The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 10:20 a.m., on Saturday, May 15, 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 Bernice Mathews

COMMITTEE MEMBERS ABSENT:

Senator Bob Coffin

STAFF MEMBERS PRESENT:

Gary Ghiggeri, Principal Deputy Fiscal Analyst

Johnnie L. Willis, Committee Secretary

OTHERS PRESENT:

John P. (Perry) Comeaux, Director, Budget Division, Department of Administration

DEPARTMENT OF PRISONS

Senator Raggio called on Gary Ghiggeri, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, to report on Closing List No. 31 (Exhibit C Original on file in the Research Library.) regarding the prisons system budgets. Mr. Ghiggeri indicated he would summarize the recommendation for closure made by the Joint Subcommittee on Public Safety/Natural Resources/Transportation (Exhibit D).

Mr. Ghiggeri said that in summary the subcommittee agreed with the Governor’s recommendation to close the Southern Nevada Correctional Center. He said the closure of the facility has been delayed until September 1, 2000, because of anticipated delays in the construction of the Cold Creek State Prison. He stated the best estimate is that both phases of the Cold Creek State Prison will be operational September 1, 2000.

Mr. Ghiggeri said the subcommittee did not agree with the recommendation to privatize medical services.

Mr. Ghiggeri noted that overall the closing actions, after extracting the onetime cost for the necessary startup supplies and equipment for the Cold Creek State Prison of about $2.9 million, reflect a net cost of about $65,000 in Fiscal Year (FY) 2000 and a savings of about $1.8 million in FY 2001.

Mr. Ghiggeri said the funding for the startup supplies and equipment for the Cold Creek State Prison is being recommended as a "oneshot" appropriation. He commented staff is currently reviewing that recommendation for duplications in the capital improvement bill and also any equipment or furnishings that can be transferred from the Southern Nevada Correctional Center.

Mr. Ghiggeri said that included in these closings is a recommended 5 percent salary differential for all custody officials at the Ely State Prison and the Lovelock Correctional Center. He said the Governor recommended the 5 percent salary differential for the custody officers at the Ely State Prison and a $6 remote area differential payment to all employees of the Lovelock Correctional Center. However, Mr. Ghiggeri remarked, the subcommittee recommended the 5 percent salary differential for custody officers instead of the $6 remote differential payment.

Mr. Ghiggeri stated the Department of Prisons budgets are "driven" by the number of inmates housed in each facility. He said reprojections of the inmate populations negated the need to place female inmates out of state in FY 2000. He noted the reprojections resulted in a savings of about $2 million in FY 2000. However, he said it is planned to house about 41 additional female inmates over what was anticipated in the Governor’s budget at the Southern Nevada Women’s Correctional Facility in FY 2000. He said this results in a cost of about $631,000, and that in balancing the difference between not having to house inmates out of state and housing the additional 41 inmates at the Southern Nevada Women’s Correctional Facility, the result is a savings of about $1.4 million.

Mr. Ghiggeri said the majority of the savings in the second year of the biennium comes from reducing the number of inmates that are placed in the Southern Nevada Women’s Correctional Facility. He said an approximate savings of $4.5 million is realized by that placement. He noted what is planned at this time is to convert the Jean Conservation Camp to female occupancy once the Cold Creek State Prison becomes operational. Mr. Ghiggeri said the conversion will provide housing for 240 female inmates. He said that is planned to coincide with the opening of the Cold Creek State Prison.

Mr. Ghiggeri said the Governor’s budget includes expanding the Silver Springs Conservation Camp by 48 beds. He said the recommended closing does not accommodate that expansion. He noted the female bed population for minimum custody can be housed at the current Silver Springs facility and the converted Jean Conservation Camp.

Senator Raggio inquired whether the expansion of the Silver Springs Conservation Camp was needed. Mr. Ghiggeri replied the expansion is not needed at this time.

Senator Raggio asked, in reference to the Jean Conservation Camp closing, whether there will be an effort made by the state to lease out the facility to acquire income. Mr. Ghiggeri replied yes and explained it was recommended that suggestion be communicated in a letter of intent.

Senator Raggio stated there was no need for more detail on the budget, because the committee had been following the discussions throughout the session. The senator asked Mr. Ghiggeri to highlight the letters of intent on the handout, "Department of Prisons: Letters of Intent and Legislation" (Exhibit E).

Mr. Ghiggeri said the first letter of intent is to direct the Department of Personnel to perform a compensation study for all custody officers employed in the department. Senator Raggio commented the committees information was that the study had not been performed in a long time. He said the committee should agree with the subcommittee’s recommendation to send a letter of intent to the Department of Personnel.

Mr. Ghiggeri said the second recommendation for a letter of intent on Exhibit E is to direct the State Public Works Board to include a penalty provision in the contract for Phase II of the Cold Creek State Prison construction project. Senator Raggio said the penalty provision is in anticipation of the "sole source contracting" situation, and can be included in the agreement.

Mr. Ghiggeri stated the third letter of intent recommended by the subcommittee is to the Department of Prisons to continue to track and monitor medical costs. He said this letter of intent would direct the Department of Prisons to report the tracking monthly to the Fiscal Analysis Division along with quarterly reports provided to the Interim Finance Committee. He said the subcommittee also expressed a concern that the Department of Prisons improve its tracking of all costs incurred in treating/housing inmates who are transferred from the Ely State Prison to the Ely Conservation Camp, and that when the private contractor is billed for the costs there should be added an annual inflationary increase.

Senator Raggio inquired whether this was the only letter of intent regarding medical services. Mr. Ghiggeri replied there is one item for inclusion in the General Appropriations Act that language be included to "not allow" privatization of medical services over the next biennium except in the Ely area. Senator Raggio asked whether there was privatization at the women’s prisons. Mr. Ghiggeri replied the women’s prisons and the Ely area prisons already have privatized medical services. He said the women’s prisons’ medical services are completely privatized.

Senator Raggio asked where the language for the appropriations act was documented. Mr. Ghiggeri replied it is under the "legislation section," page 2, item 2 of Exhibit E.

Senator Raggio suggested that if the language for the General Appropriations Act is included, there should also be a notice that if the state continues the same level of operation with the same problems occurring as at present, and the costs of the medical services remain at the same level, then there should be a strong notice that the next legislative session seriously reconsider the issue of privatization. He commented the privatization of medical services has been delayed for almost a decade. He inquired whether it was the intent of the subcommittee to eliminate the option of privatization. Mr. Ghiggeri replied he could not speak for the subcommittee but his impression was there was a consensus that this was the last chance for services to be improved.

Mr. Ghiggeri said the fifth item on the list of letters of intent indicates the subcommittee recommended to instruct the Department of Prisons not to expend any of the funding provided for the department to operate above emergency capacity if the fund is not required for that purpose. He said that throughout the budget closing the department is provided funding to operate above emergency capacity. He noted that included in the funding for the opening of the Cold Creek State Prison is the provision to hire 24 additional correctional officers and a counselor, 2 or 3 correctional officers and a counselor at the Nevada State Prison, and an additional counselor at the Lovelock Correctional Center. Mr. Ghiggeri said additional inmate-driven funding is provided for the purpose of hiring personnel. He explained that currently the male population is about 360 to 370 inmates below projection. He noted if the lower population continues there is a possibility the department will not need to operate above emergency capacity.

Mr. Ghiggeri said the sixth item recommended on the list of letters of intent is to direct the Department of Prisons to monitor and report the cost of operating the sewage aerators at the Ely State Prison. He explained that in a 1995 Capital Improvement Program (CIP) the cost of the aerator was around $116,000. He said the information being received now is that it costs around $36,000 a year to operate the aerator. He noted the subcommittee recommended those costs be monitored.

Mr. Ghiggeri explained there is an anticipated onetime revenue coming in from the reissuance of license plates. He said Prison Industries will see that funding in FY 2001 and a similar amount of funding in FY 2002. He explained item No. 7 on Exhibit E is the letter of intent the subcommittee recommended be sent to direct that those funds be accounted for separately and reserved until a plan for expending them can be developed.

Mr. Ghiggeri said the eighth item on the list is a letter of intent directing the Department of Prisons to provide quarterly reports to the Interim Finance Committee concerning the department’s progress in increasing the level of sales in the prison industries program from $3.4 million in FY 1998 to $4.8 million in FY 2000 and $5.7 million in FY 2001.

Mr. Ghiggeri said the ninth item on the list explains the subcommittee also requested a letter of intent be sent to the Department of Prisons enjoining it to aggressively explore staffing/scheduling plans to aid in recruitment and retention of staff at the Ely State Prison and the Lovelock Correctional Center. He said the subcommittee recommended that additionally the department should explore the feasibility of requiring a 1-week rotation for new hires at either Ely or Lovelock to address staffing problems at those facilities. He said the recommendation was that a report be provided to the Interim Finance Committee no later than December 1999 detailing activities in those areas.

Senator Raggio commented the subcommittee’s recommendation was a good idea. He recommended the Senate Committee on Finance support the subcommittee’s recommendation for the letter of intent and add to that letter that the prison explore the liability of the state providing housing for officers on a limited basis as a means to recruit staff for those facilities. He commented the information the committee is receiving is that there is not adequate housing in those areas. He noted it may take money to build quarters or a dormitory for officers who want to have their families live elsewhere.

Mr. Ghiggeri stated the final letter of intent on the list would be to direct the Department of Prisons and the Division of Parole and Probation to study alternative housing of prerelease inmates (inmates that have served his or her sentence and are preparing to be released) and post-parole inmates (inmates that have been awarded parole but are not yet released) and to provide a report to the next legislature. He said the intent was for the Department of Prisons and the Division of Parole and Probation to study the option of providing a housing arrangement in a reduced-cost setting to free up the higher-security beds.

Senator Raggio asked for a summary of the proposed legislation documented in Exhibit E. Mr. Ghiggeri responded by indicating the first item on Exhibit E is a piece of legislation which is required to enable the department to continue its practice of billing the Inmate Welfare Fund for inmates that are returned from the restitution centers to major institutions because of rule infractions if the inmate does not have sufficient funding in his or her personal account. He said the department has been doing this on an ongoing basis and this would "firm up" that practice.

Senator Raggio, referring to the second item on the list of legislation in Exhibit E, inquired why the subcommittee felt it was necessary to include the language "not allow" in the legislation for the General Appropriations Act. He asked why the "not allow" language is necessary if the Legislature is not authorizing the privatization of medical services. The senator said it was his belief that once that language was included in legislation it would remain there; therefore, he did not feel he could support the exclusion of future privatization of medical services for the prisons. He stated the statute would have to be repealed to privatize in the future. Mr. Ghiggeri replied that it should be "session law" and would only be valid during the next biennium. Senator Raggio pointed out it was not necessary to include the language "not allow" in the General Appropriations Act and reiterated that privatization of medical services would not be authorized by the Legislature. Mr. Ghiggeri replied there was no intent to put that language in the statute.

Mr. Ghiggeri, moving to the next item on the list, said that currently the forensic specialists employed by the Department of Prisons in the medical area are required to qualify semiannually in firearms. He explained those employees do not routinely carry weapons in the performance of their duties. He said there was a recommendation to pass legislation to exempt forensic specialists from having to qualify on the firearms on a semiannual basis.

Mr. Ghiggeri said there was also a recommendation to include language in the General Appropriations Act to allow the Department of Prisons to borrow from the General Fund for cash flow purposes pending receipt of federal funds for housing illegal aliens. He said the budget closings include about $2.6 million a year for that purpose.

Senator Raggio inquired whether there were bills for some of these legislative recommendations. Mr. Ghiggeri replied that currently there is not.

Senator Raggio noted that on the list one of the legislation recommendations is on decriminalization of marijuana and that it was not in any of the bills the committee was reviewing. Mr. Ghiggeri replied there is a bill on that, but there has not been a bill drafted on decriminalization of marijuana for the Senate Committee on Finance.

Senator Raggio, referring to the seventh item under the heading of Legislation on page 2 of Exhibit E, said the committee has the drug courts bill (S.B. 184), but has not heard anything on the "317 Program." Mr. Ghiggeri responded the "317 Program" is something the Governor is working on with the drug court to move inmates out of the prison system and place them in the drug court.

Senator Raggio stated the committee had not received any details on the plan. He noted the committee would have to review the drug court bill it had heard and said if there is a program of this kind that the Governor wants to come forward with, the committee needs to hear about it. Mr. Comeaux responded the Governor has had several discussions with some of the judges on this subject. He said he was not aware of where the planning is at present but would find out and relay that information to the committee.

Senator Raggio inquired whether Mr. Comeaux had an item regarding the prison system’s budgets to discuss with the committee. Mr. Comeaux replied he had sent a memorandum to Mr. Miles outlining a proposal that the Governor is making. He stated the Office of the State Treasurer recently completed refunding of about $83 million in bonds. Mr. Comeaux explained that transaction was structured so that the majority of the savings on the interest will be realized in the 2 years of the next biennium. He said the interest will be $4.5 million and will appear in the form of reduced debt-service requirements over the 2 years of the next biennium. He said the Governor is recommending the state remove from the General Fund appropriation the debt service piece of the payments for the Southern Nevada Women’s Correctional Center, budget account 101-3761. He said the amount in the budget is $2,308,934 a year. Mr. Comeaux asserted that if those debt service payments are made out of the Bond Interest and Redemption Trust Fund for the next 2 years it will "free up" about $4.6 million over the next biennium. He stated the Governor is recommending that $2.7 million of those freed-up funds be used to address the most critical problems the Governor is aware of for the K-12 school facilities and other related items in the state. He said the Governor is recommending that a little over $2 million of those funds be used for an appropriation to White Pine County to retire the debt that county has.

Senator Raggio inquired whether, with the refunding, there are sufficient funds to pay the debt service on the women’s prison as well as to address the Lincoln County School District problem and the White Pine County debt issue. Mr. Comeaux replied the savings total about $4.5 million and the debt service is about $70,000 more than that over the biennium. He stated there is enough room in the Bond Interest and Redemption Trust Fund to absorb the $70,000. He said that would free up $4.6 million in General Fund dollars that could be used for those projects. Mr. Comeaux asserted the adjustment that needs to be made in the prison budget is to reduce the appropriation by $2,308,934 in each year of the biennium, and then the debt service can be paid by the Bond Interest and Redemption Trust Fund.

Senator Neal inquired how the $4.6 million that would be freed up from the General Fund would be used. Mr. Comeaux replied those funds would be used to make the debt service payments on the privatized women’s facility in southern Nevada. He said those payments have been made and are proposed to be made with General Fund appropriation. Mr. Comeaux said if those payments are made from the debt service fund that would free up $4.6 million over the biennium to be used for other purposes, and the Governor is recommending the purposes for which those freed-up funds should be used.

Senator Neal inquired whether White Pine County’s debt was a priority for the Governor. Mr. Comeaux replied, "Yes, as is Lincoln County." He said the Office of the State Treasurer, in addition to the refunding mentioned earlier, has completed a bond swap which trades fixed-rate bonds for a lower-interest-rate variable bond. He noted it is a transaction where anticipated income is used for investments. Mr. Comeaux explained that in this case the intention is to use the "rainy day fund" as a guarantee of payment if that low variable rate goes above the fixed rate of the previous bond. He said the way the treasurer created the transaction was that he will receive a check for $5 million. He stated that in the legal opinion of the state’s bond counsel the $5 million is associated with the investment income not with the bond, and as a result it can be deposited into the General Fund. He said that basically the $4.5 million plus the $5 million amounts to a total of $9.5 million. Mr. Comeaux said the Governor’s recommendations for that $9.5 million is to use $2.7 million to address White Pine County’s debt and Lincoln County’s K-12 problems, $3.5 million to leverage "some private donation" for the high tech center in Pahrump, and $3.3 million for a water project "associated with" a bill in the Assembly.

Senator Raggio commented that for the committee’s purposes the committee needs to include the authorization to use the bond redemption funds for the purposes listed by Mr. Comeaux rather than using the General Fund. The senator reiterated that the letter of intent regarding the Department of Prisons aggressively exploring staffing/scheduling plans should have added to it that the department should also explore the liability of the state providing housing for officers on a limited basis as a means to recruit staff for those facilities.

Senator Raggio stated the language of "not allow" should not be included in the General Appropriations Act. He said that if an emergency arose during the interim, that language could create a problem by the implication of its limiting the available options. The senator said if the committee approves the recommended actions of the subcommittee, the language "not allow" should be deleted from the recommendations.

Mr. Ghiggeri informed the committee the Prison Warehouse Fund closing sheet (Exhibit F) had not been reviewed. He said that budget was assigned to staff to review and the adjustments which are reflected on the closing sheet are based on information provided by the Department of Prisons.

Senator Raggio inquired whether adjustments to the revenues in the Prison Warehouse Fund were shown on Exhibit F. Mr. Ghiggeri replied "Yes." Senator Raggio said that budget will be included in the motion.

Senator Raggio said all of the Department of Prisons budgets will be closed in accordance with the recommendations of the Joint Subcommittee on Public Safety/Natural Resources/Transportation. He said the Senate Committee on Finance also approves the issuance of the letters of intent recommended by the Joint Subcommittee on Public Safety/Natural Resources/Transportation and the proposed legislation as modified by the motion.

The Department of Prisons budgets are in The Executive Budget, Volume 3, and are listed as follows:

Budget Name Account No. Budget Page

Director’s Office 101-3710 PRISONS-001

Prison Warehouse Fund 101-3713 PRISONS-020

Prison Medical Care 101-3706 PRISONS-011

Southern Nevada Correctional Center 101-3715 PRISONS-022

Warm Springs Correctional Center 101-3716 PRISONS-027

Southern Nevada Women’s Correctional Facility 101-3761 PRISONS-031

Northern Nevada Correctional Center 101-3717 PRISONS-034

Nevada State Prison 101-3718 PRISONS-039

Southern Desert Correctional Center 101-3738 PRISONS-044

Ely State Prison 101-3751 PRISONS-050

Cold Creek State Prison 101-3762 PRISONS-054

Lovelock Correctional Center 101-3759 PRISONS-059

Jean Conservation Camp 101-3748 PRISONS-095

Silver Springs Conservation Camp 101-3749 PRISONS-099

Offenders’ Store Fund 240-3708 PRISONS-111

Inmate Welfare Account 660-3763 PRISONS-118

Prison Industry 525-3719 PRISONS-126

Prison Dairy 525-3727 PRISONS-137

Prison Industries Capital Project 525-3727 PRISONS-141

Senator Raggio adjourned the hearing at 11 a.m.

RESPECTFULLY SUBMITTED:

Johnnie L. Willis,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: