The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Monday, May 10, 1999, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Bernice Mathews

GUEST LEGISLATORS:

Senator Ann O’Connell

STAFF MEMBERS PRESENT:

Patricia Hampton, Committee Secretary

OTHERS PRESENT:

John P. Comeaux, Director, Department of Administration, testified the amounts recommended in this bill represent the remainder of the funds necessary to complete the "bailout" of the State Employees Group Health Insurance Program and restore the incurred but not reported (IBNR) reserve for that program to an amount of approximately $11 million. He called attention to action previously taken, on an emergency basis, approving an appropriation of $9 million from the General Fund and $1 million from the Highway Fund to tide the program over until the bill restructuring the program is moved along in the legislative process.

Mr. Comeaux noted A.B. 416 provides in section 1 an additional appropriation from the state General Fund of $6,970,765 and in section 2 an additional appropriation from the Highway Fund of $1,797,547. It also provides in section 3 that the Budget Division of the Department of Administration will assess state agencies whose funding includes federal funds and sources of funds other than the state General Fund and the Highway Fund, in an amount equal to $1,208 per employee and not to exceed a total of $7,230,494.

Mr. Comeaux stated that if this bill is approved, in combination with the bill approved earlier, approximately $26 million will have been provided to the fund. Approximately $15 million of this amount would pay for the deficiency in the fund and an additional $11 million would restore the reserves. Mr. Comeaux said section 4 of the bill indicates the measure would become effective upon passage and approval. He informed the committee that based on the latest cash flow projections, the fund will be depleted in approximately 2 weeks.

Senator Raggio noted there has been some adjustment in the bill since the first version. Mr. Comeaux said that is mainly due to a revision of the allocation within the Highway Fund. He explained that the amounts were arrived at by means of a spreadsheet that was based on the number of employees and the allocation between the federal and state highway funds in the Nevada Department of Transportation (NDOT) were adjusted slightly. This accounts for the difference in the amount from what was indicated earlier.

James Richardson, Lobbyist, Nevada Faculty Alliance, testified in support of the bill and expressed appreciation to the Governor for the proposal, and for the bill already passed, that kept the insurance fund solvent. He spoke about the serious nature of some of the cuts in the plan made by the Committee on Benefits and said the hope is that ways can be found to remedy some of the more serious cuts, particularly the Medicare "carve-out."

Senator Raggio closed the hearing on A.B. 416 and opened the hearing on A.B. 150.

Senator Raggio commented this bill was heard earlier and there was no opposition from the administration. Mr. Comeaux agreed.

Senator Raggio closed the hearing on A.B. 150 and opened the hearing on Senate Bill (S.B.) 245.

Senator Raggio noted the bill was heard on March 31, 1999. He said there is a small fiscal note but said he did not recall anything controversial regarding the bill.

Senator Raggio closed the hearing on bills and moved to budget-closing considerations.

Office of the Governor – Budget Page ELECTED-1 (Volume 1)

Budget Account 101-1000

Senator Raggio asked whether these budgets have been heard in joint subcommittee meetings. Dan Miles, Senate Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, answered, "No, they have been heard independently."

Mr. Miles reviewed this budget. He pointed out that one revision has been requested, to add a host fund of $1,800 in Fiscal Year (FY) 2000 and $2,400 in FY 2001. He said that there is currently a host fund at the Governor’s Mansion, but the request was to provide a separate fund for accounting purposes in order to differentiate between expenditures at the mansion and those at the office.

Mr. Miles stated the major issue in this budget is the treatment of the staff within the Governor’s Office. He said the budget requested, and A.B. 660 would provide nonclassified status for the staff and the allocation of funds to the Governor to use to employ individuals for his office. He would control the numbers of employees and the salaries of those individuals. He noted the bill has been passed in the Assembly and will be heard on Wednesday, May 12, by the Senate Committee on Finance.

Senator Mathews asked whether this would affect the employees’ participation in the Public Employees’ Retirement System. Mr. Miles replied no. He said they would receive all the benefits as regular state employees. The only difference would be that the Governor could control the number of employees and the salary levels at which they would be employed.

Senator Raggio asked whether this would change the total number of dollars that are otherwise in the budget. Mr. Miles answered it would not, it just provides flexibility.

Senator Coffin asked whether a salary cap would be imposed. Mr. Comeaux replied he did not believe there was a salary cap. Mr. Miles said the amendment the Assembly Committee on Ways and Means approved indicates no salary could increase more than 7.5 percent over a biennium.

Senator Coffin asked whether the employees would be allowed to retain businesses or interest in businesses while serving in the Governor’s Office. Mr. Comeaux responded he knows there are specific members of the staff who are not allowed any kind of outside employment, but he does not believe that covers all employees. He did not know which ones are restricted.

Senator Raggio pointed out the budget can be closed with approval of the funding, and if the bill passes it would provide controls.

Lieutenant Governor – Budget Page ELECTED 21 (Volume 1)

Budget Account 101-1020

Mr. Miles reviewed the budget adjustments shown on page 3 of Exhibit C. He said an additional Administrative Secretary position, which was in the Governor’s recommended budget, would be added for the Carson City office. He noted the Lieutenant Governor has requested an adjustment for in-state travel as indicated in a letter shown on page 4 of Exhibit C.

Senator Raggio asked why a budget such as this cannot be used "between years." Mr. Miles said some institutional budgets can be moved between years, but this has never been allowed in a normal budget.

Mr. Miles pointed out the Administrative Secretary position in E-125 was not approved by the Assembly Committee on Ways and Means. Senator Raggio stated he believes the Lieutenant Governor has been responsible and if the need for a position is being indicated, it should be considered.

Controller’s Office – Budget Page ELECTED 70 (Volume 1)

Budget Account 101-1130

Mr. Miles noted the technical adjustments and decision units in the budget shown on page 5 of Exhibit C. He said some of the adjustments are attributable to new prices quoted by the Purchasing Division for software. Mr. Miles stated that since the closing sheets were prepared, a memorandum received from the Budget Division indicated support for two more positions in E-850, an Accountant Technician I and a Program Assistant II. He said these two positions would be related to the accounts receivable duties that the controller is assuming through S.B. 500.

Senator Raggio asked whether the Budget Division has reviewed the request and determined that those positions are justified as a result of the bill being processed. Mr. Comeaux answered it is a combination of the bill being processed and what will be required to implement the new Integrated Financial System (IFS). He stressed the Budget Division believes the two positions are required.

Senator Raggio noted the positions are not shown on the sheets and asked how much they would add to the budget. Mr. Miles answered the additional cost would be $66,000 in FY 2000 and $70,000 in FY 2001. He mentioned that the Assembly Committee on Ways and Means did not add the positions. Senator Raggio remarked this was discussed in the Senate Committee on Government Affairs and a good case was made with S.B. 500 having been processed there is a need for the two positions.

Secretary of State – Budget Page ELECTED-74 (Volume 2)

Budget Account 101-1050

Mr. Miles outlined the changes in the budget shown on page 6 of Exhibit C. He noted that decision unit M-200 provides funding for 10.04 full-time equivalent (FTE) new positions based on workload increases in the office. He pointed out this is the major increase to the budget.

Senator Raggio recalled some money had been "swept" from the Special Services Fund. He asked how much money is currently in the fund. Mr. Miles said the fund was "swept" and a limit of $2 million was placed on it. He said there is currently $2 million in the fund. Senator Raggio noted that "after the $2 million is in the fund, the balance goes into the General Fund."

W.I.C.H.E. Loan & Stipend – Budget Page WICHE-1 (Volume 1)

Budget Account 614-2681

Melinda Braun, Education Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, provided a description of this program as shown on page 10 of Exhibit C. She said there is one unresolved issue in this budget, that of continuing support for six slots in the field of physical therapy where there is now a program at the University of Nevada, Las Vegas (UNLV). This issue is addressed on pages 10-12 of Exhibit C.

Senator Rawson disclosed that he is a WICHE (Western Interstate Commission for Higher Education) Commissioner. He asked what option Ron Sparks, Executive Director, WICHE, was supporting. Ms. Braun answered that Mr. Sparks was supporting option 4, shown on page 12 of Exhibit C. Senator Rawson stated a critical component of getting some of the practitioners into the rural areas is the awarding of WICHE positions to rural students and then, if they return to their home areas, treating them the same as any other WICHE student and letting them work off their loan obligation. He acknowledged this would be a departure from what has been done in the past, but he recommended that option 4 be approved. Option 4 is to approve the budget as recommended by the Governor.

Senator Raggio asked whether option 4 would keep the existing slots. Ms. Braun said currently there are 8 out-of-state slots and option 4 would reduce that number to 6. She said WICHE would allow 4 in-state slots. The students would be required to provide services to underserved areas, and there would still be 2 out-of-state slots. Senator Raggio asked when the funding for physical therapists would be phased out completely. He said, "If you have a school, you have to phase them out at some point." Ms. Braun said that evaluating how option 4 would work over the next 2 years and, if desired, phasing out the physical therapy slots at that time, had been discussed.

Senator Rawson said the original intent was to be able to send Nevada students out of state and give them an edge in getting into school, and then forgive their loans if they returned to Nevada to practice. He said what is being proposed is the same thing as the WICHE program "except for the rural counties." Essentially, he said, this proposal says the rural students can go to even an in-state school and if they go back to the rural county, they can work off their loan. He pointed out, "If you recruit from the rural areas and have students go to schools in or out of state and allow them to go back, many will return to provide services to their small hometowns." He suggested trying option 4 for a few years and seeing if it works.

Senator Rawson asked whether option 4 reduces the Governor’s budget or adds to it. Ms. Braun answered it would remain the same.

WICHE Administration – Budget Page WICHE-5 (Volume 1)

Budget Account 101-2995

Ms. Braun explained this account provides for the costs of administering WICHE funds for stipend payments and loans that are paid out of the WICHE Loan and Stipend Fund. She reviewed the major issues shown on pages 13-14 of Exhibit C.

Military – Budget Page MILITARY-1 (Volume 3)

Budget Account 101-3650

Jim Rodriguez reviewed the purpose of the budget and the major issues and technical adjustments shown on pages 15-17 of Exhibit C. He reported that the Joint Subcommittee for Public Safety, Natural Resources and Transportation, voted unanimously to recommend that the adjutant general be given authority to hire three positions upon moving into the new Readiness Center, with a caveat that the new positions not be hired until the Nevada National Guard has moved into the new facility and that the funding provided for these positions not be used for any other purpose.

Mr. Rodriguez called attention to the 2 engineering positions that had been requested from the Interim Finance Committee (IFC) at its December 13, 1998, meeting, to help with the design and planning of the relocation of the Nevada Air Guard base at the Reno airport. Those plans were indefinitely deferred by the Washoe Airport Authority. The Guard has provided new justification for maintaining the positions within its budget accounts. The joint subcommittee reviewed the justifications and unanimously recommended that the adjutant general be given authority to retain the 2 engineering positions originally approved by the IFC.

Mr. Rodriguez said the joint subcommittee recommended a Letter of Intent directing that the agency not hire the 3 maintenance/custodial positions until the agency has moved into the facility and placing a restriction on the use of the funding until these positions are hired.

Senator Raggio said that as he understands it, if the 2 Engineering positions were going to be used for the relocation, the state’s part would be only a 25 percent match. Mr. Rodriguez confirmed the match is still 25 percent even though the positions will be used for another purpose. He said this has been confirmed.

Senator Raggio asked about the issue within the maintenance group in Clark County. Mr. Rodriguez said there are 3 employees in Clark County and 2 in Henderson, He explained that there is currently a senior building custodian (in the Henderson office) who performs all the supervisory responsibilities for all 5 maintenance workers. The custodian has indicated he no longer wishes to perform those duties, so he is requesting a voluntary downgrade from a grade 31, step 1 to a grade 26, step 9. Mr. Rodriguez explained the custodian’s pay will remain the same and the maintenance repair specialist in Clark County will assume the supervisory responsibilities. Senator Raggio asked whether this is recommended by the agency. Mr. Rodriguez replied yes.

Adjutant General Construction Fund – Budget Page MILITARY-8 (Volume 3)

Budget Account 101-3652

Mr. Rodriguez reported this budget was approved by the subcommittee as recommended by the Governor with one modification. He stated E-375 was apparently overlooked in the budget review process. He said the budget office assumed these items would be accounted for in the Capital Improvement Program (CIP). He noted some of the projects are in the CIP; however, the funding mechanism for those projects still run through this budget account, so the funding was reestablished into this account.

Senator Raggio asked whether this merely provides the authority to collect the federal funds. Mr. Rodriguez answered yes. He called attention to a spreadsheet indicating the projects having a 90 percent or better chance of happening during the biennium or the ones that are actually authorized in this account, as shown on page 19 of Exhibit C. He pointed out two of the projects, the Readiness Center and the C-12 Hanger, are in the CIPs.

National Guard Benefits – Budget Page MILITARY-10 (Volume 3)

Budget Account 101-3653

Mr. Rodriguez reported this account was approved by the subcommittee as recommended by the Governor. He said S.B. 292 would double the maximum allowable reimbursement for the Guard’s college expenses.

Mr. Rodriguez explained that as long as the language in the bill remains permissive, the bill will have no effect on the budget. Senator Raggio said this bill was heard on March 31, 1999, and he recalled the bill does not change the amount. Mr. Rodriguez agreed it does not. It says the Guard may reimburse up to 100 percent. Senator Raggio said if S.B. 292 is passed it will not change the budget. Mr. Rodriguez agreed.

MIL, Commissioner for Veterans Affairs – Budget Page MILITARY-11 (Volume 3)

Budget Page 101-2560

Mr. Rodriguez noted this is the main account for the veteran services office. He said it supports 21 positions and the subcommittee approved the account as recommended by the Governor.

Senator Jacobsen commented the commissioner is in the process of leaving. There are 5 applicants for the position and the Governor has said he will not pick a replacement until the legislative session is over.

MIL, Veterans Home Account – Budget Page MILITARY-16 (Volume 3)

Budget Account 101-2561

Mr. Rodriguez said this is a new account for this biennium and establishes a Nevada veterans home in Boulder City. He pointed out several adjustments to the account, as well as major closing issues, shown on pages 23-24 of Exhibit C. He said the major concern of the subcommittee was that the original proposed salary structure for the veterans home personnel was considerably lower than had been anticipated. He said some surveys were conducted and an average salary for the positions were determined. He stated the revised salaries are just below the national average. The committee also proposed accelerating the hire date of the Director and the Computer Network Specialist.

Senator Raggio said the major issue is whether or not the veterans home would be a state-run facility or contracted out. Mr. Rodriguez stated that as the budget is currently structured, that issue would not affect the budget as far as an increase. If the state elected to have the home privately run, rather than operated by the state, it would be assumed this only would occur if there were significant cost savings, which would mean a reduction to this budget. Mr. Rodriguez said if the home is approved as a state-run facility, the budget would remain as it is currently.

Senator Raggio asked whether the budget "goes further than just the home administrator." Mr. Rodriguez answered it does. He explained the budget is structured so that this would be the worst-case scenario. It assumes the home will be run by the state and if the choice was to go with a privatized home, it could be assumed there would be cost savings and therefore a budget reduction.

Senator Raggio commented he is impressed with the fact that the home in Georgia was cited consistently, when a veterans home was being considered, as being a model and the one most ideal; and that home is operated by a private company. He said he hates to close that option without exploring the advantages or disadvantages of privatization, and past experience has shown that once the home were to become state-run it would be very difficult to try to privatize the operation. He stressed the need to make sure the home is being established in the most cost-effective manner, with the capability of providing the best services to the veterans utilizing the facility.

Senator Raggio said he is willing to close the budget and approve the funding, but he hates to close the budget leaving the idea that a state-run facility is being endorsed forever. He acknowledged that those who will be able to use the facility think there is great advantage to having a state-run facility. He asked what the subcommittee discussed. Mr. Rodriguez agreed with the concerns voiced by Senator Raggio. He said the subcommittee did address quality of service. He pointed out surveys of other veteran’s homes were conducted. He agreed the privately operated Georgia home is probably one of the best in the country. He emphasized that how well the home is managed, whether it is state-run or privately run will dictate its quality.

Senator O’Donnell stated, "When you privatize a home and you have a fixed amount of dollars, you will be able to provide more quality of care than if there is a state-run system." He noted he had made that argument in the subcommittee hearing, but he was in the minority in the decision-making process.

Senator Raggio asked what option is available that leaves the decision open to the IFC until there are some proposals to consider. He said he has not seen any information to use for a comparison.

Senator Jacobsen said this has been discussed at length by the Nevada Veterans’ Services Commission, which he has chaired for the last several years. He said commission members visited four other states and looked at veterans home facilities, both state-run and privatized, and concluded that privatization should not be ruled out for the future but that in the beginning, the home should be operated by the state. He said his observation of veterans homes in other states is that when they are privatized, the volunteer effort is somewhat minimal.

Senator Raggio asked which privately operated facilities were visited. Senator Jacobsen answered that facilities in Barstow, Utah, and Idaho were visited and he was not impressed with any of them. He said "it seemed like a machine running," and the veterans’ in each of these homes did not seem to be very happy with the way it was run He stated he would support the home starting off as the veterans want it to and if it is not successful, it can be changed. Senator Raggio reiterated the problem is that "once it starts, you never can change it."

Senator Jacobsen said a legislative measure is being heard regarding making the veterans commission a stand-alone agency, as it was many years ago. He maintained that if the bill passes, the administrators will be under the Governor, "and the veterans deserve that." Senator Raggio asked whether a cost would be involved if this were to become a separate agency. Senator Jacobsen answered the budget would be the same as what is currently being funded.

Senator Coffin said it was not necessary to assume that just because an agency is government-run that it will be inefficient. He stated, "Not all of them are, and some cannot be comparable in the private sector." He suggested allowing the facility to be run by the state for a few years and then determining whether it meets expectations. He stated "he did not recall the option to privatize being removed from the Legislature."

Senator Raggio stressed "I cannot recall when a state-run agency has been changed to privatization, even though there has been a compelling argument to do so." He suggested closing the budgets with the adjustments and the home Administrator position included, but reserving until the IFC can make a determination, the option of privatizing. He further suggested continuing to gather information in the meantime as to "the potential for either a state-run or privatized operation."

Senator Raggio requested a Letter of Intent to cover the above motion.

Mr. Rodriguez called attention to two contingency issues in the Veterans Home Account, shown on page 24 of Exhibit C. He said the way the current budget is constructed, the construction of the home needs to be finished exactly on schedule. Currently all of the initial start-up money is in the first year of the biennium. If the construction is delayed into the following year, legislative approval would be needed to carry forward the equipment money.

Mr. Rodriguez explained that the nature of the billing and the collection structure for the home is such that it is anticipated there will be some time lags between billings and collections. He said if that created a significant cash flow problem, authority would be needed to take a temporary advance from the General Fund to cover shortages. This amount would be repaid.

Senator Raggio stated that since there seems to be no problem with these issues, they will be included within the closing action on this budget.

Mr. Rodriguez gave an overview of the Department of Information Technology (DoIT) as shown on page 1 of Exhibit D. He said the major issue addressed by the subcommittee was the proposal to restructure the billing system. He called attention to the rate study performed for the department by consultant David M. Griffith. The recommendations to realign the billing structures are embodied in the proposed budget. Mr. Rodriguez said the recommendations include several realignments of personnel, a redefinition of how billings are made to agencies, and the delineation of the manner in which current departments are aligned in the restructuring. These proposed corrective actions are shown on pages 1-2 of Exhibit D.

Mr. Rodriguez pointed out another issue was the department’s request to purchase a new mainframe computer, the cost of which equates to approximately $7.8 million over the biennium.

Mr. Rodriguez noted most of these budget accounts will reflect changes from the funding study, which will require transferring of personnel or restructuring the way the charges are made for services.

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

Budget Account 721-1373

Mr. Rodriguez called attention to the technical adjustments and major issues shown on pages 3-4 of Exhibit D. He said the Joint Subcommittee on General Government recommended two Letters of Intent. One requires DoIT to develop a set of accounting and monitoring procedures for the new billing system and to provide monthly status reports to the Budget Office and to LCB staff with quarterly reports to IFC. The other directs that the IFC establish an oversight committee to receive additional information on whether purchasing the R-36 computer, or some alternative, is the best direction for the state. Mr. Rodriguez noted there was some question as to whether the R-36 was the most economical and technologically feasible for the strategic DoIT plan for addressing the state’s capacity issue. He said the second purpose of the oversight committee was to review and evaluate the state’s strategic long-term plan and the direction the state is going in the development of its computer technology infrastructure.

Senator Jacobsen asked how often the oversight committee should meet. Senator O’Donnell answered that quarterly meetings would probably be sufficient. He emphasized the committee’s feeling of extreme necessity to oversee the department in the implementation of the new $7 million computer.

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

Budget Account 721-1370

Mr. Rodriquez said this budget was recommended for closure as recommended by the Governor with some technical adjustments to the training and computer requests shown on pages 5-6 of Exhibit D.

DoIT- Application Design and Development Unit – Budget Page DOIT-16 Budget Account 721-1365

Mr. Rodriguez called attention to several funding adjustments shown on page 7 of Exhibit D. Senator Raggio asked about the purpose of this account. Mr. Rodriguez explained this budget has funding for most of the programming positions.

Mr. Rodriguez stated the subcommittee recommended closing the budget as recommended by the Governor, with the technical adjustments.

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

Budget Account 721-1385

Mr. Rodriguez said this account is the division’s facility, communications, and Internet account. He pointed out this is the budget account that was recommended to be restructured. He reviewed the technical adjustments and major issues shown on pages 9-10 of Exhibit D. He said this account would be divided into four budget accounts, which more accurately defines the service being provided.

Senator Raggio asked whether the 81 full-time positions distribute among the four accounts. Mr. Rodriguez replied yes. He said 39 positions will remain in this budget account and the remainder will be distributed to the new accounts.

Senator Raggio pointed out this motion also closes the four new budget accounts, 101-1386, 101-1387, and 101-1388. Mr. Rodriguez commented that in the funding in DoIT’s assessment, the department’s calculation is going to be adjusted to reflect a change in the Nevada Operations Multi Automated Data Systems (NOMADS) funding requirements. He said that apparently the Budget Division overlooked the restriction on NOMADS funding and had to readjust the department’s funding requirements, which will put DoIT over the $2 million reserve that the budget office has set aside for DoIT’s new funding plan.

Mr. Rodriguez stated the first year will result in an overage to the reserve of $55,000 and approximately $363,000 in the second year. Senator Raggio asked what this means. Mr. Rodriguez explained it means the budget office has set aside $2 million a year for the DoIT assessment that the department is realigned for this one-time effect. Now, with the adjustment in NOMADS funding, the department cannot absorb the assessment assigned because of federal restrictions, so it will go over the $2 million set aside in General Fund dollars to compensate for the changes.

Mr. Comeaux stated he is aware of the necessary change.

Senator Jacobsen requested a list of communities having the capability for telecommunications. Mr. Rodriguez stated he has a map that will show exactly where the 47 communication sites are in the state and how they are configured. Senator Jacobsen said another concern is the 800 and 900 telephone numbers. Mr. Rodriguez stated that since those services are contracted out, there is not much control.

B&I, Insurance Regulation – Budget Page B&I-82 (Volume 2)

Budget Account 101-3813

Mr. Rodriguez said this is the insurance division’s main operating/administrative account. He noted the account was approved by the Joint Subcommittee on General Government as recommended by the Governor with some modification. He said all of the changes shown on pages 15-16 of Exhibit D will reflect the realignment of the division’s intra-divisional cost allocation which will stabilize the flow of funds into this account. He pointed out there was a problem this year because of the inability to make a full transfer from budget account 223-3817, Insurance Examiner’s Fund, which resulted in the Division of Insurance going to the IFC for supplemental funding. He stated that these cost allocation changes will give the division the ability to more accurately estimate its budgets and maintain a reliable flow of funding. Mr. Rodriguez reviewed the other technical adjustments to the budget as shown in Exhibit D.

Senator Raggio asked whether only 1 new position is being requested. Mr. Rodriguez responded yes. He said most of the funding for new position was eliminated in the executive budget review process. Senator Raggio asked whether any of the other proposed legislation will have any impact on this budget. Mr. Rodriguez said there is a bill requesting an ombudsman for insurance within the division, but that is not requested in this budget.

Senator Coffin pointed out he would abstain from voting on these budgets. Senator Raggio indicated he is a director of Sierra Health Services but said he does not believe he has a conflict of interest.

B&I, Insurance Education & Research – Budget Page B&I-94 (Volume 2)

Budget Account 101-3824

Mr. Rodriguez explained this budget was established to provide training, education, and research activities for state employees, the insurance industry, and consumers. He reviewed the budget and technical adjustments shown on pages 17-18 of Exhibit D.

Senator Raggio asked whether E-126 was a research grant. Mr. Rodriguez replied it was actually funding out of the reserve because significant reserves were being built up. It and was specifically designed to give the Division of Insurance some direction as to how to use the money or to motivate the division to expend the funds and develop an adequate plan to more effectively utilize the reserves.

Senator Raggio commented the division could make a request at some point if they developed a plan. Mr. Rodriguez stated the subcommittee directed the division to develop a plan to use the funds and if it did not, the subcommittee indicated the IFC could redirect the funding to some other agency. He said the funding has been deleted and moved into the reserve account.

B&I, Self Insured-Workers Compensation – Budget Page B&I-104 (Volume 2)

Budget Account 210-4684

Mr. Rodriguez reported this account was approved by the subcommittee as recommended in the Governor’s budget with the modification of the division’s new funding allocation methodology and other technical adjustments as shown on page 19 of Exhibit D.

Colorado River Commission – Budget Page CRC-1 (Volume 3)

Budget Account 296-4490

Mr. Rodriguez noted there was only one closing issue on this account, having to do with the proposal from the commission to shift the classification of 3 of its division heads from the classified service to unclassified service and to apply across-the-board increases to their salaries bringing them to $90,000 each. He said that would include the division heads of power and water and the ASO IV positions. He stated the subcommittee felt the reclassifications for the division heads of water and power were appropriate but did not recommend the reclassification of the ASO IV position, because no significant change in duties or responsibilities was presented. He said this is in E-805, shown on pages 20-21 of Exhibit D, along with other technical adjustments. Mr. Rodriguez explained ASO stands for Administrative Service Officer.

Senator Rawson said his understanding is that the ASO IV position is involved in major investments of the earnings of this commission. He recommended moving all the positions to unclassified service with the proposed salary as indicated on page 21 of Exhibit D. Senator Raggio asked whether these changes are included in The Executive Budget. Mr. Rodriguez answered the salary adjustments were included.

Senator O’Donnell commented the subcommittee did not hear any testimony to support changing the ASO IV position. He said the consensus was that if the other salaries were raised it would be necessary to raise the salary of the ASO and vice versa, and it was not felt the salary increases were warranted.

Senator Rawson maintained there was no testimony in this regard because it was not anticipated there would be any concern. Senator Raggio suggested closing the budget as recommended by the Governor, with the changes, and discuss the issue with the Assembly. Mr. Rodriguez stated the Assembly members of the joint subcommittee recommended only the reclassification for the power and water division heads and did not approve the salary increases.

* * * * *

DHR Administration – Budget Page HR/DIR-1 (Volume 2)

Budget Account 101-3150

Senator Rawson said he would like to propose there be an office of indigent health care financing within the Department of Human Resources that would be located in the office of the Chancellor of the University and Community College System of Nevada (UCCSN). He indicated the appropriate budget for such an office would most likely be the Department of Human Resources (DHR) Administration budget. He stated it is not critical where the office be located, but its purpose would be to provide indigent care, Medicaid financing for the School of Medicine and a dental school, and any other health programs that would use the funding.

Senator Rawson explained the proposal would cost approximately $400,000 a year, $200,000 of which would be provided by Medicaid matching funds. He said $100,000 would come from the UCCSN budget and $100,000 would have to come from the Department of Human Resources. He noted there has not been time to discuss this with the budget director because "the final format" was received just this morning. He said he has not checked to see whether "there is this kind of reserve in that office or whether it would have to be appropriated."

Senator Rawson said it is anticipated an additional $10 million can be brought in for the medical and dental schools, if the dental school is approved.

Senator Raggio suggested moving on to the next budget until information can be provided.

HR, Purchase of Social Services – Budget Page HR/DIR-6 (Volume 2)

Budget Account 101-3237

Larry L. Peri, Senior Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, stated that all of the closing recommendations in the Director’s Office are a result of closing actions taken by the Joint Subcommittee on Human Resources/ K-12. He explained the technical adjustments and closing actions approved by the subcommittee shown on page 4 of Exhibit E.

Senator Raggio asked which budget the subcommittee moved the excess Title XX money into. Mr. Peri answered the joint subcommittee’s actions moved Title XX Social Services Block Grant money to the new Homemaker and Elder Protective Services budget.

HR, Community Services Block Grant – Budget Page HR/DIR-12

Budget Account 101-4864

Mr. Peri stated that the Joint Subcommittee on Human Resources/K-12concurred with the Governor’s recommendations on this account.

HR, Family to Family Connection – Budget Page HR/DIR-15 (Volume 2)

Budget Account 101-3278

Mr. Peri said this program was formally approved by the 1997 Legislature and a "sunset" provision was placed on it; therefore, there were no displays of expenditures in the base budget and the program had to be resubmitted as an enhancement. He testified the continuation of the program was scaled back substantially from approximately $6.4 million in FY 1999 to $2.8 million in each year of the 1999-2001 biennium.

Mr. Peri reviewed the closing actions of the subcommittee shown on pages 6-7 of Exhibit E.

HR, Family Resource Centers – Budget Page HR/DIR-18 (Volume 2)

Budget Account 101-3289

Mr. Peri said this is an existing program established in the 1995-97 biennium and had been contained in the budget account for the director’s office (DHR Administration, 101-3150). He stated that for the coming biennium The Executive Budget recommended all costs associated with the program be removed from the director’s office and placed in a separate budget account. He pointed out the subcommittee voted to reduce staff in-state travel to $5,000 in each year of the 1999-01 biennium, a reduction of $2,195 each year, and to also continue a Letter of Intent containing an annual reporting requirement to the IFC, concerning all of the expenditures for the Family Resource Center program in the preceding fiscal year.

Senator Raggio called attention to page 9 of Exhibit E, showing all of the General Fund adjustments thus far in the listed items. Mr. Peri explained this shows the General Fund appropriation savings for the listed budgets in the Division of Child and Family Services (DCFS), shown on page 9 of Exhibit E.

HR, Children and Family Administration – Budget Page DCFS-1 (Volume 2)

Budget Account 101-3145

Mr. Peri said this is the central administrative account for the DCFS. He reviewed the closing actions of the joint subcommittee, shown on page 11 of Exhibit E.

Senator Raggio said that in one of these budgets there were several positions suggested by the counties. Mr. Peri stated this budget recommends 3 new Social Worker III positions in M-205 and 16 additional positions in E-256. Both recommendations are shown on page 10 of Exhibit E. Senator Raggio said he recalled there was testimony that there could be major problems if the positions are not approved. He thought this might be the budget to which the testimony pertained.

Mr. Peri recalled a discussion that had ensued on S.B. 288, which proposes a pilot program between Washoe County and DCFS.

Mr. Peri stated that if the positions referenced by Senator Raggio were to be added, this would be the appropriate budget. He said his recollection of testimony before the committee is that DCFS felt the legislation could be accommodated with existing resources, but May Shelton, Washoe County Social Services, felt some positions were needed. Senator Raggio said the committee recommended amend and do pass on S.B. 288. He stated 2 new positions were requested. Mr. Peri said he believed Ms. Shelton has "reconsidered to potentially 1 position." Senator Raggio said that since the bill has been processed he feels at least 1 position should be added for the pilot program.

HR, UNITY/SACWIS – Budget Page DCFS-12 (Volume 2)

Budget Account 101-3143

Mr. Peri reported this is the automation budget for the Division of Child and Family Services and represents the division’s compliance with a federal mandate to automate foster care and adoption information systems. He reviewed the recommended budget and technical adjustments approved by the Joint Subcommittee on Human Resources/K-12, shown on pages 12-13 of Exhibit E.

Mr. Peri said DCFS informed the joint subcommittee during one of its hearings that the contractor selected for the UNITY (Unified Nevada Information Technology for Youth) Automation Project and currently working on the project, BDM International, would not be able to fully complete all deliverables scheduled for FY 1999. As a courtesy the agency informed the joint subcommittee of the situation and indicated the deliverables would be pushed back to FY 2000. Mr. Peri said the issue of how to fund the delay became a concern. He noted an option was chosen, in agreement with the DCFS, the Budget Division and the joint subcommittee, which basically allows approved funding in FY 1999 to be carried forward into FY 2000, to accommodate the expenditures. He said the new estimated implementation date is the end of January 2000, versus the original date of October 1999.

HR, Child Care Services – Budget Page DCFS-20 (Volume 2)

Budget Account 10-3149

Mr. Peri explained the joint subcommittee approved additional federal Title IV-E revenue based upon revised agency calculations. He said the approved increase adds $65,256 in FY 2000 and $69,149 in FY 2001. Mr. Peri stated the General Fund would be decreased by the same amounts.

HR,Youth Community Services – Budget Page DCFS-24 (Volume 2)

Budget Account 101-3229

Mr. Peri said this budget is also known as the child welfare budget. He pointed out the closing recommendations are on page 23 of Exhibit E. He stated the joint subcommittee made no adjustments other than those indicated. He reminded the committee of the difficulties this account has incurred in the past, with the volatile, sometimes uncontrollable expenditures on children’s placement costs. He said the last action approved by the IFC in April augmented this budget by $1,035,000 to meet projected expenditures through the remainder of the current fiscal year 1999. Mr. Peri pointed out this action brought total expenditure authority in this year to $40,944,569, which compares to the amounts budgeted for the coming biennium of $41,265,234 in FY 2000 and $42,828,770 in FY 2001.

Senator Rawson noted there were 106 out-of-state placements and that number has decreased to 21. Senator Raggio said it is still an amazing expenditure that has to be provided for.

HR, CFS Juvenile Justice Programs – Budget Page DCFS-43 (Volume 2)

Budget Account 101-1383

Mr. Peri reviewed the technical adjustments and closing actions recommended by the joint subcommittee shown on pages 24-25 of Exhibit E. He pointed out the joint subcommittee also approved continuing a Letter of Intent for a reporting requirement to the IFC on the Community Corrections Block Grant program. He said that will require a semiannual report to the IFC on the distribution and use of those funds by judicial districts, for designing and implementing programs on the local level that reduce or limit commitments to the state’s juvenile training centers.

Senator Raggio invited testimony on S.B. 411.

Senator Ann O’Connell, Clark County Senatorial District No. 5, spoke in support of S.B. 411 and the amendments which will be presented to the committee this morning. She testified:

Samuel P. McMullen, Lobbyist, AT&T, testified on behalf of AT&T and a consortium of telecommunication and utility companies that are represented in a letter to Senator Mike McGinness (Exhibit F). He said all of the people signing the letter have made a commitment to work with local governments on a Legislative or Executive Branch study to resolve a number of issues that are presented by this policy question. He pointed out that S.B. 411 presents a "very pure" policy issue: whether or not intangible values should be utilized in the valuation for ad valorem property taxation. He called attention to an attachment to Exhibit F containing a proposed amendment to S.B. 411. He said he believes this amendment is acceptable to all concerned. Mr. McMullen explained this amendment would phase in the impact of the bill over 5 years, and ensures there are some hold-harmless provisions so that the local governments, in the first interim, are not hurt. He said that presumably, the study will lead to a far-ranging discussion and set of recommendations relating to this area, so that by next legislative session, if necessary, some adjustment can be made.

Mr. McMullen pointed out the amendment would make the value of the intangible assets decrease over the tax years beginning July 1, 2000. He said that in 2000-01, 100 percent of the value would be subject to assessment; then it decreases, until July 2003, to 33.3 percent and to zero the next year. He said the amendment tries to demonstrate good faith in making sure that impacts on the local governments are accommodated, understood, and sensitively treated.

Mr. McMullen said the local governments will testify on an amendment that has a few changes and his group is agreeable to the changes, in terms of the study. He stated the theory on the study is that it should be technical and directed to these issues; therefore, it requires some expertise, not only in the technical and taxation area, but also on the technical and practical side of the telecommunication businesses involved. Consequently, the group is looking for a committee that has representatives from the telecommunication industries, as well as local governments in the state. Mr. McMullen said it is the group’s intention that a report be made to the legislative committee created by S.B. 253 of the Sixty-Ninth Session (the "253" committee) which would be "of equal dignity" to all parties involved. The purpose of the report would be to make sure the issues are adequately addressed and processed through the full committee based on the subcommittee’s recommendations.

Robert S. Hadfield, Lobbyist, Nevada Association of Counties, presented testimony on an amendment outlining the details of the study that would be completed under the auspices of the "253" committee. He said, "The request is to undertake a broad-based study of those industries that are currently treated, for purposes of taxation, using centrally assessed properties." He stated the concern is that the taxation system of Nevada has not kept up with the change in the way the Utilities industry operates and what the future of the industry may be. He said a study, over a 2-year period, would take a look at the current system of taxation, and the utilities industry itself, to find a way to devise a better system of taxation that treats the industry fairly and equitably and captures the business being done in the state without creating a windfall profit for local government.

Mr. Hadfield stated, "The proposed amendment deletes letter (g) under section 4, and asks that any subcommittee created, report to the 253 legislative committee." Also to be included is that the work that the committee would perform would be to study the extent to which any local government or political subdivision in the state provides services in competition with those businesses that are centrally or locally assessed.

Mr. Hadfield remarked:

Mr. Hadfield stated it is clear no one knows what the recommendations will be, but some tasks to be done that will ensure the integrity of the proposal have been outlined.

Thomas J. Grady, Lobbyist, Nevada League of Cities, testified that he and Mr. Hadfield have been authorized by counties and cities to convey that they agree to this amendment. He said the two have been meeting on a regularly with the local governments, as well as with the utility industries. They feel that all of the local governments are in favor of this amendment and, definitely, the study and what is hoped will come out of the study.

Senator Raggio said apparently there is agreement with the phase-in that has been proposed. He asked whether this amendment requests a study. Mr. Grady answered the industry has agreed to the study and the agreement is that the study would be under the 253 committee. A report would be made to the Legislature at the next legislative session, and if the "study comes out as hoped," the phase-in would begin.

Senator Raggio asked when the phase-in would begin. Mr. Hadfield replied it would begin July 1, 2001. He said it has been agreed that the telecommunication industry has some real issues regarding the method of taxation. Rather than having litigation go forth, it is being agreed to change the law and put in place a makeup revenue mechanism during that time to hold harmless. The issues can then be addressed from the standpoint of tax policy and studied over the next 2 years with the goal of returning to the Legislature with perhaps a better methodology for "the utilities industry as a whole."

Senator Raggio asked when the phase-in would actually occur under this amendment. Stephanie Tyler, Lobbyist, Nevada Bell, said the phase-down would not actually be felt until July 1, 2001, at the end of the next legislative session. Senator Raggio asked why the phase-in amendment is being considered if there is to be a study and legislation could be enacted next session. Ms. Tyler answered the precedent-setting nature of "removing intangibles" is very important.

She stated:

Ms. Tyler reiterated that the precedent of removing intangibles, as a method of taxation is very important to the utilities industry and is an issue that has been worked on with the Department of Taxation for a number of years. She stated it is an important policy issue.

Ms. Tyler noted work was done with the local governments in regard to this amendment. She said the important issue here is parity. As the utility industry moves forward and becomes more and more like "main street" business, it is important that the industry be looked at, from the taxroll standpoint, as such. Ms. Tyler remarked there are a number of important safeguards within this amendment. She stated the industry is very supportive of the 253 committee.

Mr. McMullen added this has been a constructed settlement, in terms of a number of the issues. He stated he believes this amendment is important because it created the security that allowed discourse to begin. He said this was the mechanism that created "enough comfort" to have arrived at this amendment. He maintained the amendment is very important as a piece of a composite structure in looking at these issues.

Senator Neal inquired about the money that will be lost to the counties. Mr. McMullen said the amount of the money is somewhere in the range of $1 million, but the attempt was made to create a mechanism in this amendment that no matter what the dollars are, by relating the mechanism to percentages of assessed value and makeup provisions there would be no lost revenue. Senator Neal asked whether there is a termination of that action. Mr. McMullen answered it expires on its own terms. If this is the only legislation enacted on this issue, it would terminate "as it rolls through the provisions." The last year it would have any effect is the tax year commencing July 1, 2003. Senator Neal said the counties would have to make up that money sometime in the future. Mr. McMullan said the assumption is that these are very fast-growing assets, in terms of valuation. He stated the local governments have been very kind in working with the industries, in terms of looking at the growth of assets as at least one thing that makes them feel comfortable. He said, "My impression is, that at the point of termination, the assessed valuations will be well exceeding what I think the issue might have been in terms of deletion of intangibles."

David Pursell, Executive Director, Department of Taxation, explained that in administering the amendment, the department will keep track of the value of the intangible amount so it can be reported to the 253 committee year by year what the effect is on all of the governments receiving an allocation of that assessed value. He said that depending on what the 253 committee determines, after all the facts are submitted it can be seen what the impact will be and how the impact can be mitigated with the local governments. He pointed out the information will be provided year by year when the Nevada Tax Commission certifies the values each October. He said that this October the intangibles, and what the value is of the intangibles will be identified and reported to the 253 committee.

Senator Neal asked, "What if it is less than what is presently taken in by the counties?" Mr. Pursell answered that is something the committee will have to take into consideration as the issue is studied. He said the value of these types of companies has continued to increase, and with the state continuing to grow, a decrease in value would be a change in what has historically happened. He explained the Department of Taxation would be showing the committee the value of those intangibles that could impact the local governments. He maintained they will know what the difference is.

Carole A Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in support of S.B.  411 as well as the amendments to the bill. She said there is a point that is very important relative to the policy dealing with the state. Noting there are cases in court over this issue, she asserted it is much better that the Legislature deal with this issue and take recommendations from a subcommittee than have a court decide that article 10, section 1 of the Nevada Constitution, for uniform and equal valuation and assessment, is being violated.

Senator Raggio asked what the composition is of the 253 subcommittee. Senator O’Connell answered there are actually two committees in one. She explained there is a technical committee, which is made up of all of the local government finance individuals, and there is the voting committee, which is made up of legislators. Serving from the Assembly are Mr. Price, Ms. Freeman, Mr. Neighbors, Mr. Humke, and Mr. Goldwater and from the Senate, Senators McGinnis, Coffin, Porter, and O’Connell.

Senator Raggio closed the hearing. Noting that several of those signing the letter to Senator McGinness (Exhibit F) are clients of the law firm in which he is a partner, he indicated he will not participate in the discussion or vote on this bill.

Senator Raggio closed the hearing on S.B. 411 and the committee resumed closing budgets.

HR, Youth Alternative Placement – Budget Page DCFS-48 (Volume 2)

Budget Account 101-3147

Mr. Peri reviewed the closing actions of the Joint Subcommittee on Human Resources/K-12 shown on pages 26-27 of Exhibit E. He stated the joint subcommittee reduced the total available in the budget in FY 2000 for out-of-state and contract placements from $945,187 to $850,000, resulting in a reduction of General Fund support of $95,187. He said an addition to the China Spring Youth Camp was also approved. He noted the increases were apportioned between state and county funds in accordance with the existing funding formula.

Mr. Peri said the DCFS administrator requested flexibility in expending the out-of-state and contract placement funds for juvenile correctional placements over both years of the biennium. He pointed out if this request is approved, the General Appropriations Act would need specific language to allow the carryforward of the unexpended General Fund portion of those funds from FY 2000 to FY 2001. He noted the joint subcommittee agreed to allow the use of approved funding of $850,000 over both years of the biennium.

HR, C&FS – Juvenile Correctional Facility – Budget Page DCFS-51 (Volume 2)

Budget Account 101-3148

Mr. Peri said this is a new budget recommended by the Governor to provide contractor payments for the new juvenile facility that is to open in June 2000. He called attention to the primary adjustments shown on page 39 of Exhibit E. He said these adjustments take into account a revision received from the Budget Division shown on pages 40-49 of Exhibit E. He stated the joint subcommittee approved this revision.

Senator Raggio asked why there is an adjustment in the General Fund. Mr. Peri explained that the addition of $513,014 in E-375 was to add interest payments in FY 2000.

HR, Youth Parole Services – Budget Page DCFS-67 (Volume 2)

Budget Account 101-3263

Mr. Peri said the Joint Subcommittee on Human Resources/K-12 recommended and approved the adjustments and recommendations shown on page 51 of Exhibit E. He pointed out there is a letter, shown on page 52 of Exhibit E, indicating there will be funding in FY 2000 for 2 federally funded Intensive Aftercare Program (IAP) positions scheduled to be deleted at the end of FY 1999 and therefore the 2 positions were continued. He reviewed the closing action approved by the joint subcommittee.

HR, Chapter I-Special Education Project – Budget Page DCFS-75 (Volume 2)

Budget Account 101-3276

Mr. Peri reviewed The Executive Budget recommendations as well as the technical adjustments and closing actions approved by the joint subcommittee, shown on pages 53-54 of Exhibit E.

Senator Raggio asked whether the budget will allow for the Home Activities Program for Parents and Youngsters (HAPPY) program, which has been successful in southern Nevada, to be expanded to northern Nevada. Mr. Peri answered yes. He explained the HAPPY program is primarily for rural Nevada and portions of southern rural Nevada and removes the program from the Chapter I budget and moves it to other accounts within the DCFS.

HR, Northern Nevada Child & Adolescent Services – Budget Page DCFS-81

Budget Account 101-3281

Mr. Peri said there are no recommendations in this budget other than a technical adjustment shown on page 55 of Exhibit E.

HR, Southern Nevada Child & Adolescent Services – Budget Page DCFS-89

Budget Account 101-3646

Mr. Peri said pages 57-58 of Exhibit E summarize the changes made by the joint subcommittee and the technical adjustments, issues, and closing actions approved by the subcommittee. He stated there is a potential shortfall in the current fiscal year and the Budget Division and DCFS are working together to resolve the problem. He said it appears there will not be a request for a supplemental appropriation.

Referencing S.B. 411, heard earlier in the meeting, Senator Raggio suggested ordering the amendment to S.B. 411 and taking action once the amendment is ready.

Mr. Comeaux explained that the Office of the State Treasurer has refunded over $83 million in bonds, which will result in a savings, over time, of approximately $7 million. He said the refunding was restructured such that most of the savings, in terms of reduced cash flow, will occur in the 2 years of the next biennium. He stated that means the debt service requirements out of the Bond Interest and Redemption Trust Fund will be reduced by approximately $4 million over the next biennium. He said what the Governor is proposing, as a mechanism to address the most critical problems in regard to the condition of K-12 schools, is to eliminate from the budget the General Fund appropriation that was proposed for the debt service portion of the contract on the privatized southern Nevada women’s prison. That debt would be serviced out of the Bond Interest and Redemption Trust Fund.

Mr. Comeaux pointed out the amounts "almost match up perfectly." He said the debt service is approximately $70,000 more, over the 2 years, than the cashflow savings will be, and there is enough "room in" the Bond Interest and Redemption Trust Fund to absorb the $70,000. He stated that a General Fund savings of approximately $4.6 million would be realized. He said the Governor proposes using $2.7 million of the savings to provide payment of the short-term debt that White Pine County is faced with, in the amount of $2,031,337. He noted that figure is based on a June 1, 1999, payoff. He said if the debt is structured so that this money is not available until July 1, 1999, then the cost in additional interest would be between $8,000 and $9,000. Mr. Comeaux said the second item of $700,000 would be for the acquisition and siting of a modular elementary school in Pioche, Nevada. He stated these are the two critical needs that have come to the Governor’s attention. He said he has provided this information (Exhibit G) to Mr. Miles.

Senator Raggio asked, "Is it assumed that if the state approves this, that the modular school buildings will be state property?" Mr. Comeaux said he has not given that any thought, but he would assume that if the appropriation were made directly to the school districts it would be their property. He stated it would depend on how the appropriation was handled. Senator Raggio asked whether the criteria that was discussed is shown in the letter (Exhibit F). Mr. Comeaux answered yes and said that the two entities meet the criteria.

Senator Raggio indicated that the concern was that there be specific criteria if this proposal were to be approved, so the action would not otherwise be cited as a precedent.

Senator Coffin pointed out that because the language is drawn narrowly to meet one school district’s problem does not mean the problem does not exist in other ++counties, especially the small ones. He said he does not believe it is possible to avoid establishing a precedent by drawing narrow language in the bill, when the general concept is precedent-setting. He stated many of the school districts are near the statutory maximum and many have schools in their district that cannot be repaired because the districts do not have the money. Additionally, every district has assessed valuation which is declining because "that is the way the formula is written." Senator Coffin said the only reason some counties are having an increase in revenues is that there is new construction.

Mr. Comeaux emphasized the intention for the criteria listed in No. 2, shown in Exhibit E, was that to be eligible the district must have a net decrease in assessed value. Senator Coffin maintained that if the proposal is to be approved, the entire need of the school districts should be addressed. He asked whether there is a proposed bill for school construction to be paid for from the General Fund. Mr. Comeaux said there is a bill in the Assembly from Ms. Giunchigliani that would set up a funding mechanism. He did not recall the details of how the Bond Interest and Redemption Trust Fund would be accessed.

Senator Raggio said that at this point, a bill needs to be drafted for the purpose discussed. Mr. Miles pointed out that White Pine County does not qualify under all three categories of the established criteria. He said the county’s assessed value had declined, and this last year it was held even; but the White Pine County payment is for a short-term debt that is for more than just construction. He recalled that equipment and other items were involved in that debt, so the word "construction" was to be left out for White Pine County. He stated Lincoln County’s project is clearly for construction. He said when he read the criteria he thought that in this instance, it applied primarily to Lincoln County, as opposed to White Pine County, "because it was simply the payment of a debt."

Senator Raggio agreed White Pine County probably would not qualify for declining property tax values.

Senator Neal stated he was under the impression a bill draft had been requested. Senator Raggio said he thought so too. Mr. Miles said the bill is currently being drafted.

The meeting was adjourned at 11 a.m.

RESPECTFULLY SUBMITTED:

Patricia Hampton,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: