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 8:20 a.m., on Tuesday, April 6, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William R. O’Donnell, Chairman

Senator Lawrence E. Jacobsen

Senator Joseph M. Neal, Jr.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Mrs. Vonne S. Chowning, Chairman

Mr. Bob Beers

Mrs. Marcia de Braga

Ms. Christina R. Giunchigliani

Mr. David E. Goldwater

STAFF MEMBERS PRESENT:

Debbra J. King, Program Analyst

Jim Rodriguez, Program Analyst

Mary A. Matheus, Local Government Budget Analyst

Birgit Baker, Program Analyst

Barbara Moss, Committee Secretary

OTHERS PRESENT:

Debbra J. King, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau (LCB), distributed the Nevada Legislative Counsel Bureau Budget Closing Action Detail Report on General Government (Exhibit C). She read the budget account activities, adjustments, and modifications on pages 1 and 2 of Exhibit C. Ms. King explained in further detail that the budget account reflects the activities of the three full-time equivalent (FTE) positions assigned to coordinate and administer the state employees’ workers compensation account. She said the adjustments are in response to budget modification No. 80 which accomplishes two things: (1) it adjusts the budget to reflect the Governor’s recommendation that the Public Employee Health Plan become a stand-alone entity, which required that the amendments to base, M-800, E-125, E-127, and E-800 reflect increases in payments to the Department of Administration, Administration Services Division for accounting support and elimination of payment to the Public Employee Health Plan for the same service; and (2) the revised retrospective rating premium for payments to Employers’ Insurance Company of Nevada as reflected in the M-200 decision unit. Additionally, she indicated that Amendment No. 80 also reflects the reversion of $3 million to various accounts in FY 1999. This reversion is necessary to reduce the reserve level to the actuarially determined level to avoid penalties or questions regarding federal cost allocations.

Don Hataway, Deputy Director, Budget Division, Department of Administration, indicated the Budget Division has been working with federal cost-allocation individuals on spending down the reserves. He explained that 3 or 4 years ago, when the federal officials began examining retained earnings, the reserve was considerably higher than what was felt necessary. The division committed to bringing the reserve down and the activity has been ongoing. Mr. Hataway said the state will be in compliance with what is considered a reasonable amount when the task is accomplished. He recommended the adjustment be made.

Asked by Mrs. Chowning when the reserve in the various accounts will be balanced, Mr. Hataway answered the reserve will be reverted directly to the General Fund and the Highway Fund at reconciliation when budgets are closed. He indicated a journal voucher will transfer the money from the reserve fund to federally funded budget accounts and budget accounts funded by other sources. He said the division is in contact with the federal government to ensure the action will be acceptable under the "buy-down" of the reserves. Mr. Hataway declared that a prior-year refund-revenue general ledger will probably be used and the transfer will be made within the next 30 days.

Referring to the overall reversion from FY 1999, Mr. Hataway indicated that even with the adjustment the division is "slightly ahead of" what was in The Executive Budget.

Ms. King read The Executive Budget decision unit recommendations on page 2 of Exhibit C.

Decision Unit E-125. This decision unit recommends the addition of an occupational health nurse position to enhance claims management, coordinate the early return-to-work program, coordinate development of fitness programs, and oversee the statewide blood-borne pathogen program for state employees.

Decision Unit E-126. This decision unit recommends additional funding for training staff in this account and providing equipment to state employers to allow early return to work.

Decision Unit E-720. This decision unit reflects the recommended funding for a new file cabinet.

Decision Unit E-805. This decision unit recommends reclassifying the existing staff to a Workers Compensation Program Specialist and a Safety & Health Representative to more accurately reflect their duties.

Mrs. Chowning entertained a motion to close the budget.

Ms. King read the budget account activities and adjustments on page 3 of Exhibit C, and The Executive Budget decision unit recommendations on page 4 of Exhibit C. She explained this budget account reflects the activities of the Insurance and Loss Prevention Section. She said the adjustments recorded as "Budget Amendment No. 81" reflect the modifications received from the Budget Division and reflect the Governor’s recommendation that the Public Employee Health Plan become a stand-alone entity.

Decision Unit E-125. In this decision unit the cost for training and travel was recalculated and corrected to eliminate cost included in the base.

Decision Unit E-175. In this decision unit the cost of printing risk management guides was reduced to the amount specified in the agency request budget document.

Decision Unit E-125. This decision unit recommends funding for activities which were funded in FY 1998 but not completed due to reassignment of staff to Benefit Services Fund activities.

Decision Unit E-175. This decision unit recommends publishing and distributing a Risk Manager’s User Guide for state agencies, training on Sexual Harassment Prevention, and training state agencies on loss control.

Decision Unit E-805. This decision unit recommends reclassifying the Insurance and Loss Prevention Specialist to a Risk Manager.

Questioned whether the sexual harassment prevention training is handled by this division, Ms. King responded the training is done by this division in cooperation with the attorney general, but the actual contract for the cost of the trainer was paid out of this budget account.

DEPARTMENT OF TAXATION

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

Budget Account 101-2361

Mary A. Matheus, Local Government Budget Analyst, Fiscal Analysis Division, LCB, read the Governor’s recommendations for this budget account on page 5 of Exhibit C. She indicated the Governor’s recommended budget includes in the base a funding shift for the State Demographer’s budget.

Decision Unit M-200. This decision unit includes the addition of eight classified positions for the Audit Division, as well as an increase to the State Demographer’s contract.

Decision Unit E-325. This decision unit includes funding for the Department’s Disaster Recovery Plan, Asset Research Services, a national credit bureau and collection service.

Decision Unit E-710. This replacement equipment decision unit includes upgraded copiers and upgraded computer hardware and software for the Carson City, Reno and Las Vegas offices.

Ms. Matheus read the technical adjustments on page 6 of Exhibit C. She indicated the budget was adjusted in M-200 to reflect the removal of three modular units recommended for the Carson City office. The said the staff received updated pricing for software and hardware from the State Purchasing Division to recalculate the cost of purchases recommended in the E-710 decision unit.

Ms. Matheus read the items for committee discussion on page 6 of Exhibit C. She said it had been determined that the Department of Taxation funding for the second phase of the agency’s information services project was not included in the Governor’s recommended budget. She indicated that the business process reengineering (BPR) phase was funded in the current biennium at $595,852, and the department indicated that the cost of phase II, including but not limited to system requirements, data mapping, interface, and report identification, would cost approximately $860,000. Ms. Matheus suggested that should the committee choose to fund phase II of the reengineering project, they consider the following options:

• The Department of Administration has provided a modification to Amendment No. 90.
• The department is requesting a supplemental appropriation of $165,000 for Fiscal Year (FY) 1998-99 to cover DoIT costs in the current fiscal year. Ms. Matheus indicated the supplemental request is included on pages 11 to 14 of Exhibit C and was not included in the Governor’s recommended budget.
• The Department of Administration should afford assurance that the recommendation provides adequate funding for ongoing DoIT operations as well as funding for phase II of the department’s information services project without shifting costs to other agencies.

Asked the status of the supplemental appropriation, Mr. Hataway said the Budget Division has worked with the agency in an attempt to pare its total needs for the year. He pointed out three alternatives in priority order that might be considered:

1. The Senate Committee on Finance or the Assembly Committee on Ways and Means could request a bill on behalf of the agency as a separate, stand-alone supplemental appropriation for the department.
2. The supplemental appropriation could be included in the General Appropriation Act as a special section.
3. While the supplemental appropriation is being fine-tuned, it could be held until after the legislative session and submitted to the Interim Finance Committee (IFC) for a contingency fund allocation.

Mr. Hataway indicated the first alternative is preferred and requested the indulgence of one of the "money committees" to request a separate bill.

Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, LCB, indicated that Dan Miles, Senate Fiscal Analyst, and he had discussed the issue and arrived at a recommendation. He said a number of exempt bills will be required to implement the budget and this issue could be addressed by one of those bills. Mr. Stevens pointed out the recommendation suggested by himself and Mr. Miles is for one of the money committee chairmen to request an exempt bill which includes a supplemental appropriation of $165,000.

Asked by Ms. Giunchigliani whether other supplemental appropriations could be added to the bill, Mr. Stevens answered it could be handled either way. He said supplemental appropriations are usually handled individually, not collectively; however, the committee must decide whether to present all the supplemental appropriations in one bill, or process them individually. Mr. Stevens indicated there will probably be a number of bills required to implement the recommendations made by the money committees in order to close the budget.

Ms. Giunchigliani inquired whether the supplemental appropriation will be sufficient through July 1, 1999. Mr. Hataway answered yes. Ms. Giunchigliani pointed out a commensurate reduction based on the new allocation and asked whether it will require another supplemental appropriation. Mr. Hataway stated the supplemental appropriation of $165,000 is "reasonably secure."

Mrs. Chowning asked, "Can you give us assurance that we will not have this shaky history again so that we don’t unnecessarily pass these costs on to other agencies if we approve Budget Amendment No. 90?" Mr. Hataway said that with the new cost allocation system for DoIT, overcharges or undercharges are anticipated to be in the form of credits and debits in the next biennium, and hopefully all agencies will get through the next biennium through the cost allocation process. Mrs. Chowning noted that DoIT "forgave" $168,000 and emphasized she did not want that to reoccur. Mr. Hataway explained the cost allocation process was utilized to create more stable funding for DoIT, as well as to assure the agencies the amount would be all they must pay for that time frame. He indicated that should there be a need for an adjustment the agencies may receive a credit for the next biennium. He stated the process is preferable to the volatile situation of the last few years.

Senator Neal queried, "If the $165,000 shortfall can be anticipated, why was it not provided for in the budget?" Mr. Stevens explained the shortfall was not realized until after The Executive Budget was submitted. Mr. Hataway explained the $165,000 shortfall was attributable to the DoIT charges, the unanticipated postage increase, and "missing the best guesstimate" 2 years ago. Senator Neal said he could understand an unanticipated gasoline price increase, but expressed doubt in regard to having unanticipated postage increases.

Mr. Hataway called attention to a spreadsheet on page 12 of Exhibit C which showed the pluses and minuses projected in both the revenue and expenditure categories.

Senator Neal asked from whence the money would come to cover the shortfall. Mr. Hataway answered the money would be taken from the reserves for FY 1999. He explained that when the budget was prepared there was a slight cushion on the 5 percent mandatory ending-fund balance and the shortfall funds would come from that balance.

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

Budget Account 101-2363

Ms. Matheus indicated the recommendation is to close the budget as recommended by the Governor. She said the Senior Citizens’ Property Tax Assistance account allows for rebates on property tax for senior citizens with lower incomes. She pointed out the income ranges and the accompanying explanation, as well as The Executive Budget recommendations, are reflected on page 15 of Exhibit C.

Senator Neal asked whether the increases in the budget were based upon legislation passed in 1997. Ms. Matheus answered yes. Questioned whether the increases were included in the Governor’s platform, she responded no.

Ms. Giunchigliani queried whether there was any reserve, particularly after the cushion was added when the income levels were adjusted. Ms. Matheus indicated the amount is based on anticipated actual costs. Ms. Giunchigliani said it was her understanding there was no need for the reserve over the biennium; however, she expressed concern because in the 1997 Legislative Session an attempt was made to "ratchet" the reserve in order for more senior citizens to qualify for the rebate. Should the cushion be removed, the seniors’ property tax would be prorated and would realize a reduction if they qualified the last time, Ms. Giunchigliani remarked.

Mr. Hataway said a reserve exists in the sense that it is one of the budget accounts in which the appropriation was authorized in both years of the biennium. He indicated a reasonable projection was made as to the needs through decision unit M-200 and it was built into the budget. He stated that should the demand be higher, money would be transferred from the second year of the biennium to cover the first year, and the Legislature would be approached in 2001 regarding any further adjustments.

Mr. Hataway noted that should there be a funding need, the level of the reserve is reasonable and the $250,000 will "sit on the table." Asked what is considered a reasonable amount, he responded "the combination of the base and M-200 will be the demand," and should the demand be higher, the flexibility of both years of the biennium appropriation would be used. Asked the dollar amount, Mr. Stevens indicated M-200 was estimated to be approximately $287,000 the first year of the biennium and $444,000 the second year.

Pointing out the 5.15 percent increase was based on the projected population increase, Ms. Giunchigliani queried how many people were represented in that percentage. Mr. Hataway indicated he would provide the information. Mrs. Chowning postulated the over-65 population is greater than 5.15 percent and asked the time frame of the state demographer’s projection of the increase. Mr. Hataway explained that at the beginning of each budget cycle the demographer publishes the "best guesstimate" of general population and subunits, and agencies are required to use those figures as part of their budget-building process. He said updated information could be requested from the demographer; however, the 5.15 percent is the official prognostication for the next 2 years. Mrs. Chowning questioned the 5.15 percent figure given the growth and development of southern Nevada and requested an update on the population increase since 1998.

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DEPARTMENT OF PERSONNEL

Personnel – Budget Page PERSONNEL-1 (Volume 1)

Budget Account 717-1363

Ms. Matheus read the Governor-recommends decision units and technical adjustments found on pages 16 and 17 of Exhibit C.

Decision Unit M-200. This decision unit includes the addition of two full-time positions including operating costs and equipment.

Decision Unit M-825. This decision unit recommends the replacement of 21 computers.

Decision Unit E-126. This decision unit recommends increased travel costs related to Occupational Studies of the Clerical Series to be performed during the biennium.

Decision Unit E-127. This decision unit will isolate all enhancement costs associated with the new payroll/personnel system, and include two new positions and additional costs, travel, operating and equipment associated with the integrated financial systems (IFS) payroll/personnel system.

Mrs. Chowning expressed appreciation to fiscal staff and the Department of Personnel for working together to save $33,000.

Judy Holt, Administrative Services Officer, Department of Personnel, was asked the criticality of the multiplexers. She answered the multiplexers have been used for some time to take the applicant-tracking system to the Las Vegas area and the University of Nevada, Las Vegas (UNLV). She said the system, with DoIT’s help, is anticipated to "go into a direct connect" within the next biennium. She indicated the direct connect is presently set up "on the UNLV side," and by utilizing the state backbone the need for multiplexers can be eliminated. Although the multiplexers were put on hold, they will remain on a maintenance contract should they break down, Ms. Holt noted.

Mr. Beers asked whether personal computers (PCs) are being run with 3270 emulator software in Las Vegas. Guy Duensing, Deputy Director, Communication and Computing Division, Department of Information Technology, indicated the tracking system is not a 3270-based system.

Ms. Matheus read item 1 of the items for committee discussion on page 17 of Exhibit C. Mrs. Chowning asked whether the department could manage with fewer than the full two positions requested. Jeanne Greene, Acting Director, Department of Personnel, indicated the department requested the positions be funded full-time for the first 2 years, with the payroll position to be reassessed at the end of the 2-year period. She said time is reported weekly, rather than biweekly, which requires additional paperwork. Ms. Greene declared the agencies will be going on-line over the 2-year period and the paperwork is expected to diminish.

Mrs. Chowning asked when the agencies will come on-line. Ms. Greene indicated the agencies on the IFS, which are the Controller’s Office, the Nevada Department of Transportation (NDOT), and the Department of Personnel, will be first to come on-line.

Questioned whether agency employees are being trained to enter the payroll, Ms. Greene indicated one position will be devoted to training the agencies’ staff. Mr. Beers asked whether the requested positions will potentially be involved in training. Ms. Greene replied the positions are primarily clerical, but their hire will allow the professional positions to devote their time and energies to the training effort.

Senator Neal inquired what forms would be utilized by the agencies to input payroll. Ms. Greene said all the agencies are using the same form. She indicated that after the form is filled out it goes to the Department of Personnel to be entered into the computer system by data entry operators. She explained that as agencies come on-line they may either continue to use the form provided by the Department of Personnel, or develop their own form to better suit their individual accounting purposes. Ms. Greene pointed out that all agencies would have the same type of universal coding information, in which case the information coming into the Department of Personnel will be edited rather than entered.

Senator Neal inquired what kind of information the Department of Personnel would require should the agencies create their own form. Ms. Greene answered the requirements would be hours worked, annual leave, sick leave, and catastrophic leave. She noted individual agencies may have additional requirements, such as cost allocations for federal grant reporting, which would not be needed by the Department of Personnel in order to pay employees. Ms. Greene said the Department of Personnel has not yet worked with the agencies on their particular payroll document and indicated that function would be in the rollout phase over the next 2 years.

Senator Neal asked why the task will take 2 years to complete when agency budget codes are in place. Ms. Greene replied budget codes are not the issue. She explained the issue is that many agencies do not yet possess the equipment to come on-line. With respect to quality assurance, she indicated the task will be accomplished systematically to work out the "bugs" with the agencies as they come on-line, rather than bringing all of them on-line at the same time and then having the problems surface.

Questioned how much of the task will be completed at the end of 24 months, Ms. Greene said 80 to 90 percent completion is anticipated at that point in time.

Mrs. Chowning suggested that should the committee agree to fund the two requested positions, perhaps a recommendation could be made to "sunset" the Accounting Clerk II position at the end of the biennium. In that event, the department could return to the Legislature to justify additional funding should it be determined the position needs to be continued. The position would not be funded out of the base budget but would become an enhancement should it be continued, Mrs. Chowning remarked.

Senator Neal indicated the current budget shows 77.50 positions and asked how the department plans to utilize those employees. Ms. Holt explained that several temporary positions assisted with implementation of the new system this biennium and they will "roll off" June 30, 1999. Asked by Senator Neal the functions of the two requested positions, Ms. Holt indicated the two positions will replace the clerical support positions acquired from the data entry section of DoIT. Questioned the number of clerical positions in the department at present, Ms. Greene said there are about 10 clerical positions in Carson City and Las Vegas combined. She clarified that the two positions under discussion are replacing the positions being paid $30 an hour on a contract basis through DoIT. She stated the two individuals will be paid approximately $10.56 an hour, plus benefits; therefore, even though full-time equivalent positions (FTEs) are increased, there will be significant savings.

Senator Neal asked whether DoIT is responsible for bringing the system on-line. Ms. Greene responded this will be a consolidated effort between the Department of Personnel, DoIT, the Department of Administration, and American Management System (AMS), which is the contract service.

Referring to E-127 on pages 17 and 18 of Exhibit C, Mrs. Chowning requested further information. Ms. Holt said that additional AMS contract services are requested to provide knowledge transfer to the state staff in three areas: system administration, system functionality, and decision tools.

• System Administration. Ms. Holt indicated that security must be articulated and defined before agencies are brought onto the computer system. She said security in the system can be defined by function, employee within an agency, task, screen, and certain fields. All security will be dependent upon each individual agency’s business process. She indicated the learning process has just begun and most users are "all profile" and can do "whatever." Ms. Holt declared agencies will not be allowed to be all-profile, nor can employees in an agency be allowed to see confidential information; however, an agency may want an employee to perform a certain task. She said the security issue is complex and assistance will be required from the vendor to learn this part of the system. It was anticipated this particular function would take approximately 780 hours in the first year, Ms. Holt noted.

• System Functionality. Ms. Holt remarked the computer system is "bare bones" and will pay, hire, and promote people. She said the system has functionality that will benefit the customers. Citing an example, she indicated there is no way at present to research an employee’s training history in any one place and indicated the system has the capability to track employee training for the purpose of conducting a performance evaluation. Ms. Holt pointed out that to develop the functionality of the system will take 800 hours the first year only.

• Decision Tools. Ms. Holt indicated that programmers and staff are accustomed to working with a mainframe flat-file type system but are now addressing an Oracle database. It was her understanding that certain tools can be utilized to best report the data and, in addition, the Advantage System possesses some decision tools. Ms. Holt noted that 208 hours in each year would help take the transmission from reporting out of the old system to reporting efficiently in the new system.

Mrs. Chowning asked whether the new system will track employees who are no longer employed by the state to ensure their medical insurance charges are removed. Ms. Holt answered that an interface has been developed that will automatically transmit that particular information to the Risk Management Division.

Mrs. Chowning suggested the committee approve the funding and requested a requirement of quarterly progress reports.

Ms. Matheus called attention to the IFS Project Budget Distribution sheet on page 19 of Exhibit C and explained that it details the costs from the IFS system, including $495,000 for the first year and $502,000 for the second. She said the Department of Administration had indicated the IFS costs are recurring and are included in the Department of Personnel budget account. She noted it did not appear the amounts were included in the personnel department budget and deferred to Mr. Hataway to address how the costs will be covered.

Diane Jungwirth, Budget Analyst, Budget and Planning Division, Department of Administration, explained that the costs included in the IFS budget for the Department of Personnel were $495,948 the first year and $502,649 the second. She said the budget office intended to use Department of Personnel budget money that was set aside to reimburse the General Fund to offset the costs, and then resume General Fund payback in the upcoming biennium.

Mr. Stevens indicated this was the first time he had heard this issue. He explained there is a payback for costs that were "upfronted" on the IFS in the 1997 Legislative Session. He expressed uncertainty as to whether this was the proper way to proceed and suggested the committee carefully examine the recommendation. Because a number of factors had not yet been taken into account, Mr. Stevens was unsure of the Personnel assessment amount. He suggested the committee consider including the additional costs of about $500,000 a year in the Department of Personnel budget to be reflected in the assessment.

Ms. Matheus read item 4 on page 18 of Exhibit C.

Mrs. Chowning summarized the four items for committee discussion:

1. The two positions would be funded in decision unit M-200 and the Accounting Clerk II would "sunset" at the end of the biennium and be removed from the base.
2. Should the committee agree the AMS contractual services are necessary, the funding would be approved with required quarterly reports to the IFC.
3. The $495,948 for FY 1999-2000 and $502,649 for FY 2000-2001 would be added to the Department of Personnel budget.
4. The staff would be authorized to make the necessary technical adjustments because the cost allocation assessments are not finalized.

Mr. Hataway clarified the committee wanted to continue the General Fund payback as a payback, add the cost to the budget, and then adjust the rates. He indicated he would work with the staff on the issue.

DEPARTMENT OF EMPLOYMENT, TRAINING AND REHABILITATION

DETR, Rehabilitation Administration – Budget Page DETR-64 (Volume 2)

Budget Account 101-3268

Mrs. Chowning read the Governor’s recommendation on page 25 of Exhibit C.

Item 1. Decision unit M-525 provides $8,500 in each year of the biennium to respond to requests for reasonable accommodation under the Americans with Disabilities Act (ADA) from division employees.

Item 2. E-125 recommends $1,126 in each year of the biennium, $356 for travel and $770 for training, for the eight positions in the administrative account.

Item 3. E-913 recommends the transfer of an existing Program Assistant IV position from the Rehabilitation Operations budget 101-3258.

Birgit Baker, Program Analyst, Fiscal Analysis Division, LCB, indicated the only technical adjustment concerned the contingency reserve for salary increases. She said the Governor did not recommend salary increases for state employees and the contingency reserve is therefore recommended to be removed. Ms. Baker pointed out that some of the budgets of the Department of Employment, Training and Rehabilitation (DETR) are funded through cost allocations, and it was therefore requested that other cost allocations be adjusted by staff subsequent to the budget closing.

Mrs. Chowning clarified additional adjustments will be made if the Governor recommends that salary increases be included before the budget closings. Ms. Baker indicated that was correct, and added that should a salary increase be approved by the Legislature, all cost-allocated budgets would be adjusted back in at budget closing.

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DETR, Disability Adjudication – Budget Page DETR-68 (Volume 2)

Budget Account 101-3269

Ms. Baker read the Governor’s recommendation on page 26 of Exhibit C. She said the Social Security Administration, under 20 CFR 404-1626 and 416.2026, provides funding to the Bureau for "the necessary costs in making disability determinations." The amount provided to Nevada is based on projected workload, expected productivity per employee and an estimated cost per case. The Governor’s budget reflects the Bureau’s projected needs based on the chart on page 26 of Exhibit C regarding workload statistics. Ms. Baker indicated the committee had concerns regarding the mean processing time, which is approximately 80 days, and the agency projects it will be able to reduce the time to 75 days. She said the agency recently received approval from the Social Security Administration to fill two more vacant Disability Adjudicator positions. Ms. Baker noted the budget is funded by the Social Security Administration, which determines the amount that will be provided for support.

Ms. Baker read the technical adjustments on page 26 of Exhibit C.

Item 1. The base budget included an adjustment for postage based on a 20 percent surcharge assessed by the state mail room for handling of the federal postage meter mail.

Item 2. The Governor’s budget included a request for a 3 percent per year cost of living increase for medical consultants in this account.

In reference to the second technical adjustment on page 26 in Exhibit C, Mrs. Chowning pointed out the 3 percent cost-of-living increase is not for state employees, but rather for medical consultants. Consequently, should salary increases be recommended, the committee must make a decision whether or not to put the cost-of-living increase back in the budget.

Senator Neal queried why there would be a problem with the cost-of-living increase when the budget is federally funded. Ms. Baker indicated that when the agency was asked the reason cost-of-living increases were recommended for consultants, the agency responded cost-of-living increases would only be provided if they were also received by state employees. Mr. Hataway indicated that should an adjustment be required the issue could be handled with a work program subsequent to budget closing.

Mrs. Chowning stated the first technical adjustment will save $21,500 of federal funds, and invited a motion.

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DETR, Vocational Rehabilitation – Budget Page DETR-73 (Volume 2)

Budget Account 101-3265

Ms. Baker read the Governor’s recommendation on page 27 of Exhibit C.

Decision Unit M-200. This decision unit recommends funding for six new positions to address a projected increase of 540 clients in FY 2000, and 860 clients in FY 2001.

Decision Unit E-125. This decision unit recommends Section 110 funds and required state match to continue the office established in Douglas County with income earned pursuant to an agreement with the former State Industrial Insurance System (now Employers Insurance Company of Nevada).

Decision Units E-917, E-917, and E-918. These decision units provide for the transfer in of 1.51 FTE and strategic planning and training funds from the Rehabilitation Operations budget account 3258, to the Bureau of Vocational Rehabilitation (BVR).

Ms. Baker read the issues for subcommittee discussion on page 28 of Exhibit C.

1. The Vocational Rehabilitation program provides a variety of assessment, training and work-placement programs to promote employment of Nevadans with disabilities. The state funds recommended by the Governor in the first year of the biennium will not support all of the federal funds already available to the agency during FY 1999, and the amount in the second year supports an increase of approximately 2 percent over the FY 1999 award.
2. There are several inconsistencies in the budget: (1) the Governor recommends six new positions to address growth in the program, (2) the Governor’s budget includes approximately $210,000 in each year of the biennium in vacancy savings, which is the equivalent of five positions, (3) the net increase for purchase of client services is approximately $48,000 in FY 2000, and $97,000 in FY 2001, to serve about 540 additional clients in FY 2000, and 860 in FY 2001.

Carol A. Jackson, Director, Department of Employment, Training and Rehabilitation,

recommended combining the option of reducing the vacancy savings to $80,000 with the option of eliminating two or three positions. She said the performance indicators would have to be adjusted in that event and she welcomed the opportunity to work with staff to accomplish the task.

Ms. Giunchigliani asked how many new clients could be served with the addition of the two or three new positions proposed for elimination. Maynard R. Yasmer, Administrator, Rehabilitation Division, Department of Employment, Training and Rehabilitation, replied he would not know which positions would be involved until after he met with the staff; however, he surmised "the bar could be raised a little higher." He stated that current year projections were closed, but he predicted that when he examined the third-quarter report and projected ahead the budget would "come out ahead" for the year 2000. Ms. Giunchigliani asked whether contractors would be lost due to the reduction. Mr. Yasmer answered no.

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DETR, Services to the Blind and Visually Impaired – Page DETR-92 (Volume 2)

Budget Account 101-3254

Ms. Baker indicated the problems of this budget are similar to those in the Vocational Rehabilitation budget in that they are tied to the same funding source. She noted approximately 20 percent of the funding goes to this budget and 80 percent to the Vocational Rehabilitation budget. She pointed out there were other programs in the budget with no reductions proposed at present. She read the Governor’s recommendation and the issues for subcommittee discussion on pages 29 and 30 in Exhibit C. Ms. Baker pointed out that should additional general funds become available, about $743,000 in federal funds could be generated in the first year and $1 million in the second.

Mrs. Chowning indicated new positions were recommended in the Governor’s budget and requested further justification for them. She said the Rehabilitation Technician II position for the Elko office was $30,000 the first year and $38,000 the second. She noted the position was requested for an increased caseload of 27 new clients in Elko but pointed out the client number appeared to be flat at 524. She asked the source of the projected number.

Ms. Baker said the agency performance indicators mirrored the federal performance indicators. She indicated the agency projected the caseload for each year of the biennium at 524, which was the number of clients served in FY 1998. Mrs. Chowning inquired how the position can be justified when the projected number is the same as the number of clients served in FY 1998. Mr. Yasmer did not have an answer but said the question could be revisited with staff. Mrs. Chowning declared that should an answer not be forthcoming the position would not be approved. Mr. Yasmer gave his guarantee that justification for the position would be provided as soon as possible.

Mrs. de Braga clarified the position serves more than Elko County and takes in all the rural areas. Mr. Yasmer indicated the position will cover Deeth, Elko, Ely, Winnemucca, and other communities in rural Nevada. Asked whether the clients represented in the increase are scattered throughout the area, Mr. Yasmer answered yes.

Mrs. Chowning indicated justification was needed for the Employment Specialist position for the Las Vegas office. Mr. Yasmer indicated the purpose of the Employment Specialist position is to increase the number of clients who become successfully employed through utilization of this position. Mrs. Chowning declared the projections do not demonstrate an increase in the number of clients in performance indicator No. 4. Ms. Baker indicated the agency requested deletion of performance indicator No. 4. She explained indicator No. 4 was requested by the subcommittee during the 1997 Legislative Session and represents the number of clients having attained competitive employment divided by the total number of clients served. She said it was the agency’s desire to replace performance indicator No. 4 with a federal performance indicator that represents the number of clients competitively employed divided by the total number of cases closed. Ms. Baker said the agency projects an increase to 70 percent using the federal performance indicator. She said no information is available for the original performance indicator No. 4 and requested the information be furnished by the agency.

Mr. Yasmer responded that he assumed a document had been submitted which increased performance indicator No. 4 to 58 percent for each of the 2 years of the biennium based on the approval of E-126. Mrs. Chowning requested Mr. Yasmer to provide the information to the staff.

Mrs. Chowning said she would entertain a motion based on the assumption the information will be forthcoming.

*****

DETR, Blind Business Enterprise Program – Budget Page DETR-100 (Volume 2)

Budget Account 101-3253

Ms. Baker indicated the budget supports the blind vending operations, of which there are 22, and the agency projects 23 in the current year and 25 in each year of the upcoming biennium. She read the Governor’s recommendation on page 31 of Exhibit C.

Item 1. The adjusted base budget includes funding for the continuation of both the Health Insurance and Retirement programs established for the blind vendors during the current biennium.

Item 2. The work program year, FY 1998-99, reflects a large beginning balance of $3.1 million, as well as a significant amount of expenditure authority in the business enterprise category, which is attributable to the Hoover Dam project.

*****

Senator O'Donnell resumed chairing the meeting and announced the subcommittee would address the Department of Information Technology budget.

DEPARTMENT OF INFORMATION TECHNOLOGY

DoIT Director’s Office – Budget Page DOIT-1 (Volume 1)

Budget Account 101-1373

Senator O'Donnell asked whether the budget reflects the final adjusted numbers. Marlene Lockard, Director, Department of Information Technology, indicated DoIT’s fiscal staff worked with the budget office to arrive at the final adjustments. She said the entire funding study was predicated upon making annual adjustments when the department shifts to the new model, in which case adjustments will be made annually and the results will be made available to the Legislature.

Questioned whether adjustments will be made to the non-General Fund budget accounts, Ms. Lockard said it was her belief the adjustments were compiled on a list broken out by General Fund and non-General Fund.

Mrs. Chowning inquired whether the budget office was confident that all costs were allocated properly. She requested an accounting tracking system which would include monthly reports to the Budget Division and the Legislative Counsel Bureau Fiscal Analysis Division to ensure tracking is accomplished, as well as a quarterly report to the IFC. Ms. Lockard stated the agency would comply with the request.

Senator O'Donnell commented tracking would be a lot of work and asked Ms. Lockard whether she was comfortable with the request. Ms. Lockard agreed it would be a lot of work but stressed the importance of remaining on track and monitoring and reporting any radical departures from the funding estimates.

Mr. Hataway indicated the budget office was comfortable with the cost allocation. In regard to the monthly reporting, he pointed out an additional Management Analyst position had been added to monitor the project.

Questioned about the agency’s plans regarding Year 2000 conversion (Y2K), Ms. Lockard pointed out DoIT employees have already been notified no annual leave will be permitted during the rollover to Year 2000. She indicated DoIT is working with the federal government and emergency response services to establish command centers to report any problems that may occur. She said there will be a coordinated effort between the federal government and the states to remain abreast of any problems that may arise. Ms. Lockard declared DoIT is working diligently to ensure any problems will be "blips" and not major catastrophes. The DoIT staff will be available around the clock to deal with any issues, she remarked.

Senator O'Donnell suggested the brunt of the problems will occur when the state employees return to work after the holiday. Ms. Lockard said DoIT will have an opportunity to observe the things which roll over during that weekend; however, the first day of work will present other challenges. She indicated September 9, 1999 is "red flagged" to determine how certain systems will transfer beyond that date. She pointed out that the major Y2K date for the Department of Employment and Training was January 1, 1999, and she reported the system rolled over successfully and the checks continued to be generated. Ms. Lockard called attention to an incident in New Jersey that occurred when a programmer was making a Y2K repair and made a mistake which caused millions of dollars in early deposits to be made to recipient accounts. She said there is always a potential for human error; however, DoIT is doing everything possible to avoid Y2K-related errors.

Senator O'Donnell requested Ms. Lockard to comment on U.S. Senator Harry Reid’s remarks regarding a Y2K "bug" and a law that was passed in regard to it. Ms. Lockard responded she had testified at a field hearing in Las Vegas at which U.S. Senator Robert Bennett’s federal staff gave Senator Reid a copy of S.B. 180 of the Sixty-ninth Session. The Senator received the bill just prior to the hearing, and there was no opportunity to brief him on the bill’s contents before the hearing.

Ms. Lockard explained Senator Reid was under the impression S.B. 180 of the Sixty-ninth Session granted full global immunity in Nevada to all parties regarding Y2K issues. She declared that (1) S.B. 180 of the Sixty-ninth Session was the appropriation bill for part of the appropriation, and (2) the attorney general had added an amendment which provided limited liability for government entities and subdivisions. Ms. Lockard indicated S.B. 180 of the Sixty-ninth Session is very limited and does not encompass broad immunity as understood by Senator Reid.

Senator O'Donnell voiced the opinion Y2K problems are "overblown" and indicated he did not anticipate major tribulations as predicted by some individuals. He mentioned that a computer chip produced 15 years ago and used in heart pacemakers was set to be operative until December 31, 1999. The senator pointed out that individuals who possess the pacemakers have been notified to replace the chip before that date. In response, Ms. Lockard indicated DoIT has linked the state’s Y2K web page to other important links for information regarding health, medical devices, various hardware, and to any number of additional informative pages that deal with different specific issues. She said the federal government also provides information on health issues in instances where it has regulatory authority. Senator O'Donnell asked whether DoIT had surveyed all state computers to ascertain whether they are Y2K-compliant. Ms. Lockard answered yes. She noted that DoIT checked the agencies a second time because there have been replacements of personal computers (PCs) and hardware. The department has also provided information to help the agencies self-check their computer systems.

Mr. Beers inquired whether funding has been provided to specifically deal with unanticipated Y2K occurrences. Ms. Lockard indicated contingency funds were requested for "carryover" Y2K issues, and it was her understanding the Governor’s budget considered it top priority should funding be available. She emphasized there will be follow-up Y2K issues and they will be dealt with accordingly. Senator O'Donnell asked whether DoIT has sufficient human resources to "gear up" quickly. Ms. Lockard replied indicated that at present the Y2K project office is in place and in the process of completing the testing on the renovated code and putting it back into production. She said DoIT moved the Office of Public Works and is working with the office on the embedded chip inventory and assessment in that entire arena. She indicated the project was divided into various phases and is 75 percent complete overall, the renovation phase is 100 percent complete, and 25 percent of the code is still in test and due back in production by July 1999. Senator O'Donnell inquired when the inventory and assessment phase will be complete. Ms. Lockard replied agency reports are coming in and a team is being formed to perform an analysis of the inventories. She indicated the effort is collaborative because no department, including DoIT, received additional staff for Y2K work. DoIT therefore created an internal Y2K project team to work with agencies and enlist their help for the collateral phases.

Senator O'Donnell asked when the embedded chip analysis will be completed. Ms. Lockard answered it will be done by the end of June 1999. Senator O'Donnell inquired whether funds are allocated in the budget for the embedded chip analysis. Ms. Lockard indicated the task is being performed within the existing resources of the Y2K appropriations made in the 1997 Legislative Session. Asked whether the funds must be returned, Ms. Lockard expressed hope that whatever funds are left can be balanced forward.

Diane Jungwirth, Budget Analyst, Budget and Planning Division, Department of Administration, indicated a bill would be required to request the funds to be balanced forward. She declared the appropriation bill specifically stated the money would be reverted at the end of the biennium. Senator O'Donnell asked whether such a bill had been requested. Ms. Jungwirth answered no. Senator O'Donnell expressed concern that in the event funds are cut off July 1, 1999, there will not be sufficient money for unanticipated Y2K problems. In response, Ms. Lockard speculated that S.B. 180 of the Sixty-ninth Session contained the General Fund appropriation and the federal funding was distributed in line items throughout various budgets, and therefore General Fund money would be balanced forward. She acknowledged that was the area in which the budget would be very tight. She indicated there would be sufficient federal funds, but distribution would be required in order for the funds to be reassessed. An analysis by agency is being performed in that vein, Ms. Lockard noted.

Mr. Beers asked whether the budget office is counting on some reversion of funds to balance the budget for the next biennium. Ms. Jungwirth replied reversion of funds had not been considered. Mr. Beers indicated there would be minimal fiscal impact on the General Fund by not reverting the funds through a bill.

Mrs. Chowning inquired whether she was comfortable with an approximately 2-month reserve of funds. Ms. Lockard answered yes.

DoIT Planning and Research Unit – Budget Page DOIT-7 (Volume 1)

Budget Account 101-1370

Senator O'Donnell commented the funding for this budget requires the Capability Maturity Model (CMM) and requested further information. Ms. Lockard explained DoIT is attempting to fundamentally transform the department to make it more efficient to better serve its customer agencies. She indicated the focal point of DoIT’s request to "get on track" this biennium centers around the planning section of the department’s transition chart, which is in this budget account. She said the planners need to work with the agencies from beginning to end for early design, justification, and planning of a technology project. The planning unit works with the agency while interfacing with programmers and system staff on other needs of the department as the project moves through its various phases, Ms. Lockard remarked.

Ms. Lockard indicated that on "the programming side," DoIT is attempting to implement Carnegie Mellon’s Software Engineering Institute’s CMM, which contains programming standards from level 1 to level 5. She said CMM is a comprehensive and methodical protocol that is implemented into an organization to bring programmers and technology staff up to certain standards. She indicated that, by any criteria used to evaluate DoIT, there is no question the department is at level 1 at present. Ms. Lockard indicated the budget proposes incremental improvements for the department. She said it is the desire of the department to bring the staff up to level 2, which requires 27 months according to the protocol schedule and implementation plan provided by Carnegie Mellon. She indicated CMM is an essential component that will make a difference within the department in providing better service, quality, and productivity. Ms. Lockard declared it will help to track and monitor the programmer’s productivity. She indicated CMM is in the planning budget because that is where it will be administered and implemented throughout the department.

Mrs. Chowning asked whether the CMM is a "canned package" or "a stand-alone," or whether it will require additional resources in order to implement it. Ms. Lockard answered yes, indicating that all three apply. Mrs. Chowning asked, that being the case, "How will additional resources be funded?" Ms. Lockard indicated the numbers in the budget are an estimate of the first step to reach level 2. She said training budget funds will cover specific classes provided by Carnegie Mellon for this type of implementation. She indicated the budget projects the amount of money required to hire an organization to train the staff, on-site, on the implementation process. Thereafter, the "team leads" and programmers would be responsible for the various implementation phases, Ms. Lockard stated. Mrs. Chowning clarified the "package" consists of hiring people to do the training, and Ms. Lockard affirmed it does. Asked whether any further funds will be needed, Ms. Lockard said none will be needed for the CMM.

Mr. Beers reflected that a 27-month target in technology is inherently risky but clarified this training is not technology training per se. Ms. Lockard said, "That is correct." Asked the subject of the training, Ms. Lockard answered the training will be in protocol, standards, and methodology. She said that presently, inconsistent methodology and standards are utilized by the programming staff within not only DoIT but the entire Executive Branch as well. She pointed out it is the desire of DoIT to "raise the bar" and bring everybody up to Carnegie Mellon’s standard level 2. Ms. Lockard indicated the training will adopt a methodology and the programmers will work toward that standard and methodology.

Mr. Beers asked Ms. Lockard to elaborate on her definition of methodology. Ms. Lockard replied methodology includes software development, life cycle, cradle-to-grave project planning, design, programming, and the various stages that are experienced by programmers on a project. She explained that the reason planners and programmers must work together closely is that the CMM asks the planners to develop, design, and create a requirements definition with the customer agency, then create a comprehensive requirement document, and then work with the programmer to implement and program to the document and standard. Ms. Lockard offered to provide the committee extensive, comprehensive, and early information on the CMM.

Mr. Beers queried whether the process will culminate in a series of written standards which will help DoIT’s employees plan projects. Ms. Lockard responded, "Absolutely." She said the department has already incorporated much of Carnegie Mellon’s publicly available information into its current standards. She indicated the funds in the budget are to be used for the training and implementation needed to get the programmers "on the road." Ms. Lockard noted that when the standards were updated they were closely aligned with what was publicly provided by Carnegie Mellon.

Mr. Beers asked how long the training is. Ms. Lockard answered there are various configurations depending upon the number of people involved. She offered to provide the specific proposal to the committee.

DoIT Computing Division – Budget Page DOIT-24 (Volume 1)

Budget Account 101-1385

Senator O'Donnell commented NOMADS (the Nevada Operations Multi Automated Data Systems) is in trouble and major portions of the ES-9000 can still be utilized. He asked whether any alternatives have been considered at this juncture. Ms. Lockard indicated alternatives have been carefully considered. She said that in the event NOMADS does not move forward, the need for the hardware will be deferred only a few months. Ms. Lockard deferred to Mr. Duensing, Deputy Director, DoIT, to elaborate on the forecasting. She reported an increase of approximately 25 percent capacity of the state’s enterprise server configuration, which is about a 2.50 percent increase per month. Ms. Lockard mentioned she had previously distributed the historical growth and future projections to the committee, and offered to provide the information again for the committee’s edification.

Mr. Duensing distributed a document entitled "The Capacity Crunch . . . Historical Growth for the Enterprise Server is 25% per Year!!!" (Exhibit D) which is a flow chart that demonstrates the growth of the enterprise server from March 1999 through 2001, with and without expansion.

Mr. Duensing explained that a tool called "Information Systems Manager," as well as historical data, was used to prepare DoIT’s projections. He indicated that analysis results revealed a monthly growth rate of 2.1 percent a month, which equates to an annual growth rate of 25 percent. He said the projection through 2001 was approximately 411 millions of instructions per second (MIPS), and historically this number has been about 397 MIPS. Senator O'Donnell asked whether it included NOMADS. Mr. Duensing answered yes. Without the NOMADS project, the projection of MIPS utilization would decrease about 100 MIPS. Senator O'Donnell asked whether "it would buy a lot of time." Mr. Duensing answered, "Not necessarily." He remarked that Project Genesis in the Department of Motor Vehicles and Public Safety, the Unified Nevada Information Technology Project (UNITY) in the Division of Child and Family Services, and DETR projects are still coming onto the system.

Senator O'Donnell further inquired whether a couple more processors could be added to the R-25. Mr. Duensing said yes. Senator O'Donnell wondered whether two more processors would buy more time. Mr. Duensing replied it was possible, but applications would have to be moved back and forth between the two machines. Senator O'Donnell asked how much money it would save. Mr. Duensing replied that to add one engine would cost $320,000, and two engines would cost approximately $500,000. He explained the hardware is the cheaper portion and emphasized the software cost "hits the hardest." Mr. Duensing pointed out that of the $4.8 million for the mainframe and associated software, the software was approximately $2.7 million. Senator O'Donnell wondered whether software must be purchased if upgrades are added to the processing unit for the R-25. Mr. Duensing declared there would be upgrade fees for any additions.

Ms. Lockard noted the software component is a very expensive part of operating the facility, and software costs increase depending on users and numbers. She indicated that DoIT attempts to aggressively negotiate and consolidate; however, as the project moves into different phases, many agencies are on different levels of software, which ends up to be very expensive. She said the goal is to reach a point that when there is a need to upgrade and migrate to a new level, it will be done "enterprise-wide" and everyone will move up at the same time. In regard to migration and cost, she indicated the Y2K issue has been a catalyst to migrate and move everyone up, and to that extent Y2K has been a good thing, Ms. Lockard remarked. She emphasized, however, that "we never want to be in that position again." She indicated DoIT is trying to consolidate and work with agencies to eliminate single-application-only kinds of software.

Senator O'Donnell asked whether the software is operating system (OS) software. Mr. Duensing answered yes. Senator O'Donnell wondered how there can be one box with different levels of OS software. Mr. Duensing reported there are different levels of the customer information control system (CICS), the on-line monitor for the mainframe, and DataBase II (DBII). He said the database levels are caught up, but some individuals are still using older versions of Common Business-Oriented Language (COBOL) rather than the newer versions. Senator O'Donnell asked whether the database is an IBM product. Mr. Duensing replied yes. Asked whether the state owns WordPerfect 8, he answered yes but noted some customers are still using WordPerfect 4. Asked further whether the state owns the rights to use WordPerfect 8, he indicated the state pays a monthly lease for WordPerfect 8 and the expenditure is in the base budget. Mr. Duensing said, when questioned why everyone is not brought up to that level, that DoIT is working to bring all entities up to a minimum of the CICS "version 4." He indicated there are still applications running in "212," which will no longer be supported should it break down. He explained that not everyone can be brought up to the WordPerfect 8 level due to the programming change requirements. Mr. Duensing further explained that most of the "212" applications have been replaced by either an integrated financial system (IFS) or another system; however, as soon as these applications are gone the "212" will be eliminated.

Senator Neal asked who decides the type of software that will be used in each agency. Ms. Lockard answered that this issue has been a problem in the past. She said one of the reasons different levels of software exist in agencies is that the requirements of each agency are diverse and administrators have chosen to upgrade or not, according to their individual needs. Consequently, over the years the entire enterprise has not been upgraded in a timely way. Ms. Lockard indicated Y2K has forced all the agencies to upgrade and move up so that all the agencies are on a consistent platform. She stated that maintenance and support should be the responsibility of DoIT to preclude agencies from concern about upgrading from one version to another. She stated, "If a program agency is required to choose between a new version of CICS at a cost of $300,000, or two new positions to man the front line at one of the windows, the agency will opt for its immediate program need."

In answer to Senator Neal‘s question, Ms. Lockard explained an attempt is being made to charge DoIT with the responsibility to routinely maintain and upgrade computer systems and prevent agencies from having a choice whether or not they will take action or be concerned about funding at a certain stage. She declared the system will be in much better shape after Y2K when all the upgrades are complete. Citing an example, Ms. Lockard said that on the Y2K issue the Department of Motor Vehicles and Public Safety (DMV&PS), as well as DETR, had old Adabase code that could not use the uniform renovation model because of overlays. She pointed out the problem exists when there is disparity distributed throughout the enterprise. She indicated that once the hurdles are passed, it is the desire of DoIT to maintain the system throughout the entire enterprise to avoid those particular problems. A reduction in software costs will be observed when issues such as license fees for an old version of Adabase for the DMV&PS are eliminated, Ms. Lockard remarked.

Mr. Beers pointed out that Ms. Lockard’s testimony did not answer Senator Neal‘s question and all Ms. Lockard had done was mention a series of applications that are on different levels. He asserted the state is on a $2.7 million OS which is specific to "a box." Mr. Beers asked Ms. Lockard to clarify whether the cost is $2.7 million to purchase a multiprocessor capable of operating the version of the OS that exists in the state at present, or whether the current OS is not capable of running multiprocessors on the box.

Mr. Duensing responded on behalf of Ms. Lockard, stating that software companies charge according to how much work a processor will perform. He declared that at present the 821 and the R-25 are called "group 50" machines by IBM and other companies. He explained that when the system migrates to the R-36, the license will upgrade to a "group 100." He said the policy states "if more work is done, the cost will be higher." Mr. Duensing indicated that nobody in the business likes that aspect; however, the industry is not regulated. Mr. Beers elucidated, "Hence the business community’s flight toward Intel-based systems where those problems do not exist."

Senator O'Donnell expressed the desire to go to a Sun Systems PC base in which the entire state could be run on a multitude of networked PCs. He said that basically the state is tied to IBM because the federal government’s NOMADS project was built around the IBM. Mr. Duensing responded the Genesis, UNITY, and DETR projects are "built towards IBM" and the IBM is a large-system machine. Asked whether Sun Systems has been compared with other manufacturers, Mr. Duensing answered that all manufacturers have machines capable of very-large-transaction volumes; however, the state system cannot be dropped onto a Sun System and be expected to work. Senator O'Donnell indicated he understood.

Mr. Beers stated:

In response, Mr. Duensing remarked that a lot of big business is returning to centralized systems. Mr. Beers clarified that he (Mr. Duensing) was referring to a specific vendor. Ms. Lockard stated, "You are absolutely correct¾ we do not need to be vendor-specific."

Senator O'Donnell said Mr. Beers’ point was well-taken when he said the state is continuing on the track of vendor-specific software¾ in other words, the application software being developed is vendor-specific. The senator reflected that this is IBM’s mode of operation. He stated that when IBM produces a new box (such as the R-36 versus the R-25) it includes a whole new set of OS instructions, and none of the programs which worked on the old system will work on the new box. Senator O'Donnell indicated that is the reason there are so many problems to fix when the system migrates or aggregates to a higher level of OS. He emphasized, "That’s IBM! That’s how they operate and get you to pay more money." The senator expounded that with Sun Systems and others which are Intel-based, "the instruction code is the instruction code and Intel has the processor." He said that if the system could migrate away from that particular software, the state would be able to "port over" its application software from one box to another with no problems.

Mr. Duensing pointed out that some of the applications still running today were written when the state had a disk operating system (DOS) machine. He indicated he had no preference for IBM and stated, "IBM just happens to make the software." Senator O'Donnell replied, "And the taxpayers just happen to be the ones paying the bill." He emphasized that it was frustrating and frightening to see the amount of money being poured into the information system (IS) and stressed that every year the state puts "millions and millions" of dollars into DoIT.

Ms. Lockard explained DoIT is trying to migrate to new technology while utilizing the investment in the current infrastructure without totally moving to new systems and starting over, which would also carry a healthy price tag.

Mr. Beers said a short-term solution in a tight budget year would be to explore the feasibility of returning to the OS and additional processors. Mr. Duensing asked whether Mr. Beers was suggesting adding additional processors to the R-25, and Mr. Beers answered yes. Mr. Duensing indicated it would be possible to add additional processors. Questioned whether it would be a $500,000 cost or a $3.1 million cost, Mr. Duensing said it would depend upon how many engines are turned on. He said the hardware would cost between $320,000 and $530,000. He declared the software cost would have to be investigated because the addition would raise the level of the processor to the point where the state would be required to pay upgrades on the software.

Mr. Beers clarified that software refers to the OS on the box. Mr. Duensing indicated it refers to the OS, Compuware products, CA products, Oracle¾ everything. Mr. Beers asked whether Oracle would have a different version should a processor be added to the box. Mr. Duensing answered no, it is not a version. He explained that IBM sets prices by measurable service units (MSUs) whereas some companies set prices by MIPS. He explained that a 120-MIP machine is a "group 50," a 180-MIP machine is a "group 70," and a 300-MIP machine is a "group 100." Mr. Duensing asserted the price is not for different code, it is for a license fee.

Questioned whether the R-25 is "multithreading," Mr. Duensing indicated he was unfamiliar with the term. Mr. Beers explained that multithreading is the ability to simultaneously perform tasks versus only linearly performing scheduled tasks. Mr. Duensing indicated the R-25 machine performs more than 270 tasks at a time. Mr. Beers clarified the machine is, in that case, multithreading. Mr. Duensing agreed it is a multitasking machine. Mr. Beers asked whether MIPS is the only measure being examined to determine capacity. Mr. Duensing replied yes.

Senator O'Donnell inquired whether the OS would be capable of being transferred to the R-36 if two extra processors and corresponding software were purchased for the R-25. Mr. Duensing said he assumed that should extra engines be purchased for the R-25, the R-36 would not be in the equation because the R-25 and R-36 have different-speed engines. Senator O'Donnell further inquired whether the OS purchased for the R-25 could be used on the R-36 if the purchase of the R-36 is delayed until next biennium and the state buys the cheaper version of the processors for the R-25. Mr. Duensing answered yes but noted there would still be upgrade charges.

Ms. Lockard pointed out the proposal was based upon retiring the 821, partly because of its escalating maintenance cost. Should processors be added to the R-25, the 821 would have to continue operating and there would be additional charges for that machine.

Mr. Beers requested Mr. Duensing to describe the difference between the R-25 with two additional processors and the R-36. Mr. Duensing answered the processors are 100-MIP engines and the R-25 has 60-MIP engines. He explained that adding two additional engines to the R-25 would bring the total MIPS to about 240, and with the R-36 there would be about 307 MIPS without any additional engines. He reported that 10 engines per system could be added on both machines. Senator O'Donnell inquired, "Then why don’t we?" Mr. Duensing replied, "Because of the cost." Senator O'Donnell asked whether it was cheaper to buy a new engine, or buy a brand new box. Mr. Duensing answered, "In the long run it would be cheaper to do the R-36, or, should NOMADS happen to take a bullet, an R-26." He further explained that should NOMADS be eliminated, 100 MIPS would be reduced over the biennium, and in that case an R-26 would be the cheaper way to proceed.

Senator O'Donnell asked whether other options are being considered, such as Sun Systems, Lucent Technologies, and other makers of large computer systems. Mr. Duensing indicated there are 60 customers and to put all of them onto an alternative platform would require planning and reengineering of all their applications. Senator O'Donnell suggested putting the Department of Taxation on its own box, to which Mr. Duensing replied that presently "their own box" would have to be a mainframe-class machine. The senator suggested an alternative type of experimentation with Sun Systems or an Intel-based processing system be considered. Mr. Duensing responded the application would have to be rewritten in order to do that.

Ms. Lockard remarked that one of the problems encountered in the attempt to increase efficiency and move technology is attributable to decisions made years ago that locked the system to a particular vendor forever. She pointed out that to move or change the system is very costly, which is why DoIT has attempted to move to new technology within the existing infrastructure with the least amount of disruption and introduction of multiple platforms. She indicated it is possible to move in a different direction, but "unfortunately a price tag is attached." Senator O'Donnell remarked, "If the whole world had that attitude we would still be using the abacus." Ms. Lockard said it was important for Senator O'Donnell to know that if there was a way to migrate easily she would have been the first in line to do so.

Mrs. Chowning stated a cost analysis must be performed before a decision can be made. She asked how much it would cost to add central processing units (CPUs) to the existing system versus changing to the R-36, with or without NOMADS. Senator O'Donnell noted the staff should be integrally involved in order to neutralize bias. Ms. Lockard requested that the record reflect there is no vendor bias and "it is quite the opposite." Senator O'Donnell said he stood corrected regarding bias, but explained the philosophies are different. He asserted, "We keep paying the bills and we’re tired of it."

Mr. Duensing indicated vendors have been contacted to ascertain the cost of machines should NOMADS go out of existence, and what it would cost to add additional engines as well as the license fees for the software. Senator O'Donnell indicated the staff would parallel DoIT’s efforts to obtain answers on the issue.

Mr. Beers said:

Ms. Lockard responded DoIT has implemented the IFS system and has introduced Oracle and added it to the state’s environment, and currently a Department of Industrial Relations (DIR) application is being implemented with Oracle web-based technology. She emphasized the new projects are incorporated with new technology.

Mr. Duensing indicated he has no preference on which technology the system runs; however, he asserted the customers must be supported. Senator O'Donnell expressed understanding of the problem but emphasized his major concern is the ES-9000 and all the money that has been spent.

Mrs. Chowning indicated 11 new positions are requested in the budget and asked for the department’s priority list identifying which positions are really needed and which might be deferred. She made the same request with respect to expansion of the router-based network, additional disk storage, and additional backup capability. She said the information must be presented to the staff before decisions can be made on the budget.

Mr. Duensing indicated the disk and tape are separate from the mainframe request and are required in any event. Mrs. Chowning clarified the disk and tape are priority items and cannot be deferred. Mr. Duensing agreed.

Referring to Exhibit D, Senator Neal asked whether the flow chart has been presented to the Governor and whether the Governor has "bought off" on it. Ms. Lockard answered the items were included in the Governor’s recommended budget.

Senator Neal asked Ms. Lockard and Mr. Duensing to "divorce themselves" from the state for a moment and present a scenario wherein they are putting a computer system in place. He asked them to explain what they would do and where they would go to perform the task considering the obstacles with which they are confronted.

Mr. Duensing reflected that in the "perfect world" he would do the business process reengineering (BPR) on each of the applications, including determination of the business requirements, the type of platforms on which the system would run, and the cost to perform the requirements. He indicated the mainframe would remain an integral part of the system because it is a viable server and "would end up as the client-server systems" that will use it as a database and for data storage. He said UNITY is one that would have a "fat" client-server system. Mr. Duensing expounded the parameters would depend upon the business need for every application. He speculated that if he had an opportunity to begin again he would create applications suited to each agency that could integrate with one another and share data.

Senator O'Donnell asked how many master services agreements (MSAs) there will be when the system is complete. Ms. Lockard replied there are currently 60 MSAs on contract. Senator O'Donnell inquired how many MSAs there would be should NOMADS be eliminated. Ms. Lockard answered there are currently 14 Complete Business Solutions, Inc. (CBSI) MSAs on NOMADS, and 28 IBM subcontractors, which are not included in the total amount in the budget. Senator O'Donnell asked whether the subcontractors are paid time and materials. Ms. Lockard said yes. She indicated the 1997 Legislative Session funded DoIT for the equivalent of 30 MSAs at approximately $60 an hour. She said the services of the 30 MSAs are split almost half with CBSI and part of the balance of the funding is paid to IBM to hire that company’s subcontractors at $94.50 an hour. In addition, the Legislature added another $3.2 million to pay IBM directly for IBM staff. Ms. Lockard indicated the status quo of the 30 MSA component is included in the Welfare budget, the corresponding DoIT budget, and the DoIT Computing Division Governor-recommends budget. She envisioned choosing critical technical staff from IBM and CBSI out of the component of 30 MSAs.

Senator O'Donnell asked the amount of funding in the budget specifically for continuation of NOMADS through the next biennium. Ms. Lockard indicated she would need help from the budget office because the DoIT budget only contains DoIT-related items, not the entire NOMADS funding. Senator O'Donnell speculated there might be enough money in that budget to pay the penalty.

Mr. Goldwater asked whether NOMADS would be eliminated. Senator O'Donnell answered the decision would probably be made by the Governor or by legislative leadership. Mr. Goldwater asked the senator what his decision would be. Senator O'Donnell answered, "I made my decision 4 years ago. I would pull the plug." He said NOMADS was a major disaster for the state and he did not wish to see it continue.

Senator O'Donnell asked whether MSA contractors’ ratio will be raised to approximately $100 an hour. Ms. Lockard replied that a new request for proposal (RFP) had been submitted, award letters sent, and an analysis performed, resulting in an average hourly rate across multiple services levels of $70 to $75 an hour. She reported the rate for a senior programmer will be approximately $100 an hour.

Senator O'Donnell stated the following:

Ms. Lockard pointed out NOMADS was an outsource project and was not developed by the State of Nevada. Senator O'Donnell said his comments were not a reflection upon DoIT or the MSAs and that on the contrary, NOMADS was a problem inherited by everybody. He declared the finger was not pointed at any particular person or entity, and the state should fall back, regroup, and try another way.

Mr. Beers asked how many companies responded to the RFP. Ms. Lockard answered that 44 letters of approval were sent out of about 60 RFPs. Mr. Beers contemplated that assuming this was a stereotypical contract with one award, there would have been 1.5 applicants.

Mr. Goldwater stated:

Asked for a suggestion, Mr. Goldwater said, "I need a piece of paper that says these are the issues in the budget we need to close¾ option 1, option 2, option 3¾ choose one option¾ close this budget. That is my suggestion."

Senator O'Donnell said the problem with closing the budget was caused by the "curve ball" known as NOMADS. Mr. Goldwater indicated the problem was discussed in the Welfare budget hearing and in the DoIT budget hearing, and Senator Rawson brought the issue to a head in the Human Resources/K12 budget hearing. He reiterated a decision must be made.

Ms. Lockard indicated DoIT has created a budget that meets the department’s pared-down critical needs for the next biennium. She noted that all agencies were asked to reduce their budgets before submitting them to the Budget Division for inclusion in The Executive Budget. She stated an attempt is being made to fundamentally change DoIT. Ms. Lockard declared there are many things the department would like to do; however, those things are not possible this biennium because of budget constraints. The existing budget reflects what is needed for DoIT to perform its job, she emphasized.

Mr. Goldwater voiced his impression of Ms. Lockard’s remarks as, "Here is our proposal and your options are to take it or leave it." Ms. Lockard explained that was not her intent and said the task charged to DoIT at this meeting is to peruse the software and hardware costs for the facilities enterprise server in the event NOMADS is not a component. Mr. Goldwater indicated Ms. Lockard’s explanation framed the issue better and he felt progress had been made.

Mrs. Chowning reminded the committee she had requested the costs, with and without NOMADS, in order to do a comparison before making a decision. Asked whether the $75 MSA rate is the current rate or a negotiated rate, Ms. Lockard answered the $75 rate will go into effect with a new MSA July 1, 1999.

Mrs. Chowning asked whether the April 12, 1999, meeting with the federal government in San Francisco regarding NOMADS would be teleconferenced in order for legislators to participate. Ms. Lockard indicated she had conveyed the request to Myla Florence, Administrator, Welfare Division. She said the Governor will accompany the contingent attending the meeting. Mrs. Chowning requested the staff communicate with Ms. Florence and inform her of the seriousness of the request.

Senator O'Donnell pointed out that he had just spoken on the telephone with Richard Gammick, District Attorney, Washoe County, who informed him the Governor had decided to "stay the course" on NOMADS and wait until after the April 12, 1999, meeting to close the budget. There being no further business, the meeting was adjourned at 11:40 a.m.

RESPECTFULLY SUBMITTED:

Barbara Moss,

Committee Secretary

APPROVED BY:

Senator William R. O’Donnell, Chairman

DATE:

Mrs. Vonne S. Chowning, Chairman

DATE: