The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:15 p.m., on Monday, February 8, 1999, in Room 2149 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 Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Dina Titus

Senator Terry Care

GUEST LEGISLATORS PRESENT:

Senator Bernice Mathews, Washoe County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Amelie Welden, Committee Secretary

OTHERS PRESENT:

Chairman O’Connell opened the meeting as a subcommittee meeting and introduced Senate Bill (S.B.) 48.

Senator William J. Raggio, Washoe County Senatorial District No. 3, stated S.B. 48 represents a recommendation from the Legislative Committee on Education, which met ten times during the interim. He said other bills representing the committee’s recommendations will be heard in various committees of the Legislature. Collectively, these measures are intended to further the goals of the Nevada Education Reform Act, as adopted by S.B. 482 of the Sixty-ninth Session.

Senator Raggio testified that in March 1998, Neil Stevens, Superintendent, Eureka County School District, appeared before the Legislative Committee on Education. Senator Raggio said Mr. Stevens at that time explained Eureka County’s situation with regard to dropping gold prices and the ensuing decline in revenues from the tax on net proceeds of minerals. Senator Raggio pointed out Eureka County School District does not receive state aid under the Nevada Plan because the revenue the county collects from local property taxes and local school support tax has, for the last 10 years, exceeded the amount the school district would have been guaranteed under the Nevada Plan. Currently, the Eureka County School District continues to draw enough revenue from its property and sales taxes to fund its operations. However, the decline in mining revenue has affected the school district’s budget. Senator Raggio said Mr. Stevens testified mining revenue was down $3.4 million in Eureka County over the last 2 fiscal years. Thus, in fiscal year 1999, the school district’s budget was expected to be $1 million to $1.5 million less.

Senator Raggio explained the Eureka County School District placed $500,000 in a revenue stabilization fund in order to protect against downturns in the mining economy. When the school district tried to add additional monies to this fund, however, a question arose over whether the district could add more than 10 percent of its prior year’s expenditures.

Senator Raggio gave details regarding S.B. 456 of the Sixty-eighth Session, which authorized school districts and other local governments to establish four types of funds for improved local financial administration.

Senator Raggio reviewed the funds, the first being for extraordinary maintenance, repair or improvement of capital projects. Another fund included extraordinary maintenance, repair, or improvement of local governmental facilities. The third fund was for construction of capital projects, and the fourth was a revenue-stabilization fund, or a fund to stabilize operation of local governments.

Senator Raggio affirmed the law allows a governing body to establish a revenue-stabilization fund by resolution. The money in such a fund may only be used when the total revenue in the governing body’s General Fund falls short of total anticipated revenue in the fiscal year in which the money is used. He said money remaining in the fund at the end of the year may not revert to any other fund or be a surplus for any other purpose. Senator Raggio explained that these provisions ensure money in the revenue-stabilization fund will be available for the aforementioned limited purposes only. Existing law further states that the balance in a revenue-stabilization fund may not exceed 10 percent of the General Fund expenditures of the previous year, with the exclusion of items like federal funds. Senator Raggio expressed this monetary cap was intended to ensure that an unreasonable amount would not be placed in such funds.

Senator Raggio said the Eureka County School District wanted to increase the amount of money in its revenue-stabilization fund above 10 percent of the prior year’s expenditures in order to cushion the school district against staff layoffs. The school district asked to be allowed to add 10 percent of the prior year’s expenditures each year. Senator Raggio pointed out the Legislative Committee on Education asked the district to review the problem and offer suggestions for amendments to existing law. The school district consulted with advisers and convened a budget crisis group, which formulated a plan to cut 6 staff members, 1½ of whom were certified teaching staff.

Senator Raggio stated that in May 1998, the Eureka County School District asked the Legislative Committee on Education to consider a bill draft request that would increase the cap on the revenue-stabilization fund to 30 percent of the prior year’s expenditures. School districts surrounding Eureka County suggested a $2 million cap in addition to the 30 percent limit. They further suggested that any amendment of this type should apply to small school districts only. Senator Raggio explained Superintendent Stevens indicated the school district does not intend to stash money; it simply wants enough money on hand to avoid mid-year reductions in staffing.

Senator Raggio concluded by reiterating the Legislative Committee on Education’s support for S.B. 48. The bill allows school districts to add to their revenue-stabilization funds an amount not to exceed 10 percent of the previous fiscal year’s General Fund expenditures up to a cap of 30 percent of the previous fiscal year’s General Fund expenditures or $2 million, whichever is less. Senator Raggio stressed under this bill, these provisions apply only to counties whose populations are less than 100,000 people.

Senator Neal asked where the money for revenue-stabilization funds is generated. Senator Raggio answered the money comes primarily from local revenues that are dedicated for school purposes. Aside from Eureka, most counties affected by this bill are further guaranteed an amount from the distributive school account.

Douglas C. Thunder, Deputy Superintendent, Administrative and Fiscal Services, State Department of Education, offered the department’s support for S.B. 48. He presented prepared testimony and a chart (Exhibit C) showing the bill’s possible impacts on various Nevada school districts. Mr. Thunder emphasized Eureka County is the most concerned county regarding this measure. He stated this is an emergency measure and is not designed to address all the problems caused by the net proceeds issue. He pointed out, however S.B. 48 will help school districts get through times when mining activity declines.

Mr. Thunder said one question not addressed is what happens when a county receives more revenue than they need from net proceeds. Existing law prohibits the Nevada Department of Education from collecting any surplus money from school districts. Mr. Thunder remarked some of that money should certainly be used to ensure relevant school districts can recover when mining activity tapers off.

Mr. Thunder pointed out that very few school districts are able to avail themselves of these special funds, probably because of the way revenue is determined for school districts as opposed to other local governments. He indicated because the enrollment in the Eureka County School District is small compared to other districts, a relatively large amount of revenue coming from the net proceeds of mines has a far greater effect on that county’s school district. Also, because Eureka has been the leading producer of gold in the state, it is the county most affected by fluctuations in net proceeds. Mr. Thunder said in other school districts besides Eureka County, mining revenues are less, and enrollment is at least three to four times greater.

Mr. Thunder stated 75 cents per $100 of assessed valuation is collected on net proceeds in Eureka County, which is 25 cents more than the amount the Eureka County School District would receive from the state. He said when the county receives more than the state would provide, the surplus becomes an additional amount of revenue which the school district must budget and use.

Mr. Thunder commented Eureka County would only be able to put approximately $600,000 in a revenue-stabilization fund under existing law. Under S.B. 48, the county could put approximately $1.8 million in the fund.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, also offered support for S.B. 48. Ms. Vilardo pointed out that Eureka County is not the only county which would benefit from S.B. 48. She offered the example of Nye County, where school enrollment projections fell short in 1998-99, forcing the Nye County School District to adjust its budget by $1.3 million. Ms. Vilardo said allowing school districts to put surplus money into revenue-stabilization funds could preclude staff reductions and classroom size increases, thus allowing the school districts to maintain a current level of service without having to take any drastic cuts. She emphasized an increase in the cap on such funds is important because of the sizes of smaller school districts.

Chairman O’Connell closed the hearing on S.B. 48, and opened the hearing on S.B. 52.

Senator Bernice Mathews, Washoe County Senatorial District No.1, introduced S.B. 52 which was brought to her by constituents who attended the meeting to testify.

Paula Berkley, Lobbyist, Reno-Sparks Indian Colony, stated S.B. 52 is intended to facilitate land swaps. The idea for such a bill originated in 1998, when Washoe County and the Reno-Sparks Indian Colony wanted to swap a piece of land. Ms. Berkley indicated during that process, they found that Native American tribes are not defined as public agencies. Thus, the two entities had to undergo a cumbersome process of setting up escrow accounts and exchanging checks.

Ms. Berkley explained section 1 of S.B. 52 adds Native American tribes as public agencies who can sell, lease or exchange lands with other public agencies. Currently the City of Reno, the City of Sparks, and Washoe County can swap lands with each other, but not with Native American tribes.

Ms. Berkley went on to describe section 2 of S.B. 52, which would allow a public agency to give property to a Native American tribe, as long as that property will be used for a public purpose. She offered an example of tourism. Ms. Berkley stated when Europeans travel to the United States, they are interested in seeing Native Americans. If the Reno-Sparks area wanted to enhance tourism by giving the Reno-Sparks Indian Colony some land for a cultural center, that would be an example of land to be used for a public purpose.

Ms. Berkley stated section 3 of S.B. 52 would allow Native American tribes to exchange land with school districts. This section was necessary because school districts are not considered public agencies. Ms. Berkley said this section would allow land swaps between tribes and school districts to enhance school district locations. However, this section would not allow school districts to give property to Native American tribes. Ms. Berkley also summarized section 4 of S.B. 52, which would require that such land exchanges be handled in accordance with the rules of a public agency rather than those of a school district. This section is included because public agency rules regarding public hearings and other provisions are more stringent than those of school districts.

Ms. Berkley pointed out S.B. 52 does not require action of anyone and concluded that it provides a "win-win situation."

Chairman O’Connell asked whether other states have passed similar legislation. Ms. Berkley responded that she would research that question.

Arlan D. Melendez, Lobbyist, Chairman, Reno-Sparks Indian Colony, emphasized the Reno-Sparks Indian Colony has always tried to establish a positive working relationship with counties and cities. He stated in 1997, the tribe successfully supported S.B. 146 of the Sixty-ninth Session, which stipulated local governments would not lose the tax value on land that tribes put into trust.

Mr. Melendez testified S.B. 52 defines and streamlines the process for land exchanges between Native American tribes and public agencies, thus providing a solution that meets everyone’s needs. He said this bill enables the tribe to work out land exchanges with counties, cities and the state without having to come back to the Legislature.

Senator O’Connell asked for more information about the land exchange in 1998. Ms. Berkley explained the Reno-Sparks Indian Colony purchased four or five acres in Verdi with the original intent to build a smoke shop there. Even though the property was zoned for commercial use, some nearby residents requested a buffer from such development. Ms. Berkley elucidated the Reno-Sparks Indian Colony looked for an opportunity to swap land to provide such a buffer. The colony exchanged one acre of their Verdi land for two acres of county land in Hungry Valley, the site of a dormant fire station which the county had unsuccessfully tried to sell a few times. Ms. Berkley stated the entities had to set up an escrow account between the fire station, the fire district, Washoe County, and the Reno-Sparks Indian Colony.

Senator Neal asked if the sovereign rights of a tribe apply to land when the tribe engages in such arrangements as described above. Ms. Berkley replied the sovereign rights of the tribe are not affected. The tribe determines whether or not to put land they own into trust. Once the land is in trust, it is owned by the federal government, not the tribe. Ms. Berkley asserted land in trust would almost never be swapped. An exception could occur, as it did many years ago, when the Stead Airport and the Reno-Sparks Indian Colony swapped land for expansion of the airport. The tribe had to go to Congress to set up the land swap, which took 5 years. Ms. Berkley added most of the time, the tribe purchases land for economic development reasons, and this land is usually put into trust. Senator Mathews reiterated land put into trust no longer comes off of the tax rolls since the enactment of S.B. 146 of the Sixty-ninth Session.

Senator Care asked whether use of the word "tribe" in S.B. 52 is sufficient to include all Native American tribes, especially considering that the Reno-Sparks Indian Colony uses the word "colony" rather than "tribe" in its title. Ms. Berkley replied affirmatively, noting the word "tribe" is the general legal term used in state statutes.

Senator Titus referred to Chairman O’Connell’s previous question regarding similar legislation in other states. She claimed perhaps it is likely Nevada is the only state which has not enacted legislation like S.B. 52. Ms. Berkley said she hopes that is the case, adding that in her experience, tribes and states usually work well together.

Madelyn Shipman, Lobbyist, Assistant District Attorney, Civil Division, Washoe County, testified she was involved in advising the county’s commission on the 1998 land swap with the Reno-Sparks Indian Colony. She was not aware whether other states have arrangements similar to those in S.B. 52. Ms. Shipman stated the bill clearly deals with sovereigns, like the State of Nevada, the United States government, and the departments and agencies of the federal government, as public entities. As a result of this system of "sovereigns within sovereigns," Washoe County regards a Native American tribe as virtually the same as any sovereign public agency or entity.

Ms. Shipman emphasized S.B. 52 would not change existing process, which requires public hearings and notification. The bill simply allows results to be more easily accomplished. Ms. Shipman concluded Washoe County supports S.B. 52. She said she would be happy to find out about similar legislation in other states.

Chairman O’Connell questioned whether a casino could be established on property gained by a Native American tribe in a land swap. Ms. Shipman answered such questions are governed by separate compacts with the state. In the case of Washoe County, at least, trust areas are already designated for various uses. Ms. Shipman stated S.B. 52 has nothing to do with trust, and she doubted Washoe County would enter into a land exchange involving trust property. Ms. Shipman asserted the trust issue has sometimes been a contentious issue, but in the case of the 1998 land swap between Washoe County and the Reno-Sparks Indian Colony, it was resolved.

Chairman O’Connell asked whether the property the Reno-Sparks Indian Colony received in the 1998 land exchange is now under the autonomy of the tribe rather than the autonomy of the State of Nevada. Ms. Berkley clarified the property will be under the autonomy of the tribe when it goes into trust.

Senator Neal repeated his question about Native American tribes’ sovereign rights as they apply to property gained through a land swap. Ms. Shipman answered tribal sovereign rights do not necessarily apply to such land, though tribal ownership rights do apply. Only if the tribe places property into trust does it become a sovereign territory. Ms. Shipman stated such issues are generally resolved through the judicial process and/or a field process as it relates to the placement of that land in trust. Ms. Berkley added land owned by a tribe but not in trust is legally called fee land.

Chairman O’Connell closed the hearing on S.B. 52 and adjourned the meeting at 3:00 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

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