The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 3:00 p.m., on Wednesday, March 31, 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 Mark A. James, Clark County Senatorial District No. 8

STAFF MEMBERS PRESENT:

Amelie Welden, Committee Secretary

OTHERS PRESENT:

John P. Comeaux, Director, Department of Administration, testified S.B. 533 proposes a three-word amendment to Nevada Revised Statutes (NRS) 284.173, which sets forth requirements for state-agency contracts with independent contractors. He indicated section 6 of NRS 284.173 currently requires that all contracts with independent contractors, except those entered into by the university and community college system, be presented to the State Board of Examiners. However, Mr. Comeaux pointed out that section also allows the board to authorize its clerk to approve certain contracts, including those for amounts less than $5,000, those necessary to preserve "life and property" for amounts less than $25,000, and those entered into by the State Gaming Control Board for the purposes of investigating applicants for gaming licenses.

Mr. Comeaux explained S.B. 533 would add three words – "or his designee" – as set forth in line 24 on page 2 of the bill. He noted this change would allow the clerk to designate someone to approve contracts in the clerk’s absence. Mr. Comeaux stated he is currently the clerk of the State Board of Examiners and is the only person authorized to approve contracts. He expressed contracts can "stack up" if he is out of the office, and this backup can cause problems for agencies.

Mr. Comeaux emphasized he intends to personally approve contracts unless he is out of the office. He asserted he would designate the deputy budget director to perform that function in his absence.

Chairman O’Connell closed the hearing on S.B. 533 and opened the hearing on S.B. 419.

Senator Mark A. James, Clark County Senatorial District No. 8, stated he believes economic development requires the attention of the Legislature and the Governor, especially due to increased competition in and potential federal regulations on the gaming industry. Senator James emphasized Nevada should implement measures to encourage high-wage and high-skill jobs to locate in the state. He pointed out Nevada already has low taxes, minimal regulations, and a "business-friendly government."

Senator James continued he consulted Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development, and Mr. Shriver suggested job training is the most important measure Nevada could take in encouraging businesses to locate in the state. Senator James indicated Mr. Shriver provided information from Texas, Florida, and California, which have instituted programs allowing employers to apply to the state for job-training funds. Senator James noted these programs ensure employers that the state will participate in employee training. He noted S.B. 419 provides for a similar program and requires that the individuals trained be Nevada citizens.

Senator James pointed out if a new business comes to Nevada, especially considering the state’s limited university-system infrastructure, the business may not find enough workers trained in its industry. For example, he commented biotech and high-tech companies have been interested in coming to Nevada.

Senator James explained S.B. 419 would reallocate a certain amount of money in the Department of Employment, Training, and Rehabilitation (DETR), to the existing job-training fund. He added the bill would re-qualify the fund to require that high-skill, high-wage jobs be favored and that the created jobs use materials produced and bought in Nevada. Also, he asserted the bill would require that people who are trained be employed in a full-time and permanent position by the business which requests job-training assistance. Senator James added the bill requires those employees to be paid not less than 80 percent of the average industrial wage across the state. He pointed out the bill would not increase any revenues or raise any taxes.

Senator James mentioned training would be conducted by, or in conjunction with, a community college, noting Nevada’s community-college system is well equipped for that function.

Carol A. Jackson, Director, Department of Employment, Training and Rehabilitation, offered her support for S.B. 419. She commented she and Mr. Shriver met with Senator James, in January, to work out details of the bill. Ms. Jackson asserted, "Moving $500,000 of the Claimant Employment Program training fund money to economic development is one of the wiser things that we could do at this time." She maintained the department would like to make the transfer on July 1 of every fiscal year. She stated the department would then evaluate the $500,000 in January to make sure it had been spent. If the money had not been spent, Ms. Jackson contended the department would consider a plan for spending it so the money would not be reverted back to the Unemployment Insurance (UI) trust fund.

Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development, stated as the commission attempts to upgrade the skills of Nevadans, it faces a challenge to develop monies for training. He stated his research has revealed an avenue he believes would be most useful for Nevada employers.

Mr. Shriver expressed the program outlined in S.B. 419 would operate similarly to the existing Train Employees Now (TEN) program. He explained a company would request funding and file an application with the Commission on Economic Development. He pointed out under the current program, the company contacts the local community college in its area. Mr. Shriver noted teams are formed with the community college system to efficiently operate the program.

Mr. Shriver presented proposed amendments which would make the bill coincide with current operating procedures, thus clarifying administration of the proposed program (Exhibit C). He stated a company would request funding and appear before the Commission on Economic Development. He explained regulations require that the company create a minimum of ten jobs and that those jobs fall within the commission’s criteria for diversified jobs in the state. Mr. Shriver noted the commission currently requires that after training, employees trained under the program receive at least 75 percent of the statewide or county wage, whichever is less. He asserted once employees acquire and improve a skill set, their wages will rise accordingly. Mr. Shriver commented the average wage of employees trained through the TEN program is over $15 per hour, which exceeds the statewide average wage of $13.37 per hour.

Mr. Shriver asserted job-training programs are "a wonderful way to help Nevada citizens" and reiterated only Nevada citizens are eligible for such programs. He added these programs also help companies get started in the state and help existing Nevada businesses expand their operations. For example, he noted if a Nevada business buys new equipment or technology for competition purposes, the job-training program proposed under S.B. 419 would allow those businesses to approach the commission for monies to train existing employees.

Mr. Shriver maintained the commission uses the monies very judiciously, pointing out only $500,000 is currently allocated per fiscal year. He expressed if S.B. 419 passes, the commission would not expect to go before the Interim Finance Committee as it has in the past. He contended having additional funds would provide a long-term benefit to Nevada employers and citizens.

Mr. Shriver said the community college system would also benefit from the program proposed by S.B. 419. He indicated the commission currently uses community colleges as its "primary trainer[s]," which has allowed the colleges to upgrade their course offerings and their faculty members’ skills in areas like electrical-mechanical and medical-screening training. He maintained the Community College of Southern Nevada has a strong medical-technology course that was developed through the job-training program. Also, he claimed some exceptional financial computer-services courses were developed through the program as a result of employers’ demands for such skills.

Mr. Shriver concluded S.B. 419 provides a "win-win" situation for Nevada citizens, businesses, and community colleges.

Chairman O’Connell asked if companies are required to pay back into the program. Mr. Shriver answered no and expressed the salary requirements and the placement of Nevada workers in higher-paying jobs are the paybacks. He reiterated participating businesses currently must pay an employee 75 percent of the average statewide wage after training. He emphasized this wage increases as the employee gains experience, especially due to current competition for employees. Mr. Shriver contended the state wants employees to earn sufficient wages so they are not dependent upon state services.

Senator James clarified he drafted S.B. 419 to require participating employers to pay 80 percent of the statewide wage in consideration of the state’s investment in the program. He stated he worked on S.B. 419 with Dr. Robert Silverman, Senior Vice President, Community College of Southern Nevada (CCSN), and with Dr. Richard Moore, President, Community College of Southern Nevada. Senator James related they were not able to attend the hearing, but they asked him to convey their support for the bill.

Senator Raggio asked for clarification regarding funding for the proposed job-training program. Ms. Jackson responded $500,000 would come out of the Claimant Employment Program, a fund to which employers pay a percentage of tax to support better training programs in Nevada. She stated that fund is projected to receive approximately $8.2 million in fiscal year 2000 and $9.1 million in fiscal year 2001. She mentioned DETR has budgeted $500,000 for the program outlined in S.B. 419, and she noted that budget was presented to the Legislature earlier in the session.

Senator Neal asked if DETR is currently involved in programs similar to the one proposed in S.B. 419. Ms. Jackson answered yes and elaborated the department contracts with community colleges and with post-secondary certified training providers. She commented approximately $2.9 million is budgeted for that purpose in fiscal year 2000 and approximately $3.1 million in fiscal year 2001. She added the department is also involved with a program for youth called the career information system, which goes through school systems to provide information for students as they decide on future employment, training, and education. Ms. Jackson stated she believes the department currently spends about $1.3 million of the aforementioned budget involving community colleges on various training contracts.

Senator Neal asked if S.B. 419 would take money away from existing programs. Ms. Jackson replied she believes money would not be taken away, and the bill would enhance the training provided by the state. She noted S.B. 419 encourages high wages and high skills, which are items the Governor supports.

Senator Neal asked if current training programs under DETR are industry-specific. Ms. Jackson answered no and explained the Claimant Employment Program is available to any unemployed individual. She commented the program used to be available only to unemployed clients who were profiled through the employment security division, but that provision was changed in the Sixty-eighth Legislative Session. She noted DETR can currently do an assessment on any unemployed individual to determine the type of training he or she needs to become employed. Ms. Jackson expressed the department can then place the individual in a training program and find him or her a job. She stated the department has statistics on the numbers of persons who have been trained and who have entered employment, as well as their hourly wages.

Senator Neal asked who would be trained under the program set forth in S.B. 419. Mr. Shriver answered DETR currently spends much of its money on placing unemployed persons in jobs. He noted the department will have additional responsibility due to the Workforce Investment Act of 1998 and the Welfare-to-Work program. Mr. Shriver commented the Commission on Economic Development would deal with a "higher level" of employees and would demand that they have the skill set to receive 80 percent of the statewide average wage, as set forth in S.B. 419. He suggested such persons would already be in the workforce and would have skills that they wish to upgrade in order to earn a higher wage. He asserted the overall training system offered by DETR "works very well" to help unemployed people find jobs and to then improve their skills. Mr. Shriver added unemployed individuals could also take advantage of the training program provided under S.B. 419.

Senator Neal asked for clarification on the differences between DETR’s current training program and the one outlined in S.B. 419. He pointed out the bill intends to provide high-skill and high-wage jobs for Nevada residents. He continued, "I’m [I am] concerned. … Does that mean that we will be training engineers?"

Ms. Jackson responded she would not anticipate training engineers through the proposed program unless they needed an additional specific skill in order to bring an employer into the state.

Senator Neal asked how people would be referred to the training program and how the program would get started. Mr. Shriver replied under the current TEN program, the employers’ service office of DETR helps screen workers for the minimum qualifications of the jobs. He stated this relationship has been beneficial and noted the employers are responsible for choosing their employees. Mr. Shriver continued a customized training program developed with community colleges would aid the effort to give Nevada residents a higher skill set. He maintained the program could provide skills in areas like computer-aided design, equipment operation, and financial-services skills. He asserted he does not know of any monies that have been used for professional training for engineers or similar employees. Mr. Shriver concluded the program predominately addresses people with associates’ degrees or less education who are seeking technical training, skills training, and upgrades.

Senator Neal asked if the program creates a "pool" of trained employees from which the employer can select. Mr. Shriver answered no. He clarified companies first hire the employees, and then the employees go through the customized training program.

Senator Raggio asked how much participating companies would pay toward the program. He noted S.B. 419 states the employer’s contribution "must not be less than 25 percent of the amount the commission approves for the program." Mr. Shriver responded the same requirement exists for the current TEN program. However, he contended clients’ contributions have historically been approximately 50 percent or more. He offered the example of the Michelin plant in Reno, noting the commission paid $145,000 for the plant’s training program, while the company provided more than $750,000. Mr. Shriver stated, "What this is is seed money to get them to consider here, and we’re [we are] showing good faith by helping them get skilled Nevadans to work. And it’s [it has] proven to be extremely successful."

Ms. Jackson indicated:

Andrea L. Reitan, Deputy Chief of Staff, Office of the Lieutenant Governor, distributed a memorandum conveying the Lieutenant Governor’s support for S.B. 419 (Exhibit D).

Mr. Shriver referred to his proposed amendments to S.B. 419 (Exhibit C). He explained they are mostly procedural amendments which would change the bill to coincide with current practices. He added, "And obviously it gives the Commission on Economic Development the ability to adopt regulations, and quite honestly, they would probably be quite similar to what we use our training monies for."

Mr. Shriver summarized the proposed amendments, noting he suggests changing "conducted" to "administered" in section 7 of S.B. 419 because "community colleges’ strengths in certain areas may not transcend to what the companies’ demands are." He asserted as part of a company’s 25-percent match, the company sometimes provides additional training and recommends specific trainers who are not currently found on the college campuses. He commented that practice is currently allowed, and "it has worked very well." Mr. Shriver explained the community colleges control the actual instruction, and they should be allowed the flexibility to select appropriate training methods.

Mr. Shriver continued his proposed amendments would change subparagraph (2), paragraph (f), subsection 2, of section 8 of S.B. 419. He noted this change would be made due to current administration of training monies based on statewide or county average industrial wage, whichever is less. He expressed the state wants to encourage employers to use the job-training program, and if the state "set[s] the bar too high," employers may not take advantage of the opportunity. Thus, workers may not receive training. Mr. Shriver reiterated workers who have been trained under the current program earn more than the statewide average wage. He maintained employers which use the program are "quality corporate citizens" of Nevada.

Mr. Shriver explained his proposed amendments would also change the timeline for consideration of applications, as provided in subsection 4 of section 8 of S.B. 419. He noted the bill gives 30 days for consideration, but the Commission on Economic Development does not meet every month. Thus, the proposed amendment would allow the commission to approve or deny each application at its next regularly scheduled meeting.

Mr. Shriver stated subsection 2 of section 9 of S.B. 419 contains "convoluted" language. He stated Ms. Jackson wants the commission to administer the proposed program in a manner similar to the existing program. He said:

Mr. Shriver concluded he proposes amending subsection 3 of section 9 of S.B. 419 so that Ms. Jackson would make a determination regarding available funds in a timely manner.

Chairman O’Connell closed the hearing on S.B. 419 and opened the hearing on S.B. 407.

Madelyn Shipman, Lobbyist, Washoe County, testified S.B. 407 was requested by Washoe County. She stated the county has worked closely with representatives from Associated General Contractors (AGC) so the bill would not create a burden on them. She noted current law gives counties the authority to enter into lease-purchase agreements based on specifications which have been adopted by the county Board of Commissioners. Ms. Shipman added the provisions of NRS chapter 338 relating to labor laws and prevailing wages must be included in relevant contracts.

Ms. Shipman asserted Washoe County has interpreted the law to mean there is no need for competitive bidding as part of lease-purchase agreements, since the referenced provisions of NRS chapter 338 do not include the competitive-bidding statutes. She stated, "This is not something counties all the time do." She pointed out Washoe County recently entered into a lease-purchase agreement. She maintained the county generally prefers to own its buildings and facilities, but those options are not always available.

Ms. Shipman asserted S.B. 407 is intended to clarify that lease-purchase agreements can be used to remodel an existing facility, not just to construct a building. However, she noted Washoe County would like to remove the words "a purchase agreement" from line 6 on page 1 of the bill. She explained the legislation is not intended to apply to purchase agreements because if an entity plans to purchase a building or facility, the entity would have the necessary money up-front and would be acquiring the property.

Ms. Shipman contended the AGC’s interpretation of the law differs from the county’s. She expressed the AGC would like to retain the option of challenging the competitive-bidding portion of the law; thus, the organization requests removal of references to competitive bidding in S.B. 407. Ms. Shipman asked that the bill be amended to delete the words "without competitive bidding" on line 3 of page 1. She further requested deleting the proposed language regarding an exemption to the competitive-bidding statute in paragraph (a), subsection 6, of section 2. She suggested these changes would in effect require that the competitive-bidding issue be decided in another forum. However, Ms. Shipman contended Washoe County would still take the position that competitive bidding is not required because the statute addresses a private-property arrangement. She elaborated the county would not want to require private-property owners who lease their property to enter into competitive bidding.

Ms. Shipman asserted Washoe County and the AGC have agreed on the bill with amendments as proposed.

In response to a question from Chairman O’Connell, Ms. Shipman added she also requests deletion of the language in paragraph (a), subsection 6, of section 3 of S.B. 407.

Senator Neal asked what public purpose would be served by S.B. 407. Ms. Shipman responded by offering the example of a Washoe County library. She explained the county was looking for land in a particular area to build a new library, and the county knew the approximate costs of the building and the land. Ms. Shipman stated a person came forward who had an option on property in the desired area, but the county did not have the financing immediately available to purchase the property outright. Ms. Shipman continued the person indicated he or she was willing to construct the library to the county’s specifications, which had been completed and approved by the county commission. Ms. Shipman commented the arrangement ultimately resulted in a library facility for Washoe County residents at a $2 million savings from the originally-estimated costs. She clarified all contracts required payment of prevailing wages and accordance with labor provisions.

Senator Neal asked when the county would actually take ownership of a building under S.B. 407. Ms. Shipman replied neither the bill nor the current law establishes a time frame for any lease-purchase agreement. She stated the aforementioned contract the county entered into provided for varying time frames. She asserted the county could purchase the facility almost immediately if such a provision was in the contract, but she pointed out an entity normally does not enter into a lease-purchase agreement with that purpose in mind.

Senator Neal commented, in his understanding, the government and the person who is providing funding sign an agreement stating the governmental entity will lease the building. Senator Neal asked if there is a termination period included in such agreements, noting the federal government currently has 20 years to purchase a facility under lease-purchase agreements.

Ms. Shipman mentioned she was not personally involved in the aforementioned library contract. However, she suggested most lease-purchase agreements provide for a lease period of maybe 5 years, with options to renew for additional 5-year periods. She pointed out the provisions depend on individual contracts, and she commented a contract may provide an option to buy at each time period. Ms. Shipman noted Washoe County has not had much experience in this area.

Cheryl C. Blomstrom, Lobbyist, Nevada Chapter of Associated General Contractors, stated the AGC appreciates Washoe County’s efforts to work out the details of S.B. 407. She said without the proposed amendments, the bill would have allowed the county "pretty much without any restriction to do pretty much whatever they wanted."

Chairman O’Connell closed the hearing on S.B. 407 and opened the hearing on S.B. 408.

Madelyn Shipman, Lobbyist, Washoe County, stated S.B. 408 was requested by Washoe County to provide consistency in the imposition of residential-construction tax on mobile homes. She noted the Senate Committee on Government Affairs has recently held discussions regarding the homes addressed by S.B. 408, specifically those defined by NRS 461A.050, which are U.S. Department of Housing and Urban Development (HUD) manufactured homes.

Ms. Shipman indicated Washoe County is concerned about the small amount of money it obtains in residential-construction tax from mobile homes. She pointed out the county bases the tax on "the lot construction costs," which average about $8,000 per unit and lead to an $80 mobile-home fee. She contended the county was not collecting sufficient funds to produce neighborhood park facilities in park districts with large numbers of mobile homes. Ms. Shipman commented local governments in Nevada handle the residential-construction tax on mobile homes in a variety of ways.

Ms. Shipman proposed changing the 50-percent figure in paragraph (b), subsection 2, of section 2 of S.B. 408 to an 80-percent figure. She explained the 80-percent amount would prevent other local governments in Nevada from losing money. She distributed a handout showing the ways in which various local governments currently charge residential-construction tax on mobile homes (Exhibit E).

Karen Mullen, Acting Director, Parks and Recreation Department, Washoe County, indicated S.B. 408 was prompted by an outcry of the Sun Valley community. She mentioned Sun Valley has approximately 15,000 residents, about 80 percent of whom live in mobile homes. She reiterated Washoe County currently collects $80 for lot development and noted about $350,000 has been collected from Sun Valley over the years. Ms. Mullen expressed this amount is not sufficient to build one park, let alone the four parks that are needed in the community.

Ms. Mullen continued the existing rate structure penalizes communities with large numbers of mobile homes. She emphasized children in these communities "deserve and require" park facilities like those found in other communities. She emphasized local governments collect residential-construction tax on mobile homes through various means, including flat rates, minimum rates, and rates based on square footage. Ms. Mullen reiterated Washoe County values lot development at $8,000 and collects taxes equal to 1 percent of that amount, or $80.

Ms. Mullen asserted S.B. 408 would provide consistency and fairness in establishing the rate structure for mobile homes. She maintained the bill would also "keep everyone whole" throughout the state and would provide much-needed park facilities in communities with large numbers of mobile homes.

Chairman O’Connell asked if S.B. 408 would apply only to new development. Ms. Shipman responded the bill would apply only at the time of site development. She noted that provision could include individuals who are developing their own lot, but she pointed out in most cases of mobile home parks, the bill would apply at the time the building permit is obtained by the developer for site development. She noted this process is similar to the one provided for single-family residential homes.

Chairman O’Connell asked how many proposals Washoe County has for mobile-home subdivisions. Ms. Shipman answered the county has many "approved-not-built" subdivisions, but does not have many proposals coming forward. She pointed out the county has many areas that are potentially available for future lot development.

Ms. Shipman commented the committee had recently passed out a bill which would allow for HUD-manufactured homes to be placed on unapproved lots within neighborhoods of "stick-built" homes.

Senator O’Donnell asked if the residential-construction tax would be paid by the mobile home owner or by the lot owner. Ms. Shipman replied the answer depends on whether an individual is developing his or her own lot. She stated if a person develops his or her own property, he or she would pay the fee. Ms. Shipman explained in the case of a mobile-home park, the fee would apply when the park is developed, and the developer would pay the tax similar to the manner in which a contractor pays when he or she builds a subdivision. She elaborated the contractor would pay the tax with the building permit. Ms. Shipman commented the tax would ultimately be "passed through" in the rental of a lot or in the cost of a home.

Senator O’Donnell said:

Ms. Shipman answered, "It encompasses anyone who would be living or placing a HUD-manufactured home in either a park or in a residential area." She reiterated the residential-construction tax is already imposed on mobile homes throughout the state, though local governments handle the tax in different ways.

Senator O’Donnell asked, "Is there an additional fee?" Ms. Shipman answered there would be no additional fee; she pointed out the law would still provide for a tax of 1 percent or a maximum of $1,000. She stated:

Senator Care noted in mobile-home parks in Clark County, landlords usually own the lots, and tenants rent lots from them. He commented an entity like a homeowners association owns the lots in a few mobile-home parks. He asked how S.B. 408 would affect the future costs of owning or renting a mobile home in developments yet to be undertaken. Senator Care mentioned leases currently run from $325 per month to $600 per month. He indicated he does not want those amounts to rise substantially as a result of the bill.

Colleen A. Wilson-Pappa, Lobbyist, Clark County, testified she does not believe any changes in lease amounts would be forthcoming in Clark County as a result of S.B. 408. She stated the relevant statute has been applied based on various interpretations. She referred to a handout regarding the residential-construction tax in Clark County (Exhibit F). Ms. Wilson-Pappa stated Clark County currently charges the tax on mobile-home lots. She noted if the 50-percent figure in S.B. 408 is not changed as previously suggested by Ms. Shipman, Clark County estimates it would collect a fee of $275 per mobile-home lot, as opposed to the $460.80 currently collected per lot. Ms. Wilson-Pappa indicated Clark County had discussed this issue with Washoe County, and the relevant amendment had been proposed as a result. She noted if the appropriate figure is changed to 80 percent, Clark County would still lose "a little bit" of residential-construction tax revenue from mobile homes.

Chairman O’Connell closed the hearing on S.B. 408 and opened the hearing on S.B. 418.

Senator Alice Costandina (Dina) Titus, Clark County Senatorial District No. 7, testified S.B. 418 would create a state false-claims act for Nevada. She explained false claims, or "qui tam," laws have existed for hundreds of years, dating back to the Middle Ages in England. She expressed qui tam provisions give private citizens the right and a financial incentive to assist law enforcement in identifying practices which attempt to defraud government. Senator Titus noted the Continental Congress enacted various qui tam provisions, and she pointed out Abraham Lincoln promoted enactment of the 1863 False Claims Act, which was essential in protecting the government from fraudulent suppliers of faulty war equipment during the Civil War. She continued this law was amended by the United States Congress in 1986 to strengthen incentives for citizens to uncover and fight fraud.

Senator Titus stated qui tam actions have returned over $1.45 billion to the United States Treasury since those amendments were passed. She asserted in addition to the federal False Claims Act, five states – California, Texas, Tennessee, Illinois, and Florida – have enacted false-claims acts since 1986. She maintained those states have been satisfied with the outcomes of their false-claims acts and have experienced success in recovering taxpayer dollars for their governments. Senator Titus said about six more states are currently considering enaction of false-claims acts.

Senator Titus explained several types of false claims can be made against government. She elaborated government contractors can make false claims, as can medical providers. Senator Titus added individuals can wrongfully claim entitlements, such as subsidies or agricultural price supports. She concluded a fourth type of false claim involves underpayment of government through false appraisals in land swaps, under-reportings of royalties due, and so forth.

Senator Titus noted the Senate Committee on Government Affairs has heard testimony regarding the need for government to "live up to its end of the bargain" when it enters into contracts. She referred to the issue of prompt payment to contractors for public-works projects. She stated, "This is the other side of that same coin," contending government needs to be protected from unscrupulous activities by contractors. Senator Titus emphasized S.B. 418 would protect taxpayer dollars by allowing the state to "go after" individuals or companies that attempt to defraud government with false claims. She expressed the state already "goes after" insurance fraud, Medicaid fraud, and workers’ compensation fraud.

Senator Titus stated she supports an amendment to S.B. 418 which would be offered in later testimony. She distributed a copy of the proposed amendment (Exhibit G), along with a letter written by a Las Vegas attorney in support of S.B. 418 (Exhibit H), a Tenth Anniversary Report on the 1986 False Claims Act amendments (Exhibit I. Original is on file in the Research Library.), and an assessment of the economic impact of those amendments (Exhibit J. Original is on file in the Research Library.). Senator Titus explained the proposed amendment to S.B. 418 would narrow the bill so it would include only the attorney general, not city or county prosecutors.

Tim Terry, Senior Deputy Attorney General, Medicaid Fraud Control Unit, Office of the Attorney General, offered that office’s support for S.B. 418. He reiterated the federal False Claims Act has been successful after the 1986 amendments, noting approximately $355,000 was recovered pursuant to the act in 1986. He stated, "Up until 1998, including the 2-year period [19]97 and [19]98, that number had increased to over $1 billion in recoveries under that act."

Mr. Terry suggested S.B. 418 would create an important incentive to combat fraud. He elaborated S.B. 418 would allow a "relator," or a "whistleblower," with knowledge of a fraudulent activity to file a qui tam action and then share in the recovery. Mr. Terry said the bill would also protect the "relator" from termination of employment due to the reporting of fraudulent activity. He noted law enforcement currently cannot offer those incentives, and he asserted many potential "relators" are presently afraid to assist with law-enforcement investigations on fraud because they fear they will lose their jobs.

Mr. Terry maintained he has consulted with the five states that currently have state false-claims laws. He indicated most civil false-claims actions are currently related to health care fraud, and he pointed out about 61 percent of federal false-claims activity is in that area. He added such claims are typically filed in federal court under the Federal False Claims act, with a "pendant" or "attached" claim for the state false-claims activity. Mr. Terry expressed California currently has the most state false claims with about 30 active cases. He said that state has a person assigned to monitor the litigation of federal court and to participate in the discovery, or in the investigative work. He added the state shares in the recovery after the federal action is completed. Mr. Terry concluded S.B. 418 would not create the need for substantial resources at the state level, and thus, no fiscal note is attached to the bill. He suggested letting the program run for a couple of years to establish a history and a database which could be reviewed to determine whether additional resources are needed.

Mr. Terry presented proposed amendments to S.B. 418, pointing out the changes would really apply to only one issue. He expressed Senator Titus and representatives from Washoe and Clark counties decided counties should not have an obligation under the bill, and false-claims activity should be handled by the attorney general’s office. Mr. Terry indicated S.B. 418, as drafted, defines the prosecuting authority as either the attorney general or the local district attorney’s office. He explained the proposed amendments would delete references to county-level investigation and prosecution, thus focusing such procedures in the attorney general’s office.

Senator Raggio questioned the necessity of S.B. 418. He asked for specific situations in which such legislation has been necessary.

Mr. Terry answered S.B. 418 is an attempt to "bolster" the available resources to combat fraud. He elaborated the bill would be a "privatization" of the fight against fraud because it would allow a private individual with no connection to government and with personal knowledge of fraudulent activity to file an action and to share in the government’s recovery, if received. Mr. Terry asserted the bill would "open up new avenues of investigation or recovery on behalf of the state." He expressed the legislation has no "downside."

Senator Raggio reiterated his question regarding specific cases in Nevada that suggest a need for S.B. 418. Mr. Terry mentioned the attorney general’s office has units designed specifically to prosecute and investigate allegations of Medicaid fraud, workers’ compensation fraud, insurance fraud, telemarketing fraud, and securities fraud. He asserted current authority relates only to law enforcement, and he pointed out S.B. 418 would not be a criminal statute, but a civil statute allowing a monetary penalty to be assessed against those who make fraudulent claims.

Senator Raggio asked if enough false-claims activity occurs in Nevada to make S.B. 418 necessary. Mr. Terry responded federal recoveries have substantially increased as a result of amendments to the federal False Claims Act. He stated statistics prove that a high level of fraudulent activity occurs, and he asserted, "The government can’t [cannot] get to it all." Mr. Terry continued the federal government has turned down over 1200 potential false-claims cases due to insufficient resources. He explained the "relators" and their attorneys can still prosecute those cases on their own. He noted the federal government has only intervened in about 340 false-claims cases since 1986.

Mr. Terry contended the attorney general’s office regularly sees fraud in the areas it currently investigates. He emphasized S.B. 418 would allow individuals to prosecute fraud on behalf of the government in cases when the state might not have sufficient resources to do so. He reiterated this process would be an extra "tool" in the fight against fraudulent claims. Mr. Terry maintained the system proposed by S.B. 418 would not cost the government anything and could produce increased recoveries for the state.

Senator Neal commented under federal law, an employee of a company which has "shortcut" a specification can come forward with that information and have it investigated. Senator Neal explained the United States Attorney has 60 days to review the matter after such information is received from the employee. He continued if the United States Attorney goes forward with the case, the employee gets 15 percent of any recovery. He stated the employee receives 25 percent of the recovery if he or she has to bring the action on his or her own. Senator Neal commented some ex-military personnel have received substantial amounts of money from recoveries under this system. He added the false-claims law introduced by Abraham Lincoln was generated when the Union army found out the gun powder it was purchasing had been mixed with sawdust. Senator Neal explained the law allowed for prosecution of relevant individuals. He asserted S.B. 418 would not work without a "whistleblower" provision, and he noted the Legislature has already passed a "whistleblower" statute. He concluded, "Unless you have this, then you don’t [do not] have an effective way of actually getting at these particular things."

Senator Raggio asked what would happen if a person brings a case under S.B. 418 that turns out to be false. Mr. Terry replied if a case is not adequately investigated by a "relator" and his or her attorney, Rule-11 sanctions could apply under the state Rules of Civil Procedure. He added if a case is brought with a malicious or improper motive, it would be subject to abuse-of-process or malicious-prosecution countersuits.

Senator Titus commented if a person files a claim, the attorney general must decide if the case is worth pursuing. She emphasized the attorney general’s office does not have to take every accusation to court. She indicated Nevada recognizes fraud is a problem, as evidenced by the creation of various fraud units in the attorney general’s office.

Mr. Terry mentioned that on several occasions each month, the Medicaid Fraud Control Unit receives an anonymous call from someone who wants to report fraudulent activity. He contended the unit is "pretty much handcuffed" because it cannot seek a search warrant or take other substantial action based on anonymous tips. He suggested people who are afraid to be involved in reporting fraud would see S.B. 418 as a way to report fraud without losing their jobs.

Chairman O’Connell closed the hearing on S.B. 418 and opened a work session. She began discussion on S.B. 533.

Chairman O’Connell suggested S.B. 533 could go on the consent calendar.

*****

Chairman O’Connell opened discussion on S.B. 144.

Ivan R. Ashleman II, Lobbyist, Clark County, referred to the proposed amendment to S.B. 144 (included in work session document, Exhibit K). In response to a question from Chairman O’Connell, Mr. Ashleman indicated agreement had been reached among all parties that were actively involved in negotiations on the bill. He commented some entities have expressed reservations about sections of the bill, but no one has suggested not going forward with the legislation.

Mr. Ashleman summarized proposed changes to the bill. He stated page 1 of the proposed amendment reflects numbering changes for the sections. He continued language would be added to the definition of "contractor," as shown on page 2 of the proposed amendment. Mr. Ashleman explained that change is necessary because some people who need to be covered by S.B. 144 are not required to be licensed.

Mr. Ashleman continued he proposes deleting the line on page 2 of the proposed amendment that states, "The term does not include a supplier or a person who provides day-only labor." He indicated that change would be evident in other places throughout the bill, such as line 2-26 on page 3 of the proposed amendment.

With reference to page 4 of the proposed amendment, Mr. Ashleman said the changes would include deleting a section which he had previously suggested, but he pointed out that section was not in the original bill. He continued section 14 of the proposed amendment would make changes in order to coordinate sections of the bill. Mr. Ashleman further indicated the time period in section 14 would be changed from 20 days to 30 days.

Mr. Ashleman pointed out the amendment would also delete the words "or available for its intended use" from paragraph (c) of subsection 1 of section 14 of the proposed amendment. He explained the paragraph would then apply only to "the portion of the public work that is used, occupied, or bears to the total value of the public work." Mr. Ashleman expressed the change is necessary because the amendment would delete the "laundry list of ways you could trigger payment, which had the contractor announcing that it was available. So this no longer makes any sense in a coordinated manner."

Mr. Ashleman asserted the issue of payment calculation has been contentious. He suggested the proposed amendment may include various ways of expressing payment calculation. He emphasized:

Mr. Ashleman stated line 3-14 of page 5 of the proposed amendment would provide that:

Mr. Ashleman contended proposed changes to section 15 are extensive, and he commented the aforementioned "laundry list" would "essentially disappear" from that section, as shown on page 6 of the proposed amendment. He indicated parties compromised to give the public body latitude for enforcing its bargain without leaving the bargain so vague that the contractor could not identify the complaint. He stated under the proposed amendment, the public body would have to identify how the contractor failed "to comply with the contract documents or applicable building code, law or regulation."

Referring again to page 6 of the proposed amendment, Mr. Ashleman noted a public body would have to give written notice which sets forth certain items within 20 days after the public body receives a progress or retainage bill. He noted the proposed amendment would change paragraph (b), subsection 2, of section 15 of the bill to clarify the public body is responsible for identifying "what wasn’t [was not] done right." He emphasized the public body would not be responsible for determining how the problem would be corrected, and he commented that determination would be made by the contractor.

Mr. Ashleman indicated the proposed amendment would "get rid of the concept … where we got into all of this evidence and affidavits and so on." He maintained the proposed amendment outlines a simpler process that better conforms with industry practices. He elaborated a contractor would receive a written notice identifying the problem, and that notice must be signed by an authorized agent of the public body. Mr. Ashleman explained the contractor must then return a written notice of the problem’s correction, as set forth in line 4-6 on page 7 of the proposed amendment. He stated if the public body agrees the correction is complete, the body must pay the amount withheld within 30 days of the date it receives the next progress-payment bill or retainage bill. Mr. Ashleman noted the proposed amendment clarifies the contractor would bill the amount of the correction to the public body so that the contractor would receive with the next progress payment the amount previously withheld or the amount satisfied by the correction. Mr. Ashleman emphasized this idea was intended, but suggested it may not have been "picked up" in every relevant section of the proposed amendment. He asserted the Legislative Counsel Bureau would be able to make it consistent throughout the bill.

Mr. Ashleman said page 8 of the proposed amendment shows lines 4-10 through 4-30 would be stricken from the bill. He continued:

Mr. Ashleman indicated the strike-through of line 5-3 on page 9 of the proposed amendment is correcting an error he made while typing. He stated that line was not wrong in the original bill.

Mr. Ashleman stated line 5-15 of the proposed amendment would change "5 days" to "5 working days." He explained the bill uses calendar days for the 20- and 30-day payment time frames; however, he said for notifying subcontractors about payments made, the public body needs 5 working days. He added this provision would only apply to "open contracts," or current contracts under which entities are working, as set forth in line 5-17 of the proposed amendment. Mr. Ashleman commented subcontractors can find information on older contracts under the public-information law because such contracts are public records. He expressed such information may not be feasibly found within 5 days, so existing law regarding public records would govern that circumstance.

Mr. Ashleman noted page 11 of the proposed amendment provides that a contractor may withhold payment amounts equal to expenses he or she reasonably expects to incur "as a result of the subcontractor’s or supplier’s failure to comply with the subcontract or applicable building code, law or regulation." Mr. Ashleman pointed out this concept was previously discussed.

Mr. Ashleman continued lines 5-27 to 6-5 of the proposed amendment would be stricken. He noted line 6-16 would require written notice to set forth "the amount of the progress bill or retainage bill that will be withheld." He mentioned parties had debated whether to use "bill," "amount," or "payment," and he indicated the Legislative Counsel Bureau would decide on the appropriate wording.

Mr. Ashleman pointed out line 6-18 of the proposed amendment would require a contractor to follow the same provisions as a public body regarding withheld payments. He said, "That will be done throughout with, I think, only one exception, which I will bring to your attention when I get to it."

Mr. Ashleman indicated some "minor lines" would be omitted, as shown on page 13 of the proposed amendment. He explained the change proposed on line 6-37 would coordinate the bill so the same provisions apply for a contractor in relation to a subcontractor and for a public body in relation to a contractor. He asserted some changes on page 14 of the proposed amendment serve the same purpose. Mr. Ashleman noted the change to 5 working days on page 15 of the proposed amendment is another change for coordination purposes.

Chairman O’Connell commented S.B. 144 as amended seems to address the issue of a contractor paying a subcontractor. She asked if S.B. 301, which was passed out of the Senate, is still necessary.

Cheryl C. Blomstrom, Lobbyist, Nevada Chapter of Associated General Contractors, answered S.B. 301 addresses only highways. She stated:

Senator Care asked a question regarding the term "5 working days." He noted people sometimes work on Saturdays and Sundays on public-works projects. He asked if "5 working days" is the same as "5 business days."

Mr. Ashleman replied:

Mr. Ashleman continued the section numbers on page 16 of the proposed amendment are changed for coordination purposes. He pointed out:

Mr. Ashleman stated section 23 on page 18 of the proposed amendment would allow a contractor or subcontractor to withhold money from his or her subcontractors. He expressed these provisions can go "layer after layer down."

Mr. Ashleman continued lines 8-31 through 9-8 are stricken from the proposed amendment. He said the changes on page 19 of the proposed amendment represent the "trickle-down" effect of the notification process for withholding. He stated, "Page 21 continues the paralleling, as does page 22."

Mr. Ashleman noted section 26 on page 23 of the proposed amendment states:

Mr. Ashleman explained this section addresses what happens if a public body fails to act. He elaborated the section would apply to situations in which no dispute exists and no notice has been given, but the public body has not paid. He expressed the section would also apply if a public body does not provide a reason for withholding or does not respond to a request for information. Mr. Ashleman contended the section "does not get involved with the discretionary act, per se." He noted a court could still decide if a party has been arbitrary or capricious. Mr. Ashleman said:

Mr. Ashleman pointed out page 23 of the proposed amendment also states, "Nothing in this act shall be construed to prohibit a public body from including an attorney’s-fee provision in its contract." He explained the legislation is not intended to interfere with existing contracts or with arbitration contracts. He contended parties debated over an attorney’s-fees provision, so they decided to allow that provision to be set forth in contracts.

Mr. Ashleman continued section 27 on page 24 of the proposed amendment treats the relationship between the contractor and the subcontractor or supplier differently. He expressed if subcontractors or suppliers believe the amount withheld is not justified or is excessive, they can seek an order to show cause. He stated, "In that section, it is the intent of the negotiating parties that there be an inquiry as to whether or not it is justified or excessive."

Mr. Ashleman maintained section numbers are left open on page 25 of the proposed amendment due to future renumbering.

Mr. Ashleman explained lines 11-35 and 11-36 of the proposed amendment refer to "regular or certified mail;" he noted the bill had, at one point, dealt with registered mail. He clarified under the proposed amendment, public bodies and contractors could decide whether to use regular or certified mail.

Mr. Ashleman pointed out other changes on page 26 of the proposed amendment would occur due to section-numbering changes. He further commented lines 12-8 through 12-17 would be omitted.

Mr. Ashleman continued section 30 of the proposed amendment adds the words "or an arbitrator" and "or arbitration." He mentioned language regarding attorney’s fees is again included. He emphasized changes on page 27 clarify the bill would not interfere with arbitration rights.

Mr. Ashleman stated the next significant changes occur on page 30 of the proposed amendment, where lines 13-25 through 13-32 are deleted. He explained, "That was a change in some definitions and the way the process worked that we decided was not forwarding this particular body of law."

Mr. Ashleman indicated:

Mr. Ashleman stated page 32 of the proposed amendment sets out significant changes to the original section regarding suppliers, materials, and equipment. He claimed:

Mr. Ashleman said page 33 of the proposed amendment "carries out the thought on the earlier one and the amendments that the bill itself required to be made." He added the change proposed in section 34 of the amendment is a numbering change.

Mr. Ashleman continued:

Mr. Ashleman indicated page 37 of the proposed amendment provides three new sections for the bill. He noted section 36 reads, "Nothing in this act creates a special relationship between a public body and a subcontractor or a supplier." He recalled this issue had been raised during the first hearing on S.B. 144, and he stated public bodies want to pay only the contractor. He emphasized the proposed amendment would ensure the bill does not allow subcontractors to "come after" the public body if they are not treated properly by the contractor. However, Mr. Ashleman noted the public body would provide information to subcontractors upon request.

Mr. Ashleman stated section 37 of the proposed amendment addresses releases. He asserted releases would be conditional for the purpose of receiving payment, and he mentioned some contractors currently require an unconditional release before the payment. He commented, "That obviously has its hazards. If the check bounces, you’ve [you have] got to rush off to the courts to unscramble that mess." Mr. Ashleman noted if the releases are conditional in the first place, this situation is avoided. He expressed all negotiating parties agree that receiving payment means receiving "good funds," not a "hot check." He noted releases and waivers would be limited to claims related to the particular progress bill or retainage bill, "so that neither the governmental body nor a contract can require the release of another matter to get paid on this matter."

Mr. Ashleman concluded section 38 of the proposed amendment clarifies "nothing in this act shall affect the parties’ arbitration rights."

Chairman O’Connell requested a copy of the bill incorporating the proposed amendment. Mr. Ashleman and Ms. Blomstrom agreed to provide such information.

Chairman O’Connell suggested the amendment be brought back before the committee.

*****

Chairman O’Connell opened discussion on S.B. 369.

Chairman O’Connell referred to the work session document, which includes a proposed amendment for S.B. 369 (Exhibit K).

Senator Raggio recalled the proposed amendment would make the bill applicable to small businesses for private placements and equipment-only loans. He asked who requested the amendment.

Juliann Jenson, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, answered the amendment came from the Office of Business Finance and Planning.

Senator O’Donnell noted the amendment would allow the issuance of bonds without the approval of the State Board of Finance under certain circumstances. He summarized S.B. 369 would allow the director more discretion in issuing bonds. Senator O’Donnell commented, "The director can limit the issuing of the bonds. The total amount of the bonds are $2.5 million." Senator O’Donnell pointed out the amendment provides that such bonds would be sold in increments of $100,000 or more and would be done through the Securities and Exchange Commission. Senator O’Donnell explained the director needs more latitude as provided under the bill because the board-approved bond process costs a substantial amount of money. Thus, he expressed small businesses do not receive a substantial differential in interest rates between the bond process and a bank loan. He concluded not requiring board approval would allow such businesses to go through the bond process more quickly and less expensively.

*****

Chairman O’Connell opened discussion on S.B. 437 and S.B. 475.

Chairman O’Connell stated S.B. 437 and S.B. 475 are very similar. She recalled the committee previously had a 4-hour hearing on these bills, and interested parties include the Associated General Contractors (AGC).

Steve G. Holloway, Lobbyist, Executive Vice President, Associated General Contractors, Las Vegas Chapter, testified:

Senator Porter commented, "Maybe for the benefit of the committee you should explain the advantage of a design-build before you get into the bill. What it really means."

Mr. Holloway responded:

Chairman O’Connell asked, "But you feel that we’ve [we have] satisfied all of those with the language in the amendment?"

Mr. Holloway answered:

Senator Porter asked, "The certificate of eligibility; how do they qualify?"

Mr. Holloway answered:

Senator Porter asked, "So it’s [it is] mainly upon submitting the affidavits on payment of taxes, not so much on performance or quality?"

Mr. Holloway replied:

Senator Porter asked, "Like, for the prior year, or for what period of time?"

Mr. Holloway responded, "For the prior 5 years, the prior 60-month period."

Mr. Holloway continued:

Senator Raggio asked, "Does Mr. Raecke agree to that?"

Mr. Holloway answered:

Senator Raggio asked, "Who will pay the costs on the interim advisory committee?"

Mr. Holloway answered:

Senator Porter requested, "… I’d [I would] sure like to see this, not unlike the last bill we talked about, in the form of the language presented today in the amendment, so we could actually read the bill."

Chairman O’Connell commented, "A mock-up bill?"

Mr. Holloway stated, "You mean like a mock-up of this? All right, Senator. We did provide you with a mock-up of Senate Bill 437, and we can do the same for [S.B.] 475."

Chairman O’Connell asked James J. Spinello, Lobbyist, Clark County, if he wanted to add any information.

Mr. Spinello said:

Senator Titus commented:

Senator Care noted:

Mr. Holloway responded:

Senator Care commented, "That’s [That is] section 13 and section 12 of the two bills."

Mr. Holloway replied:

Mary E. Henderson, Lobbyist, City of Reno, and Regional Transportation Commission of Washoe County, testified:

Chairman O’Connell noted, "I know you did have a number of your builders from the north testify the first night, who were very enthusiastic about the opportunity."

Barbara A. McKenzie, Lobbyist, City of Reno, added:

Rod Johnson, Assistant Director, Operations Division, Director’s Office, Nevada Department of Transportation, stated:

Mr. Holloway explained:

Brian Hutchins, Chief Deputy Attorney General, Transportation and Public Safety Division, Office of the Attorney General, stated he is counsel for the Nevada Department of Transportation. He said:

Mr. Holloway responded:

Mr. Hutchins suggested, "We’ll [We will] be happy to work with you, Madam Chairman."

Chairman O’Connell pointed out, "It’s [It is] Ms. Guinasso [Kim Marsh Guinasso, Committee Counsel, Legal Division, Legislative Counsel Bureau] that you would need to submit that language to, to clear that up."

Edward R. Little, Director of Administration, ProSites Management, stated:

Ted Olivas, Purchasing and Contracts Manager, General Services Department, Clark County, stated he is also a member of the Commission to Study Governmental Purchasing, which was created in accordance with NRS 332.215. He stated:

Mr. Holloway indicated:

Chairman O’Connell closed the hearing on S.B. 475 and opened discussion on S.B. 437.

Steve G. Holloway, Lobbyist, Executive Vice President, Associated General Contractors, Las Vegas Chapter, stated:

Mr. Holloway continued, "I do have one question; this is the type of mock-up that you are requesting on [S.B.] 475 also, right?"

Chairman O’Connell indicated, "I think that this will certainly suffice, Steve [Holloway], for what we need."

Mr. Holloway asserted:

Chairman O’Connell invited questions from the committee.

James J. Spinello, Lobbyist, Clark County, added:

Chairman O’Connell closed the hearing on S.B. 437 and asked how the committee would like to handle S.B. 475 and S.B. 437.

*****

Senator Raggio explained he requested formal amendments because the committee only had one more week to process Senate bills.

Chairman O’Connell opened discussion on S.B. 500.

Chairman O’Connell noted S.B. 500 was requested by the attorney general as a result of a legislative audit. She recalled Wm. Gary Crews, CPA, Legislative Auditor, Audit Division, Legislative Counsel Bureau, testified in favor of S.B. 500. She stated questions had arisen regarding the penalties in the bill. Chairman O’Connell further remembered the state controller wanted to be in charge of the program outlined in S.B. 500.

Jeanine Coward, Assistant Controller, Office of the State Controller, distributed a summary of the proposed amendment to S.B. 500, along with information from the Government Finance Officers Association regarding the importance of centralized collection programs (Exhibit T). She explained the controller’s office was most concerned about the definition of an agency in section 3 of the bill. She raised concern the definition gives all agencies, boards, commissions, departments, and divisions of the Executive Branch "unfettered and unlimited tools for authority of collection of debt." Ms. Coward asserted this situation would only further complicate the debt-collection process. She explained the proposed amendment would allow the state controller to designate state agencies to collect their own debt when appropriate. Ms. Coward further noted the amendment would provide for the state controller to act as the overall coordinator for debt collection. Ms. Coward concluded, "The controller [has] access to the accounting records of all agencies and is in a better position to oversee a coordinated effort among the agencies, especially in the areas of offsets and write-offs."

Ms. Coward continued the proposed amendment would clarify the independent collection authority for certain departments as authorized in statute. She indicated the proposed amendment would also enhance those departments’ tools for collection of debt. She noted departments already authorized to collect their own debt include the Department of Taxation; the Employment Security Division; the Employers’ Insurance Company of Nevada; the Nevada Gaming Commission; the Division of Industrial Relations; and the Department of Motor Vehicles and Public Safety.

Ms. Coward indicated the proposed amendment would change sections 12 and 13 of S.B. 500 to give the controller and the attorney general the authority to establish the form, procedure, time, and manner of debt-collection reporting. Ms. Coward continued the proposed amendment would change section 23 of the bill to give the controller and the attorney general the authority to determine when it is impractical to pursue debt collection. She clarified that determination would not mean the debt would be cancelled, but that the debt would not be actively pursued at that time.

Ms. Coward concluded S.B. 500 with the proposed amendment would centralize the debt-collection process in Nevada and would provide "a long overdue remedy for assuring debts owed the state are paid in a timely manner." She referenced the information from the Government Finance Officers Association regarding the importance of centralized debt collection (Exhibit T). Ms. Coward asserted a central collection center would oversee state debt collection, have access to vendor information, and know what debts are outstanding. She noted this provision is especially important with regard to offsets when a vendor does business with two agencies, one of whom pays the vendor and the other of whom is owed money by the vendor. Ms. Coward indicated the state has not had much success with offsets in the past.

Ms. Coward emphasized the proposed amendment to S.B. 500 is not an attempt to increase the power of the state controller’s office. She expressed someone needs to oversee the process outlined in S.B. 500, and she said the controller has a certain amount of authority for tracking the state’s debt. She concluded the proposed amendments would rectify some problems with the bill and would coordinate debt collection.

Senator Raggio raised concern regarding the fiscal note associated with S.B. 500. He stated the Department of Administration has indicated there would be no cost associated with the bill. However, he pointed out the state controller provided a fiscal note of $76,000, primarily due to section 14 of S.B. 500, which deals with offsets. Senator Raggio asked what the fiscal note would be if S.B. 500 were amended as proposed.

Ken West, Chief Deputy Controller, Office of the State Controller, said the controller testified the provisions of the proposed amendment would require two additional positions, as would S.B. 500 without the amendment. Mr. West maintained agencies with a large volume of debt collection would still be performing their own debt-collection activities.

Senator Raggio asked why two positions would be necessary for ensuring debts are paid in installments.

Mr. West responded in order to do offsets, the controller’s office would have to keep a file of receivables for all agencies in the state. He continued that file would have to be merged and matched with a vendor file. Further, Mr. West asserted and the controller’s office would have to calculate offsets, put holds on vendors, do accounting entries, notify vendors, and so forth.

Senator Raggio asked if the Department of Administration agrees there would be a cost as suggested in the fiscal note if S.B. 500 remained as originally written. Mr. West replied he does not know.

Senator Raggio stated the committee needs assurance that if the bill were amended, the fiscal note would not change. He commented Mr. West had indicated the fiscal note would not change in that situation; however, Senator Raggio raised concern regarding the fiscal note if responsibilities were changed as proposed in the amendment. Mr. West responded the controller testified the controller’s office could perform the responsibilities outlined in the proposed amendment with the two additional positions that are currently detailed in the fiscal note.

Ms. Coward commented:

Senator Porter recalled the legislative audit in question was done in 1996 or 1997 and showed $50 million in uncollected debt. He indicated Mr. Crews had testified that "there may be kind of a revolving $50 million." Senator Porter asked Senator Raggio if agencies address their debts during the budget hearing process.

Chairman O’Connell remembered she had asked Senator O’Donnell to see that debt is included in the questions asked by the Senate Committee on Finance. She further recalled Mr. Crews testified the agency heads should be performing their own debt collection in order to accept responsibility.

Senator O’Donnell stated, "I think if you do anything, you have to put it in the controller’s office…. I’m [I am] not so sure we can’t [cannot] let the department heads do this and make it part of the performance indicators."

Senator Titus asked if S.B. 500 or the proposed amendments are related to the controller’s use of the "rainy-day fund." Mr. West answered no.

Senator Raggio suggested holding the bill to clarify the fiscal note with the Department of Administration.

Chairman O’Connell adjourned the meeting at 6:10 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: