The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:14 a.m., on Wednesday, March 31, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Bernice Mathews

GUEST LEGISLATORS PRESENT:

Senator Mike McGinness, Central Nevada Senatorial District

Senator Dean A. Rhoads, Northern Nevada Senatorial District

STAFF MEMBERS PRESENT:

Jean Laird, Committee Secretary

OTHERS PRESENT:

Senator Raggio informed the committee Senator Raymond C. Shaffer, who is the sponsor of Senate Bill (S.B.) 127, has indicated he intends to withdraw this bill because of the fiscal note. Senator Raggio asked whether there is an Assembly Bill on this same issue.

George Pyne, Executive Officer, Public Employees’ Retirement System (PERS), responded that Assembly Bill (A.B.) 44 is on the same issue and it was heard in the Assembly Committee on Government Affairs.

Mr. Pyne said that after it was determined there was a fiscal note for A.B. 44, the bill was referred to the Assembly Committee on Ways and Means. He indicated there had been no further action on A.B. 44.

Senator Raggio stated S.B. 127, at the request of Senator Shaffer, will not be processed unless there is objection from the committee. There was no objection.

Robert E. Rose, Chief Justice, Nevada Supreme Court, testified S.B. 245 would address the difficulty the court has had in attracting senior judges back into service. He indicated an enhancement that could be given to judges who are in PERS would be a slightly increased income when those judges come back to serve as senior judges. He stated it is one of the things that help to draw back senior judges. Chief Justice Rose said the court generally supports this type of legislation if it is not of great cost and if it will assist the court in attracting senior judges back to service. Regarding specific fiscal impact, he pointed out it will presently affect only one senior judge, but deferred to Judge Norm Robison and PERS staff for discussion on fiscal impact.

Chief Justice Rose stated although the court has not taken a stand on this bill, it fits into the general category of being attractive to senior judges and it helps bring them back into service. He explained it is difficult in many respects to attract judges because most do not leave retirement at all or, if they do, they go into arbitration and private judging, which is much more lucrative.

Senator Raggio asked whether someone would be explaining how this proposal would work so the committee can have a full understanding of the effect of this bill.

Senator Mike McGinness, Central Nevada Senatorial District, stated he introduced this bill on behalf of judges in his district and those judges are here to present their concerns.

Norm Robison, Senior District Judge, Nevada Supreme Court, testified that when the judicial retirement program was amended to encourage retirees to return into senior service, it provided that new time as a senior judge would be credited towards the returning judge’s retirement. He pointed out that when this occurred, there were very few judges in the PERS retirement plan. He noted a person cannot change the selected PERS option and said this measure is not intended to affect PERS. He said this bill would merely allow parity between judges who retire under the PERS system and those who retire under the judicial system.

Judge Robison explained that currently a returning senior judge’s salary is based on length of time as a district judge or Supreme Court judge. He said the salaries are the same, but retirement benefits are not the same. He informed the committee there are currently only two senior judges who have retired under PERS and only one would be immediately eligible. He said there are two senior judges in the judicial retirement system who have received benefits because of additional time. He emphasized this is not double dipping; it is new time earned in the system after retirement. He said although the statute states a person cannot retire under both systems, an Attorney General’s opinion clarifies that a person can, as long as it is for different time periods. As an example he named Judge Mills Lane, who retired under PERS from the Washoe County District Attorney’s Office and then entered the judicial system and retired from there. He reiterated it is not double dipping because it is for separate time periods.

Judge Robison continued, stating this bill allows judges who retired under PERS and returned as a senior judge to receive the same retirement benefits as judicial system retirees. If this bill passes, he said, for a judge who retires under PERS, the Administrative Office of the Courts (AOC) would calculate what the retirement would have been had that judge retired under the judicial retirement system. The PERS retirement amount would be subtracted from the calculated amount and the difference would be the additional retirement paid from the AOC budget. He clarified this would not take place until after that judge has worked the equivalent of a year, which is 240 working days. He noted it took him about 3 years as a senior judge to accumulate the 240 working days.

Judge Robison further explained that when a judge is appointed or elected and is vested under PERS the judge must elect to either stay in PERS or stay in judicial. Senator Raggio asked what currently happens to a PERS retiree. Judge Robison said the PERS retiree receives retirement benefits from PERS, which cannot be changed. He added the District Judges’ Association is not asking for that to be changed.

Senator Raggio asked whether judges are credited for the years they serve prior to being a judge as well as the years after. He also asked whether the same amount of contribution is made to PERS as is made under the judicial retirement system. Judge Robison said that under the judicial retirement system, there is no contribution. He explained the judicial retirement system is not funded the same as PERS. Instead, the judicial retirement is funded from the AOC budget.

As a side comment, Senator Raggio said one issue that has been discussed, but not resolved, is whether the Legislature should continue funding the judicial retirement system by appropriation each session or set up an actuarial fund.

Senator Raggio asked how this bill would create parity between a judge who retires after 20 years of service under the PERS retirement plan and the one who retires under the judicial retirement system. Judge Robison said that, first, the amendment provided to the committee (Exhibit C) would need to be incorporated. Senator Raggio asked whether Judge Robison’s testimony assumes the proposed amendment is incorporated. The judge responded that it does and said the bill, as currently written, does not reflect the intent of the District Judges’ Association. He noted the association had no opportunity to review the bill before it was introduced and said the proposed amendment would correct it. He said the amended bill would allow the AOC to calculate the additional payment amount. After the judge has worked for a full year as a senior judge, the AOC would determine what the payment amount would have been under the judicial system to determine the amount of increase. He said that increase would be divided by 26 and that is what would be paid in additional retirement benefit. It results in the same amount a judge would receive if that judge had retired under the judicial retirement system. He added the goal is to create parity between the two systems.

Regarding additional payments to the judge who has retired under the PERS system, Senator Raggio asked whether this bill would represent additional cost to the PERS system. Judge Robison said it would not affect the PERS system at all. The additional payment would come out of the AOC budget, as do the judicial retiree payments. Senator Raggio asked whether it would be funded by General Fund dollars. Judge Robison said it would be paid from the AOC budget, but he did not know the funding source.

Steve Bremer, Manager of Budgets and Finance, Administrative Office of the Courts, said the intent of this measure is to pay the retired judge or justice for additional time spent on the bench after retirement. The bill would require the AOC to pay the difference between the judge’s PERS retirement and what he would receive as a senior judge had he retired under the judicial retirement system, including the additional time spent on the bench after retirement.

Senator Raggio asked whether it matters how much time is spent as a senior judge. Mr. Bremer replied a minimum of 1 year as a senior judge is required to receive the additional retirement payment. Senator Raggio quoted from the bill, "Each year of additional active service must be calculated based upon the time the judge actually spends in the additional active service," and asked what that means. Mr. Bremer replied that currently a judge does not gain a year of service credit until he completes an entire year. When judges gain a full year of service they are paid from that point forward for additional time on the bench. He explained that for some judges the wait could be lengthy because it takes several years to earn the equivalent of a full year.

Senator Raggio asked what other judges might benefit under this measure. Judge Robison replied that Mario Recanzone, Senior District Court Judge, Nevada Supreme Court, will be affected, but he does not yet have the full year.

Judge Recanzone testified he does not yet qualify and indicated he has accumulated about 175 days. Senator Raggio asked whether Judge Recanzone agreed with the amendments proposed by Judge Robison. Judge Recanzone replied that he does.

Senator Jacobsen asked how many judges were used in the senior judge program over the last year. Judge Robison replied there are currently four senior judges in Nevada. He said two are in the judicial retirement system and two are in PERS.

Senator Jacobsen asked whether the four judges have a choice on what cases they take or whether instead they take all cases assigned to them. Judge Robison responded senior judges must take cases that are "conflict cases," in which they are assigned cases the local judges are unable to hear. He explained that when a judge is sitting in place of another judge, he must take that judge’s full calendar. He added that if there is a personal conflict with a lawyer or something similar, the same options any other judge has to opt out of a case still apply.

Senator Raggio asked Mr. Bremer for the fiscal note. Mr. Bremer said the judge whom this would affect immediately would receive $5,950 additional retirement per year. In the event that judge earns an additional year of service his total additional entitlement would be $15,587. He pointed out the additional retirement would be paid from Budget Account 101-1491, District Judges’ and Widows’ Pensions.

Senator Raggio asked whether there is a limit on the number of additional years’ credit that can be earned. Mr. Bremer responded there is a statutory total limit of 22 years of judicial service. Currently this particular judge has a total 13 years’ judicial service. Senator Raggio asked whether that judge could then earn up to another 9 years. Mr. Bremer confirmed that he could. Senator Raggio asked whether that is the same as for other judges. Mr. Bremer replied it is and said all judges are capped at benefits for 22 years of judicial service. He noted a judge can work after 22 years, but it does not count towards retirement.

Senator Raggio asked whether a judge who retires under the PERS system and the judge who retires under the judicial system would receive the same benefits if each completed senior service for a total of 22 years. Mr. Bremer responded that based on his preliminary calculations, he did not believe the senior judge who retires under PERS would end up getting any more than the senior judge who retires under the judicial plan. Senator Raggio asked whether someone who retires under the judicial system after 20 years and earns 2 more years under senior service will earn more, less, or the same as a judge who has 13 years in active service and then continues on until he gets 22 years of service. Mr. Bremer said he did not believe there would be a difference.

Senator Neal asked whether the 4.1666 percent of salary retirement benefit referred to in the bill is a cumulative amount or based on an average. Judge Robison responded that if a judge is under the judicial system right now he accumulates credit toward retirement, 75 percent if the total is 22 years. He pointed out the first 4 years do not count. For example, a judge in Reno retired after 6 years and had only earned 8.3 percent. Judge Robison noted there are several bills under consideration that would change this, one of which is A.B. 592.

Judge Robison explained A.B. 592 would reduce the 4.1666 percent to 3.4 percent, but would allow credit for the first 4 years. That judge in Reno who retired after 6 years would have 18 percent under the judicial retirement system or he would have 15 percent under PERS after he is vested with 5 years.

Senator Neal asked what a judge would receive at age 60 after 4 years. Judge Robison replied currently that judge would receive nothing because the judge is not vested. He added a judge must serve 5 years in the current system to be vested. Senator Neal asked whether the 4 years are picked up after the judge reaches 5 years. Judge Robison replied they are not; after 5 years the judge has 4.1666 percent credit for 1 year only. He said a judge still ends up with 75 percent as in PERS, but it is in 22 years under the judicial system, versus 30 years in PERS. Senator Neal asked whether the 4.1666 percent is based on the average salary. Judge Robison said it is based on the last year’s salary only.

Mr. Bremer described the method of calculating the retirement benefits under the judicial retirement system. He said if a judge has 22 years of judicial service and the last year’s salary was $120,000, the judge would receive 75 percent of $120,000. The cost of living adjustments (COLAs) are applied in the same manner as they are applied to PERS retirees. For the first 3 years there is no cost of living increase, then COLAs are provided over the next several years.

Senator Neal asked for further clarification on the calculation of retirement amount under the current judicial retirement system. Mr. Bremer explained that if a judge had 20 years judicial service, his benefit would be just under 67 percent of the last year’s salary. (The calculation is 20 years minus 4 years equals 16 years; 16 years times 4.1666 equals 66.67 percent.) Senator Neal asked how the retirement would be calculated if a judge were 60 years old with 18 years of judicial service. Mr. Bremer replied if a judge had 18 years service, the first 4 years of service (for which the judge does not get credit) is subtracted, leaving 14 years. The 14 years times 4.1666 equals 58.3 percent, which is then applied to the salary in the last year of service. If the salary in the last year were $100,000, the yearly retirement amount would be $58,300 or $4,860 per month.

Senator Neal asked whether a judge would start receiving 4.1666 percent the first year back to work after retirement. Judge Robison answered, "Not until after the judge has completed the first year." Senator Neal asked whether this would be 4.1666 percent of the judge’s salary for that 1 year. Judge Robison said that is what would happen based on the amendment (Exhibit C). He said the amendment would require the calculation be the same for the PERS retiree and the judicial system retiree, based on judicial time only, after having served a full additional year. Senator Neal asked whether the additional year would be added to the already existing time served for pension. Judge Robison replied that it would not be added in PERS; it does not affect PERS at all.

Judge Robison commented the judge who would be immediately affected by this bill would earn less than $12,000 if it were retroactive. Senator Raggio asked whether there is anything in S.B. 245 that would make it retroactive. Judge Robison replied the judge who would be affected by retroactivity was hoping the committee would be inclined to make the bill retroactive.

Senator Neal asked why the additional retirement would be calculated for payment every 2 weeks. Judge Robison said the judicial retirement plan currently pays every 2 weeks. He said this would allow the AOC to pay the new benefit in the same manner as other judicial retirement checks. He pointed out the intent is to achieve parity between the two systems.

Mr. Bremer added that at the point of earning the additional year of service, the judge’s benefits are recalculated. He said the payments are biweekly because the benefits are paid through the state payroll system. Senator Neal asked whether the benefits are recalculated every 2 weeks. Mr. Bremer replied the benefits are only calculated when the judge earns an additional full year service or when a COLA must be applied.

Mr. Pyne testified the Public Employees Retirement Board has not taken a position on S.B. 245 and, as Judge Robison indicated, this bill amends the judges’ retirement law and has no fiscal impact on PERS. He was not familiar with the proposed amendment but stated he generally understood the bill is intended to allow judges to earn an additional benefit in the judicial retirement system as a senior judge in addition to the benefit the judge is already receiving from the PERS plan.

Senator Raggio asked whether PERS has any objection to the bill. Mr. Pyne stated the board has taken no position on the bill and PERS staff have no objection to the bill.

Senator Jacobsen informed the committee that Judge Robison is responsible for China Spring Youth Camp becoming a reality. He was the "cat skinner," the electrician, the mechanic, the solicitor, and so forth. He said Judge Robison deserves credit for the youth camp and pointed out Washoe County is the biggest recipient of its services.

Senator Raggio closed the hearing on S.B. 245 and opened the hearing on S.B. 292.

Senator Dean A. Rhoads, Northern Nevada Senatorial District, testified he was a former member of the Nevada National Guard and indicated a member of the Nevada National Guard requested he introduce this bill which would increase the percentage of college tuition fees paid for members of the Nevada National Guard. He said it would help recruitment in the Nevada National Guard and it would be an incentive to stay in Nevada for a college education.

Brigadier General Giles Vanderhoof, Assistant Adjutant General, Air National Guard, Nevada Office of the Military, said he is representing Major General Drennan A. Clark, the Adjutant General of Nevada, who had a previous commitment at Army Forces Command requiring him to be out of the state. He testified education assistance is an extremely positive factor in recruiting and retaining quality people in the Nevada National Guard. The current law authorizes the adjutant general to pay up to 50 percent of the consolidated fees for members in good standing at any Nevada university or community college. The Guard has added another requirement that the member achieve a "C" grade or better. Members are reimbursed at the end of the semester to assure minimum grades are achieved and the member is in good standing.

General Vanderhoof indicated the Guard is grateful for this effective recruiting tool, and said being able to authorize up to 100 percent of fees, within the limits of the appropriation, would be even more helpful and would allow flexibility in the reimbursement process.

Senator Raggio asked what the recommended appropriation is in The Executive Budget. General Vanderhoof indicated it is $97,000. Senator Raggio asked whether that is the same as in the past. General Vanderhoof answered that it was $100,000 in the previous year. Senator Raggio asked whether there would be fewer people receiving reimbursement if the same amount is authorized and the Guard has the authority to pay up to 100 percent. The general responded that currently the Guard can reimburse as much as 50 percent. He said if there were insufficient funds available for everyone to receive 50 percent, the member might only receive 40 percent. He said it depends on the appropriation amount. If the appropriation were higher, then the Guard could offer a higher percentage.

Senator Raggio asked whether the Guard is requesting to double the appropriation. General Vanderhoof replied the Guard is not requesting an increase in the appropriation. Senator Raggio asked whether the Guard expended the full appropriation in the previous year. General Vanderhoof answered it had spent all but $3,000. He said because of the need to forecast the expenditures there is usually a small balance at the end of each year. Also, he said, there have been many overseas deployments in the last several years and a lot of people who were in school were unable to complete the semester because they were sent overseas. He noted the Guard is much better now at accounting for the funds than it had been in the past.

Senator Raggio asked whether a member who attends classes knows how much reimbursement he or she would receive. General Vanderhoof answered members have a fairly good idea as long as they complete the courses, are working toward a degree, get a "C" or better, and are in good standing in the Guard. Senator Raggio said this bill would allow the Guard to pay more than 50 percent if a member successfully completes the course and meets all other requirements. General Vanderhoof indicated that was true, if the appropriation allowed for it.

Senator Raggio asked how many people participated during the last biennium. General Vanderhoof answered 192, but added that does not include the spring semester because it is not completed.

Senator Neal asked how many participated on the "Air Force side." General Vanderhoof replied it was a little over 100.

Senator Jacobsen asked whether anyone in the Guard is on standby status and whether the C-130s are in use. The general replied, "Not at the current time." He added Nevada does have four imagery analysts participating and noted the Nevada Air Guard has the most senior imagery analysts in the entire U.S. Air Force or Air National Guard. He said the imagery analysts are doing real-time battle damage assessment, strategic planning, and tactical planning for what is occurring in Kosovo.

Senator Raggio closed the hearing on S.B. 292 and opened the hearing on Assembly Joint Resolution (A.J.R.) 10.

Mr. Pyne testified A.J.R. 10 is a resolution urging Congress to not mandate newly hired state and local government employees under the Social Security System. He said the timing of this resolution is critical because Congress may soon decide how to address the financial difficulties of the system.

Mr. Pyne pointed out lines 1 to 12 of the resolution provide historical context. He said PERS was created in 1947 when state and local government employees could not participate in the Social Security System. He testified that today Nevada has a financially sound system covering over 100,000 active members and benefit recipients. PERS members include employees of the state, counties, cities, school districts, and other local government entities.

Mr. Pyne said that, as it is stated beginning on line 13 of the resolution, mandatory Social Security coverage of newly hired state and local government employees will seriously disrupt Nevada’s well-founded pension plan.

Mr. Pyne provided examples. First, he explained, if Nevada were forced to overlay the cost of Social Security on its current plan structure, the cost to Nevada employers and new hires is estimated to be $27 million the first year, increasing to $157 million after just 5 years. He said it is easy to see the financial disruption this unfunded mandate would cause.

Second, Mr. Pyne stated, if Nevada were to lower contributions into PERS by the same amount as the Social Security or FICA tax, in order to maintain level costs for retirement public employee benefits for new hires in Nevada would be eroded between 13 and 25 percent. He remarked this is because a dollar invested in PERS buys more than a dollar invested in the Social Security System. Mr. Pyne emphasized that under this scenario two employees doing exactly the same job could have entirely different retirement benefits.

As a final scenario, Mr. Pyne asked the committee to consider the impact on contribution rates if it were decided by the Legislature to maintain the same benefit levels for new hires. He said the cost of retirement would increase significantly, again because of the funding efficiency of the Social Security System versus PERS. Regular member contribution rates would increase from the present 18.75 percent to 27 percent of payroll.

Mr. Pyne called attention to line 16 of the resolution, which states there is no evidence to support the assumption that coverage of newly hired public employees would solve the funding problems of Social Security. In fact, he said, a recent U.S. General Accounting Office (GAO) study concluded the solvency of the Social Security System would only be extended by 2 years if state and local government employees were mandated under that program. Mr. Pyne questioned the veracity of that statement given the additional financial liability that state and local government employees would bring to the Social Security System.

Mr. Pyne informed the committee several commissions have studied this issue and virtually all have included mandatory coverage as one revenue source to help cure the funding woes of Social Security. He said that is why it is so important for Nevada to send the message that mandatory Social Security coverage is a losing proposition for all concerned. He indicated it would either lower benefits for workers, raise taxpayer burdens, divert public dollars away from education and public safety, or increase the long-term cost of Social Security.

Mr. Pyne concluded by stating it is for these reasons PERS requests the committee’s support for A.J.R. 10.

Senator Raggio said he does not think there is anyone on this committee who opposes this resolution. He asked how many times Nevada had previously sent Congress this resolution. Mr. Pyne replied the reason PERS has brought this resolution to this Legislature is that this issue is currently on the top agenda in Congress.

Senator Neal said the only issue that he had been able to discern that is before Congress right now is the utilization of the surplus for Social Security. He said he had not seen any bills or formal actions proposing to bring in state and local government employees. Mr. Pyne replied there were bills introduced in the last congressional session that he believed would be introduced again in the current congressional session. He said that, fortunately, however, the President’s budget does not include this proposal.

Senator Raggio closed the hearing on A.J.R. 10 and opened the hearing on S.B. 299.

Senator Mathews said this is a simple bill because the life expectancy of policemen is only 57 years. She indicated concern that people argue this bill is not important because of what it will cost. She said this measure will benefit people who put their lives on the line every day "for us and our families" and who, at the end, only have a 57-year-life expectancy, compared to the normal 73 years for white males.

Senator Mathews said S.B. 299 would amend Nevada Revised Statutes (NRS) Chapter 286.510. She explained that this provision established the length-of-service criteria public employees must meet to qualify for retirement. She said it recognized two different sets of rules for service standards, one for police officers and firefighters and one for all other members of the system. She pointed out the only change sought in this bill concerns police officers and firefighters with 25 or more years of service. She said that currently police officers and firefighters can retire at the age of 65 if they have 5 years of service, at age 55 if they have 10 years of service, or at age 50 if they have 20 years of service.

Continuing, Senator Mathews said, as with all other members, police officers or firefighters with at least 30 years service may retire at any age. She said this bill proposes to change only this last category. It would permit police officers or firefighters who have served 25 years to retire regardless of their age, rather than the 30 years as is currently in the law.

Ron Dreher, President, Peace Officers’ Research Association of Nevada (PORAN), testified he represents 20 law enforcement agencies throughout Nevada. He said he is also president of the Reno Police Protective Association, is a 26-year veteran of the Reno Police Department, and has been assigned to the Robbery/Homicide Unit of the Reno Police Department for the last 10 years. He urged support for passage of S.B. 299.

Mr. Dreher stated the purpose of this bill is to provide police officers and firefighters an option to retire with 25 years service with no penalty. He said currently there is a penalty of 4 percent per year if an employee retires prior to being 50 years old. He asserted this is not equitable and it is wrong. He said Senator Mathews has introduced this measure for police officers and firefighters to meet this need. It is cosponsored by Assemblyman Bernard (Bernie) Anderson, Washoe County Assembly District No. 31. He thanked both of them as well as the committee for supporting law enforcement by supporting passage of S.B. 299.

Mr. Dreher said the police officers of Nevada have demanded he appear before the committee to ask that this bill be passed. He indicated it is the number one priority this legislative session for police officers and it has been their number one priority for several sessions.

Mr. Dreher informed the committee he would be introducing Stephen Turner, Treasurer, Peace Officers’ Research Association, who is a retired Reno Police sergeant. He said Mr. Turner will present the fiscal impact, or lack thereof, to insure the committee is aware of the miniscule fiscal impact. He said Michael Hood, Chief, Nevada Highway Patrol Division, Department of Motor Vehicles and Public Safety (DMV&PS), will testify on the impact the current system has on himself and the men and women he leads and he will attest to the "equitable qualities" of S.B. 299.

Mr. Dreher testified the cost of this measure to local government is less than .5 percent. Therefore, according to the PERS Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30,1998, on page 70 (Exhibit D), the costs should be absorbed by PERS and not by local government employers or employees.

Mr. Dreher said that recently Mr. Turner and he appeared before the PERS board and recommended the board support S.B. 299. He added that after that meeting, Mr. Pyne stated .7 percent was used in costing "police and fire" issues, that no bilateral study had been done to determine how many people would use this if police officers and firefighters had the option, and that probably very few persons would exercise this option. He added that Mr. Pyne felt the cost would be near .5 percent and not .7 percent as listed.

Mr. Dreher noted that after that same PERS board meeting, he had spoken to Andy Anderson, who is a long-time member of the PERS board and a veteran Las Vegas police officer. He pointed out Mr. Anderson is president of the Nevada Conference of Police and Sheriffs (NCOPS) and the Las Vegas Metropolitan Police Association. Mr. Dreher said Mr. Anderson opined the cost would be less than .5 percent as few would use this option. Mr. Dreher said it is, however, an option that should be afforded to all officers.

Mr. Dreher called attention to the fiscal note attached to this bill. He said it states:

Mr. Dreher said that is consistent with the CAFR report (Exhibit D), which states, in essence, a cost of .25 percent or less for employee/employer and a cost of .5 percent or less for employer pay rates is absorbed by PERS. Therefore, he said, there would be no additional cost to the state.

Mr. Dreher said firefighters in Nevada feel few of them would use this option because they reach a peak in their careers at approximately age 52, whereas most law enforcement officers peak around age 45. He indicated demographics have changed. He pointed out when he started as a police officer a person had to be 23 years old to be a police officer; now it is 21.

Mr. Dreher said law enforcement and firefighters have one thing in common, public safety. Law enforcement then goes in a separate direction, he said. Based on the stresses of both careers, Mr. Dreher said their life expectancies are not as long as for people in other careers. He said this is because they go from call to call and in an instant face life and death situations. Mr. Dreher reminded the committee two Reno police officers were stabbed in the previous week when they responded to a disturbance call. In an instant, he said, they had to respond to a life and death situation and make a decision to use deadly force. He said no other profession has this type situation and that is why the State of Nevada gave police officers early retirement benefits. He pointed out the way the system is set up, few police officers can achieve the "20 at 50 option." However, he clarified, it is a good option and does receive limited usage and has a minimal fiscal impact.

Mr. Dreher emphasized the cost to local government employers and employees is zero based on the following:

• The executive officer of PERS said an alleged .7 percent cost is really approximately .5 percent.
• A long-time member of the PERS board said due to limited projected usage the true cost is less than .5 percent.
• The PERS policy states that any cost less than .5 percent should be absorbed by the PERS system.
• The financial report reinforces that same information.

Mr. Dreher reiterated there is therefore no state fiscal impact. He said this long-overdue option should receive the committee’s full support. He added it is the least this committee can do for Nevada’s law enforcement officers.

Mr. Dreher informed the committee he had polled the Reno police officers and supervisors he represents. He asked two questions:

1. If the 25 and out is passed on July 1, would you take this option or would you like to take this option?
2. If you had to pay .7 percent of one percent to fund this option, would you be willing to do this?

He testified approximately 90 percent of those responding stated they would like to be able to consider the option when they reach that age, not that they would necessarily use it. They also responded they would be willing to pay the cost, if there is a cost.

Mr. Dreher stated the law enforcement officers of those organizations he represents want this option. He pointed out all other employees in the PERS system can retire at 30 years of age and pay approximately 66 percent of what police officers and firefighters pay. He said other employees have the same or better benefit and do not have to pay the additional cost.

Mr. Dreher said it is important our officers live longer, leave police service when they get burned out, and not have to stress about paying a costly penalty to leave. He noted his organizations are not asking for an increase in the retirement, but are merely asking for the option to retire at 25 years of service without a penalty.

Mr. Dreher called attention to a document prepared for the committee that explains their position fiscally, "Peace Officers Research Association of Nevada." (Exhibit E. Original is on file in the Research Library.)

Stephen Turner, Treasurer, Peace Officers’ Research Association of Nevada, provided a written copy of his full testimony, "Re: Testimony on SB299: Proposal to Allow Earlier Retirement for Police Officers and Firemen at 25 Years of Service" (Exhibit F). He said he would provide the highlights in his verbal testimony, and said the committee may wish to refer to the written testimony for additional information.

Mr. Turner mentioned this issue has been presented to a number of legislative sessions over the last decade. He recalled that in 1987, Senate Concurrent Resolution (S.C.R.) 22 of the Sixty-fourth Session directed the PERS board to study a number of PERS issues. The board did so and reported back on such things as improvements for unreduced retirement benefits for regular and police/fire members, reduction in the penalty for early retirement from 6 percent to 4 percent (which did occur several sessions ago), and improvements in post-retirement COLAs.

Mr. Turner said the problem in the long run is that the "straight 30 benefit" has in essence given the regular PERS members early retirement. He noted a person could start public work at age 20 or 21 and retire at age 50 in the current system. He pointed out using the "straight 30 benefit," which is available to all members, is really an illusory benefit for police officers and firefighters. He explained even if a person were to start on his twenty-first birthday, he would never be able to use "straight 30 benefits" unless he purchased service years, because he would only have 29 years’ service at age 50. He said the PERS board and everyone else, when this benefit was created, did not intend for this to be an illusory benefit, but in essence it is illusory for police officers.

Mr. Turner reminded the committee the contribution rate paid by police officers and firefighters is 28.5 percent and the rate paid by regular members is 18.75 percent. He acknowledged a lot of the extra 10 percent is to make the system 100 percent funded. He said that when he started in 1972 the contribution rates were a lot less and there were a number of post-retirement increases which were made for officers who retired in the 1950s and 1960s who received very little benefit. The Legislature, rightly so, provided certain minimum benefits for those retired officers, and their benefits in many cases increased several hundred percent.

Mr. Turner stated police officers do not mind paying for those things because it is right to do so. He said this request only affects a small percentage of the membership. For those few officers, who are exposed to hazardous situations and excessive stress over their entire careers, this option should be there.

Mr. Turner explained that when he first became a police officer in 1972, most officers were former military or had been in the community some time before being hired as a police officer. At that time most new hires were in their late 20s to early 30s and it was rare for a police officer to be as young as 21 years old. He pointed out the demographics of law enforcement have changed. He said 70 or 80 percent of the officers on the Reno Police Department were hired after 1988.

Senator Neal asked where the statistic came from that the average life expectancy of police officers is 57 years. Senator Mathews said that information was from some data in her office. She said she would identify the source and provide the information for the committee. Senator Raggio asked whether Mr. Turner had information on the source of that information. Mr. Turner said he did not, but pointed out one of the problems is that PERS makes the same actuarial assumptions for police officers and firefighters as for regular members in the system.

Senator Neal asked how many states have the type of retirement being proposed. Mr. Turner referenced the booklet provided to the committee, "Peace Officers Research Association of Nevada." (Exhibit E. Original is on file in the Research Library.). He called attention to the "Reference" section that indicated results of the 1998 update of a study conducted earlier by PERS. He said Nevada is compared to Western states and several of those other states have 20-year retirement. Arizona, which was included in the original study but is omitted from the 1998 update, also has 20-year retirement.

For the record, Senator Raggio stated the information provided indicates Idaho has the "rule of 80," which is any combination of age and years of service that total 80; Oregon allows retirement after 25 years of service; Utah allows retirement after 20 years of service; Colorado allows retirement after 30 years of service.

Senator Coffin asked Mr. Turner to comment on the assumption that the average life expectancy for police officers is 57 years. Mr. Turner said one of the reasons his organization believes it to be much less than the mortality tables and less than what PERS indicates is that personal knowledge of Nevada’s retired police officers suggests they die at a much younger age. He pointed out his organization does not have access to the seemingly confidential information controlled by PERS or the city that would allow PORAN to review aggregate data, rather than just the ones known by personal knowledge.

Senator Coffin pointed out actuarial insurance tables would probably be available, because both the life expectancy while working and what happens over the entire life span would be important factors for insurance.

Mr. Dreher said the 57 percent number came from an analysis of the statistics on Reno police officers who were killed or who died right after they retired. He said PORAN is in the process of conducting its own study, which is of Reno police officers who have retired.

Senator Raggio indicated he would ask the legislative research staff to get national information.

Mr. Turner directed attention to page 5 of his written testimony (Exhibit F) which identifies reasons for early retirement from the 1988 "Police Officer and Fireman Early Retirement Study" prepared by the staff of PERS.

Mr. Turner pointed out Mr. Pyne stated at the March 22, 1999, PERS Executive Board meeting that the actuarial cost of this additional benefit would be .7 percent, yet he later said in conversation it is really closer to .5 percent.

According to Mr. Turner the PERS Executive Board said it could not support this measure because, as Mr. Pyne had indicated, the board passed a resolution in 1998 in which it agreed not to support any PERS improvement bills. Mr. Turner responded that policy summarily rejects initiatives put forth for good cause to correct an inequity.

Mr. Turner said the board also indicated another concern that prevents the board from supporting an increase in benefits is what might happen in Congress with mandatory Social Security and its impact on PERS contribution rates. He said this concern has existed for at least the last 15 years and has been a concern in every session.

Senator Raggio said whenever a benefit is requested under the PERS system, whether it is regular or police/fire retirement, someone must establish the cost of the additional benefit. He said the committee has the information from the Peace Officers Research Association of Nevada and the committee will also ask PERS the same question. He stated the first issue is equity of the proposed change and the second issue is cost. Senator Raggio pointed out that in order to keep the system actuarially sound, it is necessary to deal with what the actuary projects the new benefit will cost. He said that is where the committee needs to focus attention.

Mr. Turner again referred to page 70 of the CAFR (Exhibit D) which states that if the difference in cost does not exceed .5 percent it is not considered to be an impact for which the contribution rates will be changed.

Mr. Turner explained that each year PERS develops a new projection regarding when PERS will achieve 100 percent funding of the system. He said it was projected in the 1992 CAFR to achieve 100 percent funding in 2025 and in 1998 it was projected to achieve 100 percent funding July 1, 2024. He pointed out that in 6 years, the CAFR has recognized the "pickup" through investments and other positive things that have exceeded earlier assumptions. The system has picked up 1 percent in the progress towards 100 percent funding of the police/fire system and that "pickup" is more than enough to fund what this measure would cost. He added that, even if it were not, if the assumptions for the PERS system were extended by an additional 6 months to a year, this benefit could be rolled into the assumptions. He said that is how his organization proposes to pay for this additional benefit.

Mr. Turner said that in a worst-case scenario, the .7 percent would be borne .35 by state and local government and .35 by the employee. That is almost a negligible increase. He testified the officers are willing to assume their part. Mr. Turner then directed attention to page 9 of his written testimony (Exhibit F), which details how that would be done.

Colonel Michael Hood, Chief, Highway Patrol Division, Department of Motor Vehicles and Public Safety, testified in support of this bill. He said he himself is an example. He began working at the highway patrol when he was 22 years old. After 20 years of service, he had to accept a $980-a-month reduction in salary to remain in the system. Senator Raggio pointed out that is because of the conversion to employer-paid contributions, so that is not a reduction. Colonel Hood said if he were not in the system, he would be making $980 more per month. Senator Raggio explained that when employees opted for employer-paid retirement contributions, there was a one-time salary reduction. Colonel Hood said that is what he was referring to. Senator Raggio reminded Colonel Hood he did not have to pay income tax on that $980 per month. He also pointed out that situation applies whether an employee is police/fire or regular.

Gary Wolff, Lobbyist, Nevada Highway Patrol Association, said he had polled his members and testified his organization supports this measure even if it is necessary to pay the employee share of the cost.

Ed Flagg, Lobbyist, Nevada Corrections Association, testified his organization supports this measure.

Robert J. Gagnier, Executive Director, State of Nevada Employees’ Association/AFSCME, testified his organization supports this measure.

Mr. Pyne testified the Public Employees Retirement Board at its March 1999 meeting voted to oppose S.B. 299. He called attention to section 1, line 9, which proposes to allow members of the police and firefighters retirement fund to retire with 25 years of service at any age without reduction.

Mr. Pyne provided background supporting the board decision not to support this bill. He said that in November 1998 the board voted not to introduce or otherwise support legislation which would increase contribution rates. He said that based on the 1998 actuarial evaluation of the system, there is little room to increase benefits or otherwise introduce plan design changes without a corresponding increase in retirement contribution rates. The calculated contribution rates contained in the 1998 evaluation report are essentially the same as the existing rates. The report states that both regular member and police/fire member contribution rates under the employer pay contribution plan will not change for 1999. Likewise, police/fire contribution rates under the employee/employer plan will not be adjusted, although matching employee/employer rates for regular members will be reduced.

Mr. Pyne pointed out the board was also concerned about the budget shortfall presently faced by the State of Nevada. He said it is understood revenues are falling short of projections and the board is very mindful of the state’s financial condition when it considers plan changes.

Mr. Pyne reiterated mandatory Social Security coverage of newly hired state and local government employees is under consideration by Congress as a means to solve Social Security problems. He pointed out this could cause a $27 million hit the first year. He said these are the reasons the board, from a "big picture" standpoint, felt it would not be prudent to add more cost to this program.

Mr. Pyne testified the actuarially determined cost of this bill is estimated by the system’s actuary to be .7 percent of payroll for police and fire members. He indicated he had never said the cost of this program is less than .7 percent as implied earlier. Senator Raggio asked the name of the system’s actuary. Mr. Pyne responded the system’s actuary is the Segal Company, which hires an independent actuary. He added the board has had second opinion reviews of work done in the past by the Segal Company. In fact, he said, per board policy there will be another second opinion of the Segal Company’s assumptions during the current biennium.

Senator Raggio asked what the impact on PERS would be if this bill were passed. Mr. Pyne said there would be an increase in contributions for all members under the employer-pay contribution plan in the police and firemen’s retirement fund. He pointed out that means all local governments with police/fire members. Senator Raggio asked whether the increase would be .7 percent. Mr. Pyne said it would trigger an increase from 28.5 percent to 29 percent. Senator Raggio asked whether the fiscal note attached to the bill is still accurate. Mr. Pyne said it is.

Senator Raggio asked why, if the increase is .7 percent, it triggers only a .5 percent increase in the contribution. Mr. Pyne said first of all that NRS 286.421 directs this process. He stated .7 percent is the actuarial cost that would trigger a .5 percent increase in the contribution rate. He explained the reason is that the actuarial cost of the system today is a little less than what is actually being paid into the plan. He noted the difference is not enough to reduce rates downward, but it would reduce the amount contributions would have to be increased because of increased costs, should large changes be implemented. Mr. Pyne referenced A.B. 189.

Mr. Pyne said the PERS bill, A.B. 189, has minor costs which, when added to the cost of S.B. 299, would trigger an increase for the state. Senator Raggio asked whether A.B. 189 adds benefits without increasing the rate. Mr. Pyne said that is correct, it increases survivor’s benefits very modestly and would have an impact of .02 to .07 percent of payroll costs. He said those small percentages would not trigger an increase in contribution rates.

Senator Raggio asked whether the .5 percent increase would be borne by the employer under the employer-paid plan. Mr. Pyne said it would be, and under the employee/employer paid plan that cost would be shared equally between employees and employers.

Mr. Pyne pointed out the cost in the first year is estimated at $836,000 for local government and $114,000 to $237,000 for state government. Senator Raggio asked whether the local government costs had been identified by each locality. Mr. Pyne responded they had not been. Senator Raggio asked Mr. Pyne whether he could do that. Mr. Pyne said he would try, but it would be a "guesstimate" based on total payroll costs. Senator Raggio asked whether the state amounts identified in the fiscal note represent a potential range in costs. Mr. Pyne said yes, it is a range and it is based on the actuarial cost of S.B. 299, .7 percent of payroll combined with the potential cost of A.B. 189.

Senator Raggio asked Mr. Pyne to comment on the testimony from those in support of S.B. 299 that the policy would not require an increase in the contribution rates. Mr. Pyne replied S.B. 299 would definitely cause a rate increase under the employer-pay contribution plan. He said a small percentage of state employees are under the employee-employer plan. For them the .7 percent cost, when divided between the employees and the employers, would not trigger the rate change in and of itself. Senator Raggio asked what percentage of the police/fire group is under the employee-employer paid. Mr. Pyne said he did not have that information with him, but estimated it is between 10 and 20 percent.

Senator Neal asked whether the law requiring sprinkler systems in all high-rise buildings would affect the levels of stress for firefighters. Mr. Pyne referred to a study conducted in the late 1980s in which PERS examined the validity of early retirement for police officers and firefighters. He said the study concluded that individuals in both those occupations need to maintain a physical capacity and emotional fortitude over and above that required of various other public employees, to protect the public from physical harm. He said the study did not make comparisons between police officers and firefighters. Senator Neal said Nevada has been touted as being one of the safest states for firefighters because of the statewide sprinkler law. He added it would seem fire fighting in Nevada would be a less stressful job now.

Continuing with his explanation of the fiscal note for S.B. 299, Mr. Pyne pointed out the total cost to government employers would be $1 million in the first year. He advised the committee it is the policy of the Public Employees Retirement Board to support legislation that benefits the majority interest of PERS members. To that end, he said, the board has a planning process to review the needs of membership and potential plan design changes. This process resulted in a request for post-retirement increases that were passed by the 1997 Legislature. Mr. Pyne said this past year’s significance study was done on the impact of mandatory Social Security coverage and PERS is now beginning to explore pension portability and other benefit preservation issues – issues that benefit the majority interests of plan participants.

Mr. Pyne pointed out S.B. 299 is costly, yet impacts a relatively small number of plan participants overall. He said there are about 8,000 members in the police/fire retirement fund and about 75,000 members overall. He added there are about 2,000 police/fire members who could take advantage of this particular program, so the .7 percent cost is something that could be very real indeed. He said PERS is not "cooking" numbers as was "almost implied" in earlier testimony.

Mr. Pyne also said S.B. 299 is unnecessary because, in effect, PERS already has "25 years and out" retirement at any age. He explained this is because any member of the system with 5 years service can purchase up to an additional 5 years credit. Therefore, he said, an individual who works for the system for 25 years can buy an additional 5 years, which would total 30.

Senator Raggio said he thought the law did not allow police to purchase years of service. Mr. Pyne said police can purchase up to 5 years’ additional service under NRS 286.300. He said that as long as the member pays the full actuarial cost associated with that service, the member receives credit. Senator Raggio pointed out there is a conflict in the law, because NRS 286.510 states that only service performed in a police officer or firefighter position may be counted towards retirement credit. Mr. Pyne said that section was probably an oversight when the law was changed in 1989 to allow police and firefighters to purchase 5 years.

Senator Raggio called attention to the public policy issue that a government entity should try to retain people who achieve expertise in these positions and should try to provide incentives. He noted there are special considerations for police and firefighters, which is why the Legislature has heretofore provided for earlier exits from service. Senator Raggio pointed out that if NRS 286.510 is in error, that is a big issue in this decision. Mr. Pyne said he would be sure it is researched for the committee.

Robert S. Hadfield, Executive Director, Nevada Association of Counties (NACO), said his association is appreciative of the work police and firefighters do in Nevada’s communities. He noted that as a matter of public policy his organization is cautious about changes to PERS. He testified that counties are concerned about the fiscal note attached to this bill. He pointed out there are 5 counties already at the "tax cap" and there are 6 counties with declining assessed values. Mr. Hadfield said the implication is that those counties do not have the revenue base to absorb any additional cost and may in fact need to reduce their budgets. He said smaller communities may not have a large number of law enforcement personnel or paid firefighters, but those positions are a large percentage of the total employees in a small county. In fact, he said, those positions usually comprise the largest part of General Fund budgets.

Mr. Hadfield said counties share with PERS the concern regarding Social Security and the National Association of Counties is also very concerned about this. He opined it is not just an idle threat, because Social Security is "hunting for money" and state and local governments are easy targets for that. He said in the event that an increase in costs would not increase the contribution, and the Nevada Association of Counties believes it would based on PERS testimony, there is still a cost. He noted the goal is to have this system fully funded and to be able to ensure everyone will have benefits. He explained that just because there is no increase in the cost of the payroll deduction, does not mean there is no cost to the additional benefit. He added this means the overall fund itself will not be fully funded as it would have otherwise been without the increase in benefits. He pointed out that counties are conservative on these issues and NACO does not believe all of its members have the ability to absorb the additional cost. He asked the committee to carefully review the PERS testimony.

Senator Raggio clarified the bill cannot apply to only one jurisdiction and if passed must apply to all jurisdictions in the PERS system.

Thomas J. Grady, Executive Director, Nevada League of Cities and Municipalities, testified that the Nevada League of Cities and Municipalities and the National League of Cities and Municipalities support the Social Security resolution, A.J.R. 10, Mr. Pyne spoke of earlier.

Mr. Grady voiced concern regarding S.B. 299 and any fiscal effect it may have on local governments. He reiterated Mr. Hadfield’s comments about the financial problems in some of the governments and indicated support for PERS. He said Nevada has a very strong public retirement system and the board is made up of people from all government levels. He stated his organization strongly supports the board’s actions.

Senator Raggio noted he assumed the position of PERS is that if the bill is passed, the Legislature would have to provide some measure for local governments to raise contribution rates. He asked Mr. Pyne whether that was correct. Mr. Pyne responded that the board is opposed to this legislation for several reasons, but if the bill is passed, the prudent thing to do would be to raise contribution rates. Senator Raggio asked whether, if the Legislature passed this bill and did not increase the contribution rates, it would impact the soundness of the actuarial program. Mr. Pyne said it would.

Senator Raggio closed the hearing on S.B. 299 and opened the hearing on S.B. 284.

Janice Wright, Acting Administrator, Division of Health Care Financing and Policy, Department of Human Resources, testified S.B. 284 is designed to revise the reversion date for the managed care "tail" funds currently in the Medicaid budget. She explained the managed care "tail" allows Medicaid to pay for costs incurred by individuals prior to their enrolling in mandatory managed care. She noted the reason for this bill is that there were delays in implementing mandatory managed care enrollment. She said some of the expenditures previously anticipated in the current biennium will now occur in the next biennium. She pointed out the money was originally appropriated in 1995 by the Legislature and the division is not asking for any change in the amount, just to allow moving the money into the next biennium.

Senator Raggio asked how this would affect the reversion. Ms. Wright replied the Medicaid budget has already placed $53.5 million into reserve for reversion, which does not include this managed care "tail" money. Don Hataway, Deputy Director, Budget Division, Department of Administration, testified The Executive Budget is based on a $130 million reversion. He said the state is still estimating that reversion amount and if that can be maintained, the year will end about $2 million to $3 million above the mandatory 5 percent ending fund balance requirement. He confirmed the money addressed in S.B. 284 is not in the reversion amount in The Executive Budget and the budget office does not oppose this bill.

Senator Raggio closed the hearing on S.B. 284.

Dan Miles, Senate Fiscal Analyst, called attention to the most current copy of the list of budget revisions from the Executive Branch (Exhibit G). He said it includes revisions through number 106. He explained the committee will be reviewing budgets that contain some of these revisions and the closing sheets will reference these revisions. He pointed out it is just a summary list of the revisions (without detail), so the committee will know where the revisions are coming from. He noted there will be a few more revisions to come relating to the statewide cost allocation, the attorney general’s cost allocation, and several other major measures.

Mr. Hataway confirmed the summary represents all the revisions that have been submitted by the budget office. He also confirmed there will be a few more as indicated by Mr. Miles.

Senator Raggio pointed out the changes are due to the short time available after the change of administration and that some of the change was unusual but necessary. Mr. Hataway asked whether the format is clear and Senator Raggio replied that it is.

Senator Coffin mentioned the Governor’s veto of A.B. 105.

Senator Coffin asked how many bills have been passed with fees in them and whether the Legislature will need to make some quick adjustments on bills. Senator Raggio said the explanation in the veto message was essentially that the Governor was opposed to any increase that affected the General Fund, even if the Executive Branch had submitted the bill. Mr. Hataway said A.B. 105 may have fallen through the cracks. He noted the only bill he was aware that was submitted by the budget office related to fees was for the Division of Minerals. Senator Coffin pointed out that many professional groups request fee adjustments because they realize they need more service and are willing to pay for it with increases in professional license fees. He wondered whether the Governor would be concerned because some of those fees process through the General Fund.

Mr. Hataway pointed out there are many boards with statutory authority to raise rates, such as the occupational licensing boards. He added the Governor wants the opportunity to review all agencies before any fee increases are approved, particularly if the fee increases impact the General Fund. Senator Coffin stated he was caught off guard by the veto message.

DEPARTMENT OF HUMAN RESOURCES

HEALTH DIVISION

HR, Family Planning Project – Budget Page HEALTH-36 (Volume 2)

Budget Account 101-3219

Ginny Wiswell, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said the mission of the Family Planning Project is to promote the health of individuals and families in Nevada’s rural counties by providing a variety of family planning programs. She explained a combination of federal funds and medical reimbursement support the daily operations. She pointed out there are no state dollars in this budget.

Ms. Wiswell noted there may be retroactive technical adjustments to this budget account, including revisions necessary for cost allocation.

Ms. Wiswell said that in closing this budget the committee will need to determine whether to approve two decision units.

Ms. Wiswell informed the committee decision unit M-200 recommends 2 community health nurse positions for Carson City and Lyon County. She noted a combination of federal grants and medical reimbursements would pay for the positions. She said the services in the two communities have previously been provided through contracts and by converting the contracts to state positions, more hours of direct client services could be provided. She said the total hours per week would increase from about 60 to about 80. Senator Raggio asked whether contract expenditures will be reduced because of these 2 additional positions. Ms. Wiswell said the contract expenses have already been removed from the adjusted base.

Ms. Wiswell said the E-710 decision unit recommends medical reimbursements to pay for the replacement of 3 desktop computers in the central office. The existing computers in the central office are older and will be relocated to rural offices which have no computers now.

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DEPARTMENT OF PRISONS

Gary Ghiggeri, Principal Deputy Fiscal Analyst, explained the budgets he will address today were assigned to staff to close and were not part of the sub-committee review. He noted these facilities, one restitution center and 5 conservation camps, are budgeted at 100 percent occupancy for the biennium, so any adjustments to the inmate population will not affect these budgets. He distributed closing sheets (Exhibit H).

Restitution Center – North – Budget Page PRISONS-63 (Volume 3)

Budget Account 101-3724

Mr. Ghiggeri recommended aligning the maintenance contracts with current contract amounts for pest control and for cleaning the culinary hood. He recommended an adjustment for uniform allowance to correct a transposition error in the budget. He recommended a reduction in the price of a heavy-duty washer based on updated information.

Mr. Ghiggeri also recommended deleting the van in this budget. He pointed out the 1995 and 1997 Legislatures funded the purchase of vans for this facility. He said this facility currently has a 1996 Ford van with 21,000 miles and a 1998 Chevrolet van with 4,000 miles. Additionally, he pointed out, the budget provides $25,000 a year for bus tickets for the inmates to be transported to work locations.

Senator Raggio asked for clarification that Mr. Ghiggeri is recommending the committee delete a van which is recommended in The Executive Budget. Mr. Ghiggeri said that is correct.

Senator Raggio asked whether the budget office had objections to the deletion of the van and Mr. Hataway said no.

*****

Wells Conservation Camp – Budget Page PRISONS-83 (Volume 3)

Budget Account 101-3739

Mr. Ghiggeri recommended several reductions to the adjusted base to account for one-time costs identified by the Department of Prisons in recent correspondence. He recommended a reduction in decision unit E-710 to align the cost of a "skittle" to the amount funded in the Ely Conservation Camp, to adjust the prices of washers and dryers. He also recommended adjustments to provide for the purchase of 2 washers and dryers in each year of the biennium, rather than all 4 in the first year. He recommended reductions in decision unit E-730 to adjust the contract cost for pumping grease and septic tanks to the same level recommended for the Humboldt Conservation Camp. In decision unit E-730 he also recommended deleting the repair and sealing of the culinary floor because it was included in a 1997 capital improvement project.

Senator O'Donnell observed all the conservation camps budgets except Ely have recommendations for reductions. He wondered whether all the reductions are necessary and whether the conservation camps will be in put in a bind with these reductions. Mr. Ghiggeri replied that all the adjustments the committee is reviewing have been discussed with the Department of Prisons and he has received no objections to the adjustments. He pointed out the adjustments to the base are in line with the state policy to delete onetime expenditures from base budgets. He said in cases where he determined there was inadequate funding he has recommended additions, and where an item is "overbudgeted" he has recommended reductions.

Senator O'Donnell said he just wanted to be certain these cuts are warranted. Senator Raggio pointed out the Wells Conservation Camp budget, for example, is over $900,000 a year, so these recommended reductions are not very drastic.

Humboldt Conservation Camp – Budget Page PRISONS-87 (Volume 3)

Budget Account 101-3741

Mr. Ghiggeri recommended adjustments to the base budget for onetime expenditures identified by the Department of Prisons. He said the largest reduction recommended for this budget account is in decision unit E-710. He said this is to adjust the price of replacement tables and the skittle to align with the Ely Conservation Camp budget and to adjust the price of washers and dryers based on updated information. He pointed out the savings realized on the cost of replacement tables is based on the purchase of a different-style table. Mr. Ghiggeri also noted recommendations for adjustments in maintenance contracts.

Senator Rawson asked whether Prison Industries constructs the tables. Mr. Ghiggeri said they do. Senator Rawson asked whether it would hurt the prison industries if the tables were changed to another type. Mr. Ghiggeri said the prison industries make both. The difference would be that the camps would be purchasing the 8-seat tables rather than the 4-seat tables and would save approximately $20,000.

Senator O'Donnell commented, as one of two members on this committee who have worked in a jail, the 8-seat tables will cause more fights because of the bench-style seating; but it will be cheaper. Mr. Ghiggeri responded that the 8-seat tables are the same picnic style as the tables currently in the camps, but the existing tables are Formica and the new ones would be stainless steel.

*****

Ely Conservation Camp – Budget Page PRISONS-91 (Volume 3)

Budget Account 101-3747

Mr. Ghiggeri recommended minor adjustments for general ledger alignments, to add insurance for the multi-purpose building, and to increase funding for cleaning the culinary hood. He also recommended moving funding for replacement of water heaters from budget category 07 to budget category 28 to facilitate tracking this onetime cost.

Senator Jacobsen asked whether there is any reason the agency is not able to recharge fire extinguishers and pointed out it is a simple operation. Mr. Ghiggeri said that is a maintenance contract charged on an annual basis. Senator Jacobsen asked whether it could be done by the Prison Industries. Mr. Ghiggeri said he could not answer that, but that particular process is a part of the maintenance contract which includes other functions, such as certifying the fire alarms.

*****

Senator Mathews requested staff look into the possibility of refilling fire extinguishers to determine if the state can save money.

Carlin Conservation Camp – Budget Page PRISONS-103 (Volume 3)

Budget Account 101-3752

Mr. Ghiggeri recommended alignment of maintenance contract funding and recommended transferring costs of exterior painting from budget category 07 to budget category 28 to facilitate tracking of this onetime cost.

Tonopah Conservation Camp – Budget Page PRISONS-107 (Volume 3)

Budget Account 101-3754

Mr. Ghiggeri recommended additional funding for the annual water application permit, for maintenance contracts, and for purchasing AC (acquisition charge). He also recommended a reduction to the same level as recommended for the Humboldt Conservation Camp for the contract to pump septic and grease traps.

*****

Senator Raggio adjourned the meeting at 10:30 a.m.

RESPECTFULLY SUBMITTED:

Jean Laird,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: