The Joint Subcommittee on Public Safety/Natural Resources/Transportation of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman Lawrence E. Jacobsen, at 8:15 a.m., on Wednesday, April 28, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator Lawrence E. Jacobsen, Chairman

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Ms. Chris Giunchigliani, Chairman

Mrs. Vonne S. Chowning

Mr. John W. Marvel

Mr. Richard D. Perkins

ASSEMBLY COMMITTEE MEMBER ABSENT:

Mr. Bob Price

STAFF MEMBERS PRESENT:

Jean Laird, Committee Secretary

OTHERS PRESENT:

DEPARTMENT OF MOTOR VEHICLES AND PUBLIC SAFETY

Director’s Office-DMV – Budget Page DMV-173 (Volume 3)

Budget Account 201-4706

Ms. Giunchigliani indicated it was necessary to clarify the previous subcommittee action on the closing of the director’s office budget.

Ms. Giunchigliani said the subcommittee reduced out-of-state and in-state travel, approved the additional $10,375 in Fiscal Year (FY) 2000 and $9,529 in FY 2001 in the operating category, approved one full-sized regular sedan at $19,473, and approved $1,600 for the Committee on Intoxication.

Ms. Giunchigliani said that for the Planning and Research Unit, the subcommittee approved option 3 on the closing sheets (Exhibit C) to fund one new Management Analyst II position and leave the Administrative Services Officer III in the budget.

Ms. Giunchigliani said the subcommittee did not approve the additional overtime funding in decision unit E-197.

Ms. Giunchigliani said the subcommittee did not approve the purchase of the vehicle but did approve an additional $1,573 a year in the in-state travel category for motor pool rent or payments for use of personal vehicles in lieu of funding the replacement vehicle.

Ms. Giunchigliani said the subcommittee voted to establish the Internal Affairs Unit as a separate budget account.

DEPARTMENT OF PRISONS

Peter Ernaut, Chief of Staff, Governor’s Office, recalled that on January 18, 1999, the Governor delivered the State-of-the-State message in which one major issue was long-term planning. He said whether that is in prisons, education, or many other state departments, the Governor believes Nevada must focus on a long-range plan and not deal with each problem in a crisis mode or in a 2-year cycle.

Mr. Ernaut explained the plan he would be presenting is an 8-year prison plan that is proposed to save approximately $60 million. He noted the Governor’s Office considers this plan a long-range plan much like what is hoped for K-12 (kindergarten through grade 12) education and the university system. He explained the Governor’s Office considers the entire system, not each facility or each bed. Those details are left to the experts who run the department. He said with this plan and with the Legislature’s oversight there can be guidance and innovation and Nevada can look forward to saving a great deal of money and having a well-managed prison system.

Mr. Ernaut said this prison plan focuses on two things: bottom-line results and bottom-line savings. Again, he said, this plan is an 8-year plan for men and women and the Governor’s Office hopes to prove to the subcommittee today that this plan will save $60 million.

Scott Scherer, General Counselor, Governor’s Office, said he would begin by focusing somewhat on the biennium because that is important in terms of closing the budgets. He said he would also provide some details regarding where the Governor’s Office sees things going through FY 2007.

Mr. Scherer referenced the handout from the Governor’s Office (Exhibit D.) and said the first page shows population versus capacity projected through the next biennium. He said the worksheets for every month through FY 2007 are also available from the Department of Prisons. He pointed out that the total capacity in the Governor’s plan continues to be above projected populations. He noted the most current projections have been used in preparation of this particular chart.

Mr. Scherer said he wanted to give the subcommittee some idea of the major capacity changes through the biennium and beyond, starting with men’s facilities. He said the remodel of the Jean Conservation Camp will be completed in September 1999, which will add 96 beds, increasing from the current 9,060 to 9,156. In January 2000 the Northern Nevada Correctional Center will be expanded above capacity by adding what are referred to as "Stickney" beds based on the Stickney court decision that set guidelines for when those beds can be used. He said that would increase the capacity to 9,300. He said the Northern Nevada Correctional Center will be increased another 40 beds and Southern Desert Correctional Center 60 beds in March 2000, bringing the capacity to 9,400.

Mr. Scherer said that takes the system to September 2000 when it has been determined phases I and II of the Cold Creek facility could open based on discussions with the State Public Works Board, the Department of Prisons, and legislative staff. He noted that would add 1,890 beds for a total capacity of 11,290. He explained that at that time closure of the Southern Nevada Correctional Center at Jean would reduce the number of beds by 613 to 10,677. Employees who wanted to would be transferred to the new Cold Creek facility.

Mr. Scherer stated the capacity would be reduced by 240 when the Jean Conservation Camp would be converted from a facility for males to a facility for females. He mentioned this conversion would allow the system to save a great deal of money throughout the biennium and beyond. He said the Sagebrush area at the Nevada State Prison would be closed for renovation, which would temporarily reduce capacity by 224 beds. At the same time all institutions would be reduced to the capacity for which they were designed, reducing total capacity by 665 beds. Finally, he said, 22 beds at the Southern Nevada Restitution Center, which had previously been converted to a facility for females, would be converted back to a facility for males. In November 2000, he said, the renovation of the Sagebrush area will be completed, increasing the capacity by 224, and in May 2001 capacity at the Cold Creek facility will increase by 152. He indicated that at that point capacity would be 9,946.

Mr. Scherer indicated that in the following biennium, in January 2003, phase III of the Cold Creek facility would add 1,008 beds. At that time another adjustment to again reduce various institutions to design capacity would decrease the number of beds by 665. He said the Jean facility would reopen in July 2004 as a minimum-security facility. He noted the Jean facility was originally designed to be a minimum-security facility but has been frequently used as a medium-security facility. He stated that in July 2005 a new 1,500-bed prison would need to be built.

For women’s prisons, Mr. Scherer said the numbers are much smaller and there are fewer major events, the biggest being in September 2000 when the Jean Conservation Camp is converted. He pointed out the current population projections are lower than what had been previously anticipated. He said these lower projections and the conversion of the Jean Conservation Camp to a facility for females provide cost savings for Nevada. One of the reasons for cost savings is that it will not be necessary during the next biennium to expand the Southern Nevada Women’s Correctional Facility, which is the private facility in North Las Vegas. He said another reason for cost savings is that the expansion at the Silver Springs Conservation Center can be postponed.

Mr. Scherer informed the subcommittee there would be some expansion after the coming biennium for women’s facilities. In February 2003, 48 beds will be added at Silver Springs Conservation Camp, going to excess capacity. In June 2004, 50 beds will be added at the Southern Nevada Women’s Correctional Facility, going to excess capacity. He said the expansion at Silver Springs Conservation Center, previously scheduled for this biennium, will be postponed until November 2005, when 56 beds will be added. He pointed out this delay generates significant savings. In November 2005, the Southern Nevada Women’s Correctional Facility will be expanded and the excess capacity in other facilities will be reduced for a net increase of 152 beds. He noted this expansion was also previously planned for the coming biennium and called attention to the fact that this delay will save operating expenses.

Mr. Scherer identified the total savings over the next biennium. By closing the Southern Nevada Correctional Center at Jean in September 2000, $10,327,124 is saved. Accelerating phase II of the Cold Creek facility saves $787,892. Reducing female population projections and converting the Jean Conservation Camp saves $4,472,496. Eliminating the need to build escape hatches at Jean and postponing the expansion of the Silver Springs Conservation Center saves $846,079 in the coming biennium.

Mr. Scherer informed the subcommittee the total savings is $16,433,591. He said the Governor has already budgeted $9.6 million of the $16.4 million savings, which leaves approximately $6.8 million new savings in this plan.

Mr. Scherer extended the projected savings through FY 2007. Closing the Jean facility and keeping it closed until July 2004 will save approximately $7 million per year, or $21 million for 3 years. Privatization of prison medical services will save approximately $2.5 million a year. He said that when these savings are added to the previously described savings in the coming biennium, the total estimated savings through FY 2007 is approximately $60 million.

Mr. Scherer explained the reasons the Governor is in favor of privatizing prison medical services. He said there would be substantial General Fund savings, estimated to be $6 million this coming biennium. He said the risk of cost overruns due to catastrophic medical expenses or litigation would be limited. Mr. Scherer explained if medical services are contracted out the contractor would be responsible for catastrophic medical expenses and tort claims related to medical services. He noted there are a fair number of tort claims impacted by medical services. He testified there is currently one very large case pending against the state as a result of a classification problem because of an inmate’s seizure disorder, which was known to the system, but not properly noted by medical services staff. He said Nevada has seen a number of cases in which Nevada is sued over medical care in the prison system. Mr. Scherer said Nevada can transfer that risk to a private contractor who will be required to be fully insured. He pointed out that if Nevada had to pay for that insurance, it would cost approximately $400,000 per year. Because the state is self-insured, he explained, the funds are either paid from the Tort Claims Fund or the Department of Prisons pursues additional appropriations from the Interim Finance Committee (IFC).

Mr. Scherer informed the subcommittee the contractor would have national accreditation, which the prison medical system does not have except at the Ely State Prison where there is already a private contractor providing medical services. He stated that national accreditation is a major issue in litigation, because it demonstrates that a facility meets the proper standards and has proper protocols. He said when there are issues over whether proper medical care has been provided, accreditation is a major plus.

Mr. Scherer pointed out that contracting for medical services would free up department support staff resources not included in the prison medical budget, such as budget staff, accounting staff, and attorney staff. He stated the majority of those expenses would be the responsibility of the contractor.

Mr. Scherer said that because the contractor would have better equipment and technology there would be improved clinical reporting and tracking. He explained that unless the state is prepared to make a significant investment in equipment and technology, a contractor could do a better job of tracking inmates throughout the facilities. He said the case he mentioned earlier, for which the state is in litigation, could have been prevented with an effective tracking system. He indicated the inmate had been in the system before and had returned, but the essential information was not available. He stated that with the advanced technology a contractor would bring, there is opportunity to minimize that kind of mistake.

Mr. Scherer indicated a contractor would also bring improved security and control over prescription drugs. He noted there have been cases where the state has been charged with giving the wrong dosage or a larger number of days than prescribed. He said the contractors have technology to track prescription drugs more thoroughly than the state can, without investing in additional technology.

Mr. Scherer testified that all these enhancements would provide increased accountability and free up equipment and technology funds for other needs throughout the state for upgraded technology.

Mr. Scherer said the contractor with whom the Department of Prisons is currently negotiating could provide better service by having licensed psychologists available 24 hours a day and 7 days a week at the mental health units in northern and southern facilities.

Mr. Scherer remarked the experience with the private contractor at the Ely State Prison has been very good. He related that the warden at the Ely State Prison had earlier said he was not a fan of privatization generally, but that privatizing the medical services was the best thing ever done at the Ely State Prison. He said the warden reported it reduced hassles, it reduced inmate litigation significantly, and it removed burdens, which allowed him to focus on managing a proper correctional facility.

Mr. Scherer explained that in looking for a contractor the department is seeking a predictable cost per inmate and a decreasing cost per inmate, even though there is significant inmate population growth experienced from year to year. He said it is his opinion Nevada can have predictable cost and controlled costs through proper contracting.

Mr. Scherer said fewer than 10 jobs will actually be eliminated. He said the contractor has proposed the elimination of a number of positions, but 54 positions are currently vacant. He said the department will work with the contractor so that the vast majority of the current employees will be offered positions with the contractor. He also mentioned these are jobs requiring skills that are in demand in Nevada.

Mr. Scherer informed the subcommittee the Governor is willing to work with the Legislature and employee representatives to structure a severance package. He said the Governor is particularly sensitive to situations in which employees are close to retirement. He also noted reemployment rights for displaced workers will be a priority.

Mr. Marvel asked whether the women’s prison would remain at the 500-bed level. Mr. Scherer replied that is the plan for several reasons. One is that it is important the contractor is able to function and not lose money and if it is decreased too much it would be harmful to the contractor. Second, there are better programs at that facility and better medical care than can be provided at the Jean Conservation Camp. Third, he said, it is important to be able to be selective about who is placed in the Jean Conservation Camp, which is a work camp, to ensure the people place there are capable of doing the work involved and are truly minimum security and not escape risks.

Mr. Marvel inquired whether there had been discussions about sending female inmates out of state and asked whether it would be necessary under the plan presented at this meeting by the Governor’s Office.

Robert Bayer, Director, Department of Prisons, said the female population projection, which was recast because there was a clear change in the trend, indicates 60 to 100 fewer inmates a month over the life of the projection. He said the reduced populations and the conversion of the Jean Conservation Camp to a women’s facility eliminate the need to send female inmates out of state.

Ms. Giunchigliani asked the cost difference to house a woman at the Jean facility versus at the Corrections Corporation of America (CCA) facility. Mr. Bayer responded that he did not have a final number because some elements have not been added back in, such as the programming aspect, and he also did not know about medical services yet. However, he estimated the cost difference over a year would be about $1 million for those inmates. He admitted that is quite a large difference but said the cost was more when the women’s prison was originally moved. He said the reason that was done was the Legislature felt that the advantages of having the women close to family, better visiting, and better programming were worth the difference in cost. He said he truly believes that from a correctional point of view this is money well-spent.

Ms. Giunchigliani inquired as to the per diem cost at CCA. Mr. Bayer said it is approximately $42.80 a day and then there is a "debt service" of $12.84. Ms. Giunchigliani asked whether it is cheaper to house the inmates at Jean. Mr. Bayer said it is cheaper to house inmates at Jean, but it is better correctional management to keep them at the multilevel-custody facility. Ms. Giunchigliani asked why it would be advantageous to pay the higher cost per day for persons who are minimum security risk. She said she recognized CCA might not like it but indicated the Department of Prisons has authority to allow the contractor to also bring in out-of-state placements. She said this would secure the contractor’s income but allow the state to same money.

Mr. Bayer responded that the fact someone is a minimum-custody inmate in terms of a classification does not mean that person is not needy in terms of services such as medical care. He said it only takes one catastrophic event to greatly impact the daily rate. Ms. Giunchigliani stated the issue of catastrophic medical care has been discussed before and is a moot issue. Mr. Bayer explained that depends on whether the service is privatized because if it is not privatized it is a liability for the state. He indicated there are many other variables that are hard to "nail down" and stated he would have to add some staff. He said some female inmates need more care and programming that is not built in for the men. He added that the men’s camp is generally staffed with about 12 staff and the women’s camp is usually staffed a little heavier. He said there will be some work crews, but there will also be some inmates who will not be able to work on the work crews and will have to be doing something else if the minimum-custody level is forced up to 240.

Ms. Giunchigliani reminded Mr. Bayer that several weeks ago he was in her office and counted over 100 people who could have been moved out of minimum security. She said it is important to have a program that works the best and ensures safety for the public, but cost is also an important factor and maintaining that number at 500 just does not seem to "get us there." She declared that the CCA aspect needs to be reviewed and revisited.

Mr. Marvel asked how comfortable Mr. Bayer was that phases I and II would be ready by September 2000. He said he wondered whether that was a little optimistic. Mr. Bayer said he is comfortable with it. He said the reason he moved it to that point in time was twofold. He explained that he had been given a completion date of June 23, 2000, for phase I and felt that by the time the department completed the punch list and checked out the equipment, it would be near the date phase II was originally supposed to open. He decided that putting it off one more month could save a considerable amount of money and would allow time to find any structural metal left under the ground and do a punch list for both phases at one time. He reiterated he is very comfortable with that plan.

Mr. Marvel questioned whether this would be done under the same contract. Mr. Bayer said the plan is predicated on fast-tracking phase II and giving sole-source authority to the State Public Works Board. He said the sole-source authority is extremely important and he supports it "150 percent."

Senator Neal requested Mr. Bayer describe the current budgeting method for medical services. Mr. Bayer said the medical budget is based on salaries in the payroll category and, like any other budget, includes equipment, contracts, supplies, and so forth. He added that, unlike other budgets, this one includes the cost for clinic services.

Senator Neal inquired whether it is based on the average number of prisoners using the services. Mr. Bayer said there is a base budget as with any other budget and catastrophic medical costs are subtracted from the base. He explained it is done on an inmate-driven basis. Mr. Ernaut stated the budget is based on what was actually spent in the base year.

Senator Neal further inquired whether the budget is based on the total population of the prison or only those who receive medical treatment. Janet Johnson, Administrative Services Officer IV, Department of Prisons, said the medical budget is based on the total population, as are all budgets in the Department of Prisons. She explained it is based on historical expenses and for medical services an average cost per inmate is used. She said it is somewhat more complex than that because it is segregated by service type, such as pharmacy, outside medical care, and so forth. Senator Neal said the medical budget, then, is based on the average prison population per month. Ms. Johnson replied that is basically correct. Senator Neal asked how the number of prisoners who do not receive medical services is subtracted. Ms. Johnson said that number is not subtracted because the budget is based on an average. Senator Neal asked how the subcommittee will know the number of prisoners who received medical services last year, should it accept the department’s budget. Ms. Johnson replied nearly all inmates receive medical treatment of one sort or another. She pointed out specific services are charted and there are reports available with that level of detail, but the basic budget is built on the average.

Senator Neal questioned whether there are service costs, pharmacy costs, and staffing costs. Ms. Johnson said that is correct. Senator Neal asked whether the department budgets for catastrophic cases. Ms. Johnson said catastrophic medical expenses are not normally budgeted. She explained that if there are savings within the budget to pay for those expenses, then the department pays for them. She said the department has at times had to approach the Interim Finance Committee (IFC) for an allocation to cover those expenses. Senator Neal said what attracted his attention was the amount of money budgeted for FY 1998 versus actual costs, which were $28 million. He said he noticed that $16 million was personnel costs and $9 million was operating expenses. He said what he did not see in the budget was the number of prisoners who received medical treatment during that year.

Ms. Johnson stated that the staffing includes nursing and physician care. She said the $9 million in operating expenses includes treatment, outside medical care, pharmacy, and so forth. She said she did not have with her the number of inmates who received medical services.

Senator Neal asked for confirmation the budget is based on an assumption that all prisoners within the system received treatment. Ms. Johnson replied it is based on the services actually provided to inmates during the base year. She added the average cost is used to project the future budget.

Senator Neal said the budget is based on the average number of prisoners per month who receive treatment. Ms. Johnson responded, "Basically, yes." Senator Neal pointed out that is almost like Medicaid or Medicare basing its budget on all persons age 65 and over for a given year. Ms. Johnson explained that for the Medicaid budget, costs are broken out for specific eligibility groups. In the Department of Prisons, all inmates are eligible for medical care and some require more than others. She added the Department of Prisons bases its budget on the average total cost, considering every medical cost by function. She mentioned that there were nearly 70,000 prescriptions in the base year and over 50 cases were catastrophic, which is defined as having costs above $10,000.

Senator Neal inquired whether the Department of Prisons exceeded its medical budget for FY 1998. Gary Ghiggeri, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, informed the subcommittee that in FY 1998 the Department of Prisons received a supplemental appropriation from the Interim Finance Committee (IFC) of about $1.4 million and reverted about $600,000. He explained that a majority of the expenses incurred in FY 1998 for medical services was the result of inmate altercations, recreational injuries, and self-inflicted injuries.

Senator Neal asked whether the Governor’s Office is testifying that costs of a privatized medical program would be less than the $28.7 million actually spent in FY 1998. Mr. Scherer replied that is what the Governor’s Office is saying and pointed out the bids have been requested and responses have been received. Senator Neal asked how much less the Governor’s Office projects would be needed with a privatized medical program. Mr. Scherer replied it would be between $5 million and $6 million less over the biennium.

Considering the previous testimony, Senator Neal requested confirmation the annual budget for medical services would be reduced from $28 million to $22 million. Mr. Ernaut explained the savings would be about $6 million over the biennium or about $3 million each year.

Regarding supplemental appropriations, Mr. Ernaut pointed out that when a service is privatized there is a contract and contract payments cannot exceed a certain amount of money. He said costs are much more predictable. He called attention to the fact that prison medical services are different from other medical services in that prisoners are the only classification of people in Nevada guaranteed medical services.

Mr. Ernaut noted the experience factor of average growth in prison populations and average growth in number of services over previous years. He said predictions based on that experience factor are as accurate as educated guesses can be.

Based on today’s testimony, Senator Neal asked whether the subcommittee should discount the $26.3 million in The Executive Budget for privatized medical services in FY 2000 and $27.3 million in FY 2001. Mr. Ernaut responded that the amounts for medical services in The Executive Budget are based on projections made in January. He explained that now there are more cognitive estimates because the state actually has received bids. He said these projections are being revised because of the availability of this additional information.

Senator Neal questioned whether the budget information on his computer file is different from what is now being discussed. Mr. Ghiggeri responded that the legislative fiscal staff do not have the information concerning what the bids are for the medical services. He explained that information is held in confidence until the bid is awarded. He indicated staff are doing some "tinkering" with the budget that would potentially reduce the prison budget for medical care prior to privatization. Senator Neal asked whether the amounts in The Executive Budget are the assumptions the subcommittee should work with. Mr. Ghiggeri said that is true at this time.

Mr. Scherer stated that the original projections of the Governor’s Office were that about $4.5 million would be saved through privatizing. He noted that after looking at the bids, he believes the savings will be significantly more. He said there may be some "tinkering" that can be done with the current prison medical budget, but it would not come close to the amount the system will save through privatizing medical services.

Senator Neal asked whether Correctional Medical Services (CMS) is eligible to submit a bid for this contract. Mr. Scherer replied CMS is eligible and is one of the bidders. Senator Neal said the term of the current CMS contract for the Ely State Prison overlaps what would be the term of the new contract for the total prison medical services. Mr. Scherer said if CMS happens to be awarded the contract, a contract could be negotiated that rolls the current contract into the new contract. Senator Neal asked what would be available for CMS to bid on. Mr. Scherer replied it would be the $26 million plus the cost of medical services at the Ely State Prison. He said the Request for Proposals (RFP) was for the entire system, including Ely. Senator Neal pointed out CMS already has a contract for medical services at the Ely State Prison. He asked whether CMS would receive the amount in the current contract plus the $26 million if they were awarded the contract. Mr. Scherer replied that if CMS were awarded the contract they would only receive the amount for the statewide contract.

Mr. Ghiggeri pointed out the current contract for medical services at the Ely State Prison expires June 30, 1999. He explained that for display purposes, The Executive Budget retained the funding for the Ely contract in a separate category. He said the RFP was for the period beginning July 1, 1999, and included medical services at the Ely State Prison. He noted the new contract would be for the $26.3 million plus the $2.8 million budgeted for the Ely contract. Mr. Ghiggeri reiterated that, depending on what the committee decides to do, there could be some reductions to the recommended budget prior to privatization.

Senator Neal pointed out the sum of the two amounts mentioned by Mr. Ghiggeri is more than the current medical costs for the prison system. Mr. Ghiggeri explained that a medical inflation factor has been applied to the base in the amount of 8.4 percent from FY 1998 to FY 2000 and another 4.2 percent for FY 2001. He said there is also an increase built into the budget for demographic growth in the inmate population. He said the amount budgeted per inmate, after inflation is added, is multiplied by the projected larger number of inmates. He said these are called "inmate-driven costs." Some of the "inmate-driven costs" are prescription drugs and out-of-institution medical care.

Mr. Ernaut indicated Senator Neal was mixing apples and oranges. He said the $28.5 million is not inclusive of the Ely contract. Also, he said, the medical costs for FY 1998 are based on a prison population of 8,700. He pointed out that in the next biennium the projected population is 9,400, or 700 more prisoners. He noted the costs for Ely need to be added to both sides of the equation and pointed out Senator Neal was only adding Ely to one side of the equation.

Senator Neal called attention to the performance indicators in the budget, which indicate 8,222 in FY 1998, 8,806 in FY 1999, 9,339 in FY 2000, and 9,800 in FY 2001.

Senator Neal indicated he was attempting to determine whether the cost of a privatized medical system would be less than the cost with the current system. He said it is difficult to determine that based on the information in the budget.

Mr. Ernaut said the amount for medical services with the current system plus the Ely contract is over $30 million. The contract for privatization for the total system is now estimated to be just over $26 million. He said that is why there is an estimated savings of over $3 million each year of the biennium or about $6 million for the biennium.

Ms. Giunchigliani asked what the cost per inmate is in the recommended budget. Mr. Scherer said the average cost in FY 1998 for medical services per inmate per day was $9.37. The range of bids received is between $8.20 and $8.40 per inmate per day. Ms. Giunchigliani asked whether that includes the Ely State Prison. Mr. Scherer said that it does and pointed out there would be $1 savings per inmate per day. Ms. Giunchigliani asked whether those bids assume an upper limit or a cap for the contractor. Mr. Scherer said that is without the cap; the contractor would be responsible for all medical services throughout the system.

Ms. Giunchigliani asked whether the cap on contractor responsibility would be removed for the contract in Ely if the medical program is not privatized. Mr. Bayer replied the cap would be removed. Ms. Giunchigliani asked what the cost per inmate was projected to be with the cap removed, but without privatizing the medical services outside Ely.

Mr. Bayer responded that according to the normal budgeting process, without privatization the department would be asking for $32,801,903 for medical services. He said that assumes the Ely State Prison remains under contract and no changes are made to the remaining medical service system. He said $28,591,011 is the amount of funds available for contracting the entire medical system. He said that assumes the Ely contract is continued and the Residential Substance Abuse Treatment (RSAT) Program is unchanged. He said the $26.3 million Senator Neal referred to is the anticipated amount necessary to award a successful contract, not including what has already been privatized. He explained those are not included because there will not be additional savings for services already privatized. He said when the $26.3 million is added to the $2.8 million for the contract in Ely it is a total of approximately $29 million. Mr. Bayer said the department originally anticipated $30.5 million as the total funding necessary to award a contract to a successful bidder. He pointed out that includes the RSAT Program, the Ely contract, and the cost of positions retained to monitor the contract. He emphasized this amount is less than the $32.8 million that would otherwise be requested. He said the amount of savings originally envisioned when the budget was developed in December 1998 was $2,287,281 per year. He said that savings is now increased with the revised plan presented at this hearing.

Ms. Giunchigliani reiterated the average cost per inmate per day in FY 1998 was $9.37. She asked for the projected cost per inmate in The Executive Budget. Mr. Bayer said he did not have that information with him and would provide it. Ms. Giunchigliani asked what was spent in FY 1998 for outside medical services. Mr. Bayer responded it was $5.3 million. Ms. Giunchigliani asked what has been spent so far in FY 1999. Phil Nowak, Medical Administrator, Department of Prisons, said the projected total for FY 1999 is $4.3 million. Ms. Giunchigliani indicated a reduction to the base budget might be necessary to reflect the decline in costs in that area.

Ms. Giunchigliani asked for discussion of the inflation factor for medical services. Mr. Nowak said Mr. Ghiggeri had earlier identified the inflation factors used in the budget. He said the department has attempted to refine the inflation projections from a single inclusive inflation factor to a method that takes into consideration such things as ceilings within a PPO (preferred provider organization) network. He said hospitals have ceiling inflation amounts and indicated 3 percent would probably be the correct factor. He noted that is not the case for specialty providers and that has not been resolved yet. Ms. Giunchigliani asked whether the 8.4 percent inflation used in The Executive Budget could be reduced by approximately half. Mr. Nowak said there appears to be some potential for that based on the PPO constraints.

Ms. Giunchigliani asked whether costs of catastrophic incidents are budgeted. Mr. Nowak said, "As far as specific cases, one could impute a certain coverage, but as an all-inclusive statement catastrophic incidents are not budgeted." Ms. Giunchigliani pointed out that if catastrophic incidents are not budgeted, the argument to not move women prisoners to the Jean facility because of the cost of catastrophic incidents is a moot issue in terms of budgeting.

Mr. Ernaut indicated that adjustments to the base budget are irrelevant to the Governor’s Office because the Governor’s Office is concerned with the bottom line. He said it is not important whether there is less in the base budget and more in maintenance or enhancement decision units, because the goal is to "spend less in the bottom line and get more." Ms. Giunchigliani pointed out that if adequate savings could be identified under the current system, it may not be necessary to change to a privatized medical system.

Senator Jacobsen indicated difficulty in dealing with assumptions regarding population and money. He emphasized that an important issue is whether the quality of services under a privatized system would be equal to the quality of services under the current system. He noted privatization is somewhat "canned and our own is kind of homegrown." He said he is attempting to discern which method is the most feasible and the most realistic. He pointed out that when dealing with assumptions, it is difficult to determine what will happen down the road a year or two, let alone eight years as projected by the Governor’s Office.

Mr. Scherer said the Governor’s Office believes the quality of care will be just as good if not better in some areas. He reiterated the availability of licensed psychologists 24 hours a day, 7 days a week if the services were contracted. He noted that would actually be better than what is currently available. He said a contractor has incentive to ensure medical care meets the constitutional standards, which is what is important. He reiterated that inmates are the only population in America with entitlement to medical care. He explained that if the private contractor does not meet the constitutional entitlement, the contractor is the first one "on the hook." He said there are requirements built into the contract to ensure the contractor pays judgments awarded, if any. He pointed out the state is not immune from liability even if the state provides the services directly. He said the state is frequently sued over inadequate medical care and in some cases the state pays judgments because of inadequate care or mistakes. He said privatizing would allow the state to transfer that risk to the private contractor, which has a direct bottom-line incentive to ensure its care meets constitutional standards. He said those payments would not come from the taxpayers as in the past, but from the contractor’s bottom line.

Ms. Giunchigliani asserted that although some risk is transferred, the final liability would still reside with the state. Mr. Scherer said that is true in the end if the contractor were unable to pay. He added that is why there are insurance and bonding requirements to ensure the contractor has the resources available even if the contractor were to "go bankrupt."

Ms. Giunchigliani pointed out the contract at the Ely State Prison calls for the provision of mental health services, but the contractor has not been providing that. She asked whether that jeopardizes the state regarding liability. Mr. Scherer said he does not know that to be true, but assuming it is, the state should confront CMS to determine why CMS is not complying with the contract. He added that CMS should have contract liability to the state if CMS is not living up to the terms of the contract.

Ms. Giunchigliani asked whether CMS is the company being considered for the statewide contract. Mr. Scherer replied CMS is one of the bidders, but it would not be appropriate to say anything else at this time. Ms. Giunchigliani stated CMS is filed with the Office of the Secretary of State as a corporation. She asked for the meaning of the terminology on the listing when it says a corporation is "not in good standing." Mr. Scherer said "not in good standing" could mean a number of things. He said it might mean the company has not paid its annual fees or filed the annual list of officers and directors. Ms. Giunchigliani asserted that is something that should be checked. She noted the information on the Internet also included the term "default." Mr. Scherer said typically that is a fairly routine thing that can be fixed fairly easily, by, for example, filing the list of officers and directors. Ms. Giunchigliani said, "That assumes your example is what is meant in this situation by ‘not in good standing.’"

Senator Neal asked what would make this contract attractive to a company. Mr. Bayer pointed out this is a $30 million contract. He said that is an attractive amount and companies would want to bid because of that amount and, if selected, would want to perform. He said that perhaps Senator Neal’s concern is that the contractor contends to be able to provide the same level of service at a lower cost. Senator Neal said his question is how a company can make money on this contract. Mr. Bayer said there are costs built into government and government has never been overly praised as a model of efficiency.

Senator Neal restated his question of how a contractor can make money with the prison medical program contract. Mr. Bayer said an example is that a contractor would have sophisticated computer tracking of narcotics and of prescriptions. He said contractors have "blister packs" for unit dose dispensing. He said such things significantly reduce the cost of medical care. He pointed out the Department of Prisons does not have those tools and it would be expensive to get them. He said the department attempted to purchase a computerized tracking system and the bid came in prohibitively high at over $1 million. Mr. Bayer clarified he was not saying the prison medical staff do not provide good service. He said the delivery system and the technology are where the savings are.

Senator Neal referenced the performance indicators for the Prison Medical Care budget. He asked whether the percent of inmates using prescription drugs reflects the number of individuals who actually received medical treatment. Mr. Bayer indicated that would not be the case, as many inmates who receive medical care do not require prescriptions. He explained an inmate might be seen for a cold or a suture, which would not require a pharmaceutical solution. Senator Neal asked whether the $3,474 annual cost per inmate would be reflective of the cost of medical treatment for the inmates. Mr. Bayer said that is correct.

Mr. Ernaut commented that this is one part of the prison plan and certainly there will be subcommittee members who agree with privatizing medical services and some who do not. He said what is important is to consider the entire plan. Regarding how a contractor would make money on such a contract, he said it is no different from any other health maintenance organization (HMO) or managed care endeavor.

Senator Neal pointed out that HMOs have made money by cutting services to individuals and asked whether that is anticipated with this contract. Mr. Ernaut said that is a function of contract negotiations and expectations specified within the contract. He added the point is Nevada has an opportunity to have a predictable expense for a prison population that has grown tremendously in the last decade. He said medical services were not privatized in Ely because Nevada decided to have a "living petri dish" of public policy. He said it was a bipartisan decision made because the Department of Prisons kept returning to IFC for more money. He said Nevada should at least consider this proposed solution because Nevada has the fifth highest medical services cost in the country. He emphasized the Governor’s Office is attempting to achieve a predictable liability for the state. He said subcommittee members may have other ideas, which is their prerogative.

Mr. Marvel pointed out the Legislature has no choice but to build budgets on assumptions. He said committees use the best information available and have outside experts review trends. He said final and absolute numbers are just not available in the budgeting process. The committee must make decisions based on assumptions or budgets would never be finalized.

Mr. Marvel also pointed out the cost of public safety has been and is increasing. He noted that in 1979, 3 percent of the budget was for public safety and now it is over 11 percent. He said costs are "inmate driven," as Mr. Ghiggeri pointed out, and once a number of projected inmates is agreed on, that is how the budgets are built.

Mr. Scherer said the Governor would want him to point out that the subcommittee had had discussions about programming in the prisons, how to reduce the recidivism rate, and how to continue savings into the future. He mentioned that $9.6 million in savings is already budgeted and $6.8 million is additional savings. He said the Governor would like to put that to use and has had discussions with subcommittee members about using it for programs that will save even more money in the long run. He said one option is the "drug court" the Governor has discussed openly on a number of occasions. He said there is also a program in Oregon the Governor would like to look into in more detail. Mr. Scherer said Nevada needs to provide better substance abuse treatment, better work programs, more money for training, and more money for education. He said Nevada needs to better prepare inmates for the day they will be released and needs to learn how to stop inmates from coming back into the prison system so the savings can be multiplied in the future. He testified that the Governor is committed to looking at many of these ideas over the course of the next biennium. He said the Governor believes there is potential to increase the savings beyond the $60 million projected through FY 2007.

Mr. Ernaut thanked the subcommittee for the opportunity to present the Governor’s plan. He said that certainly there will be parts of the plan the subcommittee agrees with, parts it does not agree with, and parts the subcommittee will want to add. But, he said, the mere fact there is discussion is important. It is important for the Legislature and the Executive Branch to work together on long-range planning to provide a safer and more efficient prison system for Nevada’s taxpayers that transcends party lines and transcends the differences between the executive and legislative branches. He said the Governor’s Office looks forward to working with the Legislature and certainly would return at the request of the subcommittee to work on this further.

Senator Jacobsen recalled Mr. Bayer had stated that if the Jean facility is converted to a women’s facility, additional supervision would be required. He said he is amenable to that and pointed out that 2 years ago the Governor reduced the supervision to one supervisor per crew. He said the Jean facility has the capacity for equipment maintenance and it is one of the better camps in terms of producing revenues. He said he wanted to be sure that is not ignored and the current system is not fouled up when it is working.

Ms. Giunchigliani stated that in either a male or female facility, there will be individuals who are not productive and it has nothing to do with gender. She surmised that Mr. Bayer had intended to say the camps are currently staffed the same for men or women regardless of the gender. She said the disagreement may be related to the number of women who can go out with a crew, rather than the staffing pattern for it.

Senator Jacobsen said that based on his experience working with the crews, one thing the camp system lacks is the requirement that someone from the agency receiving the service is there along with the prison supervisor. He said two supervisors are able to get twice the work out of the inmates because with only one supervisor there is no time to plan. He noted he has found that because of lack of planning a crew sometimes completes a job and "just sits there" because there is no direction. He said if the Department of Prisons sends a crew to do something, that agency receiving the services should also furnish a supervisor to work in conjunction with the crew supervisor from the prison system.

Ms. Giunchigliani pointed out it is also important to ensure there is no negative impact on the Nevada Division of Forestry by not sending out the number of crews anticipated in the Forestry budget.

Senator Neal referenced the inmate medical copay category in the Offender Store Fund budget account and asked what its purpose is. Mr. Bayer said the medical copayment was designed in 1987 to have inmates share the cost of medical services and to ensure they did not abuse the use of the medical services. He said it was based on the assumption that if inmates were paying a share of the costs, they would not present themselves for medical services to exhaust the resources, and would only present themselves when medical care is actually needed. He noted the copay system has worked fairly well and said that copayment would still go to the state if medical services are privatized. Senator Neal asked whether the copayment is part of an insurance plan. Mr. Bayer replied it is not.

Ms. Giunchigliani asked whether the "other wing" at the Lovelock facility is open. Mr. Bayer replied that it is. Ms. Giunchigliani asked how the prison was able to staff it. Mr. Bayer said the recruitment capabilities have improved somewhat. He said there are currently 33 vacancies, which is less than what it was previously. Ms. Giunchigliani asked how many staff there are. Mr. Bayer said it is normally staffed with 2 employees per shift. Ms. Giunchigliani asked when the opening of the wing had occurred. Mr. Bayer replied it was opened 2 to 3 weeks ago. Ms. Giunchigliani asked how many beds are being used. Mr. Bayer said he did not have that number but said the projections anticipate all beds would be utilized. Ms. Giunchigliani asked whether that would mean all 310 beds plus the emergency beds. Mr. Bayer said there would be a different number each month depending on the number of inmates above the emergency capacity. He said there may be 70 percent double-bunking one month, 65 percent the next, and 80 percent the next. Ms. Giunchigliani said it would be helpful for the committee to know the current number of staff and the number of beds filled. Mr. Bayer said he would provide that information.

Ms. Giunchigliani asked Eric Raecke, Manager, State Public Works Board, Department of Administration, for a guaranteed opening date for the Cold Creek facility. Mr. Raecke said the original contract called for a completion date for phase I of May 8, 2000. He said 46 days were added because of unforeseen circumstances and the revised completion date for phase I became June 23, 2000. He said phase II is not funded, but if it is funded and the contract is "sole source," it could be completed by August 2000. He recalled that Mr. Bayer indicated in testimony he is planning to open both phases September 2000. He said the public works board will meet that date but pointed out the "sole source" aspect is important. He noted the original bid was based on unit pricing to include phase II so there would be a known cost. He said if phase II had to be rebid an inflation factor would need to be added, which could mean the project would be $2 million short and the project would also be delayed. Ms. Giunchigliani pointed out that an inflation factor had already been included for phase II. Mr. Raecke said that is true, but in the Las Vegas area the market is volatile and he feels better with a comfort factor so it is not necessary to return to the Legislature for additional money.

Mr. Bayer testified that in the model provided to the subcommittee by the Governor’s Office, the opening is scheduled for September 1, 2000. He pointed out that would save a considerable amount of money and it is "doable," with adequate time for the punch list, to check the systems, and conduct training onsite.

Ms. Giunchigliani said she understands the use of "sole source" in this instance, although she tends to not be in favor of it in general. She also called attention to the loss of a year in the project plan and said that should be a factor in deciding whether to proceed with the "sole source" approach for phase II. Mr. Bayer said the plans provided for the subcommittee anticipate a September 1, 2000, opening of both phases I and II and the plan itemizes each step. Ms. Giunchigliani asked whether Mr. Bayer could assure the subcommittee the facility will be open September 1, 2000 and the 1,890 beds will be available. Mr. Bayer replied "Yes."

DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES

Forestry – Budget Page CNR-52 (Volume 3)

Budget Account 101-4195

Brian Burke, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, indicated there are several nominal adjustments for costs of physical examinations and computer hardware and software as indicated in the closing sheets. (Exhibit D. Original is on file in the Research Library.)

Mr. Burke said this decision unit recommends an Aircraft Mechanic position. He indicated the division testified previously that if it were allowed to have this position, rather than contracting the work out, the savings would be about $35,000.

Mr. Burke pointed out there are several amendments to this decision unit requested by the Budget Division. He said the first is amendment No. 16 to correct technical errors. The second is amendment No. 105, which acknowledges that the Division of Wildlife may not have sufficient revenues to fund the recommended FY 2000 transfer. He said the amendment eliminates the vehicle, radio, pager and cell phone previously recommended for the Aircraft Mechanic position. He indicated the amendment reduces FY 2000 expenses by $46,933 and reduces the transfers from the Division of Wildlife by $23,467 and from the Forest Fire Suppression budget account by $23,466.

Mr. Burke recommended the subcommittee require the agency to provide semi-annual reports to the Legislature on estimated savings attributable to the recommended new position.

Mr. Burke pointed out The Executive Budget reflects all training funds in the first year of the biennium. He said the agency asked for authority to use the training funding in both years of the biennium. He explained if the aircraft mechanic position is approved, the subcommittee would need to decide whether the training will be available for both years. He said if the subcommittee decides the training will be available for both years, he will work with Legal Division staff to ensure the necessary language is added to the appropriations bill.

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M-201 Demographics/Caseload Changes – Page CNR-55

Mr. Burke explained decision unit M-201 recommends a new Fire Control Dispatcher in Elko. He said that initially the Elko Dispatch Center was scheduled to open in January 2000. He reminded the subcommittee that during the February 18, 1999, hearing the subcommittee asked the division to confirm the projected completion date. He said the division’s written response indicated a completion date of April 4, 2000, which affects the position requested in decision unit M-201. He said if the position is approved with a start date of February 1, 2000, General Fund appropriations would be reduced by $9,201 in FY 2000 and $310 in FY 2001.

Mr. Burke explained that decision unit E-410 recommends a new Forester III position to work on the Forest Health Initiative associated with the Environmental Improvement Program (EIP). He said this position and associated costs would be funded by DMV Emission Control Account funds. He reminded the subcommittee there was considerable discussion regarding the viability of DMV Emission Control Account revenues as a stable source of funding on an ongoing basis. He also noted usage of DMV Emission Control Account funds is dependent upon passage of Senate Bill (S.B.) 511, which has been referred to the Senate Committee on Finance.

Mr. Burke indicated the subcommittee has several decisions regarding decision unit E-410. The first is whether to approve the new Forester III position (as amended) to support the EIP program. If so, the second is whether to permit the use of DMV Emission Control Account funds to support the cost. The third is what action should be taken if S.B. 511 is not approved.

Mr. Burke noted that during hearings on budgets for the Division of State Parks, legislative fiscal staff were directed to prepare a Letter of Intent to formally convey that all new initiatives funded with DMV Emission Control Account money, if included in the next biennium budget, should be requested as enhancement decision units.

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Ms. Giunchigliani said the issue of pollution control funds has been debated and indicated there is some impact on local governments. She pointed out, however, that the Governor discovered this fund was not being used by the local governments. She said Lake Tahoe is a statewide issue, rather than a north-south issue. She indicated that in other budgets a maximum of 2 years has been established for the use of these funds for Lake Tahoe. She said it has been recognized that continued use of the DMV Emission Control Account will deplete it, so it will not be continued ad infinitum. She concluded by stating this is a proper use of these funds for this biennium, but not on a permanent basis.

Senator O'Donnell said it is true budgets are very tight. However, he said, the subcommittee is taking DMV Emission Control Account money, provided to emission control districts through the $1 tax for each smog certificate, and giving it to Lake Tahoe. He said Washoe County does not object because Lake Tahoe is in Washoe County, but none of Lake Tahoe is in Clark County. He said the money proposed to be taken from Clark County is a fixed amount of money Clark County uses to conduct studies on air pollution control. He said Clark County has the worst air pollution on the western side of the United States and the county is trying to mitigate that pollution any way possible, including promoting the use of electric cars and tax credits for alternative fuels. And yet, he said, this subcommittee would take that money from Clark County and give it to the Tahoe Regional Planning Agency (TRPA). He acknowledged that TRPA needs money, but said this should be put on the "add back list" if money is available from the General Fund. He pointed out that would mean every county would participate, rather than just Clark and Washoe Counties.

Ms. Giunchigliani indicated she appreciated Senator O'Donnell’s concern, but said this fund has been available and counties have not used it, despite the fact Clark County has one of the worst pollution problems in the country.

Mike Nolan, Principal Budget Analyst, Budget Division, Department of Administration, indicated counties were using the money but were not using it enough to prevent an increase in the reserve balance over the last 4 or 5 years. He said that in a tight budget cycle the budget office must seek alternative funding to General Funds. He said there was money in the DMV Emission Control Account and it was determined there is an indirect link with pollution at Lake Tahoe. He explained that is why the Governor decided to use it.

Mr. Nolan informed the subcommittee the budget office has submitted legislation, which the Legislature may modify, to establish priorities for the use of DMV Emission Control Account funds. He explained the intent is for counties to continue to receive at least what they have been using. He said counties would also be eligible to apply for additional pollution control money before TRPA, the Division of Forestry, and the Division of State Parks receive money.

Ms. Giunchigliani further clarified that there would be a "hold harmless" protection that counties will at least receive the amounts they have been using and will have potential for additional money through a grant process. She emphasized that Lake Tahoe must be saved. She said the public has said that and President Clinton has said it. She said Nevada must at least proceed with a well-thought-out plan with interagency support. She said this is the time to move and asserted that counties will not be negatively impacted. She said counties would continue to move forward doing what they are supposed to be doing and in 2 years begin to rebuild the reserve or direct the reserve to accomplish a higher pollution standard. She pointed out that in Clark County the pollution problem is mostly dust. She indicated the county is not doing what is needed to reduce the dust pollution regardless of whether this money is available. She asserted it is time to move in this direction and for the next legislative session, this program will have a different funding source.

Pam Drum, Public Affairs Coordinator, Tahoe Regional Planning Agency, said Nevada is indeed at a crossroads regarding Lake Tahoe in terms of what the state has been able to pull together under the leadership of Pamela B. Wilcox, Administrator and State Land Registrar, Division of State Lands, State Department of Conservation and Natural Resources. She said Ms. Wilcox has pulled together a Lake Tahoe program in close cooperation with the Tahoe Regional Planning Agency. She said everyone is "singing from the same sheet of music" and there is a real opportunity to make measurable progress in achieving environmental quality standards at Lake Tahoe. She said she understands legislators’ concerns about the source of funding. She noted TRPA does not care where the funding comes from but wants to make sure this atmosphere of cooperation and initiative is taken advantage of. She testified her agency supports the Governor’s proposal.

Ms. Wilcox reiterated that "we are at a crossroads with magic opportunities in front of us." She said when this budget was built, there were severe constraints on general funds, but this program cannot wait 2 years. She said agencies are working together within the state, with California, with federal agencies, and with local governments and this is the time to make it work.

Senator Jacobsen pointed out that without support in Clark County the bond that was issued would never have been passed.

Senator O'Donnell said the subcommittee should analyze what it is doing. He said the committee is taking money from Clark County to pay for Lake Tahoe when there are needs in Clark County. He said there is no money being taken from Douglas County and Carson City, two counties that do not have air pollution. But, he said, Clark County does have air pollution. He asked for the rationale for having Clark and Washoe Counties pay for Lake Tahoe when Clark County needs the money for other air pollution projects.

Senator Jacobsen said that according to the budget office the rationale is that Clark County has not used this money.

Senator O'Donnell asserted that is not true. He said the fund has been set aside for projects. He explained that Clark County does not want to deplete the fund, but the county uses money from the fund for engineering projects to learn what needs to be done to mitigate the air quality problems in Clark County. He said everybody knows this proposal is taking money from a fund that should not be used for this and everybody knows that in 2 years the plan is to put it back. He said this is not the right thing to do. He said the right thing to do is to give everyone back a dollar on smog certificates. He said the Lake Tahoe basin belongs to everybody in Nevada, it does not belong to Clark or Washoe County; it belongs to everybody and everybody is responsible for the lake. Senator O'Donnell stated that just because a pot of money has been identified does not mean it is right to use it for this purpose. He reiterated that it is unfair for Clark County to be responsible for the major portion of the $3 million. He pointed out Washoe County’s share is only $600,000 and Clark County’s share is $2,400,000.

Senator Jacobsen called for the vote.

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Senator Neal said that either way this will be funded because of the interstate compact and, if it is not funded, Nevada will be taken to court.

Mr. Burke explained that decision unit E-900 recommends the transfer of a half-time Fire Control Dispatcher from Budget Account 101-4227, Forestry Intergovernmental Agreements, to this account. He said this would consolidate all forestry dispatchers into a single account. He noted amendment No. 52 from the budget office reduces General Fund appropriations by $6,801 in each year of the biennium to accurately classify intrafund transfers.

Mr. Burke indicated decision units E-901, E-903, and E-904 are companion transfer decision units to those in the Conservation and Natural Resources Administration Budget Account 101-4150 already approved by the subcommittee.

Mr. Burke called attention to item 13 in the closing sheets (Exhibit E.), which addresses the county assessment revenue. He said that during a previous hearing the agency was asked whether this revenue could be increased since the $230,000 had not been modified for several biennia. He informed the subcommittee the agency has committed to developing and proposing to the 2001 Legislature a new cost allocation plan. He said the agency has also committed to meeting with counties during the development to assure county concurrence.

Forestry Intergovernmental Agreements – Budget Page CNR-63 (Volume 3)

Budget Account 101-4227

Mr. Burke directed the subcommittee’s attention to page 7 of the closing sheets (Exhibit E). He indicated the amendments and technical adjustments are all revenue corrections to properly classify revenues.

Mr. Burke reminded the subcommittee the Governor’s budget recommended pulling Storey County from this budget. He said Storey County had requested to discontinue its participation in the western region fire district with the Nevada Division of Forestry. Mr. Burke informed the subcommittee the Division of Forestry and Storey County representatives had reached a compromise. He said representatives from the county and the division agreed to continue a cooperative agreement. The agreement is for the state to fund personnel-related costs and the county to fund operating costs. He pointed out this agreement is similar to current agreements with several northern counties.

Mr. Burke stated the subcommittee needs to decide whether to approve decision unit E-400 as amended, with the state retaining responsibility for Storey County personnel expenditures and Storey County assuming direct responsibility for operating costs.

Senator Jacobsen asked the Division of Forestry whether there were any late developments on this issue. Roy W. Trenoweth, State Forester Firewarden, Division of Forestry, State Department of Conservation and Natural Resources, confirmed the division has come to agreement with Storey County as defined by Mr. Burke.

Senator Jacobsen asked whether equipment ownership is an issue. Mr. Trenoweth indicated that has never been a problem or concern for the division.

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Forest Fire Suppression – Budget Page CNR-68 (Volume 3)

Budget Account 101-4196

Mr. Burke directed the subcommittee’s attention to page 9 of the closing sheets (Exhibit E).

Mr. Burke stated approval of decision unit M-200 with amendments detailed in item 1 on page 9 would be consistent with the subcommittee’s closing action on Budget Account 101-4195, Forestry.

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Forestry Honor Camps – Budget Page CNR-71 (Volume 3)

Budget Account 101-4198

Mr. Burke directed the subcommittee’s attention to page 14 of the closing sheets (Exhibit E). He said decision item 1 relates to project reimbursements. He informed the subcommittee The Executive Budget currently reflects $1.2 million in project reimbursement revenue. Mr. Burke pointed out that reimbursements have demonstrated strong growth over the past 8 years and recommended the subcommittee adjust the base to increase project reimbursement revenue by $80,000 and decrease General Fund revenue by $80,000.

Also regarding project reimbursements, Mr. Burke noted the Governor recommended $24,845 to erect a metal building donated by Truckee Meadows Community College. He said the Nevada Department of Transportation is also donating a used paint booth and has committed to sending about $40,000 in vehicle refurbishment work to the honor camp. He recommended the subcommittee add $40,000 in project reimbursement revenue to decision unit E-730.

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Mr. Burke indicated decision unit M-200 recommended 3 new crews for the Silver Springs Conservation Camp expansion. He explained the expansion was due to be completed in December 2000, but is not likely to be completed until FY 2005, making those crews unnecessary. He recommended the subcommittee delete the recommended 3 new crews.

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Forestry Nurseries – Budget Page CNR-77 (Volume 1)

Budget Account 257-4235

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Wildlife – Budget Page CNR-86 (Volume 3)

Budget Account 101-4452

Mr. Burke directed the subcommittee’s attention to page 18 of the closing sheets (Exhibit E). He said items 1, 2, and 3 reflect adjustments in revenues and fees necessary to make technical corrections and to restore the reserve to approximately $2.1 million. He reminded the subcommittee of its concern regarding the small amount of reserve in the recommended budget in the amount of $14,483 at the end of the biennium. He said these changes would bring the reserve back to an appropriate level.

Mr. Burke directed attention to page 19 of the closing sheets (Exhibit E).

Mr. Burke described several technical adjustments in decision unit E-400. He said the first technical adjustment is to move the Division of Wildlife’s share of aircraft mechanic costs from the Predatory Animal and Rodent Control category to a new category "Aircraft Mechanic/Forestry" to allow better tracking of the costs.

Mr. Burke indicated technical adjustment No. 6 is consistent with the subcommittee’s previous action on the Forestry budget account regarding the aircraft mechanic position.

Mr. Burke said in item No. 7 transfers from the Wildlife Heritage Account are reduced by $31,719 in FY 2000 and $49,719 in FY 2001 as a result of statutory interest expenditure limitations. He said these actions are consistent with full committee budget closings by the Assembly Committee on Ways and Means and the Senate Committee on Finance.

Mr. Burke explained that decision unit M-200 recommends a Program Assistant for the Henderson registration and titling office. He said that in response to a previous subcommittee question, the agency has indicated 7,121 documents have been processed in a 6-month period.

Mr. Burke explained decision unit E-375 recommends a Game Warden position for Boulder City to assist in boating education in an effort to reduce boating accidents.

Mr. Burke explained decision unit E-400 includes several different issues. He said the first is the Aircraft Mechanic position. He indicated adjustments are reflected on the closing sheets to match actions the subcommittee has taken on the Forestry budget.

According to previous discussions of the subcommittee, Mr. Burke recommended a reduction of $22,000 in contract costs if the Aircraft Mechanic position is approved.

Mr. Burke mentioned the concerns expressed by subcommittee members in a previous hearing regarding the lack of supporting documentation for many requests in decision unit E-400. Examples he gave were $20,000 for fish food and $100,000 for printing. Mr. Burke said he met with the division administrator to obtain justification for several of the items requested, such as printing costs for Wildlife Management Area guides, angler guides and water development maps, a replacement clutch and transmission for a helicopter, and the planning portion for the hunting and fishing license system. However, he indicated, numerous items in decision unit E-400 remain undocumented. He said he recommends, with the concurrence of the division administrator, reducing decision unit E-400 by $148,500 in FY 2000 and $400,940 in FY 2001. He further recommended placing these amounts into reserve with the understanding the Division of Wildlife can approach the IFC when additional information is available to support requests to move funding to the operating category.

Mr. Burke also called attention to $132,000 per year in decision unit E-400 for terminal annual and terminal sick leave payments for retiring employees. He pointed out that such expenses are generally not budgeted and are paid from existing resources. He explained the requested amounts could potentially be recovered through salary savings associated with new positions being hired at lower salary steps than the retiring employees. He said the subcommittee indicated at the previous hearing the division could approach IFC if necessary to transfer funds from the reserve category to the payroll category. Mr. Burke therefore recommended eliminating the $132,000 each year.

Terry R. Crawforth, Administrator, Division of Wildlife, State Department of Conservation and Natural Resources, expressed that the division concurs with the closing sheets as presented by Mr. Burke.

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Mr. Burke said the subcommittee had asked the division to provide additional information on the requested equipment in decision unit E-710. He said the division had submitted a revised equipment listing which shifts $12,737 of equipment costs from FY 2001 to FY 2000 and reduces FY 2001 equipment by an additional $91,481. Mr. Burke therefore recommended the subcommittee reduce equipment by $91,481 for the biennium.

Mr. Marvel asked the division whether this would provide enough equipment for the division to be operable. Mr. Crawforth replied that it would.

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Wildlife Obligated Reserve – Budget Page CNR-98 (Volume 3)

Budget Account 101-4458

Mr. Burke mentioned there are technical adjustments in this account, including amendment No. 68, which is a companion to amendment No. 64 in the Wildlife budget account and provides adjustments to completely transfer all dedicated funds from the Wildlife budget account to the Wildlife Obligated Reserve budget account.

Mr. Burke also noted The Executive Budget reflected a negative reserve balance in FY 2001. He said the Budget Division has submitted a technical adjustment to restore the FY 2001 ending reserve balance to $75,191.

Mr. Burke called attention to the E-900 decision units, which are consistent with the transfers from the Wildlife budget account already approved by the subcommittee.

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Wildlife - Boating Program – Budget Page CNR-103

Budget Account 101-4456

Mr. Burke identified several technical adjustments necessary to update revenue amounts. He said the balance forward amounts in the adjusted base for both years do not accurately capture reserves to be brought forward from the FY 1998 actual and FY 1999 work program amounts. To correct the inaccuracy, the balance forward amounts should be reduced by $567,804 in each year.

Mr. Burke pointed out The Executive Budget omitted the boating program share of decision unit M-300 fringe benefit adjustments in the Wildlife budget account. He said amendment No. 69 corrects the omission and increases the transfer to the Wildlife budget account by $37,044 in FY 2000 and $64,013 in FY 2001. He added that corresponding adjustments are made to reserves and balance forward revenues.

Mr. Burke pointed out that boat fuel tax increases in decision unit E-375 were overestimated in the Governor’s recommended budget. He said the Budget Division submitted amendment No. 94, which decreases fuel tax revenues by $76,027 in FY 2000 and $194,019 in FY 2001 to match the latest estimates prepared by the Department of Taxation.

Mr. Burke noted decision items 1 and 2 on page 25 of the closing sheets (Exhibit E) are consistent with the subcommittee’s closing actions in the Wildlife budget account. He said these items relate to transfers from the Wildlife Boating Program budget account to the Wildlife budget account for the Program Assistant and Game Warden positions.

Mr. Burke explained The Executive Budget recommends capital improvement and land and building improvement funding to repair and upgrade several boating access facilities throughout the state.

Mr. Burke called attention to Capital Improvement Project (CIP) 99-C18. He said the Wildlife Boating Program budget account share of this Elko project is not accounted for in the Governor’s recommended budget. He said this is a State Department of Conservation and Natural Resources project for a 4,000-square-foot office building, a 1,600-square-foot shop, and a 3,000-square-foot metal storage building. He noted the office would also include a boat registration counter. He added that to proceed with the Governor’s recommended CIP, the Wildlife Boating Program budget account decision unit E-376 would require a reduction to the reserve category of $200,000 and a corresponding increase in CIP expenditure authority. Mr. Burke noted the subcommittee needs to decide whether to approve the $200,000 adjustment in decision unit E-376 to provide the Wildlife Boating Program share of the Governor’s recommended CIP project 99-C18.

Mr. Crawforth encouraged the subcommittee to approve this CIP adjustment. He explained that the division determines the contributions of each budget account for construction projects based on estimated use. He said the $200,000 is a proportionate share from the Wildlife Boating Program for boat registration activities, boating education, and boating law enforcement/safety programs.

Mr. Marvel asked where the new Elko office would be. Mr. Crawforth replied it would be near the Nevada Youth Training Center where the forestry division office is. Mr. Marvel asked what the division would do with the old office. Mr. Crawforth responded the division would sell it. Mr. Marvel asked whether it had been appraised. Mr. Crawforth said it had been appraised about 6 years earlier when the city had indicated interest in acquiring the building for a firehouse. He said it was appraised at $301,000 and he indicated he did not believe it would sell for much more than that today.

Senator Jacobsen noted the sizeable list of equipment and asked whether all of it is accountable. Mr. Crawforth replied it is.

Senator Jacobsen called for the vote.

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Tahoe Regional Planning Agency – Budget Page CNR-136 (Volume 3)

Budget Account 101-4204

Mr. Burke directed the subcommittee’s attention to page 30 of the closing sheets (Exhibit E). He said the first decision item is in the adjusted base. He explained that at the time The Executive Budget was printed, the FY 1999 cost of living adjustment (COLA) approved by Nevada was still under consideration by California for the "rank and file" TRPA staff. He pointed out that as a result The Executive Budget did not include Nevada’s share of the previously approved COLA. He said California subsequently authorized the 3 percent COLA for FY 1999, so the cost to restore Nevada’s share of the previously authorized 3 percent COLA would be $14,994 in each year of the biennium. If approved, the TRPA Support category in the adjusted base would increase from $358,000 to $373,000. Mr. Burke said the subcommittee needs to decide whether to restore Nevada’s share of the previously authorized COLA at a General Fund cost of $14,994 in each year of the biennium.

Senator Jacobsen asked Ms. Drum whether she had any comments. Ms. Drum responded that TRPA is often caught in this type of situation because it is a bi-state funded agency. She said TRPA must track what both states do from year to year and match those up for consistency. She said that as Mr. Burke pointed out, this is a situation in which Nevada chose not to act on continuing the COLA in the current fiscal year until it was known what the California Legislature would do. She testified the COLA is included in the California Governor’s recommended budget and the California Senate and Assembly subcommittees have approved it.

Paula Bergamini, Finance Director, TRPA, testified TRPA had originally submitted this amount in the budget, but it was removed because at that time it was not known whether California would provide funding for the COLA.

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Mr. Burke explained that decision units E-150, E-400, E-401, E-402, E-403, and E-404 are recommended by the Governor to be funded with the Department of Motor Vehicles and Public Safety pollution control fund. He briefly described each decision unit:

Decision unit E-150 recommends funding for merit increases.

Decision unit E-400 recommends 6 new permanent positions to assist in coordinating and implementing the Environmental Improvement Program (EIP) at the Lake Tahoe basin in the amount of $413,000 in FY 2000 and $393,000 in FY 2001.

Decision unit E-401 recommends an increase in TRPA’s legal division for outside legal costs in response to lawsuits currently in process.

Decision unit E-402 recommends 6 new seasonal positions and the signage project which is part of the public education campaign on the two-stroke engine ban on Lake Tahoe.

Decision unit E-403 recommends continuation of the Threshold Program.

Decision unit E-404 eliminates General Fund support in the adjusted base budget. He pointed out that The Executive Budget currently reflects $670,173 in General Fund in the base budget for both years of the biennium. Decision unit E-404 would replace it with revenue from the DMV Emission Control Account. Mr. Burke pointed out that if the subcommittee approves this action, the amount would actually be $685,167 based on the restoration of the COLA.

Mr. Burke stated the subcommittee needs to decide whether to approve the Governor’s recommended proposal in these decision units, whether to permit the use of DMV Emission Control Account funds to support them, and what actions the Fiscal Analysis Division should take if S.B. 511 is subsequently not approved.

Senator Jacobsen said he did not think it was necessary to repeat previous discussions on whether to use DMV Emission Control Account funds.

Senator Neal said Nevada and California have a regional compact and asked why the Governor has chosen not to fund this agency from the General Fund.

Mr. Nolan said this was a "very tight budget this go-around." He explained that he had attempted to tie the enhancement decision units that involved pollution to the DMV Emission Control Account because of the reserve that was available in the DMV Emission Control Account. He pointed out it was mid-December 1998 when the budgets were constructed. He said it was necessary at that time, because of the revenue projections, to cut budgets or find alternate sources of funding and that is why the Governor agreed with this plan.

Senator Neal pointed out the Governor was new and this was his first time to develop a state budget. He said staff should have informed the Governor about the interstate compact, which is a contract, and that the state’s reputation is at stake if it does not honor the contract. He said TRPA should have some assurance that General Funds will be provided, so the agency does not have to compete with local governments for other funds. He said the Governor’s budget seems to not recognize that this is a bistate compact that Nevada has signed and that Nevada has agreed to support the TRPA program. Senator Neal reiterated that money should be set aside and be available for this purpose. He suggested Mr. Nolan inform the Governor about the interstate compact, that it is a contract which must be honored, and that it is necessary to set aside general funds. Mr. Nolan said he would pass that information along.

To follow up, Senator O’Donnell asked what will happen when the funds are depleted, should the state use the DMV Emission Control Account for TRPA. He said if this fund runs out in several years it will be necessary to sacrifice something else to pay for TRPA. He said the state should exercise discipline now and do this the right way initially so it is not necessary to undo something in the future. He emphasized that he was not saying Nevada should not fund the TRPA because TRPA is very important for Lake Tahoe and for Nevada. He added that he is very much in support of the TRPA oversight committee. He said it is not responsible, however, to "willy-nilly go out and look for pots of money that may be available and then somewhere down the road when those pots of money run out we have nothing and have to go look for other pots of money."

Ms. Giunchigliani said she recognized Senator O'Donnell’s concern, but the counties will be held harmless. She said the Governor recognized TRPA had to be funded and the project had to move forward, so he took advantage of money that was available. She said that for the next biennium budget cycle it will be important for the Governor to present the proper budget supported by general funds. She said that coming in new with a very short time to put a budget together and with low revenue projections, the Governor did what he felt he needed to do.

Senator Jacobsen called for the vote.

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Ms. Giunchigliani pointed out that if the Senate does not pass S.B. 511, which actually transfers the money, the issue will need to be resolved in the "joint closings."

Senator Neal emphasized it is not a question of whether TRPA will be funded but only a question of how it will be funded. He said it is his goal to ensure the money will be there to take care of this compact. Ms. Giunchigliani acknowledged the "no" votes do not indicate lack of support for the program. Rather, she said, it does indicate support and it indicates it is important enough that some believe the funding should come from the General Fund. She concurred with Senator Neal that the issue is where the funding will come from and that may not be decided until the Economic Forum report is available.

Mr. Burke called attention to an issue on salary comparability and COLAs. He said The Executive Budget does not fund Nevada’s share of TRPA’s request for adjustments to achieve "salary comparability" and 3 percent COLAs in the upcoming biennium. The California Executive Budget does include these items. He noted Jerry Wells, Deputy Executive Director, TRPA, sent a letter to John P. Comeaux, Director, Department of Administration, dated March 18, 1999, requesting reconsideration of the "salary comparability denial."

Mr. Burke said if the "salary comparability" adjustment is approved by the subcommittee, decision unit E-150 would be increased by $54,120 in FY 2000 and $79,364 in FY 2001. He said the subcommittee needs to decide whether to approve TRPA’s request to add these amounts to fund Nevada’s share of "salary comparability" and COLAs.

Ms. Giunchigliani asked whether anyone actually conducted a reclassification study or the agency itself just conducted a comparability study. Ms. Drum said TRPA has conducted salary comparability surveys itself for the last two funding cycles. She said Mr. Wells has been as fair as possible comparing positions in Nevada, in California, at county and local levels, and at the state level and has come up with the best average numbers he can. Ms. Giunchigliani asked whether there is anything to prevent TRPA from using the classification study process through the State Department of Personnel.

Freeman K. Johnson, Assistant Director, State Department of Conservation and Natural Resources, said he had previously worked in the Technical Services Division of the Department of Personnel. He pointed out the Department of Personnel is conducting an occupational group study for nearly 4,500 clerical positions, which will take 2 years to complete. He also stated it would be looking at "apples and oranges comparisons." He suggested the subcommittee give serious consideration to adopting Mr. Wells’ analysis of the salary issue.

In light of that information, Ms. Giunchigliani urged the TRPA to "piggyback" onto an independent classification study in the future to eliminate concern regarding who is actually reviewing the salaries for comparability. Senator Jacobsen suggested it be included with the Letter of Intent.

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Nevada Tahoe Regional Planning Agency – Budget Page CNR-140 (Volume 3)

Budget Account 101-4166

Mr. Burke informed the subcommittee the revenue summary on page CNR-141 of The Executive Budget is inaccurate. He said the summary should reflect appropriations of $506 in each year of the biennium and $3,214 per year in transfers from the Department of Motor Vehicles and Public Safety.

Mr. Burke explained the intent of decision unit E-401 was to recommend the elimination of all General Fund appropriations in this budget account to be replaced with DMV Emission Control Account funds. He said that to make this transaction complete the Budget Division has proposed amendment No. 15, which changes the $506 General Fund appropriation to DMV Emission Control Account funds.

Mr. Burke said the subcommittee needs to decide whether to approve the Governor’s recommendation (as amended) to replace General Fund appropriations of $3,720 each year with transfers from the DMV Emission Control Account. He said if the transfers are approved, the subcommittee needs to decide what action the Fiscal Analysis Division should take if S.B. 511 is subsequently not approved.

The chairman indicated the record should reflect that the Senate portion of the subcommittee approves the motion with the understanding the funding would be General Fund appropriations, rather than DMV Emission Control Account funds.

Senator Jacobsen adjourned the meeting at 11:15 a.m.

RESPECTFULLY SUBMITTED:

Jean Laird,

Committee Secretary

APPROVED BY:

Senator Lawrence E. Jacobsen, Chairman

DATE:

Assemblywoman Chris Giunchigliani, Chairman

Date: