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 Vonne S. Chowning, at 8:15 a.m., on Friday, March 26, 1999, in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William R. O’Donnell, Chairman

Senator Lawrence E. Jacobsen

Senator Joseph M. Neal, Jr.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Ms. Vonne Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia de Braga

Ms. Christina R. Giunchigliani

Mr. David E. Goldwater

STAFF MEMBERS PRESENT:

Bob Guernsey, Principal Deputy Fiscal Analyst

Mark Stevens, Assembly Fiscal Analyst

Brian Burke, Program Analyst

Debbra King, Program Analyst

Johnnie L. Willis, Committee Secretary

OTHERS PRESENT:

William C. Moell, Chief, Purchasing Division, Department of Administration

Don Hataway, Deputy Director, Budget Division, Department of Administration

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

Randy Waterman, Acting Chief, Risk Management Division, Department of Administration

Karen Rasner, Accountant III, Risk Management Division, Department of Administration

Chairman Chowning opened the hearing at 8:15 a.m. by calling on William C. Moell, Chief, Purchasing Division, Department of Administration to testify on budget account 718-1358 in The Executive Budget.

Purchasing – Budget Page ADMIN-51 (Volume 1)

Budget Account 718-1358

Mr. Moell stated this account is the primary administrative commodity acquisitions and service acquisitions budget within the Purchasing Division. He said that in addition to the base budget, the Governor recommended three maintenance decision units and six enhancement decision units. He stated his intention to concentrate his presentation on the enhancement units.

Mr. Moell said this unit is a request for out-of-state travel to enable participation in the annual electronic commerce conference sponsored by the National Association of State Purchasing Officials. He said this meeting is a consortia of three committees: the controllers group, the information technology group, and the purchasing officials group. He stated these groups are working toward national standards for electronic commerce.

Mrs. Chowning, seeking to clarify Mr. Moell’s statement, inquired whether this training was "indeed working toward national standards for electronic commerce." Mr. Moell replied yes, electronic commerce is an emerging technology. He said the State of Nevada is moving ahead in this field and is mirroring Washington and Utah, but there are varying degrees of advancement towards "the field" of electronic commerce. He noted that from a purchasing perspective, electronic commerce is very exciting and is a field Nevada needs to be involved in, along with other states. Mr. Moell explained this field includes digital signatures for electronic contracting, bidding, and other such functions. He said the Purchasing Division is interested in making sure the practices in Nevada will work with the rest of the country. He noted getting signatures in Nevada has never been a problem; contracts, however, can become a major problem. He stated that if there is a contractor in Florida, for example, acquiring the needed signatures could become very difficult and extremely time-consuming. He reiterated that electronic commerce is an emerging field and the division is eager to be "in on the ground floor" of the planning of this technology.

Mrs. Chowning inquired whether this training was the reason for the 44 percent increase over the 1998 actual travel costs. Mr. Moell responded the 44 percent increase over 1998 has to do with services procurement, site visits and other such items.

Mr. Moell said this unit is to fund a minimal amount of overtime. He said the agency experienced large amounts of overtime this fiscal year but is expecting the overtime to decrease as the agency becomes more familiar with the Integrated Financial System (IFS).

Mr. Moell noted this unit also requests funds for an on-call warehouse helper. He said this position is needed in Las Vegas for handling furniture and other large items that need to be moved or delivered. He stated that at present the agency is trying to use day labor from "the mission" to perform these duties. However, he noted, sometimes it is a problem acquiring someone who is actually helpful or who can be taken into state office buildings.

Mr. Moell indicated that what the agency wishes to do is to contract with a university student to be on call for part-time activities as needed.

Mrs. Chowning said this position is needed in Las Vegas. Mr. Moell responded yes. He said there are only two persons in that office and sometimes the extra help is needed to handle large items.

Mrs. Chowning stated it was "very nice" that the agency tries to use individuals from the mission for these kinds of assignments. She wondered whether the agency would continue using that resource if the need is only for warehouse labor or a driver, or whether the university student would be given all those duties. Mr. Moell replied the agency hopes the contract will replace the use of the mission help. He stated it has been difficult for the agency to get the kind of help that is needed from the mission source.

Mrs. Chowning inquired whether the agency would be able to reduce the overtime costs if it has this "solid person." Mr. Moell responded no, the part-time contract and the overtime costs are unrelated. He said the overtime costs are for commodity purchasing and trying to keep up with the workload. Mr. Moell stated the agency has significantly reduced the overtime workload over the past 3 years; however, the implementation of the IFS has required a significant amount of overtime hours in this biennium. He said the agency’s facility for processing purchase requisitions was off-line for 3 weeks and created a backlog. He noted the IFS accounting system is not strictly a purchasing system and is designed to be decentralized, but during the implementation process it is centralized. He stated the centralizing of a decentralized process is creating a great deal of additional work that should "go away" in the near future.

Mr. Beers said he would like more detail about the implementation of the IFS. Mr. Moell replied the old system was designed to deal with purchasing documents and basic information regarding these documents. The coding information was entered on the document by the agency initiating the document and was keyed in by the controller’s office. He explained that in the new system coding is of primary importance and is directly integrated with the controller’s financial system; as a result, the Purchasing Division is dealing with data entry and document acceptance of paperwork that is "heavily tied into" the state financial system. Mr. Moell said Purchasing is learning some of the ins and outs of the coding system and how to make sure the funds are available for the required purchase. He stated The Purchasing Division’s staff is having to learn the entire accounting process.

Mr. Moell further stated the system is labor-intensive on input because it was designed to be a decentralized system. Such a system allows the various departments and divisions that are familiar with their agency-specific coding entries and line items, and their budget, to have desktop access to all of that information. Mr. Moell asserted that when the documents are sent to Purchasing to perform the data entry it becomes much more difficult, and also there are more entries to key in for the new IFS. He reiterated that when the new system is fully implemented it will be decentralized. The various departments, divisions, districts, and agencies will be entering their own coding and data entry; then the documents will be transferred to the Purchasing Division electronically. Mr. Moell said the Purchasing Division will then be able to go back to the business of purchasing, which is to make sure the division secures the best value for necessary items and to process bids when necessary.

Mr. Beers inquired whether Mr. Moell was describing the need for overtime because the division is having to set up codes for general ledger accounts that the Purchasing Division has not had to do in the past. The assemblyman wondered whether this was a onetime setup function, or whether it was a learning curve for the new system that is causing the overtime. Mr. Moell replied it is both. The division is learning how to operate the new system, but the workload has also increased. He said the division is doing additional work and is not as efficient as it will be after the new system is learned.

Mr. Beers asked whether the Purchasing Division would still have the learning curve to go through after July 1, 1999. Mr. Moell responded the division may have "a small amount." He stated that sometimes overtime is necessary just to meet the demands made on the division. He said that when the division is dealing with 2 fiscal years and is trying to close out the fiscal-year purchases for agencies (their equipment and supplies) it is then that additional overtime is required. Mr. Moell stated the $8,352 is a minimal amount of overtime.

Mrs. Chowning inquired how much the person would be paid for the $8,400 contract. Mr. Moell replied the amount would be about $12 an hour.

Mr. Beers inquired whether the $8,400 contract was for drivers, and the $8,400 overtime is for accountants and purchasing technicians. Mr. Moell replied yes.

Mrs. Chowning asked whether the $8,400 was for one university student at $12 an hour. Mr. Moell replied yes.

Mr. Moell said decision unit E-128 is for the replacement of eight modems for the Shiva communication boxes. He said the Purchasing Division communicates a great deal through the file server, and these modems can carry the volume that is required. He noted the modems are specialty modems which allow the staff to fax from their desktops and to receive messages overnight. Mr. Moell said the modems cost about $450 each and need to be replaced every 3 to 4 years to keep up with current modem transmission speed and technology changes.

Mr. Moell noted this unit allows for depreciation of new equipment purchased from the Purchasing Division – Equipment Purchase budget, account 718-1364. He said $18,419 for software upgrades remains in this decision unit. The $18,419 amount is to maintain current software the division has.

Ms. Beers asked whether the software suites were $495 each or $225 each. Mr. Moell replied that when the division originally constructed the budget the suites were $495 each, but the negotiation of a new contract with Microsoft brought the price down to $225 each. Mr. Beers stated he was distressed to hear that, since $225 is about the same as an Internet price for one copy and Purchasing’s bulk rate is about $20 more per copy. Mr. Moell said the division is at a level D for purchasing from Microsoft, which is up from the previous level. Mr. Beers commented that even at the level B the division had before it was only $20 to $30 higher than level D but still was not $495 a copy. He wondered how the state ended up budgeting $495 a copy. Mr. Moell replied he did not know where that number originated. He said the division was given instructions on how to budget for information technology by the Department of Information Technology (DoIT).

Mr. Beers stated Assembly Committee on Ways and Means three days ago decided to have staff reevaluate every budget. Don Hataway, Deputy Director, Budget Division, Department of Administration, responded that every spring the Budget Division asks Purchasing and DoIT the prices on standard-issue items. He stated those were the prices the budget office was given, so those were the prices included in the instructions. Mr. Hataway said if the numbers change over time, the budget office uses the updated amount; but there is not always enough time to incorporate the changes into the budget instructions. He said the budget office "took a snap shot in time" to create the budgets, and that is what will be reflected in the budgets the legislators see. He said either there will be excess funds in the budgets or, as the legislators close budgets, the excess funds will be "pulled out." Mr. Beers stated it looks like a plan to create excess money in the budgets. He stated, "People have not paid this much money for software since software was invented." Mr. Hataway replied the Budget Division may not have gotten "perfect" information, but those were the numbers that were received at the time the budgets were constructed. He said that if there were errors in that information, then that is another issue; but the excess amount was not deliberate.

Mrs. Chowning stated the same thing happened a few years ago regarding fax machines and coffee makers. This kind of cost change does happen, she said. The legislators ask questions, and "sometimes things come out better than projected, and sometimes the prices end up higher than projected." Mr. Hataway replied computers are a prime example of this kind of price change. He said that 6 months after prices are built into the budget, the prices may be the same but the capacity of the computer has increased; so the agency may be able to purchase a better system than planned. He said this is a dynamic process and the budget office has to pick a number at some point in time and work with it.

Mrs. Chowning inquired why the software quantity seems to be doubled, noting there are 26 employees and 50 software items. Mr. Moell responded the license comes in a package of 50. He said DoIT told the Purchasing Division that the licenses are purchased in packages and to supply 26 employees the division must purchase a package of 50. He stated the division is not trying to purchase more than is needed and remarked, "The last thing Purchasing needs is to have items sitting around on shelves."

Mrs. Chowning inquired how the software was to be installed and maintained and wondered whether DoIT costs were anticipated. Mr. Moell replied no, there would be no DoIT costs. He stated the Purchasing Division installs its own software and maintains its own Internet web page and file servers. He commented, "DoIT is stretched very thin when it comes to LAN [local area network] maintenance and Purchasing has found that the computer maintenance is best done by Purchasing’s staff."

Mrs. Chowning ask Mr. Moell whether he felt the division was able to handle this maintenance. Mr. Moell replied yes. Mr. Beers commented that he also felt The Purchasing Division had the expertise to install the group software.

Senator O'Donnell asked whether the Purchasing Division had difficulty getting responses from DoIT. Mr. Moell replied the division occasionally does have difficulties. He explained the Purchasing Division’s web page needs to be updated when requests for bids are published, or when amendments to requests for bids are required, or when other adjustment are needed, and the division has found it to be much more efficient to make the needed changes immediately rather than to wait for the Department of Information Technology to get around to it.

Senator O'Donnell enjoined Mr. Moell to ensure that what is published on "the web" has received content approval. Mr. Moell replied the Purchasing Division has a management analyst assigned to supervise the information that is being published on the web.

Mr. Moell said this decision unit was amended from the originally submitted budget to change the method of financing from a transaction-based cost recovery system to an across-the-board assessment system that would be based on the legislatively approved budgets.

Mr. Moell noted this decision unit adds an ongoing cost for the Purchasing Division’s portion of the IFS. It also stabilizes the purchasing fund reserve with a "buy down" of $297,893 in Fiscal Year (FY) 2000 and $317,649 in FY 2001. He said this will reduce the purchasing fund level to $500,000 by the end of the biennium. Mr. Moell stated this amount is down by more than $1,390,408 from the fund balance in the fall of 1998. He said that includes $423,866 reverted to the General Fund.

Mr. Moell explained the purchasing assessment is based on the number of purchase requisitions produced in FY 1998, by budget account; on the dollar amount of the commodities purchased in FY 1998; and on the number of FTEs (full-time equivalent positions) in each budget. He said the assessment in FY 2000 is $1,869,317 and in FY 2001, $1,878,091.

Mrs. Chowning asked Mr. Moell to explain the assessment program in more detail, since the way it is presented indicates there will be "winners" and "losers" using this system. She said if there are no FTEs and there is an assessment based on FTEs, then there could be a big difference in estimated cost compared to the actual cost per service assessment. Mr. Moell replied this is a transition period, the services procurement rate has only been in operation for 7 months. He said to base the assessment on that 7-month period would severely "skew" any assessment over the biennium. Consequently, what the division did was to consult with Ed Perry, an expert in cost allocation, and the result of that consultation is the plan submitted to the Legislature.

Mr. Moell explained the Purchasing Division explored a number of different ways to distribute the cost. He noted the division considered the "professional services" system of cost allocation, but that method would have skewed the assessments towards The Department of Human Resources and the Nevada Department of Transportation (NDOT). He stated that after looking at other methods the division decided on the FTE method for "the short run," which is the upcoming 2-year biennium. Mr. Moell said that for the following biennium the division will use a 3-year average, based on the time and effort it takes to prepare a services acquisition. He said the averaging mechanism is designed to eliminate peaks and valleys. He asserted it is possible for one agency to have as many as 10 RFPs (requests for proposals) in a fiscal year and not have any for the next fiscal year. He explained the division is trying to even out the distribution and charge only those agencies that use the service. However, he explained that cannot happen in "the short run" and the Purchasing Division had to devise a way to distribute those costs. He said it was assumed when deciding on which system to use that the larger agencies, which have more FTEs, would be more likely to use the services acquisition option.

Mrs. Chowning asked how this system could be fair when there are agencies such as the Department of Motor Vehicles and Public Safety (DMV&PS) field services that have lots of FTEs and very few contracts, in contrast to agencies such as The Welfare Division, which has the TANF (Temporary Assistance to Needy Families) block grant program with its many contracts and no FTEs. Mr. Moell responded the Purchasing Division was aware there would be inequities. He said the budget office is prepared to allow significant discretion and assistance to agencies to rectify the inequities.

Mrs. Chowning inquired whether the agencies are going to have to continually come to the Interim Finance Committee (IFC) to get the inequities remedied. She also asked how the agencies would be assessed for costs of items such as furniture or equipment that are not included in the agencies’ base budget. She emphasized the Legislature asked for clarification on March 12, 1999, for an account-by-account analysis of this plan.

Mr. Hataway stated he has extensive experience in cost allocation and affirmed the plan submitted by the Purchasing Division was a good plan. He said the plan would "pass muster" with the federal government and those are the rules that have to be operated under in order to get federal approval for the overall state cost plan. He said time will show whether adjustments need to be made. Mr. Hataway stated that based on his experience the allocation costs will need changes.

Mr. Hataway explained an annual statewide cost plan is submitted to the federal government for approval. He noted there are two parts to that document. The first part is the general statewide cost allocation plan. The second part consists of the plans for the internal service funds, whether it is purchasing, data processing, the attorney generals office, or another agency. Mr. Hataway asserted that all of those plans are reviewed and approved by the federal government. He said when actual-time costs were compared to estimated costs, there were sizable debits and credits to the agencies to compensate for the differences. Mr. Hataway emphasized the purchasing plan will have debits and credits just like any other cost allocation process. He stated that as the program is analyzed over the next couple of years the system may have to be changed. He said that yes, there will be "winners" and "losers" in this process.

Mr. Hataway stated that to research the user trends for all the agencies over the past years would be a labor-intensive process which neither the Budget Division nor the Purchasing Division staff has time to perform. He said the budget staff recognized there will be some agencies which will have to come up with additional funds and there will be other agencies which will have savings. He noted there will be a specific general ledger account for purchasing payments so the payment data will be easier to analyze, and that data could be used to set the assessment amounts for each agency in the next biennium.

Mr. Hataway stated he could not at this time say that the allocation process is the best plan, but "time will tell." He said, "Based on my experience, the process will evolve into something else, whatever that might be." He reiterated it is a good plan and it should receive the approval of the federal government.

Mrs. Chowning said it would reflect very badly on everyone if some of the agencies are "huge winners" or "huge losers" and asked whether there had been an account-by-account analysis. Mr. Hataway responded no and said the Budget Division did not plan to do so. Mrs. Chowning declared, "Budgeting does not plan to analyze the accounts?" She asked how the Legislature could to close budgets if these accounts were not analyzed and wondered how the Legislature would know the adjustments that need to be made. Mr. Hataway said the costs are built into the Purchasing budget, and when charges are made against the special general ledger account, then that charge will be passed on to the agencies. He said there is not one item that can be pointed out in those budgets which can be reduced or increased. He said the items have a multiplicity of sources, and to analyze each budget would not be cost-efficient.

Senator O'Donnell stated this budget item is "a little too fluid." He asked, "If the cost allocations cannot be nailed down, then how can the Legislature analyze the budgets when the numbers are floating all over from here to [Las] Vegas?" Mr. Hataway responded the numbers are not "floating." He said the funds are in the budgets but are not uniformly allocated at this point, and that will be obvious when the base budgets are prepared 2 years from now. He stated that every time an agency buys paper products there is an AC (administrative cost) charge added, but to determine where all of those charges are throughout all the budgets would be a large task. Senator O'Donnell asked how large it would be and how long it would take to complete such a task. Mr. Hataway replied it was larger than the budget office feels it has time for right now.

Senator O'Donnell asked whether Mr. Hataway meant that the task could not be completed by the end of this session. Mr. Hataway replied, "With everything else that is going on it would not be cost-effective in relation to other priorities that the Budget Division has to work with the Legislature on."

Senator O'Donnell asked what kind of dollar amounts are involved. Mr. Hataway responded the value the decision unit produces in excess revenue "probably is the amount." He said most of that is in the budgets. Senator O'Donnell said he knew the amounts were in the budgets, but they were not in the right categories. Mr. Hataway responded, "Yes, they are in categories 4, 5, and 26 and in special categories." Senator O'Donnell pointed out the assessment as presented could be "a dollar off or three or four thousand dollars off on every account" and asked how the Legislature would know where the agencies’ budgets are if it has no clue where the funds should be. Mr. Hataway replied the Legislature has not "had a clue" in the past, and that has been one of the problems with the AC charge. He said the problem is that neither the Executive Branch nor the Legislative Branch has ever reconciled the Purchasing budget to the agencies’ budgets on the AC charges. He added that if there was equipment in the budget then the agency was billed a certain amount of AC charge.

Mr. Hataway stated the Budget Division is hoping, with this process, to eliminate the uncertainty for everybody. He stated the proposed change is "a baseline start"; 2 years from now it will be better and 4 years from now it will be even better. He said that to ascertain where all the costs or savings are has never been done before. Mr. Hataway reiterated that to do the analysis account by account is not cost-effective.

Mrs. Chowning asked whether at this time the budget office had provided a list. Mr. Hataway responded, "It would be a matter of taking that list and examining budget account ’ta da’ to ascertain whether it has a certain charge, and then [trying] to divide out what costs are already built into the budget." He said that for example, when an agency purchases a piece of equipment, the equipment cost is built into the budget and the budget included an AC charge. Under the new system, the agency will not be assessed the AC charge. He explained that instead, there will be a cost allocation to the agency in the special general ledger account. Mr. Hataway said this is a period of transition and the Purchasing Division has to start somewhere. He reiterated that 2 years from now Purchasing will know what the various agencies paid, if the division paid too much there will be adjustments and if it paid too little there will also be adjustments.

Mrs. Chowning stated those assessments are "holes" in the budgets, but the Purchasing Division’s budget is "whole." Mr. Hataway replied that based on the revenue which the Budget Division projects to start the plan, yes. He said that has not been the case in the past because of the tie between the AC charges and the agencies’ budgets. He said the Legislature has seen, over time, that the Purchasing Division has had to come to IFC to adjust its revenue because it received more revenue than was projected. He said returning to IFC should be eliminated in this process.

Mrs. Chowning asked how the Purchasing Division plans to handle the work programs in the budget next time if a lot of this is in flux. Mr. Hataway said, "It will be handled just like always. If Purchasing meets a certain threshold then it will come to IFC; if it does not, Budgeting will approve it automatically as there may be adjustments from category to category." He said that if the assessment is in one category and the need is in another category the funds may need to be moved, but the budget office did not expect those to be major problems.

Mr. Beers asked whether, historically, the purchases made through the Purchasing Division for agencies have been burdened with "a piece of purchasing’s costs." He asked whether the Purchasing Division was allocating the cost to items the division has bought rather than to a single line item. Mr. Hataway responded that historically everything in the budget was to carry a 4½ percent administrative charge (AC). Mr. Beers said that if the agency buys $100 worth of paper, the paper expense would be recorded at $104. Mr. Hataway replied yes. Mr. Beers stated:

Mr. Hataway replied, "Yes, that is correct."

Mr. Beers stated, "So we can develop the effect of the reallocation for DoIT’s costs, but we can’t do that with purchasing." The assemblyman inquired whether this was the direction the Purchasing Division was taking with the allocation assessment, and whether the purchase of items such as paper would no longer be burdened by being charged $104 for $100 worth of paper. Mr. Hataway replied:

Mr. Beers said he understood why an account-by-account comparison would be difficult; however, funding the $250,000 for this plan from the General Fund takes funding from other programs such as the pilot program for "disabled waivers." He said the reallocation plan will affect the state’s federal revenue and may cost or save the General Fund dollars. Mr. Beers then stated the Legislature needs to build the budget for the General Fund. He inquired whether there is a way to produce a "macro perspective by fund" effect to give the legislators a "ballpark" figure. Mr. Hataway said the Purchasing Division was not asking the Legislature to add General Fund dollars. Mr. Beers emphasized that the Purchasing Division may very well end up asking, as DoIT did. Mr. Hataway replied that would be "two years down the road." Mr. Beers inquired whether Purchasing was not planning to implement the cost plan until the year 2001. Mr. Hataway replied, "No, the plan will be implemented July 1, 2000, with existing resources that are already in the budget." Mr. Beers asked whether the division was asking the Legislature to pass a budget knowing that every single expense category which has purchases from the Purchasing Division will be over-spent, because everything purchased will be 4½ percent less than before. He said the agencies will have a new expense account in their budgets that was not planned for in the budgeting process. He said the new category will represent the allocation for the purchasing expense. Mr. Hataway replied, "Right." Mr. Beers responded that is "sloppy budgeting." Mr. Hataway said that it is transitional budgeting and that he did not believe "sloppy" is the proper term. He said it is a transition from one method to another method, and over time, it "washes itself out."

Mr. Beers stated the Purchasing Division could not break out the historical allocation effect because it is spread out too far and has never been reconciled, but wondered why the new budget effect could not be predicted. Mr. Hataway told Assemblyman Beers that he did not understand his use of the term "break out." Mr. Beers replied the Legislature wants to know how much per fund, per account the Purchasing Division is going to charge. He said that in a reallocation there will be winners and losers; the Legislature wants to know who those winners and losers are expected to be before it approves the plan. Mr. Hataway said the Legislature has, by budget account, the amount of the assessment. Mr. Beers said that since the Purchasing Division cannot break out the old allocation by budget account, the Legislature does not have a comparison. He inquired whether the budget office would suggest that the legislators reduce all office supplies, capital expenditures, contract payments, and other such items by 4 percent and substitute the new line item. Mr. Hataway responded, "If you want to do that."

Mr. Beers inquired whether the break out that was supplied the legislators is already in the agencies’ expenses, or already in The Executive Budget. Mr. Hataway said the legislators would see nothing in a line item for general ledger account 7100. He said it is not used at present, but the Purchasing Division plans to assign the purchasing assessment to that account. Mr. Beers stated the assigned assessment could not be put into the budget because something related to that effect is already stated in the base budget. Mr. Hataway replied, "That’s right."

Senator O'Donnell stated the more the subcommittee speaks about this subject the more confusing it gets. He asked Mr. Hataway how he proposed the budget be closed. Mr. Hataway replied:

Senator O'Donnell inquired whether, with this plan, the losers will be the agencies that will have to spend more money out of their budget than they have. Mr. Hataway replied he could not say whether that was true or not. Senator O'Donnell pointed out that Mr. Hataway said there would be winners and loser, and asked that he define "the loser part." Mr. Hataway replied, "The winners would be spending more money."

Mr. Beers explained, "The loser part is an agency which would be allocated more than it received under the old system, and the winner would be allocated less than it received under the new system." He said the agencies will record expenses from the Purchasing Division at 4 percent less than before. Mr. Beers further explained the Legislature would be allocating the agencies spending authorization 4 percent higher than needed, "or some percent higher because it is not a flat 4 percent, and also there is a cap on large purchases." He said the problem is that the agencies tend to take advantage of the higher spending opportunities when given the chance; consequently, there will be overspending on every item that goes through the Purchasing Division. The assemblyman explained the agencies expect those items purchased to be burdened by 4 percent, and to be able to compare the purchasing expense to the biennial purchasing budget authorization to assess the balance for further purchases. However, he stated, "Now everything will appear cheaper than before." He asserted that "this is a problem using a base budgeting concept, and trying to use it to change a prior fuzzy allocation technique."

Mr. Hataway stated the Purchasing Division intends to send a cover memo outlining a number of situations, which will include this issue. He said the Nevada Revised Statues (NRS) Chapter 353 prohibits an agency head from committing a budget to more expenditures than are authorized. Mr. Beers stated that is exactly the problem, because the rules now allow the agencies to overspend. He said the Legislature is giving the agencies a line item authorization to spend "x" amount of dollars, for example, on office supplies, where in the past those office supplies would have been 4 percent higher than they would be under this system. Mr. Hataway responded that if the agencies have any common sense at all that will not happen, because they cannot spend more than is authorized. Mr. Beers emphasized he hated making contingent assumptions in government. Senator O'Donnell stated that was also his point. Mr. Hataway said:

Mrs. Chowning inquired why, since this is a new methodology, it cannot be implemented "next time" when it can be properly budgeted. She stated the Legislature knows there will be problems because the purchasing assessment cannot be cost-allocated "all the way through." Mr. Moell stated the reason behind this change is the IFS. He said the IFS is unable to accommodate an administrative charge, and particularly an administrative charge with a cap on it. He said it would take $200,000 or more in modification to the program, and every time the percentage was changed it would be another $25,000.

Senator Neal asked whether definition of the cost allocation charge that is used here is different from the definition used when assessing charges for the attorney general (AG) services. Mr. Hataway answered, "Yes, the definition is being broadened." He said that when he was assigned the statewide cost plan in 1989 there were no other administrative-type charges except the attorney general services charge. But since that time the state has become more sophisticated, in regard to not only the general statewide plan but also the administrative charges for agencies such as the AG, DoIT, and now the Purchasing Division. He stated these plans have to be approved by the federal government. Mr. Hataway reiterated the state has become more sophisticated in regard to how it accounts for those operational dollars for the various administrative budgets.

Senator Neal said the budget model for the cost allocation in those particular areas is not based on the actual but is based on what the Purchasing Division estimates it to be. Mr. Hataway replied, "Right, it is a combination of those."

Senator Neal said the budgeted amount is not usually the actual expenditure because it is not known what the actual costs will be, so an estimate of a percentage of what the costs may be is used. Mr. Hataway stated the cost plan is based upon the total expenditures the Purchasing Division is recommending to the Legislature. He said that if the Legislature chooses to reduce or increase Purchasing’s budget, then the assessment will be adjusted accordingly. He emphasized budgeting is not an exact science. Mr. Hataway emphasized the federal government does not like major shifts in costs, so when the state incorporated the Legislative Counsel Bureau (LCB) audit costs into the plan a 2-year average was used. Mr. Hataway said a 9-year average is now being used because it spreads the cost uniformly across the budgets since LCB does not audit every agency every year. He reiterated the Purchasing and Budget Divisions believe this is a good plan, and it may or may not cause problems. He said there will be a better "picture" 2 years from now of what needs to be adjusted and how it needs adjusting.

Senator Neal asked what the motivation was for using this plan. Mr. Hataway responded that it "firms up" the funding processes and the support for purchasing. He said the agencies will know over time what their responsibilities for purchasing will be.

Mr. Beers asked whether the Legislature could obtain a "by-fund" listing of the number of debits there will be and the dollar amounts of those debits for the agencies that are in the general ledger system which the Purchasing Division used to estimate the assessments for each agency. He said the Legislature has to provide a way to ensure that every agency does not overspend its budget by 4 percent. Mr. Hataway said the Purchasing Division could provide a printout that shows each budget account and what the agencies actually paid in 1998. Mr. Beers stated figures on the printout will be burdened with the 4 percent. Mr. Moell responded that included in the information provided to staff were the number of transactions and the dollar amounts of those transactions by budget account. Mr. Beers inquired whether those numbers were historical facts. Mr. Moell replied the figures used as a basis to work from were for Fiscal Year (FY) 1998.

Mr. Beers asked whether there could be a plan to "reduce the purchasing side" since purchasing and allocations are separated. Mr. Moell replied the Purchasing Division would try to provide that information; however, the old system has limitations on the kind of information it can provide.

Mrs. Chowning requested the Purchasing Division and the budget office to work with staff and the committee members to provide a report to the subcommittee by next week. She said those committee members should include Senator O'Donnell as chairman, Mrs. de Braga, Mr. Beers, and Senator Jacobsen. Mrs. Chowning stated the first meeting will occur in Senator O'Donnell’s office right after the day’s session.

Mrs. Chowning indicated the subcommittee should turn to the performance indicators. She stated the "taxpayer savings" and the "value of sales" performance indicators fluctuate up and down. She requested further explanation of those performance indicators and requested the Purchasing Division to develop performance indicators that show the quality of and the satisfaction with the services offered by the division. Mrs. Chowning also requested performance indicators for service procurement contracts.

Mrs. Chowning asked whether the taxpayer dollars performance indicator fluctuation was attributable to the reorganization that was performed a few years ago. Mr. Moell asked for clarification on the question. Mrs. Chowning replied the Legislature cut 89 positions and reorganized the division from a centralized large purchasing unit. She stated that now there are taxpayer savings. Mr. Moell replied the taxpayer savings were based on discounts received on bids and the savings are proportional. He said the $1.2 million savings in FY 1998 are large because there were more purchases. He said the savings are also dependent on the types and quantity of items that were purchased. Mr. Moell noted that when purchasing information technology items, the discounts are very small; but when purchasing heavy equipment the discounts are very large.

Mrs. Chowning said the actual in FY 1998 is $103 million, but the division is only projecting $75 million in FY 2001. Mr. Moell said those projections will actually be lower because the budget projections are down and most agencies have had their budgets reduced. He said the Purchasing Division believes the projection will be closer to $65 million, which is a maintainable amount. He said the $65 million is the level the Purchasing Division is buying at for this fiscal year.

Surplus Property – Budget Page ADMIN-59 (Volume 1)

Budget Account 101-1367

Mrs. Chowning requested the comments on the budget be kept brief. She commented the value of distributed surplus property is projected to decrease in the coming biennium. The assemblywoman noted the change is $25:$1 versus $48:$1, which is $48 of property delivered for every dollar of distribution cost. She asked Mr. Moell to tell the subcommittee what types of surplus goods generally get distributed. Mr. Moell stated the customers for distributed surplus are primarily cities, counties, school districts, and other government entities. He said the type of goods depends on what the federal government has to surplus, such as technology equipment. Mr. Moell noted the division distributes a lot of vehicles. He commented that at present the division is trying to distribute alternative fuel vehicles. He explained the federal government has some alternative fuel vehicles in surplus and some of the agencies, particularly Washoe and Clark Counties, need those vehicles. He said the type of surplus depends on what the federal government makes available. Mr. Moell explained that if there are military base closings then the "menu" is larger, and if there are no base closings, then the menu is smaller. He stated the division has distributed just about everything. He said the division is in the process of securing large pieces of railroad equipment for the southern railroad museum. Mr. Moell stated the agencies tell the Purchasing Division what it needs and Purchasing tries to find it for them.

Mrs. Chowning inquired whether this would include the motor pool. Mr. Moell responded "Yes."

Mrs. Chowning said some of the items that come in are distributed to volunteer fire departments, cities, counties, and the homeless. Mr. Moell said the federal surplus and state excess property program can distribute to any government entity or eligible private nonprofit organization. He stated Surplus Distribution tries to broaden the number of customers for this program every chance it gets. He noted the Purchasing Division was able to add private nonprofit health-care-type agencies last session.

Mrs. Chowning requested a list of who was able to benefit from surplus distribution. Mr. Moell said the division would gladly provide such a list.

Senator Jacobsen wondered whether the Purchasing Division keeps a "want" (list) or wish list. Mr. Moell replied yes. Senator Jacobsen asked whether the division updates the list on occasion. Mr. Moell said the list is updated continually. He explained a perfect example is the laptop computers that became available from the Legislature. He stated there was a wish list of about 250 computers and those agencies on the list were supplied with the Legislature laptop computers. Senator Jacobsen inquired whether the list of surplus items was sent to the agencies. Mr. Moell replied the division has not been doing this. He said agencies generally contact Surplus Distribution and inform them what the agency needs; for example, a utility vehicle or a 1-ton dump truck. Then the division tries to find it for the agency.

ADMIN – Administrative Services – Budget Page ADMIN-105 (Volume 1)

Budget Account 716-1371

Tracy Raxter, Chief, Administrative Services Division, Department of Administration, said the Administrative Services Division provides fiscal support services to the agencies within the Department of Administration, and also provides these services to the State Board of Examiners, the Governor’s Office, the office of the Lieutenant Governor, the Commission on Ethics and the Commission for Women.

Mr. Raxter said he wished to brief the subcommittee on performance indicator No. 7, number of accounting documents processed. He said Administrative Services is trying to keep the workflow at a manageable level in order to prevent the need to return to the Legislature every 2 years and to ask for additional positions. He said the Administrative Services Division has been consolidating some accounts, such as the multiple accounts for Nevada Bell or Sierra Pacific Power Company. Mr. Raxter explained the division has been working with the vendors to incorporate all the individual accounts into one master account for each vendor. He said backup copies for each individual location would still be provided. He stated that with this system the state can make only one payment per payment period to the vendor instead of many payments. He said this system keeps the number of checks to a minimum and keeps the paperwork to a minimum.

Mr. Raxter said the Administrative Services Division is also grouping payments to allow payments to the vendor on a weekly or bi-weekly basis. He said the agency has worked with some vendors to restructure the payment period. He said this restructuring could take the form of paying on a monthly or quarterly basis when the invoice amount each pay period is the same. Mr. Raxter stated this system creates less work for the agency and for the vendors.

Mrs. Chowning inquired whether the 20 percent on performance indicator No. 5 was low. Mr. Raxter replied it was lower than he was happy with. He said 25 percent would indicate that Administrative Services would be evaluating each revenue rate structure every 4 years. He said it would be nice if the evaluations could be performed every biennium, but the agency does not have the staff to perform these evaluations very biennium. Mr. Raxter said Administrative Services wishes to be on a 4 year cycle for the revenue rate evaluations.

Mr. Raxter noted the performance indicators not only serve the Legislature, they also serves the agency as "a guide" to its performance. He stated a great deal of the information comes from the evaluations of employees, such as the number invoices processed within 5 working days and the percent of documents rejected. He said the agency keeps track of that information and it is used in the employee evaluation process.

Mrs. Chowning stated these performance indicators are meaningful to the Legislature. She commented that 70 percent is what has been achieved, but the agency is now projecting 90 percent.

Mrs. Chowning said the legislators would like to know whether there is a duplication in this module, since there is a one-shot appropriation in a bill submitted to the Legislature. Mr. Raxter replied there is not a duplication in this unit. He said the request in this decision unit is for computers that are on a 5-year replacement cycle. The Administrative Services Division is requesting funding because the computers are due to be replaced on that 5-year cycle. He stated the present computers do not meet the requirements for the use of the Integrated Financial System (IFS). Mr. Raxter noted there was not a problem requesting the computers from the IFS funds, but the agency did not tell the Budget Division to charge the computers to the IFS funds. He said that consequently, the computers were not in the IFS allocation.

Mrs. Chowning inquired why the Administrative Services Division was requesting a position transfer in this unit. She said two positions are being requested to be moved from the Administrative Services budget to the Budget and Planning budget. She wondered why the cost would affect the General Fund by $43,000 and asked why the positions could not be transferred and the costs remain. Mr. Raxter replied the General Fund is paying the $43,000 in the current biennium in the base budget. He said that in unit E-900, when the agency distributes its cost allocation to the other agencies it is shown as a negative in that budget account; in Budget and Planning it is shown as a positive. Mr. Raxter explained this exchange appears as a loss to the General Fund, but there are no additional General Fund charges to those agencies.

Mr. Raxter remarked the Administrative Services Division is concentrating its efforts on the IFS in this biennium and the next. He said IFS has a big impact on the agency since it is a pilot user agency and has devoted a lot of time implementing the program.

Noting there was an audit of the state accounts receivable process, Mr. Beers wondered why, when an invoice is submitted, nothing happens to the account. He asked whether this was because "revenue is on a cash basis." Mr. Raxter stated the state has an internal accounts receivable system. He explained the Administrative Services Division was using part of the previous state accounting system to maintain its account receivables. He said when an invoice was issued to an agency the invoice would automatically be posted to an accounts receivable report, then the agency would pay the invoice. At that time the invoice would be removed from the report, then Administrative Services would perform a reconciliation once a month and send out late notices after 60 days. Mr. Raxter stated that with the new IFS, that component of the accounts receivable system went away and has been replaced with a system that will charge agencies at the time of the billing and do a fund transfer in the same process. He said the only exception would be if the billed agency did not have the funds to cover the invoice. Mr. Raxter stated the receivable balances should be practically zero. He said the emphases of the new system will be on billing and on having all the various agencies using the same system.

Public Employees Health Program – Budget Page SPEC PURPOSE-11

Budget Account 625-1338

Mrs. Chowning inquired of Randy Waterman, Acting Chief, Risk Management Division, Department of Administration, when there would be a permanent Chief of the Risk Management Division and who is supervising the third-party administrator (TPA). Mr. Waterman replied the third-party administrator is being supervised by himself and the Governor's Task Force on Benefits, and those reports are also provided to the Legislative Counsel Bureau (LCB) staff.

Mrs. Chowning inquired whether Mr. Waterman was going to be answering the questions for the working group. Mr. Waterman replied no. He said Pete Ernaut, Chief of Staff, Governor's Office, would answer any questions.

Mrs. Chowning said the subcommittee had some questions regarding allocation of special assessments, and the chargeback to the agencies in this "budget division." She said the Legislature requested a weekly report regarding the risk management issues on February 26, 1999; however, the reports that were received lacked sufficient detail. She said the "detailed" utilization data was finally received just 3 days before the hearing. Mrs. Chowning stated the Legislature now has to review that information. She said one of the issues is a "big problem child," but the legislators and the LCB staff have not had time to evaluate the information provided.

Mrs. Chowning inquired how the Risk Management Division was coming on the reconciliation that was requested in the 1995 Legislative Session. She stated the time taken to remove employees from the benefit rolls after termination of employment was excessive. The assemblywoman emphasized these individuals who terminated employment, died, or moved from one agency to another sometimes remained on the rosters for up to 5 years, and the state was paying for unjustifiable benefits and sometimes dual benefits. She noted that in some cases, reconciliation has been made and the Legislature needs to know where Risk Management is in regard to completion of the reconciliation.

Karen Rasner, Accountant III, Risk Management Division, Department of Administration, stated Risk Management currently has only the four largest pay centers to reconciled. She said the division is making progress on those centers but the work is not completed. Ms. Rasner noted the division is concentrating on one pay center at a time and is currently working on the University of Nevada Reno's (UNR) pay center.

Mrs. Chowning inquired how far along the agency is in terms of an overall percentage of the project. Ms. Rasner replied, "Probably 90 percent." Mrs. Chowning stated that 10 percent still represents a lot of cases. Ms. Rasner responded "Yes."

Mrs. Chowning asked whether the Risk Management Division will have completed 100 percent of the reconciliation by the next session. Ms. Rasner answered "Yes."

Mr. Waterman, referring to the detailed utilization data for health benefits, told the subcommittee he was not 100 percent comfortable with the information that was supplied to the legislators and he would be re-reviewing the information. He said he would work with the LCB staff to determine where the funds were used. Mr. Waterman stated he and his staff should have the results of their reevaluation soon. Mrs. Chowning inquired how long "soon" was. Mr. Waterman replied, "About 2 weeks." Mrs. Chowning reiterated the LCB staff had only received the information about 3 days before the hearing. She said 2 weeks would probably work.

Senator Neal asked whether there was a need for the third-party administrator. Mr. Waterman replied there was "absolutely" a need for a TPA at this time. Senator Neal asked whether Risk Management could do without a third-party administrator. Mr. Waterman replied the division could self-administer claims. He said it is not a situation that could be entered into lightly. There would have to be a detailed report on the cost-effectiveness and the control issues relating to TPA versus self-administration. Mr. Waterman stated self-administration is an option that the administration is considering, and the Governor's task force is also examining, as a long-term solution to some problems.

Mrs. Chowning told Mr. Waterman there was possibly a budget problem with the Retired Employee Group Insurance budget. She said there was possibly some incorrect billing in the data and stated the legislators could not wait 2 weeks for the report on that data. The assemblywoman inquired whether Mr. Waterman and the LCB staff could get together and rectify the discrepancies by Monday of the following week. Mr. Waterman replied "Yes." He noted he was made aware of the problem just before the hearing started that morning and said he would be willing to get together with the budget office and the LCB staff.

Pete Ernaut, Chief of Staff, Governor's Office, stated the Governor's task force has had three meetings. He said the task force has been working very hard on solutions to the insurance problems with the attorney general's office, the Risk Management Division, and some of the LCB staff. He said these entities have spent the majority of their time defining the areas that should be focused on for a solution.

Mr. Ernaut emphasized it is important to understand the different parts to the problem. He stated it is the consensus of the task force that an interim administrator is needed. He said the program needs someone to oversee it everyday and noted there is an active recruitment for this administrator. Mr. Ernaut said the announcement of who will be the interim administrator could come as soon as the next week. He reiterated this administrator will review the current system and how most effectively and efficiently the current claims can be administered. He said the administrator will assume some of the workload from the Risk Management Division and from others who have been performing the job.

Mr. Ernaut stated the task force has two things to review: (1) an ongoing administrative contract for the third-part administrator, and (2) is the different avenues available for benefits. He said the task force is examining the current self-funded program and is trying to determine how it can be bolstered and improved. He said the task force is also examining the current makeup of the insurance committee and how to make it more appropriate and professional.

Mr. Ernaut said the task force is also researching a "fully insured" solution, which would use private carriers to handle the benefits. He said this solution would not be congruent with the current system. He noted the task force does not want to close the options the state has at present. Mr. Ernaut explained the goal is to provide the best possible health care plan for all state employees. He said the health plan has to be one that has choices and stability. He emphasized the instability of the current plan has not been created only by mismanagement of the claims but also by the premium and benefit structure.

Mr. Ernaut stated in summary the Governor’s Task Force on Benefits should be naming an interim administrator, is presenting to the Legislature a bill to change the structure of the Committee on Benefits, and the should be "fixing" the self-funded insurance option. He said changing the structure is only one option and was unable to say whether it was the best option. He said the task force believes that within the next 2 weeks it will be able to create a request for information or a request for proposal for private carriers to respond. He said when this information is received the task force will compare the self-insured option with a fully insured option. He explained the Governor and the task force will review the information and bring the best offer to the Legislature for approval. He stated the task force is not just to provide "a" plan, it is to provide the "best" plan.

Mrs. Chowning asked when exactly this information will be available to the legislators. She emphasized that 2 weeks is good, but the Legislature needs to review that information before making its decision. Mr. Ernaut replied the task force hopes to have the information within the next 2 weeks, which would give it until May 1, 1999, to come up with a solution.

Senator Neal inquired what Senator Porter's role was in addressing this problem. Mr. Ernaut replied the senator was a member of the task force. Senator Neal asked whether Senator Porter was appointed by the Governor. Mr. Ernaut answered "Yes." Senator Neal inquired whether the task force was aware of the concept of separation of powers. Mr. Ernaut responded the task force is made up of legislators, attorneys from the Office of the Attorney General, members of the of the Risk Management Division, and all the experts in the field in both the Senate and the Assembly. Senator Neal inquired whether Senator Porter was considered an expert on the risk management issues. Mr. Ernaut responded, "No, he is considered a representative of the State Senate that the Governor picked." He said Senator Porter worked in the insurance field although not in the health field.

Senator O'Donnell said he understood the task force was working as fast as possible but the Legislature's time was limited and the legislators needed good information quickly to make their decisions.

Mrs. Chowning stated that when she was asking for deadlines she was not asking for any rush or rash judgments. Mr. Ernaut stated the Governor and his staff start receiving the state health plan on April 1, 1999, so the staff is very motivated to solve the problems.

Mrs. Chowning said the Legislature needs to know whether the premium figures are accurate. She reiterated the utilization data has finally arrived, but it only arrived a couple of days before the hearing and staff has not been able to reviewed it. Now that the data can be reviewed the Legislature may be able to discern where some of the problem areas are, she said. Mrs. Chowning commented the Legislature and the task force needs to continue to work together to solve the problems.

Mr. Ernaut reiterated the task force and the Legislature need to ascertain whether or not the management of the claims was the problem or whether the premiums and benefits structure contributed to the problem. He said it is important to evaluate both the management of the claims and the benefits structure because "one is acute and one is chronic." He said the task force has been very active and many individuals have been working on the problem. Mr. Ernaut stated the task force is looking to "fix the health plan," not explore what happened to get it to the point it is at now.

Mr. Goldwater commented that fixing the problem is paramount, but what happened to create the problem was not all "on the up and up." He stated what happened was not just an "Oops, I forgot to dot an i and we are in the hole $50 million." He noted there might have been something that happened in the past which may give the state some recourse for settlement, and he hopes the Legislature and the task force do not forget that fact as they move forward to solve the problem. He said it was his hope the attorney general is examining this problem. Mr. Goldwater reiterated that as the committee and the task force review the problems they should not forget that recourse is an option. Mr. Ernaut responded the task force has considered recourse as an option. He said choosing a third-party administrator is the easy part. He stated the hard part is finding out whether or not the benefit and premium structure is not also contributing to a "downward spiral" in the plan. Mr. Goldwater stated that was his point. He said he has some significant issues with William Mercer. The assemblyman said that if everyone involved acted in good faith then there is no reason to "look back." He said if there was something "fishy" going on there however, then he believes it is worthwhile for the state to pursue the issue and not to give it up as an avenue of recourse. He said he was not convinced there was not "something fishy" going on. Mr. Ernaut replied the assemblyman could rest assured the Governor and the attorney general share the assemblyman's opinion. He said, "If there is a legal matter that has not been pursued and [it] comes to our attention that it needs to be pursued, it will certainly be [pursued] at the right point."

Mrs. Chowning stated that one big problem regarding the numbers is whether the premium amount is accurate or sufficient to carry forward into the next biennium. She said the Legislature needs to know as soon as possible whether the premium will be sufficient. She stated that if the Legislature does not know whether the premium amount is sufficient then it will just have to "land on a number." Mr. Ernaut stated the task force has completed part of the analysis on the premium and benefits "makeup" and it is clear there is cross-subsidization of classes within the plan. He said having a mixture in this plan of private carriers and the state, with the fee structures and premium structures different, make a complex matrix to look through in order to determine whether there is enough premium to cover the benefits. Mr. Ernaut stated that if the premium does not cover the benefits then there is a major problem. He said when benefits have to be made up out of reserves it is not like paying out of a savings account. He noted the reserves are there because the claims are paid after the billing. He stated those funds are not there as a potential "to" pay, those funds are reserved "for" payment. Mr. Ernaut stated neither the task force nor the Governor's Office was sure whether the premium structure matches the benefit structure. He emphasized it would take a lot more analysis.

Mrs. Chowning reiterated the question as to when Mr. Ernaut thought the analysis of the detailed utilization data would be finished. Mr. Ernaut said it would be about 2 weeks. He stated the task force received the detailed utilization data about the same time the legislators did.

Mrs. Chowning said there have been no line items in the budgets for repayment and wanted to know when the budgets would be amended to reflect the payback of 20 percent if the special appropriations truly were a loan. Mr. Ernaut stated that in the minds of the task force members it is not a loan. He said the system has no ability to repay the 20 percent. He noted the funds in the budget to pay the 20 percent are an appropriation. He stated this is up to a $47 million appropriation to "bail out" the health plan.

Mrs. Chowning asked the insurance commissioner to give the subcommittee a brief overview of what is entailed in the examination and when a report might be expected. Alice Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, said the examination of U.I.C.I. (United Insurance Companies Incorporated) could last another 3 weeks. She explained the examiner will then prepare a report to the commissioner's office. Ms. Molasky-Arman noted the report would then be sent to U.I.C.I. for its review and response, due within 10 days. She noted there should probably be a public report available by May 1, 1999.

Mrs. Chowning adjourned the meeting at 11:15 a.m.

RESPECTFULLY SUBMITTED:

Johnnie L. Willis,

Committee Secretary

APPROVED BY:

Senator William R. O’Donnell, Chairman

DATE:

Assemblywoman Vonne S. Chowning, Chairman

DATE: