between the two documents. She pointed out this organizational chart seems to have been a constantly moving target for the past several years and that is the source of the committee’s frustration. Ms. Giunchigliani noted the committee may not necessarily agree with the revisions. She reiterated the committee needs all the revisions as quickly as possible, because budget closings will start in April 1999. She indicated if the committee does not have the proposed revisions by then, the budgets will be closed according to the committee’s desires.

Ms. Giunchigliani asked for a description of what the one-shot appropriation would fund. Ms. West said the one-shot funds the completion of phase II, the implementation phase. It includes the final components of training for phase II, any of the related travel for overtime and the payoff for hardware, and then begins the new technology for phase III. Phase III includes Internet and telephone transactions, renewal at emission stations, and components related to digital imaging.

Ms. Giunchigliani asked whether phase II is also referred to as A, B, and C. Ms. West said the project was designed in three phases. Phase I was for laying the foundation, which was planning and developing the Request for Proposal (RFP) that was completed last year. She said the department is now in phase II, which is the implementation phase. Within phase II, the Deloitte and Touche work plan reflects phases A, B, and C. Phase A is the installation of the hardware. Phase B is the implementation of one-third of the application (the occupational and business license piece). Phase C consists of all the activities related to going into production on the remainder of the application. Ms. Giunchigliani asked when phase B will occur. Ms. West said the department is in user-acceptance testing now, the pilot is at the end of March 1999, and the pilot goes into full production May 31, 1999.

Ms. Giunchigliani asked whether the department intends to have every bug worked out and the full system implemented on August 2, 1999, just 2 months after phase B. Ms. West replied it does. Ms. Giunchigliani asked why, then, the status report from Deloitte and Touche asserts that the state has decided to delay phase A, that phase C production slips by more than 10 working days, and that the proposed implementation schedule is incompatible with the Deloitte and Touche project work plan and the Genesis implementation plan. Ms. West acknowledged there has been slippage in phase A, the installation of the hardware. There were a number of issues to resolve before the parties could agree on what would be purchased versus what would be leased and how to appropriately use the funding. There have been issues related to being able to get the telephone lines installed necessary for the network in some locations, having all the wiring in place, and getting staff out to complete installation of the hardware.

Continuing, Ms. West explained that even though it is behind schedule, the staff can overcome that delay in a short time to put the project back on schedule. She said hardware is being installed early, so employees have time to become familiar with the hardware before they start using the application. For the time being, employees will still use the same screen and the same applications as in the past, but will be using it on new hardware to get familiar with it. She said that while it is a delay, it is not one that should cause delay to the ultimate implementation date.

Ms. Giunchigliani asked for an explanation of the 10-day delay referred to by the contractor. Ms. West said she did not have a copy of the status report with her but would be happy to get back to the committee with an analysis on that reference to a 10-day delay.

Ms. Giunchigliani asked whether the personal computers (PCs) were finally ordered. Ms. West said they were. Ms. Giunchigliani asked whether the delay in ordering the PCs caused the 10-day delay referred to by the contractor. She also pointed out PC training was delayed and asked for a status report of the training.

Ms. West said the training started on March 9, 1999. She noted there are minor changes in how an employee logs onto the system with the new hardware and a couple keys are used differently. She explained that for this portion of the transition an information sheet was developed for each employee, which described how to log on and how to use the keyboard so there are no problems with the old application on the new equipment. She stated those information sheets were sent out before the hardware was installed. Ms. West remarked the actual PC training covers using a mouse and navigating in a Windows environment. She said employees are not expected to have those skills at this time to use the new equipment with the old system.

Ms. Giunchigliani asked when the department would expect employees to use the new equipment. Ms. West said employees would use a mouse and the Windows navigation system when they start using the new application. Right now employees are still using the old system on the new hardware. A mouse is not used to navigate on the old system. Employees have a new monitor and a new keyboard, but they do not have a mouse, a bar code scanner, or a magnetic stripe reader. Employees do not have to navigate in Windows. Ms. West said that right now employees have a new logon and a couple of keys they use differently than they used on the old equipment. Ms. Giunchigliani asked when staff will be fully utilizing the mouse and the Windows navigation system and whether there will be person-to-person training. Ms. West said an employee survey indicates about half the employees already know how to use a mouse and the Windows navigation system. Training has been scheduled based on what each employee needs to learn and may start with a basic class or an intermediate class.

Ms. Giunchigliani noted the phase B pilot requires site preparation, cabling, and wiring and asked whether those activities have been planned or initiated. Ms. West responded the phase B pilot will be done at the Deloitte & Touche site. Ms. Giunchigliani asked when that would be implemented. Ms. West said the pilot will be implemented on March 29, 1999.

Ms. Giunchigliani pointed out that at the last session the Legislature funded the purchase of customer traffic management systems for the Sahara and Henderson offices and a position to determine what the performance measures should be and to develop baseline data. She noted the committee has not received anything yet. Ms. Giunchigliani also pointed out the department is asking for a one-time appropriation for the same system for the West Flamingo, Carey, and Galletti offices. She asked why the committee should expand the system, since nothing was provided for the Sahara and Henderson offices.

Ms. West responded it appeared there were two issues. She said the "Q-matic" systems at Sahara and Henderson were not part of Project Genesis. She noted they are certainly endorsed by Project Genesis as an excellent customer traffic management tool, but they were funded through the Capital Improvement Projects (CIPs) for those two offices. She added the Project Genesis core team member assigned to help establish baseline data in performance measures is now evaluating the customer traffic management system. During phase I, the department identified hundreds of potential performance measures that could be used after the new system went live.

Ms. West said the next step was to have administrators review those performance measures and determine what were the most appropriate, most effective indicators to use in their divisions. She said work has been completed and the department is prepared to talk about it in relationship to the new organization. She noted that as the department testified last week, the current budgets represent numbers of outputs and the department has worked on performance indicators that measure outcomes and the agency’s effectiveness. She said the department is now in a situation where it can collect data for January through June of 1999.

Ms. Giunchigliani said the customer traffic management system was designed to provide average transaction time, customer wait times, and types of transactions completed. She asked what would be done with that information once it is collected. Ms. West responded that right now it is being used in the branch offices to help manage staffing.

Ms. Giunchigliani asked whether the budget was developed based on the staffing methodology that came from that information. Ms. West said she did not believe so. Ms. Giunchigliani asked what good it does to develop staffing patterns if they do not relate to the budget. Ms. West replied that although the customer traffic management system could be used for budgeting, it is currently used more on a day-to-day and month-to-month basis within the branch office to determine the number of windows that need to be open for particular types of transactions. Ms. Giunchigliani asked whether the rationale for expanding the system to the West Flamingo, Carey, and Galletti offices is to use it for determining when to open a service window. Ms. West said that is how it is being used within those branches today, but it also allows customers to take a number and wait to be called to a window. She said that now, with the system in two of the offices, the department is beginning to understand the potential. With the system in five major metropolitan offices the objective would be to design a series of reports to be used consistently among those offices in budget development. Ms. West noted that has not yet been done.

Ms. Giunchigliani said that is part of the concern of the committee. There is no baseline data from the other offices to even know what good the expansion would be to the next three. The $300,000 could be used elsewhere if it is simply to tell how many windows to open or how long someone has been waiting in line. The greeters could accomplish that, she remarked.

Senator Jacobsen asked whether Ms. West’s testimony is that by August 1999 all the IMB staff will be trained and on-line. Ms. West said not all the IMB staff will be trained. IMB staff are currently involved in two functions. One is maintaining the legacy system and the other is the Year 2000 issue (Y2K). As staff in IMB are available, they are brought over to the Project Genesis staff to work with IS staff and the Deloitte and Touche staff in various aspects of the project. The department will not be able to focus on fully training IMB staff until the legacy system that staff maintains no longer exists.

Senator Jacobsen asked whether the contract with Deloitte and Touche would be terminated in August 1999. Ms. West responded the contract includes a 3-month maintenance period after implementation of the system.

Senator O'Donnell asked what happens after the 3-month maintenance period. Ms. West said the contract ends. She noted the onetime appropriation request includes funding to bring back Deloitte and Touche as needed to work on various aspects that may still need to be addressed for new components not added during this phase of the project.

Senator O'Donnell said that when this project was funded, parallel programmers and parallel systems were discussed. He said state staff were going to work side by side with the contractor’s programmers. He asked whether that has come to fruition. Ms. West responded the department has hired 11 of the 13 IS staff approved to work in this parallel fashion and they are working side by side with the contractor’s programmers. Those 11 staff are assigned to work with a Deloitte and Touche member on the various tracks. She explained they are working side by side every day with the Deloitte and Touche staff and there is a high emphasis on transfer of knowledge from the Deloitte and Touche staff to those 11 staff working on the project today. Senator O'Donnell asked how many vacancies there are. Ms. West said there are two positions vacant.

Ms. Giunchigliani asked whether DMV&PS had provided the committee a copy of the "deliverable report." Ms. West said she did not believe so and would provide a copy of the report.

Mr. Drew noted he understood the committee’s desire to delay until another hearing some of the issues with Project Genesis as it pertains to the reorganization. However, he suggested, to save time in that hearing, the committee could review the two budget accounts for Automation and Field Services, which are not necessarily related to Genesis and do have new positions recommended. He said if it meets with the committee’s approval, the department could go through those budgets now and save the time at the next hearing just for Project Genesis.

DMV, Automation – Budget Page DMV-88 (Volume 3)

Budget Account 201-4715

Ms. West testified the purpose of the staff unit funded through this budget is to provide automation support for the motor vehicle branch of DMV&PS. She said when Project Genesis is implemented this unit will assume responsibility for systems operation, maintenance, and continued improvements. She noted this budget is funded entirely by the Highway Fund. She pointed out on page DMV-89 there has been a change in the base and maintenance due to the elimination of costs related to the legacy computer system. She reiterated the new Genesis application is scheduled to be implemented August 2, 1999. She explained the department obviously needs to remain on the legacy system long enough to ensure successful transition to Project Genesis.

Ms. West said this decision unit represents the DoIT facility charges based on the estimated cost of running the new application. As discussed earlier, she added, those numbers may change.

Assemblywoman Chowning asked when the final facility charges would be available. She also asked for explanation of the $1.3 million increase from FY 1998 to FY 2000 and the $1.7 million increase from FY 1998 to FY 2001. Ms. West said these amounts are based on estimates of what is needed to run the new application. She said there are more functions automated on the Genesis application than on the existing legacy application. She stated the estimate is based on the number of screens and the levels of activity between DMV&PS and DoIT. Mrs. Chowning asked whether the increase is due to DoIT’s new billing system. Ms. West replied the estimates in this decision unit were based on the existing costs at the time the budget request was submitted in August 1998.

Mrs. Chowning pointed out the department paid $1.2 million in FY 1998. She asked for confirmation that in August 1998, DoIT told the department it was going to cost $1.3 million more for FY 2000 and $1.7 million more for FY 2001. Ms. West said those are the projections the department worked on with DoIT in August 1998. She reminded the committee that at that time the department was still in the design phase of Project Genesis. She added the team had not fully developed the screens and was not fully able to say how much activity there would be. She indicated the department is closer to that point today because it is testing the application.

Mrs. Chowning asked Ms. West whether the revised amounts would be more or less than the estimates in the budget. Ms. West said the department had not had an opportunity to revisit and update the estimates with DoIT, taking into consideration more complete information on the new system and the new cost allocation formula.

Mrs. Chowning noted this is a lot of money and asked when the committee will have the revised numbers. Ms. English informed the committee that is part of what the Budget Division will be providing the committee in the statewide adjustment of the DoIT cost allocation. She added her recollection is that the amounts for this budget would decrease slightly, but the total would still be over $2 million. Mrs. Chowning said the committee needs to know the reason these costs have increased so much. Ms. English noted there is more to this system and it will be more expensive to run this system than the system that was in operation in FY 1998. Mrs. Chowning said that does not explain why the new system is more expensive than the old one. She emphasized the committee needs definite answers soon.

Mr. Comeaux informed the DoIT cost allocation information was provided to LCB fiscal staff on the previous Saturday. He said the formal communication to the Legislature, which would identify the differences, is currently being prepared and he said he would be sure it is completed today. He reiterated the information is already available through the LCB fiscal staff.

Ms. Giunchigliani noted there are two things affecting this budget. One is that Project Genesis has more servers than before and that will increase costs. She asked for comparisons of servers, PCs, or lines (depending on what is used to measure costs) for FY 1998 and the next biennium. The second is the new cost allocation plan, which may affect costs. She noted the department should be sure all estimates include the final number of devices so the budget does not need to be revisited again.

Senator Neal asked whether the new system would use the COBOL (Common Business-oriented Language) programming language. Ms. West responded COBOL is one of the languages used in the new system. Senator Neal asked what the other languages would be. Ms. West said the system uses Powerbuilder and DataBase II (DB-II). Senator Neal asked which is more confidential. Ms. West said she is not sure how to answer that question. Senator Neal said the system will be dealing with confidential records and COBOL itself would not be sufficient to maintain the confidentiality of the records. Ms. West said there are security systems in place, such as the RAC-F system that DoIT uses.

Ms. West stated this decision unit provides for telephone line charges for the network and its support. She noted DoIT provided the cost estimates, which are based on implementing the new network.

Ms. Giunchigliani asked the department to explain the need for this funding and to differentiate between the current statewide DMV&PS computer communications and the Project Genesis communications. She also inquired whether the existing communications network would be eliminated. Ms. West said the department will be running on its own network for Project Genesis. The motor vehicle side of the department will be on its own network, as opposed to piggybacking on the network for the public safety side of the department as it currently does in some cases for some facilities. Ms. Giunchigliani reiterated her question was whether the existing network will be eliminated. Ms. West said there will be two networks, one for Public Safety and one for Motor Vehicles. Ms. Giunchigliani asked whether either of those is the existing one or whether there would be two new ones. Ms. West said the current communications network is the one for the public safety side of DMV&PS and it will not be eliminated.

Senator Jacobsen said he is still not clear and asked Ms. West to explain that one more time. Ms. West replied currently most operations are on one network and it is referred to as the public safety network. She said the department will be moving motor vehicles off the public safety network and developing a new one for motor vehicles. She stated the department is not eliminating a network. Ms. West noted DoIT is the service network. Senator Jacobsen asked whether this would save the department any money. Ms. West replied, "Not that I am aware of."

Ms. Giunchigliani asked whether the $489,000 in E-175 is the last cost the committee will see for this new network. Ms. West replied those are ongoing charges for the telephone lines on which that network operates. Ms. Giunchigliani asked where there would be any savings, if there are any at all. Ms. West said the original intent of Project Genesis was to serve customers more efficiently in offices and provide services to customers without their needing to come to offices. She said this requires all three phases of the project to be implemented, including the enabling technologies. She added the additional goal was to not have to return to the Legislature every biennium asking for new staff or facilities. Ms. Giunchigliani said that intent is to be applauded, but so far every budget has increases in it, rather than decreases. She pointed out the additional communication lines have increased the budget even before considering the new cost allocation plan.

Ms. Giunchigliani also noted The Executive Budget states the line costs are "speculative" and she asked what would be a firmer number. Ms. West said the number was provided by DoIT and was based on DoIT’s contact with the telephone company for each location, and she felt the number was accurate. She added that a spreadsheet detailing the line costs was prepared and could be provided. Ms. Giunchigliani said that would be helpful and asked whether there would be additional lines added that are not included in this cost estimate. Ms. West replied there would not be additional lines and this would be the final cost estimate.

Senator Jacobsen asked whether IMB staff participated in the design and development. Ms. West said IMB staff have been involved to the limits of the time they have available. She noted IMB staff have been working on Year 2000 issues until just recently and have also been maintaining the legacy system, which is a full-time job. As staff are available the IMB manager works with the project manager to bring those staff on board for training classes, to work with the contractor, to attend design sessions, or to review deliverables.

Ms. Giunchigliani asked whether there are business rules in the legacy systems and asked whether those rules apply to the new system. Ms. West replied in the affirmative and noted Project Genesis staff reviewed all the business rules from current programs to evaluate and incorporate them into the new system as needed. She said that as part of the design process the team reviewed the business rules in relation to how the department does business. This was done to assure the new system is designed according to the new way of doing things, rather than just taking what came off the legacy system and putting it on the new system. She said the team has also gone back to double-check on everything from the legacy system to be sure nothing is missed.

Ms. Giunchigliani informed the committee she has received information that IMB has not been asked to attend meetings regarding large deliverables such as registration, drivers’ license, insurance, and so forth. She said the fact that Genesis is a new project does not mean Project Genesis staff should ignore the knowledge of individuals who have been involved in the past. Ms. Giunchigliani expressed concern regarding what she has been told versus what is being said today at this hearing, which she said is very different. She said that at some point the committee might need to visit that issue.

Senator Jacobsen asked whether some kind of manual is being developed for employees. Ms. West responded the department is developing on-line help, which is even better. An employee on his or her PC can ask a question of the system and get an answer on the computer. Ms. West noted there will still be hard-copy manuals on some things, but in most cases, the best access will be the on-line resource. She said Nevada Revised Statutes (NRS) and the codified state regulations will be on-line. Help on what information a particular screen is asking for will be on-line. How an application for a driver’s license is completed will be on-line. Ms. West said all this will be right at the employee’s fingertips.

Senator Neal asked whether flow charts have been prepared and organized. Ms. West responded that in the system there is a transaction management queue. Senator Neal said he was talking about the construction of the system. Ms. West said the system is documented as the department is going through it. Senator Neal asked whether a new person could pick up the documentation and proceed with management of the system even if all existing Project Genesis staff were to leave. Ms. West replied that, more importantly, when Deloitte and Touche leave, the department will have all the documentation for the system.

Senator Neal commented he realized how difficult it is to build systems and databases and implement them for multiple functions. He said legislators come to these hearings with their own frames of reference, and those perspectives might not match what the agencies are presently doing. He recalled another legislator mentioned the high costs, to which Senator Neal responded his experience tells him Nevada started late and the cost is higher than it would have been years ago. He said many changes in technology have occurred and Nevada is still in the "catch up" phase. He said when Nevada first began to use computers, "many of us thought of it as a tractor–you bought one and it lasted for 20 years." But that is not reality, he pointed out, because technology changes rapidly. He concluded by saying he hopes the department will be able to move forward and respond to the public and meet its mission.

Mrs. Chowning noted appreciation for the invitations from the department to visit any of the offices. She recalled recent testimony that employees and stakeholders are involved in the development and final outcome of the systems. She asked whether notice of meetings is distributed and asked for copies of past and future notices. Ms. West said she would provide that. She added there is nothing currently scheduled but indicated the department would notify the committee as meetings are scheduled. She reiterated the department’s invitation to the Project Genesis development site for a thorough understanding of what the department is doing. Ms. West suggested legislators could sit with employees who are conducting the user tests. She also said she would notify the committee when the system is conducting the pilot project and she invited the committee to view the process.

Ms. Giunchigliani said she assumes with Project Genesis there is quite a bit of overtime and asked for a breakout of the exempt and nonexempt according to the Fair Labor Standards Act (FLSA). She asked what the overtime costs are and whether the recommended budget for the next biennium backs out those overtime costs once the system is fully implemented. Ms. West responded she does not believe any of the project staff are exempt from overtime according to FLSA. Ms. Giunchigliani indicated that seemed to contradict her understanding of FLSA for administrative staff and said she would be checking on this matter. Ms. West agreed to provide the overtime costs for the committee. She pointed out that preparing for "go live" will mean intensive overtime through August 1998. Ms. Giunchigliani said it would be interesting to see overtime costs by position since this project first began. She said the overtime related to Project Genesis should end at some point and the overtime costs should not be built into the base budget or carried beyond August 1998.

DMV, Field Services – Budget Page DMV-7 (Volume 3)

Budget Account 201-4735

Pete English, Chief, Registration Division, Department of Motor Vehicles and Public Safety, testified this budget is for the field services portion of the motor vehicle branch. He said it is a Highway Fund account that provides the direct customer service operations for drivers’ licenses, vehicle registrations, and business/occupational licensing. He noted the 1997 Legislature created this budget account and moved motor vehicle field service positions and related costs into this account.

Mr. English stated these three maintenance decision modules recommend 31 new positions for northern Nevada. He noted that during the 1995 and 1997 Legislative Sessions, positions were funded for southern Nevada to respond to growing populations, increased demands for customer services, long lines, and longer customer wait times. Northern Nevada operations now face these same problems. He testified the positions recommended will address these needs. He said the 11 positions recommended in M-200 are for the rural offices of Fallon, Elko, Minden, and Winnemucca.

Senator Jacobsen said there were 17 positions authorized at the last session but not filled as of January 1999 and asked Mr. English to speak to that issue. Mr. English responded there are frequently a number of vacant positions in Las Vegas. Currently, he said, there are 15 vacancies in southern Nevada. He said there is turnover within the staff. He explained people migrate into Nevada and test for various state jobs. He said many gain employment within DMV&PS and sometimes move on. Some go back to where they came from; some move on to other state jobs; some find employment in private industry.

Senator Jacobsen mentioned that as he was reviewing performance indicators he noted there are no numbers for outcome measures. He requested the department develop performance indicators that show not only what is being done, but what the success rate is. Mr. English agreed that what has been reported by the department are output measures. He added that proposed indicators for the future would measure quality, performance, and efficiency. Examples are error rates by volume of transactions per employee, average customer wait times, and number of transactions per employee per month. Ms. Giunchigliani asked whether Mr. English would provide those outcome measures and Mr. English indicated he thought they had already been provided to LCB fiscal staff.

Ms. Giunchigliani said one of the issues with the 15 positions remaining vacant is that the staffing ratio was developed to keep an average 80 percent of the windows open. She said the report for the Henderson office indicated only 51 percent of the windows have been open on average since July 1998. She noted the committee did not have the information for other southern Nevada offices. Mr. English indicated he was not sure of the overall percent, but said the offices try to maintain 80 percent during the peak hours. Ms. Giunchigliani asked whether the vacant positions in the southern offices could be moved to the northern offices to avoid the addition of positions. Mr. English said that would not work because the positions in southern Nevada were based on the formula created in 1995 to provide extended service hours, Saturday service, and the 80 percent window coverage during the peak hours.

Ms. Giunchigliani said if there is a reduction in the number of people needing the service face to face, the staffing formula may need to be redone. She asked whether the volume has been reduced. Mr. English said the overall volume is the same and continues to grow, but it is spread throughout the 12-hour days and Saturday services.

Ms. Giunchigliani asked whether the department had provided LCB fiscal staff the justification for maintaining the vacant positions and for the recommended new positions. Mr. English said the recommended new positions are for the north and population growth has not been addressed for northern Nevada. Ms. Giunchigliani asked whether these new positions are based on the same formula. Mr. English said the new positions are based on a formula developed for rural offices because in the rural offices the staff perform more functions than in the urban offices.

Ms. Giunchigliani asked whether northern Nevada includes Reno. Mr. English said there are 13 positions requested for Reno. Ms. Giunchigliani asked whether the Reno staffing formula is based on a rural model or an urban model. Mr. English responded Reno is based more on an urban model and on the number of available windows. The Reno office also provides staffing for the Reno Express Office and the Sparks Express Office. Ms. Giunchigliani asked whether Reno has extended hours. Mr. English responded Reno has Saturday hours.

Ms. Giunchigliani asked whether Mr. English’s testimony is that the request for positions for the Reno office is based on the urban staffing formula and not the rural staffing formula. Mr. English said the Reno office was a combination of the urban and rural staffing formulas because Reno provides staff for the express offices and the commercial driver’s license (CDL) office. Ms. Giunchigliani said the express offices are part of an urban area and asked why the formula is blended. Mr. English said it is a blended formula because it is necessary to pull staff from the Reno office to provide those functions. Ms. Giunchigliani asked whether southern Nevada has express offices. Mr. English said there is one express office in southern Nevada, but in the south, express staff are permanently assigned to the express office.

Senator O'Donnell commented the Legislature did a remarkable job for the people of southern Nevada with reference to DMV&PS services. He noted the Legislature would be remiss if it does not do the same thing for the residents of Reno.

Ms. Giunchigliani said no one is arguing whether to staff the offices in the north, but she said there is confusion regarding the methods and the formula used to support the recommendation for new positions. She recalled the purpose of Project Genesis was to improve services, to allow renewals without customers having to come in to the offices, and, generally, to save processing time. She asked, "Because we have positions that have been vacant, why do we have to add additional staff or that many additional staff?" Ms. Giunchigliani said that when Project Genesis is fully implemented in August 1999, fewer services should have to be face-to-face and there should be an overall decrease in costs. She said that is what the committee is not able to balance out. She recalled the project was intended, in part, to save time and money.

Mr. English said the department had already provided the staffing formula to LCB fiscal staff. He said he did not believe the efficiencies "on the department end of it" would be realized right away. He noted the efficiencies from the customer’s perspective would be evident right away because the department would be able to provide multiple services for a single customer with the integrated system. He said the service windows will be able to handle a variety of transactions, rather than just one. Mr. English reiterated the efficiencies from the employee perspective would not be seen for a while.

Using information provided by LCB fiscal staff, Mrs. Chowning noted the number of transactions per employee at the Donovan Street office is 1,128 but no new employees are recommended. In Laughlin there are 1,714 transactions per employee and those two employees have to answer the phones and do a lot of additional things. She wondered whether those offices need additional employees. She pointed out that at the Reno Galletti office there are only 764 transactions per employee and there are 13 new positions recommended for that office. She requested the rationale for the requests.

Mr. English replied that even though rural offices are labeled full-service offices, many of the transactions are renewal transactions, which are quick and simple. He said the rural offices do provide driving tests on an appointment basis and do engage in some of the more complex transactions, but by and large the complex transactions take place in the larger offices. He said the Donovan office is primarily a commercial driver’s license office. He explained that express services are offered from this office, but its primary service is issuing commercial driver’s licenses and it caters to commercial customers. Mrs. Chowning asked whether the same rationale applies for the Yerington and Pahrump offices. Mr. English said it does. Mrs. Chowning asked whether those offices handle any complex transactions. Mr. English responded those offices do not have the volume of complex transactions the other offices have.

Ms. Giunchigliani referenced the proposed organization charts for the Field Services Division and Management Services and Programs Division (Exhibit D). She asked about the positions coded in red, which, according to earlier testimony, denotes positions transferred for efficiency. She said taking 7 positions from the field and then asking for 13 new positions for the field raises questions about the efficiencies.

Ms. West responded the positions in red would not be filled at the implementation of the reorganization if it is approved. She said the department needs those positions after it attains efficiencies resulting from phase III. Phase III enables the system that allows customers to obtain services without having to come to the office. She added the positions in red could be transitioned to provide better support to the organization. She noted the positions in green will be reclassified and are not technician-level positions. Ms. West said most of the transfers to the Management Services and Programs Division are of analysts that are currently employed within the agency. With the reorganization, the department is hoping to group together people who are focused on like functions, such as bringing analyst staff into one location to focus on management support.

Ms. Giunchigliani asked for clarification that the positions in red are not going to be filled. Ms. West said that is correct. Ms. Giunchigliani asked whether phase III goes into effect in August 1999. Ms. West said no, implementing phase II happens on August 2, 1999. Phase III begins in FY 2000, implementing some of the technologies in the latter part of FY 2000 and some in FY 2001.

Ms. Giunchigliani asked whether the new positions recommended for the Field Services Division could be delayed to see whether the efficiencies promised to be realized from Project Genesis come to pass. She suggested the committee could leave the vacant positions in the budget to be filled if and when needed for customer services. She said that seemed more rational than adding 31 new positions.

Ms. West said the positions requested in this budget are based on current workload that will not change in volume for this biennium. She said there would be the same number of customers or more, based on demographics, visiting these northern offices. Ms. Giunchigliani said she did not believe the documentation supports that assumption.

Mr. Drew said the department has frequently testified a lot of the efficiencies and effectiveness expected from this new system will take place years down the road in that the department should not have to open new offices or hire more new staff as the population grows. He explained that starting a new program in August 1999 does not mean those efficiencies will be there immediately and the system does not necessarily address the immediate growth problem that exists today. Mr. Drew said it is an "apples and oranges" comparison. He stated the new systems will grow and evolve and the efficiencies will take place 3, 4, or 5 years down the road. He added that is where the full efficiencies come in.

Senator Jacobsen asked whether the overall plan is to fill those positions eventually. Mr. Drew said that is absolutely true because, as Senator O'Donnell alluded to, the department is trying to correct the problem in the northern part of the state that occurred in the south.

Senator O'Donnell said he understands Ms. Giunchigliani’s questions, realizing that there are 15 vacancies in the south and yet the agency is asking for 31 new positions in the north. He asked whether there is a way there could be a more flexible hiring policy regarding where the positions are placed. He said there are a tremendous number of positions in the south and quite a bit of attrition that will always exist. He asked whether the department could "overhire" knowing full well there will be vacancies due to attrition. He further questioned whether the vacancies in the south could be filled in the north. He suggested if that were possible, the request for new positions for the north could be reduced by half.

Mr. English reiterated that the positions authorized for southern Nevada were based on a staffing formula developed in 1995. He said that staffing formula has not been revisited. With regard to the current 15 vacancies in the south, that is a snapshot of where the department is today. He said the department is in the process of recruiting to fill those positions. Regarding moving positions from the south to the north, he pointed out the positions were authorized specifically for the south. He indicated he did not feel the department had the authority to move those positions.

Senator O'Donnell said if the Legislature gave the department that authority for a specific number of positions, the same amount of hiring could be done with fewer positions. He said, "Let’s say we gave you 15 new positions, but you went out and hired 30 people. The very next day or the very next week you could be down 10 because of people just quitting."

Mr. English replied he did not believe the department could hire more employees than there are authorized positions. If the department were authorized 15 new positions, that is all it could hire. He said if the department had the flexibility to move positions to where the need is, that would allow the department to make adjustments for such a need. He noted those are the management decisions agencies should have available.

The meeting was adjourned at 10:38 a.m.

RESPECTFULLY SUBMITTED:

Jean Laird,

Committee Secretary

APPROVED BY:

Senator Lawrence E. Jacobsen, Chairman

DATE:

Assemblywoman Chris Giunchigliani, Chairman

DATE: