The Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman William R. O’Donnell, at 8:14 a.m., on Tuesday, March 16, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William R. O’Donnell, Chairman

Senator Joseph M. Neal, Jr.

Senator Lawrence E. Jacobsen

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Mrs. Vonne S. Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia de Braga

Ms. Chris Giunchigliani

Mr. David E. Goldwater

STAFF MEMBERS PRESENT:

Mark Stevens, Assembly Fiscal Analyst

Bob Guernsey, Principal Deputy Fiscal Analyst

Birgit Baker, Program Analyst

Mary A. Matheus, Local Government Budget Analyst

Millard Clark, Committee Secretary

OTHERS PRESENT:

Carol A. Jackson, Director, Department of Employment, Training and Rehabilitation, said that in addition to the director’s office budget she would be discussing other budgets including One-Stop resource centers and how they affect the department, and the differences between these centers and the Department of Human Resources’ family resource centers. Ms. Jackson said she would also discuss the passage of the Workforce Investment Act which was signed by Congress August 7, 1998.

Ms. Jackson said that although her narrative indicated the department will not be pursuing any new programs, on August 7, 1998, President Clinton signed into law the Workforce Investment Act which changed how the department conducts its business and had a major effect on the Job Training Partnership Act.

Ms. Jackson said the mission statement of the department is to promote economic self-sufficiency and independence by providing quality and timely employment, training and rehabilitation services to Nevada’s citizens in the most economical and equitable manner. She said the needs of Nevada’s employers, employees, and job seekers are being met by providing the skills and services to maximize independence and participation in today’s marketplace and to train the workforce for the needs of tomorrow. She said that because of the effects of the Workforce Investment Act the performance indicators for the department need to be changed. She offered to work with the Legislative Counsel Bureau and the Budget Division staff to make the necessary changes. Senator O'Donnell responded Ms. Jackson should make the necessary changes.

Ms. Jackson said the percentage of employers satisfied with the Department of Employment, Training, and Rehabilitation (DETR) services shown in The Executive Budget (Volume 2, page DETR-1) mistakenly shows only 28 percent of the employers were satisfied with DETR services. She said DETR found this percentage was submitted in error; in actuality, 43 percent of the employers were satisfied with DETR services and 13 percent were very satisfied, for a total of 56 percent of employers satisfied with DETR services. Ms. Jackson said that currently, 57 percent of the employers are satisfied with DETR’s services. The department includes the Employment Security Division, the State Job Training Office, the Rehabilitation Division, the Nevada Equal Rights Commission, and the Division of Information Development and Processing.

Senator O'Donnell asked why the performance indicators showed 2 percent instead of the 56 percent just presented. Ms. Jackson replied she was not sure where the 2 percent number came from. She requested the committee disregard the plus-2 percent and plus-5 percent numbers, since she didn’t know where they came from.

Ms. Jackson said the fourth performance indicator showing the number of public and/or private nonprofit agencies collaborating with DETR should be changed also. She explained DETR was asked to improve its collaboration with other departments and is currently collaborating electronically with 25 additional agencies and departments, for a total of 41 altogether. She said 16 entities are collaborating with the DETR department and 25 are new collaborative efforts, and the indicator should be changed from 15 to 25. Ms. Jackson said she will develop new performance indicators that make more sense. Senator O'Donnell said he would like to see performance indicators that also show what the division administrators are doing. Ms. Jackson said she would work with LCB and Budget Division staff to develop those performance indicators.

Ms. Jackson said budget account 101-3270, DETR, Director’s Office, was not changed much from the last legislative session. She noted the enhancement portion of the budget contains a request for additional travel and training for the director’s office staff. She said this travel and training is primarily for the new human resources manager, with additional in-state travel provided for the director’s office staff in response to passage of the Workforce Investment Act. Additional in-state travel is also requested for the 2001 Legislative Session. Ms. Jackson said the budget request also includes a request for some replacement equipment.

Mrs. Chowning asked about the potential impact of the Workforce Investment Act (WIA) and the Workforce Investment Board on DETR as well as other state agencies and whether the impacts have been considered in the budget requests. Ms. Jackson said there was money available for the board. She said she would discuss the WIA, which includes the board.

Ms. Jackson said the Workforce Investment Act, which was signed into law on August 7, 1998¾ repealing the State Job Training Partnership Act (JTPA)¾ eliminated the State Job Training Office. The JTPA is the third in the attempt at second-chance programs. Ms. Jackson stated:

Ms. Jackson said the WIA mandates One-Stop Career Centers. Because Nevada has two service delivery areas, one in the north and one in the south, the WIA mandates that Nevada must have at least two One-Stop Career Centers. Ms. Jackson said the career centers must be physically close to the partners DETR works with to get individuals back to work. The partners include organizations like the U.S. Department of Housing and Urban Development (HUD), the Community College of Southern Nevada, the University and Community College System of Nevada, and the Aging Services Division of the Department of Human Resources. WIA mandates additional partners to try to get individuals back to work.

Ms. Jackson said a state Workforce Investment Board (WIB) was appointed by and includes the Governor and is responsible for the development of the state plan, which will outline Nevada’s 5-year strategy for its statewide workforce investment system. She said the state Workforce Investment Board includes members from business, labor unions, youth, economic development, the university system, and state government. The WIA also mandated four legislators on the board, two senators and two Assembly members, Ms. Jackson said. The WIB is also responsible for establishing policies, although the U.S. Department of Labor has not yet established the regulations, she said.

Ms. Jackson said the WIA mandates that customers have choice and universal access, and requires intensive core services and training services in the One-Stop Career Centers. Additionally, the WIA requires memorandums of understanding be established by the partners for cost of services, referrals, duration, and management of the facility, Ms. Jackson said. The WIA also requires service integration and outcome accountability as well as labor market information, including employment statistics, so that individuals are not being trained for jobs that do not exist.

Ms. Jackson further testified the WIA mandates not only the establishment of state boards but local boards as well. The local boards must apply to the governor of the state to become temporarily designated as the local boards for the two service delivery areas. Ms. Jackson said that in northern Nevada the local board is Job Opportunities in Nevada (JOIN) and in southern Nevada the local board is the Nevada Business Service Board. She said the local boards, not the state, are now in charge of the One-Stop Career Centers in the state. The Employment Security Division must have a physical connection to the One-Stop Career Centers, Ms. Jackson said. The local boards decide the location of the career centers and what types of services will be offered in the centers. The only drawback to the state is the requirement to have a person physically assigned to work in the One-Stop Career Center, because this creates additional expense for the state. Ms. Jackson said the One-Stop Career Centers are established to serve the unemployed, underemployed, workers that have been laid off, new entrants into the workforce, employers, and youth.

Mrs. Chowning asked how Ms. Jackson anticipates the One-Stop Career Center changing as a result of the partnership with the Family Resource Centers (FRCs). Noting that some of the state employees would be housed at the One-Stop Career Centers, she asked whether these employees would interface with those in the Family Resource Centers to make more employment opportunities known at the FRCs.

Ms. Jackson said that in 1997 her former deputy, Jim Hanna, contacted Sheila Leslie (elected in 1998 to the Nevada Assembly) to determine what type of connections the department could have with the Family Resource Centers. The One-Stop coordinator has been in touch with the Family Resource Centers to install computers and Internet connections, where necessary, to establish connections with DETR. These connections will remain in place under the WIA. DETR will be funding the Internet connections for 1 to 3 years. DETR will also install the hardware and software to locate job information, employment, education opportunities, and all services available to the department. Ms. Jackson said DETR has also been drafting letters and working with the acting BADA (Bureau of Alcohol and Drug Abuse) chief to contact the alcohol and drug treatment centers. She said DETR is planning to install hardware and software at the treatment centers to provide résumé and job research capabilities. Ms. Jackson said about 400 people use the resource centers every week to get job information and prepare résumés, and use the phones to contact potential employers and set up interviews.

Ms. Jackson said the DETR resource centers are "employment-focused." The centers deal with employment and rehabilitation, and make arrangements for childcare while the client is seeking employment. The DETR resource center provides the services to help the individual get back to work. Ms. Jackson said the Maryland Parkway office in Las Vegas has a child center so the parents can access the job information and the children have a place to play without interrupting the parents.

Senator O'Donnell said the state had about a 3.3 percent unemployment rate currently and asked whether the low unemployment rate was a result of all the DETR work. Ms. Jackson replied there was an increase in employment of about 77,000 individuals in the past year because DETR is working more closely with the employers now than in the past. She said the employers are happier with the DETR now than they have been in the past and are using the services more now than in the past. Ms. Jackson noted several megaresorts have opened in southern Nevada and starting in April 1999, DETR will be helping to employ an additional 15,000 people. She said the 3.3 percent is the adjusted unemployment rate, 3.1 percent is the unadjusted unemployment rate, and the Department of Labor requires DETR to prepare the adjusted unemployment rate. Senator O'Donnell asked what the adjustment was. Ms. Jackson replied Mr. Murdock would explain the adjustment.

Senator O'Donnell said, "If the offices were expanded into the full-blown One-Stop offices, with the 3.3 percent unemployment rate, if Nevada had a zero unemployment rate, DETR would not be needed at all." Ms. Jackson replied there will always be those individuals that are "permanently unemployed," and, because after 2 years they lose their welfare benefits, will come back to DETR for help in becoming employed once they are not getting public assistance. She said there will always be a need for DETR, and there will always be disabled clients that will need services. She noted one of the major focuses of the Rehabilitation Division is employment. Senator O'Donnell said he was not talking about the disabled clients, he was talking about individuals who have the capacity to work a full-time job. He asked, "If Nevada is spending more money because of the DETR successes, should we be spending less money because of the low unemployment rate?" Ms. Jackson replied it costs about 25 cents to access job information versus spending additional money to hire a new employee to research the jobs for the clients.

Senator O'Donnell asked whether DETR was requesting any additional employees in the budget request. Ms. Jackson replied no. She said one of the developing problems in the United States and in Nevada is that of incumbent workers being laid off because they do not have the new skills the employers want. The State Workforce Development Board is considering using WIA funds plus money from the employers to train employees rather than the employers laying them off and hiring others with the needed skills. Ms. Jackson said Nevada has not done a good job with incumbent workers.

Robert A. Murdock, Research and Analysis Bureau, Division of Information Development and Processing, Department of Employment, Training and Rehabilitation, said DETR prepares both an adjusted and an unadjusted unemployment rate each month. The adjusted rate looks at the seasonal adjusted implications for the month. Mr. Murdock elaborated:

Mr. Murdock said that DETR tries to capture with seasonal adjustments the normal events that occur every year, such as school getting out in June. This allows DETR to capture any abnormalities and smooth out the trend of unemployment over a period of time, he said. Mr. Murdock said that at the same time, the unemployment rate is adjusted on an annual basis and recalculated after the survey period at the end of each year to arrive at a correct number.

Senator Neal asked whether DETR was experiencing an increase in lawsuits. Ms. Jackson replied, "No." Senator Neal noted the attorney general (AG) cost allocation in the budget request was $43,000. Ms. Jackson said she uses the services of the Office of the Attorney General all the time because there are always issues coming up, ranging from personnel issues to employment issues. She said she works closely with the Deputy Attorney General (DAG) assigned to DETR. The DAG does a lot of work for the Rehabilitation Division. When DETR was looking at the Hoover Dam suit the department had filed against the Bureau of Reclamation to allow blind vendors to provide services at the dam under the Randolph Sheppard Act, the Deputy Attorney General was used almost nonstop. Ms. Jackson said the AG cost allocation expenses are adequate for the services provided. She said she frequently uses the services of the Deputy Attorney General well after five o’clock in the evening.

DETR Administrative Services – Budget Page DETR-6 (Volume 2)

Budget Account 101-3272

Marty Ramirez, Management Analyst IV, Department of Employment, Training and Rehabilitation, said the Administrative Services unit was formed in the 1995 Legislative Session through the consolidation of three subdivisions within the department: Office Services, Human Resources, and Financial Management. As a result of the consolidation, 41.5 permanent employees and 3 intermittent employees were transferred from within the department into this new budget account, he said. Through a letter of intent the department was required to sunset 6 of those positions, leaving a staffing level of 38.5 positions. Mr. Ramirez said that in the 1997 Legislative Session the training officer from the Rehabilitation Division was transferred into Administrative Services and 2.5 additional positions were requested. This brought the staffing level to 42; there are 28 staff in Financial Management, 7 in Human Resources, and 7 in Offices Services, he said.

Mr. Ramirez said the Administrative Services performance indicators identify the primary functions of each of the three subdivisions of this budget account. He said DETR has performance indicators which identify, for Office Services, service requests and safety deficiency identification; for Financial Management, budgeting and reporting; and for Human Resources, work performance standards and recruitment.

Mrs. Chowning said the performance indicators "do what everyone envisioned they should do." She said the performance indicators include percentages and good outcome measurements as well.

Mr. Ramirez said there are two significant decision units for Administrative Services. The first is M-200. In M-200 a new Personnel Technician II position is being requested. This position will be responsible for developing and running a tracking system to measure and follow the department’s reclassifications and recruitment, and to prepare the paperwork for the newly approved legislative positions. Mr. Ramirez said the Personnel Technician II will also track the department’s disciplinary actions and grievances, prepare updates on human resources policy and procedures, assist with some of the growing caseload dealing with the Family and Medical Leave Act and catastrophic leave, and help with work performance standards and employee evaluations.

Senator O'Donnell asked whether DETR was paying the Department of Personnel $250,000 a year or a biennium. Mr. Ramirez replied the charge was for each year. He said DETR is assessed a personnel assessment as well as a payroll assessment on the department’s overall salaries. To some degree the DETR Human Resources Section is a duplication of the assessment, Mr. Ramirez said, but the section provides a lot of customized and personalized services to DETR. The DETR Human Resources Section acts as a liaison between the Financial Management section and the Department of Personnel in dealing with payroll issues. The personnel in that section track the performance standards and evaluations for employees, assist with grievances, and help with the department’s overtime policy. Mr. Ramirez said that while there is a certain amount of duplication, the DETR Human Resources Section does provide a significant number of unique services to the department.

Senator O'Donnell asked why the Department of Personnel supplies a unique service to DETR and not the other departments. He said it seems like the $250,000 is "way out of line." Mr. Ramirez said the $250,000 is assessed as it is to all budget accounts, based on the payroll. Senator O'Donnell asked what percentage of the payroll the $250,000 represented. Mr. Ramirez said he did not have that number with him. Senator O'Donnell said it appears the DETR percentage is higher than normal. He asked whether this was because DETR is federally funded. Mr. Ramirez replied he did not believe it was. He said he thought even the General Fund accounts were assessed the same percentage of personnel assessment.

Ms. Jackson said DETR was reevaluating the functions the DETR human resources staff performs and will be looking at transferring some of their duties back to the state Department of Personnel because the workload has been extremely heavy in the Human Resources Section. Senator O'Donnell asked whether the Integrated Financial System (IFS) is handling the DETR payroll or whether DETR will do it internally. Ms. Jackson replied the IFS will be taking care of the DETR payroll. Mr. Ramirez said DETR just received the Human Resources software to track the history of the DETR positions in a read-only mode. He said DETR lacks experience with the program itself. Mr. Ramirez said last week was the first time timesheets were entered into the new system. DETR just received the first pay registers from the IFS and they were not exactly what DETR was expecting, he remarked.

Senator Neal asked whether DETR contracts with the state Department of Personnel. Mr. Ramirez replied DETR does not necessarily contract with the Department of Personnel; DETR, like all state agencies, is assessed a percentage of the payroll. Senator Neal said the DETR organizational chart (Exhibit C), a 13 page handout titled "Functional Overview," shows a Personnel Officer III position, a Personnel Analyst II position, and a Personnel Technician II position, which suggests these positions are part of the DETR staff. He asked why, if DETR has personnel functions which are part of the DETR organization, it is necessary to contract with the Department of Personnel. Mr. Ramirez replied these positions are DETR staff positions and do perform, in some cases, identical functions in the area of recruitment, technical assistance, and field work, for which DETR is charged by the state Department of Personnel. He said DETR does not actually contract with the state Department of Personnel. DETR is charged the assessment whether it has the human resources staff or not.

Senator Neal asked what functions are performed by the positions shown on Exhibit C, page 3. Ms. Jackson said DETR has about 1,000 employees within the department. She noted a large variety of personnel issues are constantly being dealt with. She said it is better to have some personnel staff in the department to deal with these problems. Senator Neal said the employees within the DETR Human Resources Section should be dealing with the employees in DETR. He asked why it is necessary to contract with the state Department of Personnel. Ms. Jackson replied the Department of Personnel performs the recruiting and testing for all state agencies. She said Personnel charges DETR the $250,000 assessment for performing these functions for DETR. She was not sure how the Department of Personnel charges to state agencies are calculated.

Referencing the organizational chart for the Human Resources Section shown in Exhibit C, page 3, Senator Neal noted there is a Personnel Officer III which reports directly to Ms. Jackson. He further noted that a Personnel Analyst II, an EEO Officer, and an Employment Development Manager that report to the Personnel Officer III. Ms. Jackson replied that when DETR conducted recruiting activities, a lot of work was performed by the Human Resources Section. Senator Neal asked whether DETR performs its own recruiting. Ms. Jackson replied DETR performs some of its own recruiting. Senator Neal asked whether DETR uses the state Department of Personnel for recruiting. Ms. Jackson replied some of the recruiting is performed by DETR and some is performed by the Department of Personnel. She offered to gather the work performance standards for the DETR Human Resources Section employees and set up a private meeting to discuss with Senator Neal the duties of these employees. Senator Neal said that in looking at the organizational chart from the personnel standpoint it can be seen the state Department of Personnel is funded for a very specific function, which is to test and employ people for state service. When DETR has personnel performing these functions, "some position is unnecessary." Ms. Jackson said DETR is reevaluating the duties of the DETR Human Resources Section to identify the functions that can be returned to the Department of Personnel and that are included in the $250,000 assessment.

Mr. Beers asked about the pay register reports received by DETR from the IFS. Mr. Ramirez replied that the reports were not exactly what DETR was expecting but DETR has not yet had a chance to review the reports to verify that all of the information needed is included in them. Mr. Ramirez said the reports were received just the previous day. Mr. Beers asked whether another meeting was scheduled with DETR to get an update on the status of the IFS reports received by the department. He inquired whether the reports are merely in a different format than DETR is accustomed to seeing, or whether instead they actually lack needed information. Ms. Jackson asked whether Mr. Beers wished to have DETR set up an appointment to discuss the reports after the department completes its review of the reports. Mr. Beers replied yes. Senator O'Donnell noted the Legislature would be dealing with the IFS question as a one-shot appropriation and suggested the meeting between Mr. Beers and DETR be held before the one-shot appropriation meeting occurs.

Mr. Ramirez said the second decision unit which is significant to DETR Administrative Services is E-710. Included in E-710 is a request to replace 24 personal computers. DETR has established a computer replacement policy which replaces computers on a 3-year, 5-year, or 6-year basis, depending on who is using the computer and what the computer is being used for. This policy was designed to accomplish two things; (1) eliminate the possibility of having all the computers in the department needing to be replaced at the same time, and (2) get the appropriate equipment to the people needing the equipment. For example, DETR would not buy a new computer for someone who needs equipment to emulate a mainframe terminal. Using an older Pentium machine recycled to meet that person’s needs could satisfy this equipment need.

Senator O'Donnell asked what kind of computer DETR is replacing and whether Pentium computers are being replaced. Mr. Ramirez replied yes. He explained DETR is replacing primarily Pentium 90s and 120s which were purchased 3 to 4 years ago. Senator O'Donnell asked what DETR plans to do with the computers being replaced. Mr. Ramirez replied all of the computers will be recycled within DETR to replace older 486s and dumb terminals. There is a dual communication cost incurred when using the dumb terminals. The T-1 line is used for those staff with personal computers and the dedicated line to the equipment controllers is used for the dumb terminals. Mr. Ramirez said DETR is attempting to replace all of the dumb terminals with computers to reduce the communication cost. He said that in no case are any of the Pentiums being excised or leaving the department.

Ms. Jackson said DETR started a recycling process during the 1997 Legislative Session to move the replaced computers to lower-end users where the computer is needed. Senator O'Donnell asked why the replacement process was named a recycling program when in reality a computer is being moved to a different function and a new computer is purchased to replace the computer that was moved. He asked. "Why not just call this process buying new computers?" He said if the old computers are being scrapped because they are obsolete or they just do not work anymore, the department should get rid of them. He further commented:

Bill Vance, Administrator, Division of Information Development and Processing, Department of Employment, Training and Rehabilitation, said DETR will actually be surplusing 24 devices which will leave DETR. These devices will be either dumb terminals or 486-class machines. Mr. Vance said when the term recycle is used, it means DETR cycles the new machines to the more intensive users and the less intensive users get the older machines. This movement of computers can cascade down to three or four users in the department. Mr. Vance said there are actually 24 devices which will be surplused to agencies outside of DETR, and in these instances the net increase in devices is zero.

Senator Neal asked what needs DETR is attempting to address by purchasing the new or replacement computers. Mr. Vance replied the Financial Management staff are very intensive users of the computers. They perform a lot of heavy-duty spreadsheet work and run the department’s accounting records on the computers. Mr. Ramirez noted the Financial Management staff also perform a lot of research and analysis functions. He said it would not be necessary for a receptionist position to have the same type machine used by the Financial Management staff, who use the machine 8 hours a day, pumping out reports and authorizing payments. Senator Neal said it appears the needs could be handled by a word processor. Mr. Vance replied a word processor could not possibly handle the work, and software such as Excel 97 is being used. Senator Neal asked whether DETR works through a mainframe computer. Mr. Vance said no, DETR works through a network for the personal computers which are connected to the DETR network.

Senator Neal asked whether the personal computers are connected to the Department of Information Technology (DoIT). Mr. Vance replied DETR has connections to DoIT via the network but basically the personal computers are connected to the DETR network. Senator Neal asked whether DETR has a mainframe for its use. The senator said he thought the personal computers were for the storage of information and retrieval of stored information to certain positions within DETR. Mr. Vance said all of the DETR computers are tied together and share data files via the DETR network. Senator Neal asked how the current process would be improved. Mr. Vance said the performance of the workstations and personal computers are being improved and this will improve the performance of the employees. Senator Neal asked whether improving the performance of the employees is the goal. Mr. Vance replied it is. Senator Neal asked whether this improved performance has anything to do with the workload. Mr. Vance replied if the employee performance improves, a higher workload can be processed. He said that adding the computers would handle the workload via automation as opposed to just adding employees.

Senator O'Donnell said DETR has identified each one of the computers and asked for an explanation of how each computer will be used and what will happen to the computers being replaced. Mr. Vance said that information had been prepared and would be provided.

Mr. Beers asked whether DETR still has 486s. Mr. Vance replied yes. He said some of the employees do not have a personal computer workstation at all because they are using dumb terminals, which can now be cycled out with the new computers. Mr. Beers asked whether DETR has organizationwide e-mail. Mr. Vance said yes. He explained those people without a workstation on their desk can use workstations located in their areas. Mr. Beers asked whether DETR was centering on Group Wise or Microsoft Outlook. Mr. Vance replied, "Group Wise." Mr. Beers asked the minimum specification of a workstation running Group Wise. Mr. Vance did not know. Mr. Beers asked whether the receptionist uses Group Wise. Mr. Vance said yes.

Ms. Jackson said DETR asked the 1997 Legislature for computers so each of the Nevada Equal Rights Commission staff could have computers, and DETR was authorized to purchase 21 computers. That is when the recycling and replacement process for DETR began, she said.

DETR, Information Development and Processing - Budget Page DETR-12 (Volume 2)

Budget Account 101-3274

Bill Vance, Administrator, Division of Information Development and Processing, Department of Employment, Training and Rehabilitation, said the mission of the Division of Information Development and Processing is to provide reliable and timely labor market, analytical, and data processing services and products to support the programs administered by the department. The funding is from a mix of grants, direct allocations, and departmental allocations. The division has 75 employees with four bureaus. The Research and Analysis Bureau (R&A) has 28 positions, mostly economists, and is responsible for the collection, development, and dissemination of labor market information. Mr. Vance said this bureau also provides comprehensive occupational and career information to the state school districts and employment and service providers. He said the Information Systems Applications Bureau (ISA) has 24 employees and is responsible for application planning, development, and maintenance for mainframe and personal computer-based systems. The Computer Operations Bureau has 9 employees. It is responsible for the department’s mainframe computer services and also provides a departmentwide help desk service, he said. The Network Support Services Bureau, with 12 employees, provides and maintains the department’s communications systems including all local- and wide-area personal computer networks and supports all out-of-the-box software, Mr. Vance said.

Mr. Vance said performance indicator No. 1 in the column titled Actual Fiscal Year (FY) 98 should be read 90 percent, not 85 percent. Senator O'Donnell asked why the indicator went from 85 percent to 90 percent. Mr. Vance said a mistake was made when the information was entered; 90 percent should have been entered, not 85 percent. Senator O'Donnell requested that in the future the performance indicators be correct when they are entered. Mr. Vance said some of the performance indicators could be updated information because the numbers were prepared in August 1998, and that was very soon after the end of the fiscal year to prepare actual data.

Mr. Vance said the actual performance indicator No. 3 should read 40 percent instead of N/A. The performance indicator No. 6 description should end with "operational problems," not "programming problems," he said. Mr. Vance said that for performance indicator No. 9 the actual FY 98 should read 96 percent, not N/A. He said the Network Support-Wide Area Network (communications backbone) "up" time is currently about 99 percent; it has been very good.

Ms. Giunchigliani requested that the savings on the Career Information System (CIS) program to the school districts be provided by school district at a later time. She estimated the overall savings at about $200,000. Mr. Vance said he would provide that information.

Mr. Vance pointed out the base budget includes the deletion of two positions in accordance with an IFC agreement. He said the enhancement portion of the budget request includes a request for one Property Inventory Clerk position to maintain the department’s new comprehensive inventory system.

Senator O'Donnell requested that Mr. Vance move on to the E-710 portion of the budget request. Mr. Vance said E-710 includes a request for replacement of office furniture, upgrades of departmentwide software, replacement of 51 personal computers, replacement of wide area network (WAN) equipment, and replacement of a high-speed mainframe printer. He said much of the furniture utilized by the computer support group is in poor condition. He said he was convinced that a good working environment, like a continuous training program, is essential to retaining the data processing professionals. Among the more expensive furniture items being replaced were 11 modular units for the Research and Analysis group and 10 modular units for the Systems Application group, Mr. Vance said.

Senator O'Donnell asked whether the 51 personal computers were being requested in addition to the 42 personal computers being requested in the other DETR budgets. Mr. Vance replied yes. He said the Information Development and Processing Division staffs are intensive users and are on the 3-year personal computer replacement program. He said the division has 75 employees and the budget includes requests to replace 51 personal computers during the biennium.

Senator O'Donnell asked whether any of the funds being used to replace the personal computers are federal funds. Mr. Vance said about 95 percent of the DETR money is non-general fund. Senator O'Donnell asked for an update on the General Unemployment Insurance Development Effort (GUIDE). He said he often receives letters saying, "Senator, if you do agree with this, we will process the payment; if you do not agree, let us know." Senator O'Donnell said he does not know whether or not he agrees or disagrees and asked DETR not to send him any more letters. Ms. Jackson reminded Senator O'Donnell he is on the steering committee. The senator replied he never attends the steering committee meetings. Ms. Jackson said that is why DETR is sending the reports.

Mr. Vance said the GUIDE system went live on October 2, 1999, as scheduled and within the amount originally budgeted. He said the core system is generating unemployment checks but there are some components of the system not yet complete. He mentioned the uncompleted components are on track and on schedule. Mr. Vance said DETR has a Year 2000 unemployment insurance system in place, on time and within budget. He said a major factor in the success of the GUIDE project was a well-written, deliverable-based contact. He remarked DETR is trying to get out of the contracting business. Mr. Vance said DETR was less than pleased with the contractors, considering the price of the contract. He said that because of the Year 2000 (Y2K) problems, DETR had no choice but to use external contractors to accomplish the large volume of work required before the Y2K.

Mr. Vance stated that in the future DETR would ask the Interim Finance Committee (IFC) for positions with a "sunset" clause to accomplish specific projects that cannot be handled by existing staff. These temporary employees would be on staff from 1 to 3 years to accomplish specific projects. This would enable DETR to complete the required projects with employees rather than contractors. Senator O'Donnell said this was an exceptional idea. He said this should have happened in the state earlier, but DETR is the first agency to use this concept. He asserted the problem in Nevada is that when contractors are hired at a cost of between $100,000 and $120,000 a year and paid with state money, the state has no control over them other than the contract. The senator said the smart thing to do would be to hire employees with a sunset clause so they would be accountable and part of the process with some ownership of the projects.

Mr. Beers asked for a brief description of the DETR development environment. Mr. Vance said one of the tracks to accomplishing the successful implementation of the GUIDE system is a well-trained staff. He said DETR is preparing to provide more training because it is necessary to provide continuous training to retain competent staff. He stated that because of the workload, one of the biggest problems in the current biennium has been finding the time for the staff to attend the necessary training. He said a good work environment, a good ergonomic environment, and a known training environment are the means by which DETR will keep the best of its employees.

Senator O'Donnell asked how DETR interfaces with DoIT. Mr. Vance replied DETR uses the DoIT mainframe but has its own operational staff to run the jobs on the DETR mainframe. Senator O'Donnell asked what the DETR attrition rate is. Mr. Vance said DETR loses about 10 percent of its employees. He suggested that considering the tremendous competition for employees with computer expertise, an attrition rate of 10 percent is very good.

Senator Neal asked whether DETR currently utilizes the master contract provided by DoIT. Mr. Vance replied DoIT supplied the master contract but the contract was with the vendor, not DoIT. E-129 in budget account 101-3274 requests a service contract with a vendor to provide services for the DETR computers statewide. Mr. Vance said having this contract relieves DETR from having service employees at each DETR office location statewide. He said it is less expensive to use a vendor to service the computers statewide than to have staff located in each of the 35 DETR offices. Senator Neal asked who actually contracts with the vendors providing the service contract. Mr. Vance replied DoIT has the Master Services Agreement with the vendor but the actual contract is between DETR and the vendor. He said DoIT sets up master contracts so state agencies can contract with the vendors included in the master contract without being required to issue bids for the vendor’s services each time a service is needed from those vendors. Mr. Vance said DETR currently uses the vendor Decision One to service the DETR computers statewide. Senator Neal asked for the Decision One address and location. Mr. Vance promised to provide the information.

Senator Neal asked about the function of the Public Information Officer II shown in Exhibit C, page 6. Ms. Jackson said the function of the Public Information Officer is to develop brochures to be sent to the public, prepare press releases, set up conferences, prepare speeches, interface with the U.S. Department of Labor, and interact with the various DETR divisions. She said there were a lot of brochures for the various programs offered clients in the resource centers which must be continuously updated. She said the Public Information Officer also develops pocket résumés to be carried by the client when applying for jobs. The Public Information Officer also assists with the marketing efforts for DETR.

DETR, One Stop Career Centers - Budget Page DETR-28 (Volume 2)

Budget Account 101-4772

Ms. Jackson said DETR originally requested approval for the One-Stop initiative during the 1995 Legislative Session. DETR moved eight of the Claimant Employment Program employees to the Neil Road office in Reno to work in the initial pilot program for the One-Stop centers. The purpose of the pilot program was to identify the efforts required to begin working with universal access, customer choice, service integration, and outcome accountability. The program personnel worked with the Washoe County government, city government, and the community organizations around the highly Hispanic area where there was high unemployment. Ms. Jackson said DETR felt the One-Stop Career Centers program could make a significant difference in the area, and this effort was the start of the department’s One-Stop initiative. She said DETR also applied for a One-Stop implementation grant from the Department of Labor in 1998 but did not get it. Ms. Jackson said that during this pilot program DETR conducted 32 town hall public meetings in 1996 to discuss the new One-Stop initiative so the public would begin to sense that DETR services were changing for the better.

Ms. Jackson said DETR received a grant in July 1997 of about $5.4 million from the federal government for the One-Stop Career Centers initiative. She said DETR began purchasing computers, and office equipment and hiring staff for the centers. The passage of the WIA on August 7, 1998, slowed the initiation of the One-Stop Career Centers because the centers moved to the control of local governments. The local governments contacted DETR with the request that the department continue moving forward with the opening of the four One-Stop Career Centers it had been working to open. Ms. Jackson said DETR has prepared a business plan which includes a marketing plan, performance outcome expectations, and the services to be included in the One-Stop Career Centers. She said four One-Stop Career Centers will be operational in the near future.

Senator O'Donnell asked about the 3-year grant. Ms. Jackson explained the One-Stop Career Centers are now under the direction and control of the local government. DETR will use the remaining state One-Stop grant funds for travel to Utah for training on a tracking system. DETR will be responsible for tracking, monitoring, and reporting to the Legislature the results of the One-Stop Career Centers. Ms. Jackson said DETR will continue to function when the money "goes away," but the local governments may return to the Legislature to request state dollars to continue the One-Stop Career Centers. Senator O'Donnell said the Legislature should take another look at the One-Stop program during the 2001 Legislative Session to identify what action will be taken when the current grant money runs out. Ms. Jackson said DETR will not be requesting additional money. She said, "We know the grant will end and this grant money is considered to be seed money to help with the development of moving into the One-Stop environment."

Senator Neal asked whether the DETR budget is funded mostly with federal dollars. Ms. Jackson replied it is. Mr. Ramirez said 93 to 95 percent of the DETR budget is funded with federal money. Senator Neal asked whether the federal money was the reason DETR had the Human Resources Section shown in Exhibit C, page 3. The senator thought that using federal dollars would necessitate the department’s establishing its own personnel system.

DETR, State Job Training Office – Budget Page DETR-33 (Volume 2)

Budget Account 101-1006

Maureen Cole, Administrator, State Job Training Office, Department of Employment, Training and Rehabilitation, said the State Job Training Office is an oversight agency responsible for the programmatic and fiscal integrity of employment and training programs under the federal JTPA, the National Reserve Act, the Defense Diversification Program, and the state-funded Displaced Homemaker Program. The State Job Training Office is designated in the Welfare-to-Work state plan as the program-compliance entity with statewide monitoring and technical assistance responsibilities relating to that initiative.

Senator O'Donnell asked whether a new budget would be submitted for this program. Ms. Cole replied yes and noted she was working on the revised budget. She said she just received notice from the Department of Labor identifying Nevada’s allotment of JTPA funds for the coming year. The allotment was $1.6 million less than anticipated. Senator O'Donnell asked why the federal government decreased the federal allotment. Ms. Cole indicated the rate of unemployment among the states drives the allocation of the federal funds, and Nevada’s rate has been relatively low.

Mrs. Chowning asked what would happen with the Displaced Homemaker Program in light of the reduced federal allotment. Ms. Jackson replied the executive order clearly says if the State Job Training Office is eliminated the office will continue, just in a different form. She said the Displaced Homemaker Program would default to the director’s office and would be assigned to the Monitoring and Technical Assistance Office, which will replace the JTPA office.

Ms. Giunchigliani asked if the WIA gets repealed in FY 2000? Ms. Cole said the WIA would repeal the JTPA as of July 1, 2000. The funds being discussed are JTPA funds for program year 1999, and state FY 2000. Ms. Giunchigliani said, "This would not just be a name change but also a subsequent reduction." Ms. Cole said the $1.6 million reduction is really not tied to the WIA, it is driven by the relative unemployment rate. Ms. Giunchigliani asked whether this is something that is affecting every state which has low unemployment and whether this potential reduction will be taken into consideration as the budget revision is prepared. Ms. Cole replied the funding system under WIA will be very similar to the JPTA allocation system. She said there may be potential for additional cuts later but that is dependent on the relative rates of unemployment. Ms. Giunchigliani asked what would happen should additional cuts to the JPTA occur and whether DETR would have to go to the Interim Finance Committee (IFC). Ms. Jackson said it would not be necessary to go to IFC should additional cuts occur, because the budget will be presented to the 1999 Legislature with the known cuts included.

Mr. Ramirez wished to clarify what will happen to the existing budget account 101-1006, the State Job Training Office, as it relates to the WIA program. He said DETR is planning to submit to LCB staff a revised budget request for the current State Job Training Office as soon as the department can finalize the budget request. He said the revised budget would include reduced funding in the amount of $1.6 million. Mr. Ramirez said budget account 101-1006 and existing staff and resources will be in existence and operational through the first year of the biennium. He said that before the end of the first year of the biennium, FY 2000, DETR will request a second budget account from the IFC because the department does not have all the information needed about WIA to complete a revised budget request at this time. Mr. Ramirez said a new budget account would be requested specifically for WIA. The new budget account will be for the second year of the biennium and the existing staff, or as many staff as the funding will support, will be transferred into the new budget account. This will occur before state FY 2001. Mr. Ramirez said budget account 101-1006 will remain in existence until all the outstanding obligations are liquidated, "keeping in mind the JTPA money is 3-year money."

DETR, Equal Rights Commission – Budget Page DETR-40 (Volume 2)

Budget Account 101-2580

William H. Stewart, Administrator, Nevada Equal Rights Commission, Department of Employment, Training and Rehabilitation, stated the mission of the Nevada Equal Rights Commission (NERC) is to protect the rights of Nevada residents and to defend them against discrimination in employment, housing, and public accommodations because of race, religious creed, gender, age, national origin, or disability. The statutory authority for the Nevada Equal Rights Commission is found in the Nevada Revised Statutes (NRS) chapters 233, 613, 651, and 118. Mr. Stewart noted that performance indicator No. 2 for the Actual FY 98 column should be 1,287 rather than the 1,306 shown.

Senator Neal noted Mr. Stewart’s position was not shown in the DETR organizational chart (Exhibit C).

Mr. Stewart continued that performance indicator No. 3 for the Actual FY 98 column should be 1,096, not the 976 shown. He said performance indicator No. 5 for the Actual FY 98 column should be 72 percent rather than the N/A shown. He further pointed out that for the Actual FY 98 column, performance indicator No. 6 should be 100 percent, performance indicator No. 7 should be 6, and performance indicator No. 8 should be 1.

Senator O'Donnell noted performance indicator No. 5, the percentage of cases closed within 250 days, was 72 percent rather than the 90 percent projected. The senator asked, "Overall, how are you doing with your cases? In the past it has been dismal but I understand the performance has improved." Mr. Stewart replied there is still room for improvement but the performance has improved during the past 2 years.

Senator O'Donnell recalled the Legislature had loaned the Nevada Equal Rights Commission funds to process the backlog of cases. He said the federal government reimburses the state for the amount of time the staff spends on the cases. Mr. Stewart replied the Equal Employment Opportunity Commission (EEOC) pays the state equal rights commission $500 for each case it investigates and makes a finding on. There is a significant time period between the submittal of a closure and the acceptance of the closure. Mr. Stewart said the problem has been cash flow, actually receiving the money. He said there have been instances at the end of the fiscal year where the reimbursement funds are "outstanding but not actually received." He said the 1997 session of the Legislature approved a $115,000 revolving fund but the fund has not been used during FY 1999. Mr. Stewart noted that any money used from the revolving fund would be repaid.

Mr. Ramirez stated the revolving fund had never been used. He said the statute reads that the state equal rights commission may request a loan of up to 25 percent of the EEOC contract, which has historically been about $462,000. He said the statute also requires the funds borrowed be repaid during the same state fiscal year they were loaned.

Senator O'Donnell noted the federal funds had been reduced for the current fiscal year. Mr. Ramirez said the federal funds were reduced by about $45,000 to $50,000 during FY 1999. He said the reduction was a result of the way the EEOC establishes the base period for the federal contract. He further explained that from June 1 through May 31 the federal government identifies all of the cases the NERC receives. Mr. Ramirez said the federal government then makes adjustments for the rejected cases, the beginning cases, and the projected ending cases, to establish the projected base period total. Then, depending on the amount of federal funds available, the federal government has historically funded between 80 percent and 87 percent of the projected base period total. Mr. Ramirez noted the NERC would always have to have more cases in the base period than will get reimbursed because the EEOC will not reimburse for all of the cases. He noted that during the State Fiscal Year (SFY) 1998, the NERC established a low base period which resulted in a reduction of the SFY 1998 contract. He said there were several reasons for this, including staff turnover and having new staff. Mr. Ramirez said DETR has evaluated the base period of June 1 through December 31 and the Nevada Equal Rights Commission is averaging about 100 new cases each month, which indicates the yearly caseload will be between 1,100 and 1,200. This caseload would restore the $460,000 projected for FY 2000 and FY 2001. Mr. Ramirez said FY 1999 might be just an anomaly.

Senator Neal asked whether the federal government is paying the State of Nevada for protecting its citizens’ equal rights. Mr. Stewart said the contract with the EEOC contains a deferral relationship wherein the EEOC will have national jurisdiction in any of the charges filed provided the EEOC covers the class the case is being filed under. He said that anywhere it has jurisdiction the EEOC will pay the state to conduct the investigation at the state and local level rather than having to conduct the investigation itself.

Senator Neal asked for an example of where the EEOC would not have jurisdiction. Mr. Stewart said an example would be that should sexual preference and sexual orientation become part of the protected classes covered by the NERC (which is being proposed in Assembly Bill 311), the EEOC would not have jurisdiction.

Senator Neal said the EEOC does not cover these classes and any cases investigated by the Nevada Equal Rights Commission that involve complaints related to sexual preference or sexual orientation, should these classes be approved for inclusion, would have to be paid for with General Fund money because EEOC will not reimburse for these types of cases. He said the EEOC will not reimburse for cases where they do not have jurisdiction.

Senator Neal asked whether Mr. Stewart is essentially an employee of the federal government. Mr. Stewart replied the federal government pays about 40 percent of his salary. Senator Neal commented that along with federal money goes federal control. He asked whether the other investigators working with Mr. Stewart are paid with about 40 percent federal money also. Mr. Stewart replied that about 40 percent of the Nevada Equal Rights Commission’s entire budget is federally funded. Senator Neal noted that without the federal funds, the NERC would be only 60 percent its current size. Ms. Jackson agreed.

Mrs. Chowning asked whether the NERC has enough equipment. She recalled that in the past, the office did not even have a copy machine and had very little equipment. Mr. Stewart replied the commission does have enough equipment.

Mrs. Chowning noted the performance indicator for the total cases closed and accepted for payment by the EEOC for FY 1998 was 1,096 and the projection for the next biennium is about 1,400 each year. She asked how this workload can be accomplished with a position being left vacant. Mr. Stewart replied it would be difficult. Mr. Ramirz said the projection of 1,408 cases being closed and accepted for payments by the EEOC was prepared before it was decided to leave one position vacant. Mrs. Chowning asserted the projection will have to be revised because it will not be possible to achieve the projected totals and leave one position vacant. Ms. Jackson said DETR did not anticipate the federal government contract would be reduced. She noted the reduction of about $50,000 for the federal contract plus the $60,000 reversion included in the NERC budget represents a cut in this budget of more than $100,000.

Mrs. Chowning requested the performance indicators be revised to include the reduced budget. She asked what the NERC needs to accomplish the performance indicator projections included in the budget request. She wondered whether the commission has been meeting and is being utilized effectively. She inquired whether the commission members are being utilized and how many times the commission meets each year. Mr. Stewart replied that since he has been with the commission, beginning in 1995, the commission has met 4 times each year. He added the commissioners have been very helpful.

Senator Neal noted that Mr. Stewart, as administrator, reports directly to the commissioners. He asked what responsibility the commissioners have for Mr. Stewart’s work. Mr. Stewart replied the five-member commission was established to review problems involving race, religion, and sex discrimination. The commission is authorized to appoint the director to carry out commission duties. Mr. Stewart said he views the function of the commissioners as similar to that of a board of directors, whose members identify problems they feel need attention.

Senator Neal said he recently spoke with an attorney from EEOC about the possibility of the EEOC pulling cases from the Nevada Equal Rights Commission because the EEOC felt the NERC was not receiving the necessary support to perform its job. Mr. Stewart said he has heard nothing about any EEOC concerns. Senator Neal asked whether the EEOC had pulled any cases from the NERC. Mr. Stewart replied the EEOC has assumed jurisdiction in some cases but only where it was attempting to bring about class-action lawsuits. He said any time there are two or more similar cases against a particular respondent, the EEOC wants to take jurisdiction of the cases.

Senator Neal observed the Nevada Equal Rights Commission seems to be buried in layers of administration. He said that at one time the commission functioned as an arm of the Governor’s Office. The senator asked how the placement of the NERC in DETR has affected the commission’s ability to investigate cases of discrimination and carry out the intent of the statutes. Mr. Stewart replied he has encountered no problems. Senator Neal asked about the organizational structure and lines of authority of equal rights commissions in other states. Mr. Stewart said he began working in the equal rights arena in 1973. He said the prevailing thinking at that time was for the person responsible for the equal rights functions to report directly to the general manager or the top person of the organization. Mr. Stewart said the theory was that to maintain the integrity of the equal rights work it was important to eliminate as many layers of reporting responsibility as possible. He said the effectiveness of an equal rights organization depended on how the chief executive of the organization felt about the equal rights functions. He explained that if the chief executive felt it was important and wants to be actively involved, the equal rights function should report directly to the chief executive. Mr. Stewart recalled that very early during his training he was told:

Senator Neal asked whether Mr. Stewart or Ms. Jackson finalizes the conclusions reached after the investigation is performed. Mr. Stewart replied that he makes the final determinations of the individual cases. Senator Neal asked whether Mr. Stewart’s final determination could then be appealed in court. Mr. Stewart said the Nevada Equal Rights Commission does not issue a right to sue. He said if a respondent wants to go to court, he or she must get a right to sue from the EEOC. He noted the EEOC has accepted the NERC’s determination in about 95 percent of the cases. Senator Neal asked whether the Nevada Equal Rights Commission’s authority is connected to the EEOC and whether a determination made by the NERC that is under the jurisdiction of the EEOC would be investigated again by the EEOC. Mr. Stewart replied the EEOC would not conduct an additional investigation if it accepts the findings of the NERC’s investigation.

Senator Neal requested that Mr. Stewart identify the reporting structure of other states’ equal rights commissions. Ms. Jackson said that at the federal level, the EEOC is in the Department of Labor. She said most of the other states’ equal rights commissions report to their state’s counterpart of Nevada’s Employment Security Division.

DETR, Employment Security – Budget Page DETR-44 (Volume 2)

Budget Account 205-4770

Stanley P. Jones, Administrator, Employment Security Division, Department of Employment, Training and Rehabilitation, said the mission of the Employment Security Division is to provide a statewide labor exchange, conduct programs that promptly pay unemployment benefits, improve the employment stability of those collecting unemployment insurance, and administer an effective tax system. He said the Employment Security Division (ESD) budget is composed of two major functional areas, unemployment insurance and employment service. Mr. Jones said the employment service component provides labor market information, job skills assessment, counseling, and job placement services for Nevada’s workers and employers. The unemployment insurance component collects the unemployment taxes from the employers and pays benefits to eligible unemployed workers.

Mr. Jones discussed the performance indicators projected for each year of the next biennium shown in the DETR, Employment Security budget, account 205-4770 on page DETR-44 (Volume 2) of The Executive Budget. He said that for performance indicator No. 5, first pay orders time lapse, the projected FY 2000 and FY 2001 percent should be 92 percent, not the 87 percent shown. He also noted in regard to performance indicator No. 6, deposit timeliness, the Projected FY 2000 and FY 2001 should be 100 percent, not 90 percent as shown.

Mrs. Chowning asked Mr. Jones about providing additional performance indicators including what percentage of time the unemployment insurance contribution audits are completed within a standard time frame of 3 days. She asked the percentages of time unemployment claims are processed within a standard time frame of 14 days. She also requested the percentage of time that appeals decisions are rendered within a standard time frame of 30 days. In addition she requested the percentage of people served that find employment and the average cost per client of providing the service. Mr. Jones said he would get the requested information as quickly as possible.

Mr. Jones said enhancement request E-125 provides funding for the operating costs for a Microscan Electronic Imaging System to facilitate the timely and accurate processing and retrieval of unemployment insurance information in the Contributions section. This project will enhance the accuracy of unemployment insurance information handling and allow almost immediate response to employer inquires.

Senator Neal asked when the Microscan Electronic Imaging System will be implemented. Mr. Jones replied the system will be operational by the close of FY 2000. Mr. Jones said the developmental costs of the imaging system are included in the DETR Employment Security Special Fund, budget account 235-4771.

Mr. Jones said E-126 request is for the second year of the biennium and is for the telephone claims center for northern Nevada. He said the telephone claims center has already been implemented in southern Nevada.

George A. Govlick, Southern Region Administrator, Employment Security Division Regional Office, South, Employment Security Division, Department of Employment, Training and Rehabilitation, discussed the successful implementation of the centralized telephone initial claims-taking system in southern Nevada. He said the centralized telephone system was developed to provide a system whereby any individual who would have to file for unemployment insurance could do so from the convenience of home or from any touch-tone phone. Mr. Govlick said another objective was to consolidate unemployment insurance claims-taking in southern Nevada from four separate locations into one centralized location. He said that perhaps the most important objective was to bring about a major improvement in terms of customer service. The last objective was to be responsive to the federal emphasis of moving toward receiving claims by telephone nationally, Mr. Govlick said.

Mr. Govlick said the Employment Security Division committed to implementing the telephone claims-taking system in southern Nevada by July 1998. He said that because it was necessary to wait for the implementation of the GUIDE system to be on-line before moving ahead with the telephone claims-taking system, the telephone claims-taking system was not begun until November 1998. Mr. Govlick said all new claims filed weekly, and all continuing claims, are entered into a statewide telephonic filing system. He said the telephone claims-taking system was fully operational on March 8, 1999. He noted the division now has a system of 38 claims-processing people located in one location at the corner of Maryland Parkway and Desert Inn in Las Vegas. These people began working with the telephone claims-taking system March 8, 1999. He said four of these staff members speak Spanish. Mr. Govlick said there is also a special language line for languages other than English or Spanish and a telecommunication device for the deaf (TDD) for people with a hearing impairment.

Mr. Govlick said the original budget request indicated the telephone claims-taking system would have 51 staff. He said that because of the low unemployment rate, the higher level of staffing is not needed and a staff of 38 can handle the workload. He observed the telephone claims-taking system is working remarkably well considering the system is new. It will take a while for the system to even out and to fully achieve the desired customer service, he said. He noted that during a 2½-day period in early March 1999, the system was able to process a claim in 15 to 20 minutes. During the 2½-day period in March, 1,342 claims were received and filed, with claimants spending only about 10 minutes on the phone with ESD staff members. Mr. Govlick said that considering how long people had to stand in line before the implementation of the telephone claims-taking system, the time it takes now to file a claim is a remarkable achievement in customer service. He said the system is not yet perfected. Other states that have implemented this kind of system report it takes about a year to work out all the problems, and after that the system works at peak efficiency, Mr. Govlick said.

Mr. Govlick stated that in the near future an interactive voice response unit, which is a front-end device, will query the claimant while the person is waiting to talk to a claims-taker. This will permit the person to enter his or her social security number, address, and name. When the person does get to the claims-taker, the screen will be populated with the data and the claims-taker will be able to greet the customer by name and begin the work of taking the claim. Mr. Govlick said the division will be adding to the telephonic system to accommodate the increased workload that will occur when the unemployment rate increases. He said the staff, which is working in two shifts at the Maryland Parkway location, will be moved into a centralized location that will provide space for additional staff when the unemployment rate increases.

Senator O'Donnell asked, "Why not use a toll-free number to the southern office rather than develop a new facility in northern Nevada?" Mr. Govlick replied the claim center currently in operation is for southern Nevada and itinerant locations such as Pahrump and Laughlin. Claimants can call in from these areas and leave a message, and division staff will call them back from the southern office. Senator O'Donnell asked how many positions the division will have in the new center in northern Nevada. Mr. Govlick replied the number of staff needed for the northern center is still unknown. Mr. Jones said the uncertainty of staff needs for the northern center is one of the reasons the request for the northern center is for FY 2001. This will allow the division to analyze what has taken place at the southern center and use the information to staff the northern center.

Senator O'Donnell asked how many of these centers other western states with a population similar to Nevada’s have, such as Utah and Colorado. Mr. Govlick replied those states each have one statewide center. Senator O'Donnell asked why Nevada needs more than one center. Mr. Govlick said that ultimately it will be a business decision; the division will evaluate the southern center to determine whether two centers are needed. Mr. Jones said the cost to upgrade the southern Nevada telephone initial claims center to accept all calls throughout the state was estimated by Lucent Technologies in Las Vegas to be $370,000. Mr. Jones said the cost to upgrade the southern office was about the same as the projected cost to implement the northern center. He said the center in northern Nevada will provide a backup system for the southern center, alleviate the need to move a number of long-term employees to Las Vegas, and avoid the long-distance line charge of between $65,000 and $85,000 a year.

Mr. Jones said decision unit E-127 provides funding for the link to the new unemployment insurance database and reduces the time involved in identifying claimants who are working and collecting unemployment insurance benefits. Senator Neal asked about the potential savings of the early fraud-detection program. Mr. Jones replied that at present the division has knowledge of about $7 million in benefits which have been fraudulently received. These are benefits that were paid to persons who filed a claim for unemployment insurance, went back to work, and continued to receive unemployment insurance payments, which is a fraudulent practice. Mr. Jones said there is a lag time of as much as 6 months before the ESD can detect this kind of fraud. He said that under the new-hire provisions of the NRS every employer must report every new hire within 20 days of the hiring. This program will allow the division to intercede after the 20-day period has passed.

Mr. Beers said he was confused about the 6-month period discussed by Mr. Jones. Mr. Jones explained the employer files a quarterly report at the end of each quarter. With the time it takes for the report to be filed, added to the time it takes the division to interject the quarterly information into the current benefit accuracy measurement program, there can be a lag time of as much as 6 months before the fraud is detected. Mr. Beers asked whether it takes up to 3 months for the employer to file the report and an additional 3 months for the division to discover the fraud. Mr. Jones replied yes, it could take up to 3 months. He added there are also employers that are not timely in filing their quarterly reports. He said the employer must report a new hire within 20 days of the hire date, and the new benefits accuracy measurement system will interface with the new-hire reporting provision. Mr. Beers said it seems a 3-month delay on the part of the division is simply procedural and the fraud-detection system could be implemented now. Mr. Jones said 6 months is the maximum time it takes to detect the fraud; it could be discovered sooner. In many cases it is discovered within days of the employer filing the quarterly report but it can take up to 6 months, he said.

Senator Neal asked for an explanation of E-710. Mr. Jones said E-710 is a request to replace old, worn, and obsolete equipment. He said the replacement is necessary in the office environment the ESD is working in today. Mr. Jones said many of the telephones are broken and not functional. Senator Neal asked for a breakdown by cost center or budget account as to where each piece of the requested equipment will go. Mr. Jones said he would supply that information. Mrs. Chowning asked about the computer-recycling program, which started during the last legislative session, and said she wanted to know where the recycled computers, as well as the new computers, will go.

Senator Neal requested explanation of E-806. Mr. Jones said E-806 is a request for the reclassification of 8 vacant Employment Service positions to Unemployment Insurance positions. The Employment Service positions can no longer be supported due to the reduced funding, and the Unemployment Insurance positions are necessary to meet increased workloads in the Contributions section where workload activities are driven by the number of employers. Mr. Jones noted the number of employers has been rising about 6 percent each year. Senator Neal requested additional information justifying the workload of the 12 individuals in the Contributions section. Mr. Jones said he would provide the requested information.

Mrs. Chowning said it is her understanding Nevada is one of the few states that does not use the lockbox system. She asked why the division does not use a lockbox system. Mr. Jones said the ESD has reviewed the lockbox process and has met with Bank of America on several occasions to discuss the process. The division is reviewing the information but did not include a request to change to a lockbox system in the current budget. Mr. Jones said it is possible the division will present the lockbox concept to the IFC if there is justification for its use. Mrs. Chowning asked that the information be provided before the budgets are closed. She said it seems to be labor-intensive to process the information internally when the bank could provide the service. She asked for information about the problems of using a lockbox.

Ms. Giunchigliani said she thinks it saves money to use a lockbox and directed the division to "within 1 week identify the bank your division will be using for the lock box services so it can be included into your budget request."

DETR, Claimant Employment Program – Budget Page DETR-53 (Volume 2)

Budget Account 205-4767

Ross Whitacre, Claimant Employment Program Chief, Employment Security Division, Department of Employment, Training and Rehabilitation, said the mission of the Claimant Employment Program (CEP) is to provide skills enhancement training and reemployment services to unemployed persons, including unemployment insurance claimants, to help them overcome the negative impact of job loss due to lack of job skill and workforce dynamics, to increase earnings potential, and to meet the growing demand of Nevada employers for better-trained, productive employees. He said the program originally was funded to provide skills training to unemployment insurance claimants. Mr. Whitacre noted the program was expanded in 1995 to provide the same services to all unemployed Nevadans looking for work. He said that within the last 2 years the division has worked with other service providers to address employment and training needs of identified segments of the population. Mr. Whitacre said the Claimant Employment Program is funded through the Unemployment Insurance Trust Fund at a rate of .05 percent of the moneys that go into the fund for the payment of unemployment insurance benefits.

Mr. Whitacre identified several corrections which needed to be made to the "Projected" columns for FY 99, FY 00, and FY 01. He said that for performance indicator No. 1, number of program participants, the projected numbers for FY 99, FY 00, and FY 01 should be changed from 6,333 to 7,531. For performance indicator No. 2, number of program participants entering employment, the projected numbers for FY 99 and FY 00 should be changed from 5,320 to 6,220. The Projected FY 01 column should be changed from 5,320 to 6,520. For performance indicator No. 3, percent of program participants satisfied with services, the Projected columns for FY 99, FY 00, and FY 01 should be changed from 75 percent to 83 percent. Mr. Whitacre said that for performance indicator No. 4, number of program participants enrolled in training, the numbers in the Projected columns for FY 99, FY 00, and FY 01 should be changed from 4,408 to 5,294.

Mr. Whitacre said the Claimant Employment Program is requesting 8 new positions during the upcoming biennium, 6 in FY 2000 and 2 in FY 2001. He said the positions will be used to expand the reemployment services to clients through a presence in the resource centers in the local offices. He explained that while an extensive amount of training is provided to get the claimants back to work, there are also people who need services other than training. These people need reemployment services, which can be provided through the resource centers. Mr. Whitacre said the new positions would go into the largest offices throughout the state and would help in getting the claimants back to work quicker and possibly at a higher wage. He predicted that with the new positions the number of program participants entering employment will increase.

Senator Neal asked about the quality controls used to monitor the quality of the services being provided by vendors to ensure they are meeting the agency goals. Mr. Whitacre replied that a large portion of the training is provided by the community colleges. He said the Commission on Post-Secondary Education must approve the private vendors before their services can be used. He added that vendors who lose their accreditation are dropped from the list of vendors.

DETR, Employment Security – Special Fund – Budget Page DETR-60 (Volume 2)

Budget Account 235-4771

Stanley P. Jones, Administrator, Employment Security Division, Department of Employment, Training and Rehabilitation, said E-125 is a request for funding for developmental costs for a Microscan Electronic Imaging System and includes the programming, hardware, and software necessary to implement the system. Mr. Jones noted decision unit E-126 is the request for the northern Nevada Telephone Initial Claims Center which will be implemented during FY 2001. A revised work program will be submitted to IFC after the evaluation of the southern Nevada center is completed.

Ms. Giunchigliani asked whether the $3 million requested will be adequate to complete the proposed unemployment insurance tax system. Mr. Jones replied it would be enough to complete the system. Ms. Giunchigliani said the committee should not anticipate the division going to IFC or anyone else to request additional funding. Mr. Ramirez said the request will be modified to reflect a change in the implementation date to FY 2001. He said the revision will be submitted by March 19, 1999. Ms. Giunchigliani asked whether there are federal dollars available for the unemployment insurance tax system. Mr. Ramirez replied there are not. He said this project is "a Year 2000 conversion"; therefore, the funding that the U.S. Department of Labor (DOL) has given the division for GUIDE and the other Year 2000 efforts do not apply to this project.

Ms. Giunchigliani asked whether the unemployment insurance tax system will be Year 2000-compliant (Y2K). Mr. Ramirez said the compliance issue is being worked on right now and the millennium conversion should be complete within the next 60 days.

Senator Neal asked about the Y2K status. Mr. Vance replied the division is on track with the Y2K conversion project. He said ESD is just completing phase 1 of the "contribution project" to make the system Y2K-compliant. Senator Neal asked whether the system has been tested. Mr. Vance replied the system is being tested currently as the work is progressing. He said it is being reviewed by the contractor that performs the independent validation and verification and the contractor is finding the changes to be Y2K-compliant. Senator Neal asked whether this vendor was contracted through the Department of Information Technology (DoIT). Mr. Vance replied this vendor is one of the three contractors currently doing work for the division to conform to a DOL mandate. Senator Neal asked when the system testing will be completed. Mr. Vance replied, "May 31, 1999."

Senator O'Donnell asked whether the services to implement the unemployment insurance tax system are being contracted with DoIT or whether the work is being performed in-house instead. Mr. Vance replied that one of the reasons the project is being postponed until FY 2001 is to wait until the division can do the project in-house.

DEPARTMENT OF TAXATION

Department of Taxation – Budget Page TAX-1 (Volume 1)

Budget Account 101-2361

David Pursell, Executive Director, Department of Taxation, said the department’s mission is to provide equitable and effective administration of the tax program for the state of Nevada as established by statutes, regulations, and internal policies and to assist the state and local government entities in serving the taxpayers statewide.

Mr. Pursell said the Department of Taxation consists of three divisions: Administrative Services, Compliance (which includes the Revenue and Audit Divisions), and Assessment Standards. He said the total number of full-time equivalent (FTE) positions included in the Governor’s recommended base budget is 217. The Administrative Services Division is responsible for providing all administrative, financial, and fiscal support for the department. Mr. Pursell said this division includes budget, tax distribution, internal audit, personnel, mailroom, supply-room, information services, and the Senior Citizens’ Property Tax Assistance program.

Mr. Pursell said the Revenue Division is responsible for administering the collection of taxes for distribution to the General Fund, the Highway Fund, the cities, and the counties. The Audit Division is responsible for administering a program to ensure taxpayer compliance. The Division of Assessment Standards is responsible for valuing all centrally assessed properties, which include railroads, airlines, electric utilities, telephones, and mining property. This division also establishes appraisal guidelines for county assessors. The Local Government Finance section, which ensures the Local Government Budget Act is administered by all local entities, is included in the Division of Assessment Standards.

Mr. Pursell said the department is responsible for annually developing the official estimates of the population of the state and the various counties and local governments. Once certified by the governor, the estimates are used to distribute certain revenues to counties, cities, and towns and to determine the appropriate number of justices of the peace statewide. Mr. Pursell said an eight-member commission appointed by the governor heads the department. The Nevada Tax Commission exercises general supervision and control of the department. The chief administrative officer of the department is the executive director. Actions by the department may be appealed to the Nevada Tax Commission and the commission may review all decisions made by the department.

Mr. Pursell said the Department of Taxation is also responsible for staffing the State Board of Equalization, a five-member board appointed by the governor, which hears and acts on property tax appeals from the actions of various county boards or from valuations set by the Nevada Tax Commission. He said the values set by the Nevada Tax Commission are the centrally assessed railroad, telephone, and electric values. Mr. Pursell said the department also staffs the Committee on Local Government Finance that is composed of 11 members appointed from the Nevada League of Cities, the Nevada Association of Counties, the Nevada School Trustees Association, and the Nevada State Board of Accountancy. The purpose of the committee is to advise the department regarding regulations, procedures, and forums for compliance with the Local Government Budget Act contained within the Nevada Revised Statutes (NRS). Mr. Pursell noted the Property Appraiser Certification Board is composed of 6 members, 3 of whom are qualified appraisers chosen by the Association of County Assessors; the other 3 are appointed by the Nevada Tax Commission. He said this board advises the department on matters pertaining to the certification and continuing education of property appraisers.

Mr. Pursell said the base budget recommends funding to support 217.02 FTEs and 10 intermittent or seasonal employees in each year of the next biennium. He said funding is also recommended to support meetings of the Nevada Tax Commission and the State Board of Equalization. He noted that category 26, Information Services, includes funding for the following positions: 1 Network Technician position, 1 Master Services Agreement contractor (MSA) to function as a programmer, and 4 Department of Information Technology (DoIT) programmers.

Senator O'Donnell asked whether the positions are new or are on board now. Mr. Pursell replied the positions are in the base budget request and are currently filled.

Mr. Pursell said the M-200 request is for funding for 6 Auditor II positions, 1 in the Reno office and 5 in the Las Vegas office; and 1 Auditor III and an Accounting Clerk III in the Carson City office.

Mr. Pursell discussed the average number of audits completed by the department auditors. He said a history of the audits was completed, both excluding and including the combined audit years FY 94 and FY 95, shows the average number of audits per auditor excluding the combined audit years and identifies that each auditor was completing about 55 audits a year. When the combined audit years are included the average drops to about 50 audits a year completed by each auditor.

Mr. Pursell said the Governor’s recommended funding in the M-200 budget request is based on 50 existing full-time auditors. He said the assumption is that each auditor can complete an average of between 50 and 53 audits a year. He noted that 50 auditors performing an average of 53 audits a year could complete about 2,650 audits in the first year of the biennium. He said the department has estimated there are about 57,430 accounts available to be audited each year. Mr. Pursell noted that 2,650 audits of the 57,430 accounts would be a penetration rate of 4.6 percent. He said that by including the combined audit years the penetration rate would increase to about 5.6 percent.

Mr. Pursell said he asked the division hearing officers to look back at FY 96 and FY 97 to determine what the noncompliance rate is associated with the Sales and Use Tax reporting. He referenced page 1 of the Estimated Non-Compliance report (Exhibit D), a 15-page handout. He said the report indicated 97.5 percent of the total accounts are compliant. He said column A of the Estimated Non-Compliance report assumed the Sales and Use Tax collected will grow by 4 percent each year. Mr. Pursell said using the assumed Sales and Use Tax collected information enabled the department to determine the total estimated Sales and Use Taxes uncollected, shown in column D. He pointed out that for FY 2000, $50 million of the Sales and Use Tax is projected to be uncollectable.

Senator O'Donnell asked for clarification of the projected uncollectable Sales and Use Tax. Mr. Pursell replied that out of the total amount of projected sales tax which could be collected, 2.5 percent has historically been uncollectable. He said the Department of Taxation used the 2.5 percent number as a projection of future uncollectable sales tax. Senator O'Donnell asked why the sales tax is uncollectable. Mr. Pursell replied it is because some businesses go out of business while owing taxes and because some businesses do not follow the statutes and regulations set for how the business should report and pay sales tax.

Senator Neal asked whether the $12,436,983 shown in the Audit recoveries column for Fiscal Year 1989-90 on the Estimated Non-Compliance worksheet, page 1 of Exhibit D, was the amount of the $21,356,728 uncollected sales tax that audits recovered. Mr. Pursell replied that is correct.

Mr. Goldwater said he was concerned the Department of Taxation is budgeting as revenue an amount to be collected by the auditors. He voiced doubt it is in the state’s best interest to identify possible collections as revenue. He said it is helpful for the committee to understand the value of adding a position and the projected audit recovery gained by adding the position. Mr. Goldwater asserted it is not good policy to say there is some amount of money which is anticipated as revenue from audit recoveries; additionally, this information is shown in the performance indicators as a per-auditor benchmark. He asked whether the individual auditors were aware of how much they were expected to recover and how much they have recovered, and whether their job performance evaluation is based on the recoveries. Mr. Goldwater also asked how the Department of Taxation could get away from the policy of budgeting for the estimated audit recoveries. He stated:

Mr. Pursell replied the auditors have not been and will not be evaluated on the amount of recoveries they generate. He said when the anticipated audit recoveries are used as performance indicators it does give the perception the auditors must recover the amount identified. Mr. Pursell said he worked for the Department of Taxation about 19 years before he went to the Legislative Counsel Bureau’s Fiscal Analysis Division, and historically the indicator was used just to estimate whether there was a need for more auditors or not. He said it is known there can be a point where there is a diminishing return. Mr. Pursell said it is not possible to just keep adding auditors and expect the estimated audit recovery to remain the same. He said the estimated audit recoveries should not be a performance indicator; it is just a tool to give some indication of how many auditors are needed. He recalled hearing Assemblyman Hettrick say there should be some kind of performance indicator that tells what the educational program is accomplishing. Mr. Pursell said he agrees that a decreasing return per auditor is not necessarily bad news.

Mr. Goldwater stated he would like to see the estimated audit recoveries eliminated as a performance indicator. He reiterated it is "a terrible message" to send to the taxpayer. Mr. Pursell replied he would like to develop different performance indicators but the necessary data to develop new performance indicators is not currently being collected. He said the Department of Taxation needs to work more on its performance indicators. Mr. Goldwater asked what can be done to get away from including the estimates of recoveries, penalties, and interest in the revenue. He said this becomes a tacit quota, it is unspoken, "and we should get away from the quotas entirely. We should treat recoveries, penalties, and interest as cherries, and not include them into the budget."

Mr. Goldwater recalled a time he was discussing traffic citation quotas with a police captain. He said the police captain told him he did not have quotas, "but we know that if an officer is not writing any tickets he may be sitting in the donut shop all day." Mr. Goldwater said, "That is not what we want. We also do not want to send the message that we have budgeted for some amount of recoveries for each auditor, and we’d better get it or the auditor is in trouble." He said that whether or not this is being done or whether or not the amount of recoveries is a directive, does not matter; that is the message being sent by having recoveries included in the performance indicators and included in the budget.

Mr. Pursell said the Department of Taxation needs to create different types of performance indicators and needs to focus more on the consistency within the department, the Audit Division and the Revenue Division, to ensure the department is giving consistent information. He said the training ensures that consistent dissemination of information occurs. He stated the department educates the business community and must come up with some way to quantify how the efforts to generate compliance by the taxpayers are working. Mr. Goldwater interjected, "And not budget as revenue penalties and interest; that is the tacit message we are sending and we must get away from it." Mr. Pursell replied that he understands the concern.

Senator O'Donnell said he realizes the Department of Taxation is basing the budget on the dollars being collected. However, he said, as the dollars per auditor "go down" it indicates the compliance by the taxpayer is "going up," and "if you are only auditing 4.6 percent of the accounts it means there is a lot of evasion that can still exist." He said it makes little sense to employ more auditors even after the audit recovery drops below what it costs to perform the audit.

Senator O'Donnell further stated that when the recovery by each auditor is in the $300,000 to $400,000 range, "you know the compliance is not there." He said the committee would rather know whether or not the compliance is there and whether or not more auditors are needed. The senator said, "We should not budget the money expected to be recovered by the auditors. You cannot budget money that may or may not be there predicated on history." He further remarked, "In one sense I would like to see the recoveries by auditor stay but in the other sense I would like it to go away in terms of counting on it because I think as you add more auditors your compliance rate will go up." Senator O'Donnell said that should the compliance increase to 99.5 percent or even to 100 percent, "we are looking at an additional $50 million dollars for very little spent in auditing. We should collect as much money possible for the least investment possible."

Mr. Beers noted the audit recoveries column on the Estimated Non-Compliance spreadsheet, which is page 1 of Exhibit D. He noted the amounts in that column fluctuate greatly each year. He said the only other column that is not derived from an estimate is column A; columns B, C, and D are all estimated values using the audit error rates in column B from FY 1996-97. However, he said, "with as much variability as we are seeing in the audit recoveries over the last 10 years, the audit error rate shown in column B should encompass more than 2 years." He said that because everything else is based on an estimate, columns F and G "go back to a smooth curve." He asked whether it is possible to get the actual, specific audit error rate for FY 1990 through FY 1998. Mr. Pursell replied he was not sure how far back the specific audit data can go. He agreed that more information would give a better trend. He said the audit recovery columns are actual calculated audit recoveries. Noting the recoveries vary from $16.9 million to $9 million and $8 million, he attributed this fluctuation to the failed combined audit program.

Continuing, Mr. Pursell said another reason for the other fluctuations shown in the audit recoveries column is that the department began performing more excise tax audits, which involve less taxable sales. Additionally, departmental training on new computer equipment was added; there are unresolved audits in the Office of the Attorney General; and the department began using a team approach, which reassigned an auditor who was actually in the field auditing, to a supervising auditor position. He remarked there have been a number of factors through the years which have impacted the audit recoveries column. Mr. Pursell said that when he looked at this data he determined it was the department’s best effort to use historical information to attempt to determine how much in taxes was not being collected each year through noncompliance, to determine whether additional auditors were needed. He suggested that educating business to comply will be less expensive and more effective, in the long run, than not doing so.

Mr. Beers noted that column D on page 1 of Exhibit D, Total Estimated Sales and Use Taxes Uncollected, is significantly different from the audit recoveries column. He said there were two elements separating the two columns of numbers that are not clearly stated. Subject to error in the taxpayer error rate assumption, the first element is unpaid taxes that the audit program failed to find and the second is audit findings which the Department of Taxation failed to collect. Mr. Beers said the audit recoveries column was basically the actual collections on a cash receipt basis. Mr. Pursell said he was correct. Mr. Beers continued, recalling that one of the things the Department of Taxation was criticized for in the Legislative Counsel Bureau (LCB) audit of the state’s accounts receivable was the collection process. He said it would be helpful to see the differences between column D and column E of the Estimated Non-Compliance spreadsheet. He said that identifying the total of the uncollected but audited findings would identify some of the difference between the total estimated uncollected taxes and the audit recoveries.

Mr. Beers asked for comments on what the collection efforts are, whether they have changed as a result of the LCB audit, and how the collections procedure can be improved. Mr. Pursell replied that in response to the LCB audit, the Department of Taxation has worked with the Department of Administration through the Budget Division, Mr. Comeaux and some others who are part of a task force to review the collection procedures of the Department of Taxation. Mr. Pursell stated the Office of the Attorney General has drafted a bill draft which will address the need for consistency in the way all agencies collect revenues. Additionally, the Department of Administration will include a section in the State Administrative Manual (SAM) that will aid those agencies which do not have specific legislation to help with the collections process. Mr. Pursell said the task force will review the offset situation wherein one agency may be paying a taxpayer who owes the state money, with the objective of coordinating the collection process so one agency of the state is not refunding money to the taxpayer while the taxpayer owes money to a different agency of the state.

Mr. Beers asked for a breakout by year of the audit findings that were not recovered. Mr. Pursell replied he would work with his staff to identify what information was available to clarify the two columns.

Senator Jacobsen asked whether Mr. Pursell was telling the committee that with the Office of the Attorney General’s bill draft, the Department of Taxation will be assuming the responsibility for collections. Mr. Pursell indicated this was not what he was saying. He explained the bill draft will be legislation which will direct agencies as to how collectables should be treated to ensure agencies are consistent in the collection activities. He said the Department of Taxation is in a fairly good position because it has statutes and regulations which can be followed through the collection efforts. He said some agencies do not have collection statutes and the bill draft will address collection procedures for these agencies. He said the SAM will include a section for agencies that do not have specific collection legislation to give those agencies a blueprint of what collection activities to use.

Senator Jacobsen said he thought one agency should have final responsibility for the collection efforts. He asked Mr. Pursell where that function should be assigned. Mr. Pursell replied that through the efforts of the task force developed by Mr. Comeaux, the Office of the State Controller, the Department of Taxation, and the Budget Division were all involved in drafting the bill draft and the instruction to be included in the SAM to ensure the tools needed for agencies’ use are available to them to achieve a better rate of collection.

Mr. Pursell said the Department of Taxation is in the process of going through a business process reengineering (BPR) program. He noted that in 1991 the Legislature approved funds for the department to develop an automated collection enforcement system (ACES). In 1993 funds were included to develop a new revenue management system. The ACES approved in 1991 and the revenue management system funded in 1993 were combined to form the existing ACES computer systems. The ACES manages the sales and use tax and business tax collection and distribution in the state. Mr. Pursell said ACES is falling short of the department expectations. He said he does not believe the system will successfully take the department into the future, accommodate additional technology required due to growth, or the integration of excise taxes with business and sales tax.

Mr. Pursell stated that to avoid this situation in the future, the department undertook the study of the acquisition of a new revenue management system in three phases. Phase 1, the BPR study, is just about completed. Page 3 of Exhibit D shows the timeline of the first phase of the study. Mr. Pursell said the contractor, TRW Incorporated, has been asked to respond to some concerns from the department and DoIT. Once the contractor responds, the department will make the decision of whether or not to accept the first phase of the process. Mr. Pursell said the second phase of the process is a high-level-requirement definition and a preliminary system design based on the results of the BPR study.

Mr. Pursell said the third phase will be the development of a detailed system design and implementation of a new revenue management system for the state. TRW Inc. has estimated the second phase of the process will cost about $800,000. In addition, TRW Inc. recommends that the insurance premium tax program, based on the review of a requirements definition prepared by the Department of Taxation which would cost about $60,000, be implemented. Mr. Pursell noted the total of $860,000 is not included in the department’s budget, nor is there a bill draft request to fund the second phase. He said that after reviewing the department’s budget and seeing the inadequacies of the ACES system, he agrees with DoIT’s concern that a systems requirement definition is needed before the processor problems residing in ACES can be fixed.

Mr. Pursell referred to the information on page 5 of Exhibit D discussing DoIT concerns. He said the first phase of the BPR does not address the system’s requirements; these will be addressed in the second phase of the project. He stated the business community in Nevada is expecting and deserves a user-friendly reporting system which will support telephone filing and electronic filing. He said the department needs an integrated system that will support the collection and distribution of all taxes, not just sales and use taxes and the business tax.

Mr. Pursell acknowledged the audit positions are important to the department and in the efforts to collect on noncompliance issues but requested that the subcommittee consider a combination of eliminating some of the positions included in M-200 and enhancing the funding in the department’s budget to accommodate the second phase of the revenue management system.

Mr. Pursell referred to page 13 of Exhibit D, which outlines the costs associated with approved additional positions. He said the 6 DoIT positions currently at the department have not been filled 100 percent of the time and the majority of the work performed by the DoIT positions has been on Y2K compliance issues for the current ACES system. He stated no reprogramming has been done to any of the processors in ACES. Mr. Pursell said that while the department will need DoIT’s support until a new system is obtained, he is not sure all 6 DoIT positions are needed. He noted the department will need network system support and the portable tax-auditing program. He said the 2 DoIT positions, some modular equipment, and 8 new staff will cost the department $1.1 million during the next biennium that could be used to pay the $860,000 estimated cost of the second phase of the study for the new revenue management system.

Mr. Pursell said that even if ACES could be reprogrammed, it only provides the collection and distribution associated with sales and use tax. It will not affect any of the excise taxes, it is labor-intensive, and is just not a good system, he declared. He said the state would be a lot better off to fund and implement a better-integrated revenue system than ACES.

Senator O'Donnell said he went to the Department of Taxation looking for a program and the program was not provided even though the director of the department approved the request. He said the request required the additional approval of the DoIT director and the program was never provided. Senator O'Donnell said he feels no additional projects should be given to DoIT considering the outcome of the ACES project. He said, "This is exactly why the state has problems."

Senator O'Donnell further remarked, "The whole philosophical structure of the DoIT organization is backwards." The senator said what is needed is a data processing center, staff, and a manager of information services director that can take agency directions and rewrite the ACES program over again internally. Senator O'Donnell said if it is necessary to use a "sunseted" position, that is fine. He said agencies cannot hire MSA contract employees through DoIT and be given absolutely no control of the programmers, and have a successful project. The senator said the programmers hired to work on the ACES project had only been working on the Y2K compliance problem. He said, "At least we know the ACES program, which does not work in 1999, will now not work in the year 2000 even though it is Y2K-compliant."

Senator O'Donnell asserted that what has occurred makes no sense and commented, "We have spent a lot of time spinning our wheels for 2 years, when we could have done it right." He observed that a DETR project was successful because DETR had ownership of the project and staff. The senator said he could not turn over another project to DoIT without a drastic change. He asked the status of the Department of Taxation BPR from TRW Inc. and requested a copy of it. Mr. Pursell said the BPR was due during the week of April 5, 1999 and said he would provide Senator O'Donnell with a copy of the BPR when it is received.

Mr. Beers said he thought DETR purchased a system being used in another state and made some modification to the system so it could be used in Nevada. He said his understanding of the ACES system is that it probably should have been written off when DoIT first became involved. He said the ACES project was begun with no specifications, which he said is a very "fly by the seat of the pants" programming style guaranteed not to produce results and to cost a lot more than anticipated. Mr. Beers said he would like to know how much it would cost to find out what the 41 states that are larger than Nevada are using and whether the state could buy that system rather than develop its own ACES. Senator O'Donnell said that is what was attempted about 8 years ago. He said that 2 years ago DoIT and the Department of Taxation appeared before this committee and the Department of Taxation requested more control of the programming staff. At that time the Department of Taxation could not tell the programmers to fix the ACES program, the senator noted. All communication had to go through DoIT and DoIT would discern whether or not the corrections would be made.

Mr. Beers asked whether anyone has tried to discern "if" the program could be fixed. Senator O'Donnell said the sequence of events was that during the last legislative session he stated the programming staff should be placed at the Department of Taxation. He said the programming staff, at that time, were physically housed in a different building, so the tax director could not go to the programmers and discuss the project status or request changes. Senator O'Donnell said this was a terrible situation and programs were falling apart, programs which were not Y2K-compatible, and no Department of Taxation information systems management were involved in the project; only DoIT staff were involved. The senator said, "Now we have another big problem in the Department of Taxation this year in that ACES is Y2K-compatible but it still does not work correctly and is cumbersome."

Senator O'Donnell remarked that now Mr. Pursell was saying the Department of Taxation needs more money for the ACES project to get the project right, and that he needs the support of DoIT. The senator indicated his own position is that "we should develop an MIS staff and fix the problem once and for all."

Mr. Goldwater said that what Mr. Pursell is requesting is to eliminate 8 of the audit positions recommended by the Governor and move to phase 2 of the BPR process, which the committee has decided was acceptable for other agencies to do. He said he understands what Senator O'Donnell is saying and that he has identified great points which he has made many times before. But now the committee must decide whether to go to phase 2 of the BPR or keep the audit positions and "limp along with ACES," Mr. Goldwater stated. He said these are the two options presented today.

Mr. Pursell said the BPR defines the Department of Taxation business process as it is currently. He said the BPR also defines what the process should be. The BPR recommends a team concept for the revenue department. Mr. Pursell said TRW Inc. recommends that the Department of Taxation have a client-server type of system, but there would be data stored with DoIT. He said the high-level requirements definition included in the second phase is where the kind of system needed to accomplish the recommendations included within the BPR will be identified. He noted the third phase, which will come before the 2001 Legislature, will identify the kind of equipment required to be used, and who will do the programming; it may not be DoIT, he remarked. Mr. Pursell said the request for proposal (RFP) will identify the programmers needed based on the high-level requirements definition that will be completed.

Senator O'Donnell noted the state response to the BPR is due April 24, 1999, and asked whether it is correct that the DoIT people do not approve of what the BPR identifies is needed. Mr. Pursell said there are a couple of issues that have been interpreted incorrectly. The first is that the recommendation through this process by TRW Inc. has never been that there would be a complete data storage information service operation as a division within the Department of Taxation. TRW Inc. has always recommended that the client server, the handling of the information with the exception of the storage, would be a function at the Department of Taxation. Mr. Pursell said TRW Inc. recommends that the Department of Taxation have an information services manager to handle the department networking and serve as a liaison between the data storage and the department.

Mr. Pursell said the second communication problem is that when programming for the department staff is discussed, DoIT takes this to mean specialized programming in COBOL or DB2, and what is being referred to is training on Microsoft Excel, Outlook, and software packages the department has within the network. He said the department is not talking about technical programmers. He said the training on the software packages should not be confused with having 6 programmers on the Department of Taxation staff that will be involved in programming. Mr. Pursell said the department will get an integrated system that will be easy to add or change as tax laws change. He said the system should be able to integrate the sales tax, the business tax, and the excise taxes. He believed this to be a recommendation in the BPR.

Senator O'Donnell said DETR was able to successfully implement its project in-house using the DoIT mainframe computer and the department’s own information services (IS) staff. He said the Legislative Counsel Bureau (LCB) accomplished a major project using internal IS staff. Senator O'Donnell said "contractor after contractor" was hired by LCB to write the programs needed, and now everything is completed in-house using internal staff. He suggested the Department of Taxation use the same approach of developing the needed programming internally using in-house staff. Mr. Pursell said he agreed and that was the approach the Department of Tax would like to use. Senator O'Donnell said the Legislature should provide the resources to the Department of Taxation to accomplish the department’s programming needs internally.

Mrs. Chowning said it was easy to say the resources would be provided and the projects would be accumulated, but "sadly," positions authorized to accomplish projects like ACES were left unfilled or untrained staff was hired. She said the positions experienced high turnover because what they were hired to do and what they were trained to do were two different things. She noted that the Department of Taxation staffing decisions will come as a result of phase 2 of the project and will not be known for 2 years. Mrs. Chowning said the decision the committee has to make now is whether or not to fund the $860,000 needed for the project. She asked what would be done to collect the taxes if ACES is broken and cannot be fixed. She summarized her questions by asking, "Where will the Legislature get the $860,000 needed for the project, and how will the Department of Taxation continue with a crippled system?" She said the personnel question can be decided later.

Mr. Pursell replied the DoIT programmers did assist in helping to make ACES Y2K-compliant. They also assisted with data-fixes: when the ACES processors did not do what the department thought it should do, the problem was isolated and documented so the DoIT programmers could write the code to fix what could not be fixed using the computer screens available to the users. Mr. Pursell said what the DoIT programmers have not been able to do is reprogram ACES so it is not necessary to continually process frequent time-consuming fixes every time a problem occurs. He said he is recommending the committee consider trading the 8 positions and expenses identified in Exhibit D, page 13 for the $860,000 needed for the second phase of the process.

Senator O'Donnell noted that if the Department of Taxation used the 8 audit positions and 2 additional auditors were hired, with a recovery rate of $300,000 to $400,000 per auditor the cost of the project would be almost paid for. He asked, "Why not give you the 8 positions plus 2 additional auditors and there would be enough money generated through recoveries to pay for the project?" Mr. Pursell replied the audit recovery does not go into the Department of Taxation budget. Senator O'Donnell said he knows the money is deposited into the General Fund, which he pointed out is the fund used to pay for the additional positions.

Mr. Goldwater pointed out this was exactly the message the state needs to get away from sending to the taxpayers. He observed the taxpayers do not want to hear that the Department of Taxation needs a new computer so it has added a couple of auditors to get additional money from the taxpayers. Senator O'Donnell said he agreed with Mr. Goldwater and he was only using averages of collections by auditors to illustrate that the additional money could be generated. He noted both Mr. Goldwater and Mr. Pursell have put it on record that the Legislature does not chase people just because they want more money. He said the auditors are there to ensure taxpayer compliance, and when there are people that are noncompliant, then the people who are compliant are paying more money than they should. Senator O'Donnell said the business tax is a good example. He asserted that if there were $55 million in the state’s coffers, the business tax would be cut in half. He stated, "Without compliance the good, honest, taxpaying people are paying money for people who are evading."

Mr. Beers said he still had some reservations as to the validity of the statistical system being used to project the audit revenue. He stated:

Senator O'Donnell agreed and said the problem is, the Department of Taxation cannot direct the programmers to do that. Mr. Beers asked whether the committee could direct the programmers to work on the ACES project. Senator O'Donnell replied the committee could, but the director of the Department of Taxation cannot say to the programmers, "Now that the Y2K project is completed, here is what I want you to work on." The director of the Department of Taxation must tell the director of DoIT what he thinks the programmers should be doing, and the director of DoIT will decide what projects the programmers will work on. Mr. Beers said the Legislature can fix that problem. Senator O'Donnell agreed.

Mr. Pursell reminded the committee DoIT has indicated it needs a systems requirement definition before ACES can be reprogrammed. Mr. Beers said that is true, the Department of Taxation needs to tell DoIT what is wrong with ACES. He said if the Department of Taxation cannot document what is wrong with ACES because it suspects but cannot validate there is a black box process which is not working properly, the department should then document the existence of the black box and let DoIT figure it out. Mr. Beers stated, "The reason we are in the position we are in today is that we never planned any of this project; the contractor was just hired and the department told them what to do." Senator O'Donnell stated that phase 2 needs to be funded so the department can give DoIT the information needed.

Mr. Hataway stated the Budget Division does not budget audit recoveries as a separate line item in the budget, it is part of the sales tax revenue base. He said he agreed that it does send the wrong message to the taxpayer, but a separate line item is not budgeted for the audit recoveries, it is part of the sales tax line item in the budget. He noted that 2 years earlier testimony was given that ACES would not take the Department of Taxation into the 21^st century even if it was Y2K-compliant because there were too many deficiencies in the system. He said, "This is the very reason we are going through the BPR process right now." Mr. Hataway said he would be very reluctant to walk away from the M-200 budget request because the audit recoveries "are not at the diminishing returns" of generating audit recoveries at this time. He said the Budget Division will work on identifying where the additional money needed can be located. Mr. Hataway said the Budget Division fully supports continuing with the BPR process "because that is going to ultimately take us where we want to be and that will not be with a revised, revamped ACES system, it will be with something new."

Mr. Goldwater said the compromise is that not all of the auditors recommended will be approved and the department can move forward with the second phase of the BPR.

Mr. Beers said the entire ACES project has been plagued by a lack of planning and documentation. He said he hopes that after 5 years of running ACES the Department of Taxation has a detailed document already prepared which describes the problems the department has with the ACES project. He asserted there is no better way to debug the ACES project than to run it and identify the deficiencies. Until that is done he could not support the suggestion to throw out the system, Mr. Beers said. He stated, "We need to quantify whether or not it is fixable. So far we have heard that ACES is not fixable, but no documentation is available to document it is not fixable." He noted that a few years ago the Legislature was told, "Yes, ACES can be completed without any plan or documentation to accomplish the project," but ACES seems to have failed.

Mr. Pursell said a legal settlement did identify many of the problems with ACES. He said that once Mr. Beers sees the BPR a lot of his questions will be answered.

Senator O'Donnell asked whether the Department of Taxation will need a supplemental appropriation for FY 1999. Mr. Pursell referenced pages 14 and 15 of Exhibit D. These pages are a summary of the projections for FY 1999. Mr. Pursell noted that with the DoIT charges there will be a shortfall of $164,308, and without the DoIT charges there would be a surplus of $13,565 at the end of FY 1999. He said part of the problem is shown on page 15, which displays the department’s budgeted postage costs for FYs 1997-99 and the projected cost for FY 1999. He said the postage budget for FY 1997 was $383,000, the FY 1998 budget was $392,000, the budget for FY 1999 is $296,000, and the projection for FY 1999 is $478,000. Mr. Pursell said the "number of pieces of mail billed" does not look correct to the Department of Taxation, and his staff is working with the state mailroom to confirm the accuracy of the piece count. He said he received information from DoIT yesterday afternoon revising that department’s estimated charges to the Department of Taxation. Mr. Pursell said the totals shown on page 14 of Exhibit D are the totals he is most comfortable with.

Senator O'Donnell asked whether DoIT was charging $164,308 for the programmers that have been working since January 1997. Mr. Beers said the department received a settlement to cover the cost of those programmers. Mr. Pursell said the department did receive the settlement but the proceeds are already spent. Senator O'Donnell asked whether the Budget Division had a solution for the deficit in the Department of Taxation’s budget. Mr. Hataway replied the Budget Division received the report just yesterday and has not had a chance to review it in detail. He said if the Department of Taxation needs a supplemental appropriation, the Budget Division will be requesting it.

Senator O'Donnell said he did not know why the DoIT fees were so high. Mr. Hataway replied the Budget Division has asked DoIT to evaluate whether or not its projection was accurate. Senator O'Donnell stated that several positions were provided to DoIT and funded by the 1997 Legislative Session. He indicated those positions should have been included in the projected costs, if they were, because the Legislature already provided the funding for them last session. Senator O'Donnell asked that Mr. Hataway get the DoIT information back to LCB staff as quickly as possible.

Mrs. Chowning said the Legislature cannot just keep saying "we need additional information," a time must be established to have the information returned to the Legislature. She said the information must be returned to the Legislature within 1 week. She suggested a meeting be scheduled for next the following to discuss the DoIT projection. Senator O'Donnell asked LCB staff to schedule the meeting. Mr. Hataway said all agencies were asked last fall for a projection of their supplemental needs, but the Budget Division just received the Department of Taxation’s request for supplemental funds yesterday. He said the Budget Division will review the request and return it to the Legislature as quickly as possible. He added that should a supplemental be needed, the Budget Division will request the draft legislation.

Senator O'Donnell said the supplemental request will be coordinated with the Budget Division and LCB staff and a determination will be made as quickly as possible.

Senior Citizens’ Property Tax Assistance – Budget Page TAX-7 (Volume 1)

Budget Account 101-2363

David Pursell, Executive Director, Department of Taxation, said the Senior Citizens Property Tax Assistance program provides relief to eligible seniors with property tax liabilities. The base budget request includes funding to assist approximately 13,250 senior citizens in the first year of the biennium and 13,932 senior citizens in the second year.

Mr. Pursell said the M-200 funding request includes funds needed for a July 1, 1999, increase in income levels and changes regarding the Consumer Price Index (CPI) which will affect the amount of refunds that eligible senior citizens could receive.

Mrs. Chowning said the committee needs to know whether the Department of Taxation is recommending elimination of a $250,000 reserve that was authorized during the 1997 Legislative Session. She asked what the impact of Senate Bill 36 and Assembly Bill 423 will be.

Mr. Pursell replied that he is not familiar with those two bills. He said he would review the bills and respond to LCB staff in regard to them. He noted the Senior Citizens’ Property Tax Assistance M-200 budget request includes funding to cover the possible refunds for the 13,000-plus eligible senior citizens based on the law change effective July 1, 1999.

Mr. Hataway said the Budget Division did fund all the requests the Department of Taxation indicated would be needed for the refunds. He said the reserve was eliminated because of the tight revenue situation but the Budget Division also recommended using the appropriation in both years of the biennium. Mr. Hataway said if there is a problem, it can be addressed during the 2001 Legislative Session.

RESPECTFULLY SUBMITTED:

Millard Clark

Committee Secretary

APPROVED BY:

Senator William R. O’Donnell, Chairman

DATE:

APPROVED BY:

Assemblywoman Vonne S. Chowning, Chairman

DATE: